The D.C. Circuit recently upheld a district court order confirming a London-based arbitral award against the Belize government over objections that enforcement of that award would violate U.S. public policy regarding the alleged evident partiality on one of the arbitrators. The former Prime Minister of Belize entered into a secret agreement offering Belize as a guarantor for a Belizean health services provider’s bank loan, on which it subsequently defaulted. The Belize government entered into a settlement agreement to pay the debt, but eventually refused to make payments after the agreement became public and protests erupted. When the bank began arbitration proceedings in London, Belize largely refused to participate and an arbitrator was appointed on its behalf. The panel ultimately issued an award finding Belize liable for breach of its settlement agreement and ordering payment to the bank. After unsuccessful attempts to enforce the award in Belize, the bank filed a petition in the U.S. federal court to confirm and enforce the award, which the district court granted.
On appeal, Belize renewed challenges to the appointed arbitrator’s alleged impartiality on the grounds that another member of the arbitrator’s English “chambers” had previously advised a partial owner of the bank in other matters and represented interests adverse to Belize. The D.C. Circuit gave short shrift to all of the challenges except one: that the enforcement of the arbitral award violated the New York Convention because the alleged partiality was contrary to U.S. policy.
First, the court rejected the argument that the alleged partiality violated Federal Arbitration Act standards for vacatur of arbitral awards. The claim failed because the alleged conduct did not constitute improper motives on behalf of the arbitrator as required under the FAA and because the New York Convention provided the exclusive grounds on which the court could enforce an international arbitration award.
Next, the court rejected the contention that the alleged partiality violated U.S. public policy sufficient to invoke the New York Convention’s public policy defense to enforcement. Belize’s argument turned on a comparison between English “chambers”—groups of independent practitioners operating together under a common name—and American law firms—partnerships in which confidential client information, assets, and liabilities are shared. The court found the alleged partiality did not violate the “most basic notions of morality and justice” necessary to invoke the public policy defense because, even replacing foreign ethical standards with U.S. conflicts of interest rules, the factual differences between English chambers and American firms remained. Barristers are self-employed and the chambers model is designed to protect their independence. Furthermore, the arbitrator’s membership in the relevant chambers did not threaten the neutrality of the arbitration process, as the chambers system was historically familiar to Belize and it had previously been involved in a proceeding in which members of the same chambers appeared on opposite sides of the same appeal without objection.
Belize Bank Ltd. v. Gov’t of Belize, No. 16-7083 (D.C. Cir. Mar. 31, 2017).
This post written by Thaddeus Ewald .
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