International Arbitration — New York Convention / Vacatur / Fees Assessment

The plaintiff/petitioner in Int’l Thunderbird Gaming Corp. v. United Mexican States, 2007 U.S. Dist. LEXIS 10070 (D.D.C. Feb. 14, 2007), sought to vacate a NAFTA arbitration award that rejected its claim against the Mexican Government for shutting down its gambling operations and awarded $1.25 million in costs fees to Mexico. Thunderbird’s primary argument was that the tribunal acted in manifest disregard of the law by announcing a particular standard for burdens of proof and then failing to apply that standard. In rejecting this argument, District Judge Henry H. Kennedy, Jr., quoted and applied the Second Circuit’s manifest-disregard standard — namely, that:

‛‘(1) the arbitrators knew of a governing legal principle yet refused to apply it or ignored it altogether and (2) the law ignored by the arbitrators was well defined, explicit, and clearly applicable to the case.’ LaPrade, 246 F.3d at 706 (quoting DiRussa v. Dean Witter Reynolds, Inc., 121 F.3d 818, 821 (2d Cir. 1997)); see also Duferco Int'l Steel Trading v. T. Klaveness Shipping A/S, 333 F.3d 383, 390 (2d Cir. 2003) (‘Even where explanation for an award is deficient or non-existent, we will confirm it if a justifiable ground for the decision can be inferred from the facts of the case.’).“

It is difficult to see how this standard could have been transgressed by an arbitration tribunal’s alleged failure to follow its own, articulated burden-of-proof standard. The Court, however, did not need to reach this issue directly because it found that the arbitrators had, in fact, applied the burden-of-proof standards that they had articulated, and, therefore, Thunderbird lost on its own analytical playing field.

The Court’s treatment of the assessment of fees and costs also merits attention. Applicable UNCITRAL rules plainly vested the tribunal with the authority to assess fees and costs against the losing party. Thunderbird argued that prior NAFTA arbitration awards reflected that costs and fees could be assessed against the claimant only in limited circumstances. The Court relied on the text of the UNCITRAL rules in rejecting this argument, also holding that the earlier arbitration awards cited by Thunderbird did not stand for the proposition asserted.

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