MATTER OF CHROMALLOY AEROSERVICES (ARAB REPUBLIC)

• Decision Date: 31 July 1996
• Docket Number: Civil No. 94-2339 (JLG).
• Citation: 939 F. Supp. 907
• Parties: In the Matter of the Arbitration of Certain Controversies Between CHROMALLOY AEROSERVICES, A DIVISION OF CHROMALLOY GAS TURBINE CORPORATION, Petitioner, and The ARAB REPUBLIC OF EGYPT, Respondent.
• Court: U.S. District Court — District of Columbia

939 F. Supp. 907

In the Matter of the Arbitration of Certain Controversies Between CHROMALLOY AEROSERVICES, A DIVISION OF CHROMALLOY GAS TURBINE CORPORATION, Petitioner and The ARAB REPUBLIC OF EGYPT, Respondent.

Civil No. 94-2339 (JLG).

United States District Court, District of Columbia.

July 31, 1996.

Gary H. Sampliner, and Allen B. Green, McKenna & Cuneo, L.L.P., Washington, D.C., for Petitioner.

Mitchell B. Berger and Dean M. Dilley, Patton, Boggs & Blow, L.L.P., Washington, D.C., for Respondent.

MEMORANDUM

JUNE L. GREEN, District Judge.

I. Introduction

This matter is before the Court on the Petition of Chromalloy Aeroservices, Inc., ("CAS") to Confirm an Arbitral Award, and a Motion to Dismiss that Petition filed by the Arab Republic of Egypt ("Egypt"), the defendant in the arbitration. This is a case of first impression. The Court GRANTS Chromalloy Aeroservices' Petition to Recognize and Enforce the Arbitral Award, and DENIES Egypt's Motion to Dismiss, because the arbitral award in question is valid, and because Egypt's arguments against enforcement are insufficient to allow this Court to disturb the award.

II. Background

This case involves a military procurement contract between a U.S. corporation, Chromalloy Aeroservices, Inc., and the Air Force of the Arab Republic of Egypt.

On June 16, 1988, Egypt and CAS entered into a contract under which CAS agreed to provide parts, maintenance, and repair for helicopters belonging to the Egyptian Air Force. (Arbitration Award ("Award") at 3.) On December 2, 1991, Egypt terminated the contract by notifying CAS representatives in Egypt. (Award at 5.) On December 4, 1991, Egypt notified CAS headquarters in Texas of the termination. (Id.) On December 15, 1991, CAS notified Egypt that it rejected the cancellation of the contract "and commenced arbitration proceedings on the basis of the arbitration clause contained in Article XII and Appendix E of the Contract." (Id.) Egypt then drew down CAS' letters of guarantee in an amount totaling some $11,475,968. (Id.)

On February 23, 1992, the parties began appointing arbitrators, and shortly thereafter, commenced a lengthy arbitration. (Id.) On August 24, 1994, the arbitral panel ordered Egypt to pay to CAS the sums of $272,900 plus 5 percent interest from July 15, 1991, (interest accruing until the date of payment), and $16,940,958 plus 5 percent interest from December 15, 1991, (interest accruing until the date of payment). (Id. at 65-66.) The panel also ordered CAS to pay to Egypt the sum of 606,920 pounds sterling, plus 5 percent interest from December 15, 1991, (interest accruing until the date of payment). (Id.)

On October 28, 1994, CAS applied to this Court for enforcement of the award. On November 13, 1994, Egypt filed an appeal with the Egyptian Court of Appeal, seeking nullification of the award. On March 1, 1995, Egypt filed a motion with this Court to adjourn CAS's Petition to enforce the award. On April 4, 1995, the Egyptian Court of Appeal suspended the award, and on May 5, 1995, Egypt filed a Motion in this Court to Dismiss CAS's petition to enforce the award. On December 5, 1995, Egypt's Court of Appeal at Cairo issued an order nullifying the award. (Decision of Egyptian Court of Appeal ("Egypt Ct.") at 11.) This Court held a hearing in the matter on December 12, 1995.

Egypt argues that this Court should deny CAS' Petition to Recognize and Enforce the Arbitral Award out of deference to its court. (Response to Petitioner's Post-Hearing Brief at 2.) CAS argues that this Court should confirm the award because Egypt "does not present any serious argument that its court's nullification decision is consistent with the New York Convention or United States arbitration law." (Petitioner's Rejoinder at 1.)

