Federal Judge Confirms $400 Million ICC Award, Finds Mexican Court Erred

Federal Judge Confirms $400 Million ICC Award, Finds Mexican Court Erred

 NEW YORK — (Mealey’s) A New York federal judge on Aug. 27 granted a Mexican corporation’s request to confirm an approximately $400 million arbitration award that was issued in its favor in a dispute over contracts for the construction of offshore platforms, finding that a Mexican court that nullified the award improperly applied a law that was not in existence at the time the parties entered the underlying agreements (Corporacion Mexicana De Mantenimiento Intergral, S. De R.L. De C.V. v. Pemex-Exploracion Y Produccion, No. 1:10-cv-00206, S.D. N.Y.; See June 2013, Page 20).

Petition

In January 2010, Corporacion Mexicana De Mantenimiento Intergral, S. De R.L. De C.V. (COMMISA) filed a petition to confirm an arbitration award in the U.S. District Court for the Southern District of New York.  The award was issued by a Mexico City panel against Pemex-Exploracion Y Produccion (PEP) by the International Court of Arbitration of the International Chamber of Commerce (ICC).

The dispute related to a contract between COMMISA and PEP under which COMMISA would construct and install two offshore platforms and ancillary structures.  The parties subsequently entered a specific agreement for additional work.  After disputes arose under both contracts, COMMISA filed arbitration proceedings against PEP.  The District Court confirmed the award in favor of COMMISA.  The award, with interest, is now worth approximately $400 million.  

Appeal

PEP appealed to the Second Circuit U.S. Court of Appeals.  PEP moved to vacate the District Court's order confirming the award.  PEP requested that based on an intervening ruling by the 11th Collegiate Court of Mexico, which nullified the award, the case should be remanded.

The appeals court granted PEP's motion and remanded the case.  The appeals court noted that on remand, the District Court must address in the first instance whether enforcement should be denied because it "has been set aside or suspended by a competent authority of the country in which, or under the law of which, the award was made."

Award

Judge Alvin K. Hellerstein granted COMMISA’s renewed motion to confirm the award, finding that the 11th Collegiate Court, when deciding to nullify the award, violated the basic notions of justice by applying a law that did not exist at the time the underlying contract was formed.  Judge Hellerstein found that application of the law prevented COMMISA from litigating its claims and denied PEP’s motion to dismiss the petition.

“In declining to defer to the Eleventh Collegiate Court, I am neither deciding, nor reviewing, Mexican law.  I base my decision not on the substantive merit of a particular Mexican law, but on its application to events that occurred before that law's adoption.  At the time COMMISA brought its claims against PEP, there was no statute, case law, or any other source of authority that put COMMISA on notice that it had to pursue its claims in court, instead of in arbitration.  COMMISA reasonably believed that it was entitled to arbitrate the case, and the Eleventh Collegiate Court's decision disrupted this reasonable expectation by applying a law and policy that were not in existence at the time of the parties' contract, thereby denying COMMISA an opportunity to obtain a hearing on the merits of its claims.  The decision therefore violated basic notions of justice, and I hold that the Award in favor of COMMISA should be confirmed,” Judge Hellerstein said.

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