Sural (Barbados) Ltd. v. The Government of the Republic of Trinidad & Tobago
Filing
54
ORDER denying 5 Motion ; denying 7 Motion to Set Aside; granting Cross-Motion to Confirm 11 . Signed by Chief Judge K. Michael Moore on 8/12/2016. (mgn)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 1:15-cv-22825-KMM
SURAL (BARBADOS) LTD.,
Petitioner,
v.
THE GOVERNMENT OF THE REPUBLIC
OF TRINIDAD AND TOBAGO THROUGH
ITS MINISTER OF FINANCE AS
CORPORATION SOLE.
Respondent.
/
ORDER
THIS CAUSE came before the Court upon Petitioner Sural (Barbados) Ltd.’s (“Sural”)
Petition to Set Aside, in Part, and Confirm, in Part, the Arbitration Award against Respondent,
the Government of The Republic of Trinidad and Tobago (“GORTT”). See (ECF No. 1). Sural
also filed a Motion to Confirm, in Part, the Arbitration Award (ECF No. 5), and a Corrected
Motion to Set Aside, in Part, the Arbitration Award (ECF No. 7). GORTT filed its Answer and
Affirmative Defenses to the initial Petition (ECF No. 9) as well as corresponding responses to
each of Sural’s Motions. See (ECF Nos. 10, 11). GORTT’s latter response included a CrossMotion to Confirm the Arbitration Award. (ECF No. 11). Subsequently, Sural filed its Answer
and Affirmative Defenses to GORTT’s Cross-Motion (ECF No. 14) and replies to each of
GORTT’s Responses. See (ECF Nos. 15, 16). GORTT then filed a Reply in further support of
its Cross-Motion (ECF No. 19), to which Sural was granted leave to file a Sur-Reply (ECF No.
22). After several stays of the proceedings to facilitate settlement discussions, Sural’s Sur-Reply
was submitted to the Court on April 1, 2016. For the reasons set forth below, GORTT’s Cross-
Motion is GRANTED, Sural’s Motions are DENIED, and the arbitration award is confirmed in
its entirety.
I.
BACKGROUND 1
GORTT, through its Minister of Finance (“MOF”), and Sural, through Dr. Alfredo
Riviere (“Riviere”), Sural’s President and CEO, began discussions regarding the creation of an
aluminum smelter and associated downstream plants (the “Project”) as early as 2001. Award ¶
54 (ECF No. 1-2).
Negotiations were ongoing, and in 2005, Sural began discussions for
financing and constructing the smelter with representatives of a Chinese entity (“CMEC”). Id. at
¶ 61. Sural, GORTT, and CMEC executed a memorandum of understanding regarding the
Project on March 23, 2005. Id. at ¶ 62. On April 8, 2005, the parties incorporated Alutrint as the
corporate vehicle that would be responsible for the Project. Id. at ¶¶ 68–69. Thereafter, the
parties executed a letter agreement concerning Alutrint on May 18, 2005 (the “Letter
Agreement”). Id. at ¶ 70.
After various delays surrounding the Project, Sural and GORTT executed the Unanimous
Shareholders Agreement (“USA”) on July 3, 2007. Id. at ¶ 164. Clause 5.4 of the USA provided
that equity contributions to Alutrint would be made by GORTT at 60% and Sural at 40%. Id. at
¶ 160. Pursuant to the USA, Alutrint made an equity call for the $20 million CMEC requested as
an additional mobilization fee (the “Equity Call”). Id. at ¶¶ 87, 89. On July 30, 2007, GORTT
paid its share of the Equity Call—$12 million. Id. at ¶ 90. Although Sural repeatedly promised
to pay the $8 million it owed towards the Equity Call under the USA, it never remitted the
payment. Id. at ¶¶ 9192. On December 10, 2007, GORTT provided Sural with notice of
1
As the Court is writing primarily for the parties’ benefit, it assumes the parties’ familiarity with
the underlying facts and thus will only set forth those facts that are pertinent to resolving the
various motions before the Court under the applicable legal framework.
