Ge Transp. (Shenyang) Co. v. A-Power Energy Generation Sys., Ltd.
| Decision Date | 22 June 2016 |
| Docket Number | 15 Civ. 6194 (PAE) |
| Parties | GE TRANSPORTATION (SHENYANG) CO., LTD., Petitioner, v. A-POWER ENERGY GENERATION SYSTEMS, LTD., Respondent. |
| Court | U.S. District Court — Southern District of New York |
This decision resolves a petition to confirm and enforce a foreign arbitration award. On August 6, 2015, petitioner GE Transportation (Shenyang) Co., Ltd. ("GET") filed a petition to confirm an arbitration award pursuant to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, 9 U.S.C. §§ 201-08 (the "New York Convention"); see also 9 U.S.C. § 203 (). Dkt. 4 (the "Petition" or "Pet."). In addition to confirmation and enforcement of the arbitration award through the entry of judgment in the amount of $476,700,190.49 against respondent A-Power Energy Generation Systems, Ltd. ("A-Power"), which was also the only respondent in the underlying arbitration proceeding, GET also seeks enforcement of the arbitration award and entry of judgment jointly and severally against various entities related to A-Power under an alter-ego theory of liability. GET also requests a permanent injunction freezing all assets belonging to A-Power and related entities so as to preserve GET's ability to collect on the arbitration award. A-Power has not opposed the Petition or otherwise appeared in this action.
For the reasons that follow, the Court confirms the arbitration award, enters judgment in favor of GET against A-Power in the amounts specified under the award, and grants GET a permanent injunction restraining A-Power from transferring or otherwise dissipating its assets pending full payment of the judgment. However, the Court finds that it cannot reach in this proceeding the issue whether the arbitration award should be enforced against the other entities specified by GET under an alter-ego theory of liability. The Court therefore does not, in this action, enter judgment or issue an injunction against those other entities.
This matter stems from a default by Shenyang Lucky Wind Power Equipments Co., Ltd. ("Lucky Wind"), a wholly owned subsidiary of A-Power, on an agreement, guaranteed by A-Power, to purchase from GE Commerce Shanghai Co., Ltd. ("GE Commerce") minimum quantities of wind turbine gearboxes over a three-year period. GET. Br. 2-3. GE Commerce later assigned its rights and obligations under the agreement and the guarantee to GET. Pet. ¶ 12; Award ¶¶ 78, 86.
GET is a corporation organized under the laws of the People's Republic of China, with its registered business address in Liaoning Province, China. Pet. ¶ 3. A-Power is a company incorporated under the laws of the British Virgin Islands, with its registered business address in the British Virgin Islands and its principal executive offices in Liaoning, China. Id. ¶ 4.
On March 3, 2009, Lucky Wind entered into an agreement to purchase wind turbine gearboxes from GE Commerce (the "Agreement"), and that same day, A-Power entered into anagreement with GE Commerce to guarantee Lucky Wind's purchase agreement (the "Guarantee"). Id. ¶¶ 11-12. The Guarantee provides that "[A-Power] shall be jointly and severally liable with [Lucky Wind], as principal debtor and not as surety, for the due payment and full performance of the Obligations." Award ¶ 73 (quoting the Guarantee) (second alteration in the Award).2 The Guarantee further provides that it is to be governed by New York law. Id.
Around the summer of 2010, a dispute arose concerning Lucky Wind's failure to make progress payments in accordance with the payment schedule set out in the Agreement. Pet. ¶ 13; Award ¶ 89. After sending several notices of default and payment demands, on March 28, 2011, GET sent a notice of termination of the Agreement to Lucky Wind, and thereafter demanded payment from A-Power under the Guarantee. Award ¶¶ 89-96.
GET filed a claim for payment for the full amount of the Guarantee from A-Power in the Hong Kong International Arbitration Centre ("HKIAC"). Pet. ¶ 13. Paragraph 18 of the Guarantee provided for the arbitration in that forum of any disputes relating to the Guarantee. Pursuant to that paragraph, GET and A-Power each appointed one arbitrator, and the third arbitrator completing the panel was appointed by HKIAC. Award ¶¶ 9-12. After receiving evidence and conducting a hearing with both parties, each represented by counsel, see Award ¶¶ 49-51, on August 8, 2012, the Hong Kong International Arbitration Centre Tribunal (the "Tribunal") in Hong Kong issued an award in favor of GET, ordering that A-Power pay GET $359,997,368.50 plus interest accruing at a rate of $103,368.31 per diem. Pet. ¶ 14; Award ¶ 325.
