Arbitration award

• Pages: 77-78

77

international law update Volume 17, October–December 2011

© 2012 Transnational Law Associates, LLC. All rights reserved. ISSN 1089-5450, ISSN 1943-1287 (on-line) | www.internationallawupdate.com

ARBITRATION AWARD

I      

I A A, N

C C   ,

    U S

 

Plainti, Cubic International Sales

Corporation, a United States corporation, entered

into contracts with the defendant, the Ministry of

War of the government of Iran, for the sale and

service of an air combat maneuvering range for

use by Iran’s military in 1977. However, due to

the Iranian Revolution, the contracts could not be

performed. erefore, in 1979, the parties agreed

to discontinue the contracts and settle the accounts

later, and allowed Cubic to resell the air combat

equipment elsewhere.

In 1982, the Ministry led breach of contract

claims against Cubic in e Hague with the Iran-

United States Claims Tribunal. After the Tribunal

determined that it did not have jurisdiction to

hear the matter, the Ministry led a request for

arbitration before the International Chamber of

Commerce (ICC) in 1991. e ICC determined

that Cubic owed a nal award of $2,808,519, plus

interest and arbitration costs of $60,000, to the

Ministry. In 1988, after Cubic failed to pay, the

Ministry led a petition in the federal district court

to conrm the ICC’s arbitration award under the

New York Convention, 9 U.S.C. § 207. e district

court entered a judgment in 1999, conrming the

arbitration award. ough Cubic timely appealed

the judgment, the proceedings were suspended due

to pending litigation as to whether other judgment

creditors of Iran should be attached to the

Ministry’s award. Now that the pending litigation

has concluded, the appeal comes before this Court.

e U.S. Court of Appeals for the Ninth Circuit

arms the district court’s decision to conrm the

award to the Ministry.

Cubic presented arguments to establish that

the district court erred in conrming the Ministry’s

award because conrmation of the award would be

against the United States’ public policy, according

to Article V(2)(b) of the New York Convention. e

United States led an amicus brief in support of the

conrmation. e Court rst delineates the seven

reasons to refuse the enforcement of an arbitration

award under the New York Convention, one of

which includes the recognition or enforcement of

the award would be contrary to the public policy of

the United States. e Convention’s public policy

defense, Article V(2)(b), states:

Recognition and enforcement of an arbitral

award may . . . be refused if the competent authority

in the country where recognition and enforcement

is sought nds that . . . (b) [t]he recognition or

enforcement of the award would be contrary to the

public policy of that country. 9 U.S.C. § 207.

However, the Court notes that the defense

is narrowly construed in the U.S., considering

the strong presumption to uphold international

arbitration awards. “It applies only when

conrmation or enforcement of a foreign

arbitration award ‘would violate the forum state’s

most basic notions of morality and justice.’ [Parsons

& Whittemore Overseas Co. v. Societe Generale De

L’Industrie Du Papier (RAKTA), 508 F.2d 969, 974

(2d Cir. 1974)].” [Slip op. 21001]

ere is a “strong public policy favoring

conrmation of foreign arbitration awards. ‘ e

goal of the Convention, and the principal purpose

underlying American adoption and implementation

of it, was to encourage the recognition and

enforcement of commercial arbitration agreements

in international contracts and to unify the standards

by which agreements to arbitrate are observed

and arbitral awards are enforced in the signatory

countries.’ Scherk v. Alberto-Culver Co., 417 U.S.

506, 520 n.15 (1974).” [Slip op. 21003]

e Court states that in order to prevail, Cubic

must meet the substantial burden of overcoming

the strong public policy in favor of conrmation.

Cubic attempts to support its argument that the

arbitration award is against the U.S.’s policy against

engaging in trade and nancial transactions with the

Iran by citing several imposed sanctions, including

the Iranian Assets Control Regulations, the Iranian

Transactions Regulations, and the Weapons of

Mass Destruction Proliferators (WMD) Sanctions

Regulations. ough Cubic focuses on the