2
material breach for failure to pay Sural’s share of the Equity Call. Id. at ¶ 94. Shortly thereafter,
Sural began negotiations with a Brazilian industrial conglomerate, the Votorantim Group
(“VG”), for a restructured project. Id. at ¶ 106. After various discussions among the parties, VG
and Sural presented joint proposals to GORTT for a restructured project. Id. at ¶¶ 108–13.
On December 4, 2009, GORTT and VG entered into an agreement regarding VG’s
participation in a restructured version of the Project—one which was double the capacity
envisaged in the USA, conditioned on termination of both Sural’s equity participation in Alutrint
and the USA. Id. at ¶¶ 128–29, ¶ 263. On March 4, 2010, GORTT internally agreed to
terminate the USA and appointed a team to negotiate the price of Sural’s interest in Alutrint. Id.
at ¶ 132. GORTT and Sural attempted to negotiate the buyout but could not agree on valuation.
Id. at ¶¶ 133–34. While negotiations were ongoing, GORTT experienced a change in leadership
after the country’s May 24, 2010 general election. The new government of Trinidad and Tobago
ultimately decided not to proceed with the Project. Id. at ¶¶ 135–37.
On July 2, 2012, Sural filed a request for arbitration before the International Court of
Arbitration of the International Chamber of Commerce (“ICC”) in order to resolve the
contractual issues between GORTT and Sural that arose from the failed development of the
Project.
Specifically, Sural alleged two claims against GORTT: (1) Sural claimed that in
October 2009, GORTT “agreed to vary the terms” of the USA to buy out Sural’s interest in
Alutrint, as evidenced by the September 9, 2009, and October 2, 2009 GORTT/Sural Letter
Exchange (“Fall 2009 Letter Exchange”); and (2) Sural claimed that GORTT wrongfully
repudiated the USA when it renounced the Project in September 2010. Id. at ¶ 207. Pursuant to
the USA, these claims were governed by the laws of Trinidad and Tobago, which was treated as
following and applying English law. Id. at ¶ 30.1.
3
After an extensive discovery process, the parties proceeded to a final arbitration hearing,
which was held before a three-member arbitral panel (the “Tribunal”) on September 8–10, 2014
in Miami, Florida. 2
On June 12, 2015, the Tribunal issued a final arbitration award (the
“Award”) that rejected Sural’s arguments and dismissed its claims. On July 3, 2015, GORTT
filed an application to confirm the Award in the High Court of Justice, Queen’s Bench Division
(the “High Court”) in England, pursuant to the Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (the “New York Convention”). On July 14, 2015, the High Court
entered an order confirming the Award. Sural was served with the confirmation order on July
23, 2015, and proceeded to initiate this action on July 29, 2015. With this framework in mind,
the Court now turns to the merits of the parties’ motions.
II.
APPLICABLE LAW
The Supreme Court has recognized an “emphatic federal policy in favor of arbitral
dispute resolution.” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614,
631 (1985); see also Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217 (1985) (noting that
where parties have seen fit to adopt arbitration clauses in their agreements, there is a “strong
federal policy in favor of enforcing [them]”). Since the United States’ accession to the New
York Convention in 1970 “and the implementation of the Convention in the same year by
amendment of the Federal Arbitration Act, that federal policy applies with special force in the
field of international commerce.” Mitsubishi Motors, 473 U.S. at 631; see also Smith/Enron
Cogeneration Ltd. P’ship, Inc. v. Smith Cogeneration Int’l, Inc., 198 F.3d 88, 92 (2d Cir. 1999)
2
As the arbitration proceedings here were between parties domiciled or having their principal
place of business outside of the United States, the Award entered in this matter is considered
“non-domestic” for purposes of the New York Convention. See e.g. Yusuf Ahmed Alghanim &
Sons v. Toys “R” Us, Inc., 126 F.3d 15, 19 (2d Cir. 1997).