On October 24, 2012, GET obtained an Order enforcing the Award from the High Court of the Hong Kong Special Administrative Region Court of First Instance ("High Court"). Pet. ¶ 14; Pet., Ex. D ("High Court Final Enforcement Order").
On August 6, 2015, GET filed a petition to confirm an arbitration award, along with attached exhibits, and a supporting memorandum of law. On November 2, 2015, after numerous attempts by GET to serve A-Power through various means, the Court authorized alternative service on A-Power through email to the last known personal and operative email address of Jinxiang Lu, A-Power's chairman, chief executive officer ("CEO"), and legal representative. Dkt. 29; see Dkt. 32, at 3-4 (); Dkt. 11-4, at ¶ 2 ("High Court Contempt Judgment") (describing Lu's positions at A-Power). On November 3, 2015, GET served A-Power via email of all relevant documents in this action. Dkt. 30. On November 23, 2015, after issuing a series of temporary restraining orders and holding a series of show cause hearings (at which A-Power failed to appear), the Court issued a preliminary injunction prohibiting A-Power from transferring or dissipating assets, and freezing $476,700,190.493 belonging to A-Power and related entities and ¥54,000,000 belonging to an entity called Asia New Energy Group Limited ("Asia New Energy"), on the basis of Asia New Energy's involvement in a scheme to transfer assets belonging to A-Power. Dkt. 32.
On January 4, 2016, GET obtained a Clerk's Certificate of Default as to A-Power. Dkt. 38. On February 5, 2016, the Court issued an Order to Show Cause as to why judgment should not be entered against A-Power and related entities and why A-Power and related entities shouldnot be permanently enjoined from transferring or dissipating assets until the judgment is paid in full, and setting a hearing for March 2, 2016. Dkt. 40.4 The Order to Show Cause was served via email on A-Power on February 8, 2015. Dkt. 42. A-Power failed to appear at the hearing, and has not otherwise appeared in this action.
Arbitral awards are not self-enforcing. Rather, they "must be given force and effect by being converted to judicial orders by courts." Power Partners MasTec, LLC v. Premier Power Renewable Energy, Inc., No. 14 Civ. 8420 (WHP), 2015 WL 774714, at *1 (S.D.N.Y. Feb. 20, 2015) (quoting D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95, 104 (2d Cir. 2006)).
Chapter 2 of the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 201-08, which codifies the New York Convention, governs arbitration agreements that arise from a "legal relationship, whether contractual or not, which is considered commercial," except when those relationships are "entirely between citizens of the United States" and are otherwise domestic in nature. 9 U.S.C. § 202. Applying § 202, the Second Circuit has held that where an agreement to arbitrate "involve[s] parties domiciled or having their principal place of business outside [the United States]," that agreement is governed by the Convention. Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys "R" Us, Inc., 126 F.3d 15, 19 (2d Cir. 1997) (quoting Bergesen v. Joseph Muller Corp., 710 F.2d 928, 932 (2d Cir. 1983)). Because GET is incorporated outside of the United States, the New York Convention governs the Petition. See Farrell v. Subway Int'l, B.V., No. 11 Civ.08 (JFK), 2011 WL 1085017, at *1 (S.D.N.Y. Mar. 23, 2011) ().
When a party seeks confirmation of an arbitral award under the New York Convention, "[t]he court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention." 9 U.S.C. § 207; see Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc., 403 F.3d 85, 90 (2d Cir. 2005). "Article V of the Convention specifies seven exclusive grounds upon which courts may refuse to recognize an award." Encyclopaedia Universalis, 403 F.3d at 90. "The party opposing enforcement of an arbitral award has the burden to prove that one of the seven defenses under the New York Convention applies." See Telenor Mobile Commc'ns AS v. Storm LLC, 584 F.3d 396, 405 (2d Cir. 2009) (quoting Encyclopaedia Universalis, 403 F.3d at 90). "The burden is a heavy one, as the showing required to avoid summary confirmance is high." Id. (quoting Encyclopaedia Universalis, 403 F.3d at 90).
"Given the strong public policy in favor of international arbitration, review of arbitral awards under the New York Convention is 'very limited . . . in order to avoid undermining the twin goals of arbitration, namely, settling disputes efficiently and avoiding long and expensive litigation.'" Encyclopaedia Universalis, 403 F.3d at 90 (ellipses in original) (quoting Yusuf Ahmed Alghanim & Sons, 126 F.3d at 23 ()); accord Willemijn Houdstermaatschappij, BV v. Standard Microsystems Corp., 103 F.3d 9, 12...
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