District court recognizes and confirms a partial final arbitration award against a foreign sovereign and foreign government agency, rejecting arguments that the arbitration provision was illegal under foreign law, that the notice of arbitration was defective, and that the arbitration violated due process because it was conducted during the COVID-19 pandemic. Preble-Rish Haiti, S.A. v. Republic of Haiti, No. 21-cv-6704 (S.D.N.Y. Jan. 26, 2022).[1]
Factual Background
On May 13, 2020, Petitioner Preble-Rish Haiti, S.A. (“PRH”), a Haitian material supply and infrastructure project management company, entered into three contracts with Respondent Bureau de Monétisation des Programmes d’Aide au Développement (“BMPAD”), a Haitian governmental agency, under which PRH agreed to source, ship, and deliver fuel to BMPAD for a fee. Initially, BMPAD timely paid for the fuel, but on the fifth order, it fell behind on the payments. PRH fulfilled several subsequent orders, for which it also did not receive payment.
The Arbitration
On November 20, 2020, PRH served BMPAD with a notice demanding arbitration in New York pursuant to the arbitration clauses included in the contracts. BMPAD objected to the arbitration panel’s jurisdiction and refused to participate in the arbitration hearings. It also filed a petition in a New York state court to stay the proceedings and sought a temporary restraining order and injunction. The state court denied that relief and, on August 6, 2021, the arbitration panel issued a partial final award granting PRH’s petition for pre-award security and directing BMPAD to deposit $23 million into an escrow account.
The District Court Decision
PRH then petitioned the U.S. District Court for the Southern District of New York for an order recognizing, confirming, and enforcing the partial final award against BMPAD under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, 21 U.S.T. 2517 (“New York Convention“). BMPAD opposed the petition arguing that: (1) the New York Convention did not apply and thus the court lacked subject matter jurisdiction; and (2) even if the New York Convention applied, enforcement of the award was precluded under the defenses of “illegality of agreement,” “lack of due process in arbitration,” “improper arbitration panel,” and “public policy.”
On the first issue, the court explained that the New York Convention applies when an arbitration involves parties domiciled or having their principal place of business outside of the United States, and where the arbitration agreements or awards arise out of a commercial relationship between the parties. The court held that the New York Convention applied and that the court had subject matter jurisdiction because: (i) both PRH and BMPAD are entities organized under the laws of Haiti and have their principal places of business in Haiti, which is a party to the New York Convention; and (ii) the arbitration was directed by the contracts at issue, which contracts created a commercial relationship between the parties.
On the second issue, the court stated that petitions to confirm an arbitration award are treated akin to motions for summary judgment and should be granted unless one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the New York Convention exists. The court noted that the party opposing enforcement of an arbitral award has the burden of proving that one of the defenses applies, and this burden is a heavy one. The court then analyzed each of the defenses set forth by BMPAD.
First, BMPAD argued that the arbitration provision included in the contracts with PRH was illegal under Haitian law, which allegedly precludes arbitration between Haitian companies and Haitian government agencies. Given that this issue had already been decided in favor of PRH by the state court, the court held that BMPAD could not re-litigate the issue due to the doctrine of res judicata or claim preclusion.
Second, BMPAD argued that PRH’s notice of arbitration was defective because it was not properly served on BMPAD. Specifically, BMPAD argued that the notice should have been in French, not English, and it should have been served via letter rogatory as a matter of Haitian law. The court held that, although PRH’s request for arbitration sent to BMPAD was in English, its earlier notice of an intent to arbitrate was both in English and French, and thus the Haitian notice language requirement was met. As to the service requirements, the court held that because the state court had already held that the service was proper, BMPAD was again precluded from re-litigating the issue.
BMPAD’s other due process-related argument was that BMPAD had been unable to present its case because PRH and its arbitrators held a security hearing “in the middle of a COVID-19 surge in Haiti, less than three weeks after the assassination of Haiti’s President, and despite BMPAD’s reasonable request that any hearing be stayed until . . . BMPAD’s counsel could communicate with its client and witnesses.” While recognizing the relevance and significance of BMPAD’s concerns, the court noted that the arbitration panel did adjourn the hearing when BMPAD’s key witness contracted COVID-19, and based on the record, Haiti’s former president does not appear to have been the key person directing BMPAD’s arbitration response. Therefore, the court concluded that, based on the available record and in the context of confirming an arbitration award under the New York Convention, BMPAD did have an opportunity to present its case.
Third, BMPAD argued that the arbitration panel was improper because two of the arbitrators were former partners with a law firm that serves as PRH’s outside counsel, and the other arbitrator is directly associated with PRH’s outside counsel as they are both members of the same organization. Given that the arbitration panel was chosen according to the parties’ agreement, the court rejected this defense.
Finally, BMPAD argued that enforcement of PRH’s “improperly procured arbitration award against a longstanding U.S. ally” is contrary to U.S. public policy. The court held that enforcement of the award was not against public policy because it would not violate the most basic notions of morality and justice. To the contrary, enforcing the award would further the strong public policy in favor of international arbitration. Accordingly, the court granted PRH’s petition to recognize, confirm, and enforce the partial final award against BMPAD.
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This article was originally published in the North America Newsletter.