4
(“The adoption of the Convention by the United States promotes the strong federal policy
favoring arbitration of disputes, particularly in the international context.”).
The Convention’s goal, “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). To facilitate this goal, “[t]he New York
Convention provides a carefully structured framework for the review and enforcement of
international arbitral awards.” Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan
Gas Bumi Negara, 364 F.3d 274, 287 (5th Cir. 2004).
Chapter 2 of the Federal Arbitration Act (“FAA”) ratifies and incorporates the New York
Convention. See 9 U.S.C. §§ 201–208; see also Czarina, L.L.C. v. W.F. Poe Syndicate, 358 F.3d
1286, 1290 (11th Cir. 2004). “When reviewing an arbitration award, ‘confirmation under the
Convention is a summary proceeding in nature, which is not intended to involve complex factual
determinations, other than a determination of the limited statutory conditions for confirmations
or grounds for refusal to confirm.’” Chelsea Football Club Ltd. v. Mutu, 849 F. Supp. 2d 1341,
1344 (S.D. Fla. 2012) (quoting Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir. 2007)). Thus, a
district court must confirm an arbitration award under the Convention, unless one of the seven
enumerated defenses in Article V apply. Indus. Risk Insurers v. M.A.N. Gutehoffnungshutte
GmbH, 141 F.3d 1434, 1441 (11th Cir. 1998); see also 9 U.S.C. § 207. “[T]he party seeking to
avoid summary confirmance of an arbitral award has the heavy burden of proving that one of the
seven defenses applies.”
VRG Linhas Aereas S.A. v. MatlinPatterson Glob. Opportunities
Partners II L.P., 717 F.3d 322, 325 (2d Cir. 2013) (citation omitted).¶
5
III.
DISCUSSION
Despite the bevy of motions before the Court regarding the Award, the parties’ arguments
are relatively straightforward. The gist of Sural’s arguments is that certain discovery decisions
the Tribunal made prior to the hearing prevented it from presenting its case and ultimately
deprived Sural of a fundamentally fair hearing which now warrants the vacatur, or partial
confirmation, of the award. GORTT, on the other hand, asserts that Sural has failed to meet the
high burden required to overturn an award subject to the New York Convention given the
summary nature of this Court’s review. Alternatively, GORTT suggests that the Court may defer
to the ruling by the High Court confirming the Award, which pre-dates this cause of action. 3
Recognizing the limited review available to the Court under the Convention, the Court finds
Sural has not met its high burden to establish that the Award should be vacated.
3
Under the New York Convention, England is a “secondary jurisdiction” and the United States
is a “primary jurisdiction.” Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas
Bumi Negara, 335 F.3d 357, 368 (5th Cir. 2003). In dicta, the Eleventh Circuit has noted that
“several commentators have opined that a court of primary jurisdiction would have the power
under the Convention’s scheme to vacate an arbitration award notwithstanding the fact that it had
previously been enforced by a court of secondary jurisdiction.” Ingaseosas Int’l Co. v.
Aconcagua Investing Ltd., 479 F. App’x 955, 962 (11th Cir. 2012). “[A]lthough the Convention
permits a primary jurisdiction court to apply its full range of domestic law to set aside or modify
an arbitral award, secondary jurisdiction courts may only refuse or stay enforcement of an award
on the limited grounds specified in Articles V and VI.” Gulf Petro Trading Co., Inc. v. Nigerian
Nat. Petroleum Corp., 512 F.3d 742, 747 (5th Cir. 2008). Put another way, as the powers of the
two adjudicative bodies vary greatly under the Convention, and Sural challenges the jurisdiction
of the High Court to enforce the Award, principles of judicial comity are not offended when this
Court considers whether to vacate or enforce the Award.
6
1.
