First Inv. Corp. v. Fujian Mawei Shipbuilding, Ltd., Civil Action No. 09–3663.

CourtUnited States District Courts. 5th Circuit. United States District Court (Eastern District of Louisiana)
Citation858 F.Supp.2d 658
Docket NumberCivil Action No. 09–3663.
PartiesFIRST INVESTMENT CORPORATION OF THE MARSHALL ISLANDS v. FUJIAN MAWEI SHIPBUILDING, LTD. OF the PEOPLE'S REPUBLIC OF CHINA, et al.
Decision Date12 March 2012

858 F.Supp.2d 658

FIRST INVESTMENT CORPORATION OF THE MARSHALL ISLANDS
v.
FUJIAN MAWEI SHIPBUILDING, LTD.
OF the PEOPLE'S REPUBLIC OF CHINA, et al.

Civil Action No. 09–3663.

United States District Court,
E.D. Louisiana.

March 12, 2012.


[858 F.Supp.2d 663]


Daniel Alfred Tadros, Adelaida J. Ferchmin, Joseph Benedict Marino, III, Chaffe McCall LLP, New Orleans, LA, for First Investment Corporation of the Marshall Islands.

Scott Rodgers Wheaton, Jr., David Boies Sharpe, Kristen V. Gresham, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, New Orleans, LA, for Fujian Shipbuilding Industry Group Corp. Erroneously Sued as Fujian Shipbuilding Industry Group Corporation of the People's Republic of China.


ORDER AND REASONS

LANCE M. AFRICK, District Judge.

Before this Court is a motion 1 to dismiss or, in the alternative, to refuse to

[858 F.Supp.2d 664]

confirm an arbitral award filed by respondents, Fujian Mawei Shipbuilding Ltd. (“Mawei”) and Fujian Shipbuilding Industry Group Corp. (“the Fujian Group”) (collectively, “the Fujian respondents”). Petitioner, First Investment Corporation of the Marshall Islands (“FIC”) has filed an opposition.2 For the following reasons, the motion to dismiss is GRANTED.

BACKGROUND

FIC filed this action to confirm a foreign arbitral award pursuant to the terms of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (“the New York Convention”).3 FIC obtained the award against the Fujian Group, a Chinese state-owned entity, and Mawei, a private corporation that is majority-owned by the Fujian Group.4 The underlying dispute arose from a series of shipbuilding contracts with options to purchase additional vessels from the Chinese entities.5 When the Fujian Group and Mawei refused to honor the option agreements unless the terms were amended, FIC submitted the dispute to arbitration.6 The contracts required that any disputes be arbitrated in London pursuant to the terms of the London Maritime Arbitrators Association (LMAA) and in accordance with English law.7

The arbitration panel was duly constituted on June 18, 2004.8 It consisted of three persons: Bruce Harris (“Mr. Harris”), appointed to the panel by FIC, Dr. Wang Sheng Chang (“Dr. Wang”), appointed to the panel by the Fujian Group and Mawei, and Professor J. Martin Hunter (“Professor Hunter”), who was jointly selected as the third arbitrator by Mr. Harris and Dr. Wang. 9 Professor Hunter presided over the arbitration as the chief arbitrator.10 The tribunal held its initial hearing at the International Dispute Resolution Center in London, England from June 20, 2005, to June 24, 2005.11 After extensive submissions by the parties and a second hearing held in London on September 17, 2005, the arbitration concluded and the panel commenced deliberations.12

On September 22, 2005, Professor Hunter expressed his opinion that the panel would need to meet for their deliberations before issuing a final award. 13 Dr. Wang prepared a deliberations memorandum setting forth his perspective on certain issues in anticipation of the discussions.14 Professor Hunter took his comments into consideration in preparing a first draft of the award that he circulated back to Dr. Wang and Mr. Harris for comments.15 Dr. Wang returned a draft of his dissenting opinion along with his own comments.16 When

[858 F.Supp.2d 665]

Professor Hunter related his concern that in-person discussions would be necessary if the arbitrators could not agree on certain issues, Dr. Wang replied that he would agree to finalize the award via email, if possible, but that he would be available to meet in London in April, 2006.17

On March 25, 2006, Professor Hunter circulated a second draft of the award to Dr. Wang and Mr. Harris that incorporated all of the amendments proposed by Dr. Wang and Mr. Harris, “together with some consequential drafting changes resulting both from the existence and content of Dr. Wang's draft dissenting opinion.” 18 After some final proofreading changes by Mr. Harris, the award was finalized on March 31, 2006 and circulated to the panelists for signature.19 Unfortunately, Dr. Wang received neither the second draft of the award nor the finalized version because he had been indefinitely detained by Chinese authorities on March 20, 2006.20

