Confirmation of International Arbitration Award Barred by Collateral Estoppel
The DC Circuit Court of Appeals recently affirmed the dismissal of a second petition to confirm an international arbitration award in favor of a BVI/Israeli construction company (GSS Group) against the Port Authority of Liberia. Following the Liberian civil war, the Port Authority awarded a multi-million dollar construction contract to GSS to revitalize the port in Monrovia. The Port Authority, an independent entity of the Liberian government, ultimately cancelled the contract following government objections over lack of transparency in bidding.
The construction contract called for arbitration in London pursuant to the laws of England and Wales. After it was terminated, GSS filed an arbitration proceeding against the Port Authority in London. Meanwhile, the Liberian Public Procurement and Concession Commission, a government organization charged to ensure fairness and transparency in public procurement contracts, sought a declaration from a Liberian court that the agreement was invalid and unenforceable. The Liberian court agreed with the government. A month later, a sole arbitrator found the Port Authority liable to GSS for more than $44 million.
GSS sought to confirm the award against the Port Authority in the US. The Port Authority argued the court lacked personal jurisdiction. GSS contended that because the Port Authority was a state-owned enterprise and not a “person” under the Due Process Clause, GSS could not challenge jurisdiction. The court disagreed and held that GSS was akin to a private corporation, entitled to challenge personal jurisdiction and that the case lacked any discernable connection to the forum. When GSS failed to timely argue that the Port Authority was legally indistinguishable from the Liberian government to confer jurisdiction, the case was dismissed. On appeal, the decision was affirmed.
GSS tried again in the same forum. Its second petition to confirm was filed initially against Liberia and the Port Authority was added some weeks later. This time, GSS argued that Liberia was subject to suit as a sovereign and could not challenge personal jurisdiction. GSS argued that because the Port Authority was an agent of the government, Liberia was liable for the award. The district court again dismissed. The court ruled that the Port Authority was an independent entity of the government and that GSS had not proven the requisite agency to establish subject matter jurisdiction over Liberia. The district court also found that collateral estoppel barred GSS from revisiting its claim against the Port Authority.
On appeal, the Court affirmed the ruling that the suit against the Port Authority was barred by issue preclusion. The Court noted that “[p]reclusion applies if a later argument ‘is related to the subject-matter and relevant to the issues that were litigated and adjudicated previously, so that it could have been raised.’” The issue was necessarily decided in the first case because GSS could have argued agency at that time. The Court also affirmed the dismissal of Liberia because the Port Authority was a separate legal entity and GSS failed to establish either the principal/agent relationship or that the underlying conduct constituted fraud in order to hold Liberia liable.
This case highlights the significance of personal jurisdiction, subject matter jurisdiction and issue preclusion in confirmation of international arbitration awards. While the court had subject matter jurisdiction pursuant to the FAA and New York Convention as to the Port Authority, the petitioner still needed to establish personal jurisdiction and failed to do so. The second attempt was then precluded by the first. The case is GSS Group Ltd. v. National Port Authority of Liberia, No. 14–7041 (D.C. Cir. May 17, 2016). The opinion is here.
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