Florida District Court Rules Denial of Discovery Does Not Warrant Vacatur of International Arbitration Award
Sural (Barbados) Ltd. and the Government of the Republic of Trinidad and Tobago (“GORTT”) entered into an agreement to create a smelter and related plants. After project delays and ultimate termination of the agreement, GORTT entered into an expanded agreement with a third party, Votorantim Group (VG).
Sural filed an arbitration proceeding against GORTT before the ICC to address contract claims arising from its now defunct agreement. Trinidad and Tobago law, treated as English law, governed the Agreement and the seat of the arbitration was Miami, Florida. An Award was ultimately entered in favor of GORTT which it then confirmed before the High Court of Justice in England. Within days of confirmation, Sural filed a petition in the United States District Court for the Southern District of Florida to confirm the Award, in part, and set it aside, in part. In response, GORTT filed a cross-motion to confirm the Award.
Initially, the court rejected GORTT’s argument that it should defer to the prior ruling of the English court. Noting that England was a secondary jurisdiction under the New York Convention and the United States was the primary jurisdiction, the court determined that it had power to vacate the award (unlike a secondary jurisdiction which can only “refuse or stay enforcement of an award”). Judicial comity, therefore, did not preclude the court from ruling on the issues presented.
As non-domestic parties, Sural and GORTT agreed that the New York Convention applied to their dispute. However, Sural advocated for application of the Florida International Commercial Arbitration Act (FICAA) over the Federal Arbitration Act. After considering the issue, the court determined that the FICAA operated essentially as a “gap filler” when not in conflict with the FAA and proceeded to address both Acts in the remainder of the opinion.
Sural’s substantive challenge to the Award was premised on denial of its discovery requests pursuant to Article V(1)(b) of the New York Convention ( “the party against whom the award is invoked … was otherwise unable to present his case”). The panel had rejected Sural’s request for a third party subpoena to a principal of VG and its motion to compel communications between GORTT and VG, finding the information cumulative, not relevant and untimely.
Noting that the panel’s denials of discovery occurred months before the arbitration hearing, the court essentially held that Sural’s participation in the proceedings without objection constituted waiver. The court relied on the waiver provisions contained in the ICC rules, the FICAA, and the stringent standards set forth in the FAA’s application of the New York Convention which provide “businesses with a widely used system through which to obtain domestic enforcement of international commercial arbitration awards resolving contract and other transactional disputes, subject only to minimal standards of domestic judicial review for basic fairness and consistency with national public policy.” In light of that heavy burden and Sural’s waiver, the court declined to further address the substance of the challenged rulings and granted GORTT’s cross-motion to confirm the Award dubbing Sural’s belated challenge nothing more than “buyer’s remorse” with the outcome rather than a denial of due process.
The case is noteworthy because it addresses the distinction between primary and secondary jurisdiction and the interplay of the FICAA and FAA. The opinion also provides a reminder of potential consequences in failing to timely object during proceedings to preserve subsequent arguments – even in the face of the heavy burden imposed by U.S. and Florida courts which strongly favor arbitration. The case is Sural (Barbados) Ltd. v. The Government of the Republic of Trinidad and Tobago, Case No. 1:15-cv-22825-KMM (S.D. Fla. Aug. 12, 2016). The Opinion is here.
Ava Borrasso is the Principal of Ava J Borrasso, P.A., a Miami-based law firm that concentrates on business and international arbitration and litigation. She also serves as an Arbitrator and is a member of commercial panel the American Arbitration Association.