On May 3, 2006, Professor Hunter sent a letter to the parties informing them that he believed the final award could be issued without Dr. Wang's signature.21 Professor Hunter stated that the arbitration panel had reached its determination of the substantive issues by a majority after an extensive period of deliberations.22 Professor Hunter believed that Dr. Wang had participated fully in the deliberations and he informed the parties that Dr. Wang had indicated that he would sign the majority award under reserve of his dissenting opinion.23 Although counsel for the Fujian Group and Mawei disagreed with Professor Hunter that Dr. Wang had participated fully in the deliberations, the final award was made by the truncated tribunal on June 19, 2006, signed only by Professor Hunter and Mr. Harris.24

Professor Hunter and Mr. Harris addressed the problem of the panel's composition in Procedural Order No. 8, which was issued on the same day as the final award.25 After recognizing that English arbitration law is silent on the issue of truncated tribunals, the arbitrators looked to the agreement of the parties to assess

[858 F.Supp.2d 666]

the validity of a final award issued by only two of the three arbitrators.26 The arbitrators noted that Paragraph 8(c) of the LMAA states, “After the appointment of the third arbitrator decisions, orders or awards shall be made by all or a majority of the arbitrators.” 27 The arbitrators concluded that

[h]aving taken account of the submissions received from the Parties, and taking account of the fact that the Arbitration Board had completed its deliberations on the substantive issues in the dispute ... the majority determines that the proper course is for the Award to be “made” by inserting a date in the signature block and then, as expressly required by the parties' arbitration agreement, notifying it to the Parties immediately.28

The arbitrators recognized that they had previously contemplated the need for an in-person meeting to complete their deliberations.29 However, they explained in a footnote of the procedural order that

[t]he possibility of further deliberations at an in person meeting was discussed but (in an electronic letter dated 16 February 2006) Dr. Wang made it clear that, although he would be willing to attend such a meeting, the award could be issued more quickly if the Majority made the award with his dissenting opinion attached.30

Accordingly, Professor Hunter and Mr. Harris concluded that the award could be made without the signature of Dr. Wang as he had participated fully in the deliberations of the matter.31


On December 5, 2006, FIC commenced a confirmation action in Xiamen Maritime Court to enforce the award against the Fujian Group and Mawei.32 After hearing the matter on July 13, 2007, the Court, on May 11, 2008, issued an order refusing to enforce the award.33 The Court agreed with the Fujian respondents that the composition of the arbitral panel was not in accordance with the agreement of the parties.34 The Court found that the LMAA and English law called for the participation of all three arbitrators at every stage of decision making by the tribunal.35 Although the Court recognized that a final award could be signed and issued by a majority pursuant to Paragraph 8(c) of the LMAA, the Court explained that

the factual condition for Paragraph 8(e) of the LMAA rules to apply is that each member of the tribunal has fully participated in the arbitration proceedings. On this premise, and on this premise only, may decisions, orders or awards be made by the majority of arbitrators under the LMAA rules. Failing this premise, the majority has no powers to do so.36

On the basis of that interpretation of the relevant law, the Court held that Dr. Wang had not fully participated in the arbitration proceedings as he had been detained before the deliberations came to an end.37 Although the Court acknowledged

[858 F.Supp.2d 667]

that Dr. Wang was willing to sign the first draft of the award under reserve of his dissent, the Court explained that the use of the term “draft” indicated that his review of the first draft was not completed. 38 The Court also found that the circulation of a second draft to Dr. Wang and Mr. Harris for additional comments proved that their deliberation of the issues was ongoing at the time of Dr. Wang's detention.39 Because Dr. Wang never received a copy of the second draft of the award, and never had an opportunity to provide comments prior to the truncated panel's issuance of the final award, the Court concluded that the arbitral award was not reached in accordance with the agreement of the parties.40 Consequently, the Court refused to confirm the award pursuant to Article V of the New York Convention.41

On May 27, 2009, FIC filed its petition in this Court to confirm the arbitral award.42 In this proceeding, FIC seeks to enforce the award not only against the Fujian Group and Mawei, but also against the People's Republic of China (“the PRC” or “China”), which was not a party to the arbitration. 43 This Court initially entered a judgment confirming the arbitral award against those parties on January 26, 2010.44 It later vacated that order having found that the parties had not been served in accordance with Rule 4(h) of the Federal Rules of Civil Procedure, the Hague Convention, and the Foreign Sovereign Immunities Act.45

On March 22, 2011, this Court entered a second judgment confirming the arbitral award.46 FIC subsequently agreed to have the Court set aside the default judgment against the Fujian Group and Mawei in exchange for waiver of any service-related objections.47 This Court vacated its judgment against the Fujian Group and...

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