AAOT Foreign Economic Ass'n (VO) Technostroyexport v. International Development and Trade Services, Inc.

• Decision Date: 23 March 1998
• Docket Number: Docket No. 97-9075
• Citation: 139 F.3d 980
• Parties: AAOT FOREIGN ECONOMIC ASSOCIATION (VO) TECHNOSTROYEXPORT, Petitioner--Appellee, v. INTERNATIONAL DEVELOPMENT AND TRADE SERVICES, INC., Respondent--Appellant.
• Court: U.S. Court of Appeals — Second Circuit

Page 980

139 F.3d 980

AAOT FOREIGN ECONOMIC ASSOCIATION (VO) TECHNOSTROYEXPORT Petitioner--Appellee, v. INTERNATIONAL DEVELOPMENT AND TRADE SERVICES, INC. Respondent--Appellant.

Docket No. 97-9075.

United States Court of Appeals Second Circuit.

Argued Feb. 24, 1998.

Decided March 23, 1998.

John J. Buckley, Jr., Washington, DC (Emmet T. Flood, Williams & Connolly, Washington, DC, Elkan Abramowitz, Edward M. Spiro, Morvillo, Abramowitz, Grand, Iason & Silverberg, New York City, of counsel) for Respondent-Appellant.

Kim Koopersmith, New York City (Steven M. Pesner, Ariane D. Austin, Akin, Gump, Strauss, Hauer & Feld, New York City, Jay D. Zeiler, Gregory P. Laird, Akin, Gump, Strauss, Hauer & Feld, Brussels, Belgium, of counsel), for Petitioner-Appellee.

Before: WINTER, Chief Judge, PARKER, Circuit Judge, and SCHWARZER, Senior District Judge. ^*

SCHWARZER, Senior District Judge:

We must decide whether the District Court for the Southern District of New York (Koeltl, J.) erred in confirming two international arbitration awards rendered by an allegedly corrupt tribunal where the losing party, knowing the relevant facts, chose to participate fully in the proceedings without disclosing those facts until after the adverse awards had been rendered.

In 1991 and 1992 appellant International Development and Trade Services, Inc. ("IDTS") entered into contracts for the purchase of non-ferrous metals from appellee AAOT Foreign Economic Association (VO) Technostroyexport ("Techno"). Disputes arose over IDTS's performance under the contracts. The disputes were submitted to arbitration pursuant to the contracts' arbitration clauses which provided for arbitration before the International Court of Commercial Arbitration of the Chamber of Commerce and Industry of the Russian Federation in Moscow. Hearings were held before a tribunal appointed by the Arbitration Court which rendered awards in favor of Techno of approximately $200 million. Techno filed a petition in the district court to confirm the awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 ("Convention"), as implemented by 9 U.S.C. § 201-08. IDTS opposed enforcement of the awards under Article V(2)(b) of the Convention as "contrary to the public policy" of the United States. ¹ The district court rejected IDTS's contention and entered judgment confirming the awards. This appeal followed. The district court had subject matter jurisdiction under 9 U.S.C. § 201 and 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.

The factual showing on which IDTS founded its opposition may be briefly summarized. Following the initiation of the arbitration proceedings, IDTS sent an interpreter--Tamara Sicular--to Moscow to file papers, clarify the status of the cases and gain an understanding of the procedures that would be followed. On July 14, 1993, Sicular met with Sergey Orlov, the Secretary of the Arbitration Court, and his superior at the Chamber of Commerce. According to IDTS, Sicular, on her own initiative and to test the integrity of the court, asked Orlov whether the court could be "bought." Orlov responded affirmatively and offered to "fix" the cases for IDTS in exchange for a substantial payment. His superior later that day told Sicular he would personally assist IDTS "sort out" the arbitration. On the next day, Orlov presented Sicular with his plan which called for a payment of $1 million for which he would rig the tribunal. There followed a series of communications with Orlov over the next two months in which Sicular ostensibly sought to gather further evidence and establish that the Arbitration Court and its officials were corrupt. They ended inconclusively in September 1993, without any payment being made. Sicular passed all of this information on to IDTS president Edith Reich prior to the commencement of any arbitration hearings. The Arbitration Court held hearings beginning in December 1994 and ending in September 1995. IDTS, represented by several attorneys, participated actively. The final awards in favor of Techno were rendered in March 1996.

In November 1996, Techno filed its petition to confirm the awards in the district court. In its opposition to the petition, IDTS for the first time disclosed the offer to bribe the Arbitration Court--the sting, as IDTS describes it--in support of its contention that enforcement of an award rendered by a corrupt tribunal would be contrary to the public policy of the United States. The district court determined that IDTS's allegations failed to establish that the Arbitration Court was not impartial in these cases; ² that the use of the public policy exception is not appropriate where one party to an arbitration has initiated the situation itself prior to the commencement of the arbitration hearing, participated thereafter fully in the arbitration, received an unfavorable award, and then alleges that the arbitral proceeding was corrupt as a means of avoiding an unfavorable result; and that IDTS waived its right to assert the public policy exception where it had knowledge of the facts but remained silent until an adverse award was rendered. Because we...