III. Discussion

A. Jurisdiction

This Court has original jurisdiction under the Foreign Sovereign Immunities Act, 28 U.S.C. § 1330, et. seq. (1976), which provides in relevant part that:

The district courts shall have original jurisdiction without regard to amount in controversy of any non-jury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity ... under sections 1605-1607 of this title.

28 U.S.C. § 1330(a). Both the Arab Republic of Egypt and the Egyptian Air Force are foreign states under 28 U.S.C. § 1603(a) & (b). See Republic of Argentina v. Weltover, 504 U.S. 607, 612, n. 1, 112 S.Ct. 2160, 2164-65, n. 1, 119 L.Ed.2d 394 (1992).

(a) A foreign state shall not be immune from the jurisdiction of courts of the United States ... in any case —

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(6) in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States, or to confirm an award made pursuant to such an agreement, if

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(B) the agreement or award is ... governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.

28 U.S.C. § 1605(a) & (a)(6) & (a)(6)(B) (emphasis added).

CAS brings this action to confirm an arbitral award made pursuant to an agreement to arbitrate any and all disputes arising under a contract between itself and Egypt, a foreign state, concerning a subject matter capable of settlement by arbitration under U.S. law. See 9 U.S.C. §§ 1-14. Enforcement of the award falls under the Convention on Recognition and Enforcement of Foreign Arbitral Awards, ("Convention"), 9 U.S.C. § 202, which grants "the district courts of the United States ... original jurisdiction over such an action or proceeding, regardless of the amount in controversy." 9 U.S.C. § 203.¹

B. Chromalloy's Petition for Enforcement

A party seeking enforcement of a foreign arbitral award must apply for an order confirming the award within three years after the award is made. 9 U.S.C. § 207. The award in question was made on August 14, 1994. CAS filed a Petition to confirm the award with this Court on October 28, 1994, less than three months after the arbitral panel made the award. CAS's Petition includes a "duly certified copy" of the original award as required by Article IV(1)(a) of the Convention, translated by a duly sworn translator, as required by Article IV(2) of the Convention, as well as a duly certified copy of the original contract and arbitration clause, as required by Article IV(1)(b) of the Convention. 9 U.S.C. § 201 note. CAS's Petition is properly before this Court.

1. The Standard under the Convention

This Court must grant CAS's Petition to Recognize and Enforce the arbitral "award unless it finds one of the grounds for refusal ... of recognition or enforcement of the award specified in the ... Convention." 9 U.S.C. § 207. Under the Convention, "Recognition and enforcement of the award may be refused" if Egypt furnishes to this Court "proof that ... the award has ... been set aside ... by a competent authority of the country in which, or under the law of which, that award was made." Convention, Article V(1) & V(1)(e) (emphasis added), 9 U.S.C. § 201 note. In the present case, the award was made in Egypt, under the laws of Egypt, and has been nullified by the court designated by Egypt to review arbitral awards. Thus, the Court may, at its discretion, decline to enforce the award.²

While Article V provides a discretionary standard, Article VII of the Convention requires that, "The provisions of the present Convention shall not ... deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law ... of the country where such award is sought to be relied upon." 9 U.S.C. § 201 note (emphasis added). In other words, under the Convention, CAS maintains all rights to the enforcement of this Arbitral Award that it would have in the absence of the Convention. Accordingly, the Court finds that, if the Convention did not exist, the Federal Arbitration Act ("FAA") would provide CAS with a legitimate claim to enforcement of this arbitral award. See 9 U.S.C. §§ 1-14. Jurisdiction over Egypt in such a suit would be available under 28 U.S.C. §§ 1330 (granting jurisdiction over foreign states "as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity ... under sections 1605-1607 of this title") and 1605(a)(2) (withholding immunity of foreign states for "an act outside ... the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States"). See Weltover, 504 U.S. at 607, 112 S.Ct. at 2160. Venue for the action would lie with this Court under 28 U.S.C. § 1391(f) & (f)(4) (granting venue in civil cases against foreign governments to the United States District Court for the District of Columbia).

2. Examination of the Award under 9 U.S.C. § 10

Under the laws of the United States, arbitration awards are presumed to be binding, and may only be vacated by a court under very limited circumstances:

(a) In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration —

(1) Where the award was procured by corruption, fraud, or undue means.

(2) Where there was evident partiality or corruption in the arbitrators, or either of them.

(3) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which

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