Voiding and Enforcing International Arbitration Awards

A Colombian power company entered into a contract to sell power to a Colombian state-owned public utility, in TermoRio S.A. E.S.P. v. Electrificadora del Atlantico S.A. E.S.P., 487 F.3d 928 (D.C. Cir. 2007). The power company obtained a $60 million arbitration award in Colombia, which the utility successfully persuaded a Colombian court to overturn on the ground that the arbitration clause contained in the parties’ agreement violated Colombian law (which was governing under the parties’ agreement). The deflated plaintiff sued in the United States to enforce the award under the FAA, 9 U.S.C. § 201, and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (reprinted at 9 U.S.C. § 201). The D.C. Circuit affirmed the District Court’s dismissal of the action. First, the appeals court stressed that Colombia was the country with primary jurisdiction over the arbitral award because the law governing the dispute was that of Colombia and because Colombia was also the contractually-selected venue for the arbitration. It reasoned that, pursuant to New York Convention art. V(1)(e), “a secondary Contracting State [like the United States] normally may not enforce an arbitration award that has been lawfully set aside by a "competent authority" in the primary Contracting State.” It concluded that: “For us to endorse what appellants seek would seriously undermine a principal precept of the New York Convention: an arbitration award does not exist to be enforced in other Contracting States if it has been lawfully ‘set aside’ by a competent authority in the State in which the award was made. This principle controls the disposition of this case.”

The D.C. Circuit also rejected the plaintiff’s argument that the award should be overturned on grounds of public policy (per Article V(2)(b) of the New York Convention). It emphasized that “it is insufficient to enforce an award solely because a foreign court's grounds for nullifying the award would not be recognized under domestic United States law” (citation omitted) — that “a primary State necessarily may set aside an award on grounds that are not consistent with the laws and policies of a secondary Contracting State.” To prevail on public policy grounds the plaintiff would have to, but did not, establish that the Colombian judgment was "repugnant to fundamental notions of what is decent and just in the United States."

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