By Joshua D. Wolson
Special to the Legal
In the international realm, contractual arbitration is supposed to provide parties a modicum of certainty. They know the forum in which disputes will be heard and the procedural rules that will control. When coupled with a choice of law clause, an agreement to arbitrate should make clear the rules of the road for any future disputes. However, a recent decision from the U.S. District Court for the District of Columbia shows just how shaky that assumption might be.
The case, filed by International Trading and Industrial Investment Company against DynCorp Aerospace, involves a petition to enforce an arbitration award. The arbitration took place in Paris before the International Chamber of Commerce and was decided under Qatari law, and the arbitrator issued an award in favor of International Trading. DynCorp challenged the award, and the Qatari Court of Cassation -- Qatar’s court of last resort -- held that the arbitrator exceeded his power and erred as a matter of Qatari law.
Therefore, under Qatari law, the ICC’s award was not enforceable. Nonetheless, International Trading filed a petition in federal court in Washington, D.C., to enforce the ICC’s award, and the district court held that the ICC’s award should be enforced under U.S. law. In short, the court held that the Federal Arbitration Act and the Convention on Recognition and Enforcement of Foreign Arbitral Awards set forth exclusive bases for refusing to enforce an arbitrator’s award, and the Qatari court’s decision did not fall into one of those categories.
If it stands, the district court’s decision demonstrates an inherent uncertainty to international arbitration and might encourage forum shopping in efforts to enforce an award. Although the initial arbitral process might be relatively certain, enforcement of an arbitral award is left to the vagaries of local courts.
The possibility of conflicting decisions raises significant hurdles. For example, if International Trading enforces its judgment, obtains assets from DynCorp in the United States and repatriates them to Qatar, could DynCorp then sue International Trading in Qatar, arguing that International Trading has no right to the assets under Qatari law? Superficially, it seems unlikely that a Qatari court could undo what has been done here. But that same Qatari court might think that the district court here did just that -- undo a Qatari judicial decision.
Similarly, what happens if a court in a third country is called on to resolve this conflict? For example, what if a decision orders specific performance, replevin, or some other non-pecuniary remedy that has to take place in Germany? If a court in Qatar holds the decision unenforceable but an American court holds it enforceable, what is a German court to do? Should it resolve the dispute between the national courts of two countries? If so, how? And, does the outcome depend on what country’s courts must resolve the dispute? If so, more forum shopping.
There do not seem to be easy answers to these questions -- a product of the international system in which these arbitrations take place. Justice Robert Jackson famously said of the Supreme Court, “We're not last because we're right, we're right because we're last.” As the district court’s decision makes clear, though, one problem with international arbitration is that it is not clear who is last, and therefore it may not be clear who is right, either.
Joshua D. Wolson is a partner in the litigation department at Dilworth Paxson. He can be reached at 215-575-7295 or email@example.com.