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Federal Court Enforces Foreign Arbitral Award Without Permitting Counterclaim

Posted In Arbitration
China Three Gorges Project Corp. v. Rotec Industries, Inc., No. Civ. A. 04-1510 JJF, 2005 WL 1813025 (D.Del. Aug. 2, 2005). This action involves a Petition to Confirm a Foreign Arbitral Award filed by Petitioner China Three Gorges Project Corporation ("China Gorges") and respondent's Motion to Dismiss or in The Alternative, To Modify The Foreign Arbitral Award. The Court granted the petition to confirm the award and denied the respondent's motions. The action arose out of an accident that occurred at a construction site in the Peoples Republic of China in 1999. China Gorges purchased three cranes from respondent, a Delaware corporation, through China Huarun General Company in 1996. China Gorges found technical problems with one of the cranes and repaired it based on respondent's instructions. During the repairs, two conveyor belts fell and killed three persons and injured thirty-one others. An arbitral panel awarded damages pursuant to the Arbitral Terms in the Agreement between the parties. China Gorges applied to the Chinese courts for partial enforcement of the award. In December 2004, China Gorges applied to Federal Court for the District of Delaware to enforce the balance of the arbitration award rendered by the Chinese Court in addition to the enforcement of an execution fee ordered by the Chinese Court. The award amounted to $2,572,671.38, plus interest. The enforcement of this award was sought pursuant to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. § 202 et seq., (the "New York Convention"). Respondent contended that the award should be dismissed because China Gorges failed to conform to the requirements of Article IV of the New York Convention, since it failed to file the original arbitration agreement or a certified copy. It also sought an offset of $2,445,917.67 owed to it by China Gorges. China Gorges submitted a certified copy of Memorandum of 9.3 Accident Compensation Negotiation (the "Memorandum") executed by both the parties, that contained the arbitral terms agreed to by the parties in response to respondent's Motion to Dismiss. It also requested the court not to entertain the counterclaim sought by respondent because the arbitral award became binding when it was signed by the Chinese court ("the "CIETAC Panel") in 2004. The Court held that federal law required United States courts to confirm foreign arbitral awards covered by the Convention if an order of enforcement is sought within three years of the award unless it fell into one of the grounds requiring refusal or deferral. Accordingly, the Court confirmed the award because 9 U.S.C. § 207 required it. Further, the Court did not find any grounds under Article V of the Convention to refuse enforcement of the award or permit the counterclaim sought by the respondent. The Court accordingly reduced the award only by the amount that the Chinese court partially enforced. Authored by: Raj Srivatsan 302-888 6831 rsrivatsan@morrisjames.com