489 F.2d 1313 (2nd Cir. 1973), 99, Island Territory of Curacao v. Solitron Devices, Inc.

Docket Nº:99, 73-1664.
Citation:489 F.2d 1313
Case Date:December 26, 1973
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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489 F.2d 1313 (2nd Cir. 1973)




No. 99, 73-1664.

United States Court of Appeals, Second Circuit.

December 26, 1973

         Argued Nov. 15, 1973.

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         Paul Windels, Jr., New York City (Windels, Merritt & Ingraham, Francis E. Koch, New York City, of counsel), for appellant.

         Edward C. Wallace, New York City (Weil, Gotshal & Manges, Harold Klapper, New York City, of counsel), for appellee.

         Before KAUFMAN, Chief Judge, and SMITH and OAKES, Circuit Judges.

         OAKES, Circuit Judge:

         This appeal is by an American manufacturer, the respondent below, from a judgment of the district court granting a petition by The Island Territory of Curacao (Curacao) to confirm an arbitration award made in its favor and to enforce a judgment entered thereon in the courts of Curacao. The arbitration itself arose out of a dispute over a contract, the parties to which were the Central Government of the Netherlands Antilles and The Island Territory of Curacao, both of these political entities being a part of the Kingdom of the Netherlands, and Solitron Devices, Inc. (Solitron), a manufacturer of electronic products from Rockland County, New York, relative to the construction of an industrial park in Curacao and the installation of a Solitron manufacturing facility in the park. Solitron did not participate in the arbitration proceeding in Curacao or in the judicial proceedings in confirmation of the award in Curacao, as to which it had a right under the law of Curacao to bring an action to annul

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the award. Assorted defenses were urged below and found wanting by the district court, which held that the arbitration award was enforceable under the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, implemented by Title 9 of the United States Code Chapter 2 (§§ 201-208 inclusive), and that the judgment of Curacao was enforceable under Article 53 of the New York Civil Practice Law and Rules, CPLR §§ 5301-5309 McKinney's Consol.Laws c. 8 inclusive, entitled Recognition of Foreign Country Money Judgments.

         Because the facts are set forth in extensive detail in Judge Wyatt's capable opinion below, The Island Territory of Curacao v. Solitron Devices, Inc., 356 F.Supp. 1 (S.D.N.Y.1973), we will state them only generally for purposes of ease of comprehension here. Suffice it to say that the underlying written agreement between Curacao and Solitron which was executed in Curacao on January 12, 1968, provided basically that, because Solitron wanted an electronics plant there and Curacao and the Netherlands Antilles wanted to attract industry to the islands and create jobs, Curacao agreed to establish an industrial park of about 60 acres and to construct two factory buildings pursuant to Solitron-approved plans and to build an access road and sea water pipes to the building sites; Solitron was to lease the buildings for 20 years at a specified rent and to operate in the larger building and to use or sublease the smaller one, agreeing to put its electronic manufacturing industry into operation within 12 months of completion of the larger building and to 'create' at least 100 jobs. Solitron also undertook to 'establish itself or otherwise prior to January 1, 1974 manufacturing industries not yet established in the Netherlands Antilles which will in total provide employment for at least 3,000 persons' (including Solitron's own employees). It was agreed that the laws of the Netherlands Antilles would be applicable to the agreement and that all disputes as a consequence of or in connection with it, legal as well as factual, 1 should be submitted to a board of arbitration, the decision of which would be binding. The usual provisions were made for designation of one arbitrator by Solitron and Curacao; they were in turn to designate a third arbitrator or, failing an appointment, to have one designated or appointed by the president of the Court of Justice of the Netherlands Antilles. The arbitrators were enjoined to give an award 'like good men and true'-- 'ex aequo et bono.' There was a provision that Solitron would 'invariably'-- retranslate as 'irrevocably'-- fix as its domicile for everything pertaining to the execution of the agreement as well as 'for all acts of judicial execution,' the office of a notary public who also was Solitron's attorney in Willemstad, Curacao.