The New York Convention Mandates Confirmation of the Award
The parties do not dispute that the Award is subject to the New York Convention. 4 In
resisting confirmation of the Award, Sural relies on Article V(1)(b) of the Convention and the
grounds for vacatur under the Florida International Commercial Arbitration Act (“FICAA”) to
argue that it was denied an opportunity to present its case based on certain evidentiary rulings of
the Tribunal. Specifically, Sural now challenges the Tribunal’s pre-hearing refusal to issue a
subpoena for the testimony of Marco Palmieri, an executive for third-party VG, and the
Tribunal’s denial of a request for disclosure of correspondence between GORTT and VG from
June 2008 through 2009.
As to the denial of the subpoena, the Tribunal rejected Sural’s application as untimely
and found that the “taking of the evidence may be disruptive of the course of the arbitration and
unfair to the respondent” and “the tribunal [wa]s not satisfied that the evidence would be
necessary or material.” See Award ¶ 24 (ECF No. 1-2). On July 23, 2014 the Tribunal denied
Sural’s motion to compel as untimely and further found the request to be cumulative and lacking
relevancy. See Pet’r’s Ex. 16 (ECF No. 7-1).
4
Sural asserts that the FAA has no application to the Petition/Application to set aside or confirm
the Award. See (ECF No. 1) at 1–2. Additionally, in both Petitioner’s Motion to Confirm in Part
(ECF No. 5) and Petitioner’s Motion to Set Aside in Part (ECF No. 7), Sural relies solely upon
FICAA’s statutory grounds for vacatur/partial confirmation of the Award. See Fla. Stat. §§
684.0001 et seq. (2011). However, as GORTT correctly points out, FICAA “effectively mirrors
the limited grounds to refuse enforcement in the New York Convention.” Resp.’s Cross-Motion
(ECF No. 11) at 9 n.6. As the FAA implements the New York Convention, Sural’s initial
contention is a fundamental misstatement of the law. Certainly, the FAA and New York
Convention provide “overlapping coverage” to the extent they do not conflict, but given the
limited review under the New York Convention, the Court need not graft onto its analysis any of
the enumerated defenses present in the FAA. See Encyclopaedia Universalis S.A. v.
Encyclopaedia Britannica, Inc., 403 F.3d 85, 92 (2d Cir. 2005). As to FICAA, it is best
construed as a gap filler to the Convention for a federal court sitting in a primary jurisdiction.
7
Both of these rulings occurred months before the actual arbitration hearing before the
Tribunal. Despite its due process concerns, Sural proceeded to (1) participate fully in a three-day
arbitration hearing under the auspices of the ICC; (2) conduct extensive pre-hearing and posthearing briefings; (3) and even sought to confirm in part portions of the Award it found
favorable. Sural’s efforts to vacate the Award are merely an attempt to mask its unsuccessful
arbitration campaign under the guise of a lack of due process. The fact that Sural never objected
to—or contested—the Tribunal’s rulings is glaringly indicative of Sural’s waiver of these
arguments through acquiescence. See AO Techsnabexport v. Globe Nuclear Servs. & Supply
GNSS, Ltd., 404 F. App’x 793, 798 (4th Cir. 2010) (holding that arguments raised for the first
time in district court are deemed waived); Brook v. Peak Int’l, Ltd., 294 F.3d 668, 674 (5th Cir.
2002); United Steelworkers of Am., AFL-CIO-CLC v. Smoke-Craft, Inc., 652 F.2d 1356, 1360
(9th Cir. 1981) (“Parties to arbitration proceedings cannot sit idle while an arbitration decision is
rendered and then, if the decision is adverse, seek to attack the award collaterally on grounds not
raised before the arbitrator.”).
This point is further reinforced by Article 39 of the ICC Rules—the governing rules of
the subject arbitration—entitled “Waiver,” which provides that
A party which proceeds with the arbitration without raising its objection to a
failure to comply with any provision of the Rules, or of any other rules applicable
to the proceedings, any direction given by the arbitral tribunal, or any requirement
under the arbitration agreement relating to the constitution of the arbitral tribunal
or the conduct of the proceedings, shall be deemed to have waived its right to
object.
