Maritime Intern. Nominees Establishment v. Republic of Guinea

• Decision Date: 27 January 1983
• Docket Number: No. 81-1073,81-1073
• Citation: 224 U.S.App.D.C. 119,693 F.2d 1094
• Parties: In the Matter of the Arbitration Between MARITIME INTERNATIONAL NOMINEES ESTABLISHMENT v. The REPUBLIC OF GUINEA, Appellant, United States of America, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1094

693 F.2d 1094

224 U.S.App.D.C. 119

In the Matter of the Arbitration Between MARITIME

INTERNATIONAL NOMINEES ESTABLISHMENT v. The REPUBLIC OF GUINEA, Appellant, United States of America, Intervenor.

No. 81-1073.

United States Court of Appeals, District of Columbia Circuit.

Argued Jan. 25, 1982.

Decided Nov. 12, 1982.

As Amended on Denial of Rehearing Jan. 27, 1983.

Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 78-00388).

Stephen N. Shulman, with whom Mark C. Ellenberg and Mary M. Kearney, Washington, D.C., were on the brief, for appellant.

David Maurice Cohen, Atty., Dept. of Justice, with whom Charles F.C. Ruff, U.S. Atty. at the time the brief was filed, William Kanter, Linda M. Cole, and James G. Hergen, Attys., Dept. of Justice, and James H. Michel and Jonathan B. Schwartz, Attys., Dept. of State, Washington, D.C., were on the brief, for intervenor.

Mattaniah Eytan, San Francisco, Cal., with whom Julius Kaplan and James W. Schroeder, Washington, D.C., were on the brief, for appellee.

Before ROBINSON, Chief Judge, EDWARDS, Circuit Judge, and McGOWAN, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge McGOWAN.

McGOWAN, Senior Circuit Judge:

The Republic of Guinea ("Guinea") appeals from, and raises numerous challenges to, the District Court's order confirming an arbitration award rendered by the American Arbitration Association in favor of Marine International Nominees Establishment ("MINE"). The District Court lacked subject matter jurisdiction, Guinea claims, because Guinea was immune under the Foreign Sovereign Immunities Act of 1976 ("FSIA"), Pub.L. No. 94-583, 90 Stat. 2891; because the arbitration clause contained in the parties' contract precluded the exercise of jurisdiction under the FSIA; and because the FSIA does not, and cannot constitutionally be read to, confer subject matter jurisdiction over suits between foreign plaintiffs and foreign states. Guinea also contends that MINE's service of process upon it did not meet the requirements of the FSIA and that the arbitration award itself was defective and unenforceable.

We reach only the first of these arguments, because we conclude that Guinea was immune under the FSIA and therefore that the court lacked subject matter jurisdiction to confirm the award. Accordingly, we reverse.

I

The following facts, unless indicated otherwise, are not disputed by the parties. The Republic of Guinea is a foreign sovereign state, and MINE is a Liechtenstein corporation. On August 19, 1971, Guinea and MINE ¹ entered into a contract providing for the creation of a "mixed economy company" that became known as "SOTRAMAR." J.A. 205-27. ² The purpose of the contract, as seen by both MINE and Guinea, was to establish and provide shipping services to transport Guinean bauxite to foreign markets. Appellant's Br. 4-5; Appellee's Br. 4; J.A. 209. The contract detailed the obligations of the parties and included provisions concerning capital and profits, operation, management, labor, professional training, and tax treatment. One "special provision" stated that the parties would make a market study and set up a technical and economic dossier, and that "mixed technical commissions" would study such matters as organization and finances. All these studies were to take place before SOTRAMAR was formed. J.A. 225. Although Guinean law was to be "applicable" to the contract, the contract stated that the "law between the parties" was the contract itself, and therefore that "Guinean laws shall be used for the interpretation and the implementation of this Agreement only accessorily and only in the case where the Agreement would leave a problem unsolved." J.A. 222-23.

The contract also contained several provisions relating to the settlement of disputes. When disagreements arose, the parties were first to attempt informal conciliation. If that effort failed, the parties were then to submit the conflict to arbitration by means of the method described in the contract--a panel of three arbitrators "selected by the President of CIRDI at the joint request of the parties or, failing this, at the request of the most diligent party." J.A. 226. "CIRDI" is the French acronym for the International Centre for Settlement of Investment Disputes. A codicil to the contract stated that the arbitrators would be chosen by the "President of the International Court of Settlement of International Disputes [sic] in Washington (CIRDI)." J.A. 229.

