907 F.3d 606
D.C. Cir.2018Background
- Diag Human, S.E., a Liechtenstein corporation, sued the Czech Republic Ministry of Health to enforce a 2008 international arbitral "Final Award" awarding ≈$400 million for alleged interference with Diag Human’s blood-plasma business.
- Prior to the Final Award, a 1997 Interim Award found liability and a 2002 Partial Award granted roughly $10 million for undisputed damages.
- Czech arbitration law (and the parties’ agreement) permitted a post-award review by a second arbitral panel; both earlier awards had been reviewed and confirmed by that procedure.
- After the Final Award, both parties sought review; Diag Human later withdrew its request. The review panel issued a Resolution "discontinuing the proceedings" instead of an explicit confirmation.
- The district court refused to confirm the Final Award under the New York Convention (Article V(1)(e)), concluding the award had not become "binding on the parties." The D.C. Circuit affirmed, holding the review Resolution and Czech law prevented the Final Award from acquiring binding legal force.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Final Award was "binding" under New York Convention Art. V(1)(e) | Final Award became binding once issued and any review request that is later withdrawn cannot defeat enforcement | The parties’ arbitration agreement and Czech review procedure prevented the award from becoming binding while review was available; the review panel’s Resolution discontinued proceedings and nullified the award | The Final Award was not binding; the review Resolution and Czech law prevented legal force and enforcement |
| Effect of the review panel’s "Resolution" discontinuing proceedings | The Resolution did not nullify the award; wording ambiguity should be resolved in favor of enforcement | The Resolution, read with its reasoning and Czech law, discontinued the entire arbitration (original + review), effectively invalidating the Final Award | Resolution discontinued the arbitral proceedings and foreclosed the award’s legal force |
| Whether U.S. courts must accept foreign arbitral panel’s legal errors in review decisions | Review panel’s res judicata conclusion was wrong under Czech law, so U.S. courts should refuse enforcement | U.S. courts do not relitigate merits or correct legal errors by foreign arbitrators; only narrow Convention defenses apply | Court declines to assess correctness of review panel’s legal reasoning; mistakes do not justify overriding the Resolution |
| Whether enforcing the Resolution would violate U.S. public policy | Allowing a foreign arbitral review to nullify an award is repugnant and should be rejected | The public-policy exception is narrow and not met here given inconclusive evidence of repugnance | Public-policy challenge fails; standard is high and not satisfied |
Key Cases Cited
- Belize Bank Ltd. v. Gov't of Belize, 852 F.3d 1107 (D.C. Cir. 2017) (describing enforcement framework under New York Convention)
- Belize Soc. Dev. Ltd. v. Gov't of Belize, 668 F.3d 724 (D.C. Cir. 2012) (same context on Convention enforcement)
- TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928 (D.C. Cir. 2007) (narrow construction of Convention defenses and high burden on resisting party)
- Stolt–Nielsen S.A. v. Animal Feeds Int'l Corp., 559 U.S. 662 (2010) (courts should not review arbitral decisions for legal error)
- Enron Nigeria Power Holding, Ltd. v. Fed. Republic of Nigeria, 844 F.3d 281 (D.C. Cir. 2016) (limits on vacatur/enforcement review of arbitral awards)
- Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091 (9th Cir. 2011) (recognizing that agreed-upon review processes can delay or prevent awards from becoming binding)
- Fertilizer Corp. of India v. IDI Mgmt., Inc., 517 F. Supp. 948 (S.D. Ohio 1981) (applying foreign arbitral-review law when agreement provides for it)