8
ICC Rules of Arbitration 5, Art. 39 (2012). Further, Sural appears to overlook the fact that
FICAA has an express waiver provision that cuts against its arguments for vacatur. See Fla. Stat.
§ 684.0006 (“A party waives its right to object if the party proceeds with the arbitration and fails
to object without undue delay or within a provided time limit.”).
Given the high threshold required to overturn an arbitration award under the
Convention—and this Court’s necessarily limited review—the Court finds that Sural’s
arguments for vacating the Award must fail as a matter of law. Even if Sural’s arguments on
these issues were not waived, the Court still finds Sural’s challenges to the Tribunal’s discovery
decisions woefully deficient. After all, “[t]here is a reason why federal courts grant substantial
deference to the evidentiary findings of arbitral tribunals: these bodies have greater resources,
expertise, and access to evidence in order to develop factual findings, and federal courts are
poorly situated to second-guess their conclusions.” Gold Reserve Inc. v. Bolivarian Republic of
Venezuela, 146 F. Supp. 3d 112, 130 (D.D.C. 2015). To have courts meddle in disputes of this
nature would not only obviate the deference courts owe to arbitral tribunals, it also would
drastically “undermin[e] the twin goals of arbitration, namely, settling disputes efficiently and
avoiding long and expensive litigation.” Folkways Music Publishers, Inc. v. Weiss, 989 F.2d
108, 111 (2d Cir. 1993). The Court cannot countenance such a course of action.
IV.
CONCLUSION
The Convention, and American enforcement of it through the FAA, provide[ ]
businesses with a widely used system through which to obtain domestic
enforcement of international commercial arbitration awards resolving contract and
other transactional disputes, subject only to minimal standards of domestic
judicial review for basic fairness and consistency with national public policy.
5
The ICC Rules can be found at ICC Rules of Arbitration, INT’L CHAMBER OF COMMERCE,
http://www.iccwbo.org/products-and-services/arbitration-and-adr/arbitration/icc-rules-ofarbitration/ (last visited Aug. 11, 2016).
9
Indus. Risk Insurers, 141 F.3d at 1440 (emphasis added) (quoting G. Richard Shell, Trade
Legalism and International Relations Theory: An Analysis of the World Trade Organization, 44
Duke L.J. 829, 888 (1995). As the Supreme Court recently noted, “[i]n bilateral arbitration,
parties forgo the procedural rigor and appellate review of the courts in order to realize the
benefits of private dispute resolution: lower costs, greater efficiency and speed, and the ability to
choose expert adjudicators to resolve specialized disputes.” Stolt-Nielsen S.A. v. AnimalFeeds
Int’l Corp., 559 U.S. 662, 685 (2010). These benefits are eviscerated “[i]f we permit parties who
lose in arbitration to freely litigate their cases in court.” B.L. Harbert Int’l, LLC v. Hercules
Steel Co., 441 F.3d 904, 907 (11th Cir. 2006) (abrogated on other grounds). Quite simply,
Sural’s arguments for vacating the Award are predicated more on its “buyer’s remorse” over the
outcome rather than a violation of Sural’s due process rights during the arbitration process.
Accordingly, it is hereby ORDERED and ADJUDGED that GORTT’s Cross-Motion to
Confirm the Award (ECF No. 11) is GRANTED. The Arbitration Award (ECF No. 1-2) is
CONFIRMED. It is further ORDERED and ADJUDGED that Sural’s Motions (ECF Nos. 5, 7)
are DENIED. The Clerk of Court is directed to CLOSE this case. All other pending motions, if
any, are DENIED as MOOT.
12th
DONE AND ORDERED in Chambers at Miami, Florida, this ____ day of August, 2016.
K. MICHAEL MOORE
CHIEF UNITED STATES DISTRICT JUDGE
c:
All counsel of record
10
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