Although we will discuss later the parties' disagreement over the exact meaning of these arbitration provisions, a brief description of the International Centre for Settlement of Investment Disputes ("ICSID") should be helpful at this point. ICSID was established by an international agreement, the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, Mar. 18, 1965, 17 U.S.T. 1270, T.I.A.S. No. 6090, 575 U.N.T.S. 159 ("the Convention"), to which the United States and more than seventy-five foreign countries are parties. Although ICSID is seated in Washington, D.C., its purpose is to provide an international conciliation and arbitration forum. Convention art. 1(2). An ICSID arbitration is not undertaken by ICSID itself, but by arbitral tribunals constituted in accordance with the provisions of the Convention and subject to rules promulgated by ICSID. When two eligible parties consent to submit a dispute to an ICSID arbitration, that course is deemed to be their sole remedy unless they specify otherwise. Id. art. 26. Following the execution of a valid consent, either party may invoke the ICSID arbitration process, even if the other party refuses to participate. Id. art. 36. An ICSID award, even when rendered in such a default proceeding, is final and binding on the parties. Id. arts. 45, 53.

Although some SOTRAMAR-related activities took place after the contract was signed, SOTRAMAR never became an operating commercial entity. A rift developed between the parties, and in January 1975 the parties signed a form purporting to present their differences to an ICSID arbitration. Appellant's Br. 7; Appellee's Br. 56-57; J.A. 46.

What took place next is disputed. By Guinea's account, MINE agreed to file with ICSID the consent and a formal arbitration request; MINE took no such action but instead determined that the consent form was technically deficient; MINE mailed a purportedly correct revised form to Guinea; Guinea never received this form; and MINE made no effort to determine whether the revised form had reached Guinea. Appellant's Br. 7. MINE states that it perceived a deficiency in the first consent form and "urged" Guinea to execute a new form, but that Guinea then "broke off all relations and refused to communicate further with MINE." Appellee's Br. 6. ICSID files contain no record of any request for arbitration in connection with the SOTRAMAR contract. J.A. 236 (letter from Acting Secretary-General of ICSID to counsel for Guinea (Dec. 8, 1980), Exhibit 7 to Guinea's Motion to Dismiss and Opposition to Motion to Confirm Arbitration Award and Enter Judgment).

On January 20, 1978--some three years after the first consent form was signed--MINE filed, in federal district court, a petition to compel arbitration under section 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. Sec. 4 (1976), asserting subject matter jurisdiction under the FSIA and the FAA. J.A. 6. In essence, section 4 of the FAA empowers a federal district court to order arbitration to proceed in accordance with the terms of an arbitration agreement when adequate findings are made that an agreement did exist and that a default under the agreement did occur. Another relevant section of the FAA, section 5, 9 U.S.C. Sec. 5 (1976), sets forth the circumstances when a court is additionally authorized to order arbitration before an arbitrator or arbitrators not named in the agreement. One such instance occurs when a party "fail[s] to avail himself" of the agreed-upon method for naming arbitrators. Id.

Drawing on these provisions, the petition to compel set forth a series of allegations, with exhibits attached, to demonstrate that the court should order the parties to proceed to arbitration before the American Arbitration Association ("AAA"). In essential part, MINE maintained that it had prepared the joint consent form "in accordance with the terms" of the SOTRAMAR contract, that it had then prepared a corrected consent form and had mailed it to Guinea, and that Guinea had "failed and refused either to sign the revised submission or to proceed with arbitration." J.A. 8-9. As a result, MINE continued, it could not initiate an ICSID arbitration. J.A. 9.

Because in MINE's view these facts demonstrated that Guinea intended not to abide by the agreed-upon arbitration method, id., the petition went on to assert that no longer was that method available. Id. An order to compel arbitration was therefore proper, "since procedures are available [under section 5] to have a court appoint an arbitrator for the non-cooperating party." J.A. 10.

MINE served process upon Guinea by mailing, via registered mail, copies of the relevant documents to the Ministry of Foreign Affairs in Conakry, Guinea. MINE also sent the same documents by certified mail to the Embassy of Guinea in Washington, D.C. J.A. 47. Guinea did not respond to these documents.

The District Court heard argument on the petition on June 15, 1978; Guinea made no appearance. That same day, the court entered an order granting MINE's petition and ordering arbitration before the AAA and in accordance with the rules of the AAA. J.A. 48. The order set forth the court's conclusions that service had been proper under the FSIA, that the existence of an arbitration agreement and the failure to comply therewith were not in issue, and that Guinea's failure to avail itself of the agreed-upon arbitration method had frustrated the intent...