         Exchanges of correspondence incorporated as appendices to the affidavit of counsel for Curacao in the district court and statements in the opposing affidavit executed by the president of Solitron indicate that by April 13, 1970, Curacao had completed the two buildings as agreed, but that Solitron had failed to enter into a lease agreement, had failed to pay the costs of maintenance or to insure the buildings as required, and had otherwise treated the agreement as unilaterally terminated by Curacao. Solitron declined to proceed to arbitration on the basis that there had been express representations made regarding the favorable economic climate of Curacao particularly in respect to wage rates and availability of labor at those rates, namely, approximately 45 United States cents per hour. What had happened was a change in government and a revision upward of the minimum hourly rate of wages to $1.10 (U.S.) in January of

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1970. Solitron conceded that the electronics industry was exempted from the minimum wage increase but, quoting from counsel's letter to Curacao of May 15, 1970, claimed that as a practical matter 'there is no prospect of our being able to hire employees for less than it' and this 'new wage rate destroys the economic advantage of manufacturing in Curacao.' Other claims are set forth in the opposing affidavit of Solitron's president, but these are what might be called window dressing, since the real claim was, as the letter of May 15 stated, that 'By its own act, therefore, your government made it impossible for us to perform the agreement in question, thereby terminating the agreement and any obligation to arbitrate that we may have under it.' 2 These 'window dressing' claims were based on the eruption of 'violent riots in Curacao' with the 'business areas of Willemstad . . . in flames' and the riots being directed 'immediately against foreign interests,' etc.

         The arbitration proceeded without Solitron's participation, but Solitron was duly informed at all times of the time and dates of hearings and the other procedures followed. The award was made and signed by the arbitrators in Curacao on August 13, 1970, and in substance, as the district court pointed out, 356 F.Supp. at 8, was in favor of Curacao's position but by no means accepted all of the claims of Curacao as to damages. Thus, while the arbitrators found that Solitron was in breach of contract by omission to lease the completed buildings, they also found that Curacao could not recover as damages its 1,521,000 Netherlands Antilles guilders (NAfls) investment costs in respect to the buildings, although they did allow 53,602 NAfls as the cost of an acid neutralization plant because it was intended uniquely for Solitron. On the theory that it was virtually certain that Curacao could not find another lessee before July 1, 1971, at the earliest, the arbitrators allowed 192,482 NAfls for loss of rent on the two buildings for the period from December 1, 1969, to July 1, 1971, and a small amount as damages on account of fire insurance premiums paid.

         The only item that really is complained about by Solitron in its brief, and which strikes us as unusual, is the award of 375,000 NAfls as reflecting the present value discount of an award of 423,671.35 NAfls for the period December 1, 1970, to December 31, 1973, as damages for Solitron's failure to create 100 jobs as agreed. The basis of this award was that Curacao would have had 100 more unemployed in the period than otherwise and, under its laws, Curacao had to pay unemployment benefits and medical assistance to these unemployed persons. This award was computed by using 1969 statistics, with percentage increases for later years as could be expected. In turn, the unemployment benefits payable were computed on the basis that, of the 1,000 registered unemployed seeking a job with Solitron, some 75 per cent were 'breadwinners with dependents,' 10 per cent were 'breadwinners without dependents,' and 15 per cent were 'non-breadwinners.' Under Curacaoan law in 1969 apparently, 'breadwinners' were entitled to 800 NAfls 'financial assistance' and 'non-breadwinners' were entitled to none, but each 'breadwinner' and each dependent was entitled to 175 NAfls by way of 'medical assistance.'

         Expenses to the amount of 90,000 NAfls covering foreign travel to establish industries regarding the buildings were allowed, but Solitron was granted

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an overall set-off for the value of its structural steel and air conditioning plant to the extent of 266,424.05 NAfls. The arbitrators rejected a claim for the costs of prosecuting the arbitration but awarded interest and, as the original contract provided, one-half of the fees and expenses of the arbitrators. The arbitrators disallowed any claim of Coracao for damages for Solitron's failure to establish 3,000 jobs by January 1, 1974, on the ground that it 'depends on so many factors at present entirely unknown and not readily predictable,' even on the basis of expert advice, but left this question open for future submission. Similarly the arbitrators made no allowance for damages for failure to create the original 100 jobs beyond December 31, 1973, on the basis that it was not known whether there would be 'structural unemployment' after January 1, 1974. As the district court found, 'The award gives every indication of able,...

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