Commodities & Minerals Enterprise Ltd. v. CVG Ferrominera Orinoco, C.A.
49 F.4th 802
2d Cir.2022Background
- CME (British Virgin Islands commodities trader) sub-chartered the vessel General Piar to CVG Ferrominera Orinoco, C.A. (Venezuelan state-owned) under a 2010 charter containing a broad SMA arbitration clause selecting U.S. maritime law and three-arbitrator proceedings in New York.
- CME initiated SMA arbitration (2016); the three-member Panel found for CME and issued a Final/Corrected Award for $12,655,594.36 plus 5.5% post-award interest (Dec. 2018).
- CME filed to confirm the foreign arbitral award in SDNY (Dec. 2019). Ferrominera opposed confirmation, arguing defective service (no summons), lack of arbitral jurisdiction/invalidity under Venezuelan law, improper allocation of past payments, and that the Charter was procured by corruption (U.S. public policy bar).
- The district court confirmed the Award and awarded attorney’s fees and costs to CME. Ferrominera appealed.
- The Second Circuit affirmed confirmation (rejecting service, jurisdiction, scope, and public-policy challenges) but held the district court abused its discretion in awarding attorney’s fees and vacated that portion of the judgment.
Issues
| Issue | CME (Plaintiff) Argument | Ferrominera (Defendant) Argument | Held |
|---|---|---|---|
| Personal jurisdiction / service required to confirm (summons) | Only "notice of the application" is required under FAA §9; CME served notice consistent with SMA rules and §1608(b)(1) special arrangement | FSIA §1608(b) requires delivery of a summons and complaint to a foreign instrumentality; failure to serve summons deprived court of personal jurisdiction | FAA/NY Convention require service of notice of application, not a summons; CME’s service under SMA rules satisfied §1608(b)(1); jurisdiction proper |
| Validity of arbitration agreement (governing law) | Choice-of-law in Charter selects U.S. maritime law; questions of validity governed by that law; Panel correctly found agreement valid | Agreement invalid under Venezuelan statutory approvals; arbitration clause therefore void and Panel lacked jurisdiction | Article V(1)(a) directs courts to apply the law chosen by the parties; parties selected U.S. maritime law and Ferrominera offered no U.S. maritime-law challenge, so arbitration agreement held valid |
| Scope of Panel’s authority / allocation of past payments | Allocation and damages fall within broad arbitration clause; arbitrators' calculation is for the Panel | Panel exceeded its authority by reallocating Ferrominera’s past payments to other contracts, improperly increasing liability | Dispute was a damages/interpretation question for arbitrators; Article V(1)(c) does not permit second-guessing mere errors in calculation; Award stands |
| Public-policy defense (corruption) | Enforcement does not itself violate U.S. public policy; Panel resolved corruption allegations on the merits | Charter procured by corruption; enforcement would violate Article V(2)(b) public-policy exception | Public-policy exception is narrow; Ferrominera’s claim merely relitigates Panel’s factual finding and does not show enforcement itself violates fundamental U.S. public policy; defense fails |
| Attorney’s fees awarded by district court | Fees appropriate because Ferrominera refused to comply with Award without good-faith justification | Presented colorable arguments (including unsettled service question); did not litigate in bad faith | District court abused discretion: fee award vacated because Ferrominera’s positions were not entirely without color or brought in bad faith |
Key Cases Cited
- Yusuf Ahmed Alghanim & Sons v. Toys "R" Us, Inc., 126 F.3d 15 (2d Cir. 1997) (confirmation is a summary proceeding with limited review)
- Florasynth, Inc. v. Pickholz, 750 F.2d 171 (2d Cir. 1984) (confirmation is not an original action; summary nature of proceedings)
- Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc., 403 F.3d 85 (2d Cir. 2005) (burden on resisting party to prove an Article V defense)
- Motorola Credit Corp. v. Uzan, 388 F.3d 39 (2d Cir. 2004) (choice-of-law clauses separable for validity of arbitration agreements)
- Schnabel v. Trilegiant Corp., 697 F.3d 110 (2d Cir. 2012) (narrow exception where applicability of choice-of-law clause itself is specifically challenged)
- Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (2010) (arbitrator error or disagreement does not justify vacatur; arbitrator must have exceeded powers)
- Telenor Mobile Commc'ns AS v. Storm LLC, 584 F.3d 396 (2d Cir. 2009) (Article V(2)(b) public-policy exception construed narrowly)
- IBEW, Local 97 v. Niagara Mohawk Power Corp., 143 F.3d 704 (2d Cir. 1998) (courts review whether the award itself conflicts with public policy, not arbitrators' factfinding)