Ecopetrol S.A. v. Offshore Exploration & Production LLC
46 F. Supp. 3d 327
S.D.N.Y.2014Background
- Offshore Exploration and Production, LLC sold its subsidiary Savia Peru S.A. to Ecopetrol S.A. and KNOC under a Stock Purchase Agreement (SPA) that requires Offshore to indemnify Purchasers for taxes and to pay contested taxes.
- The SPA created an escrow with $150 million of Purchasers’ funds to secure potential indemnification claims, governed by an Escrow Agreement with detailed disbursement rules.
- Purchasers asserted $75,308,179.03 in tax indemnification claims related to Savia’s Peruvian VAT liabilities; Offshore objected to escrow disbursements.
- An Interim Award (April 15, 2013) ordered Offshore to reimburse the Purchasers within 30 days, potentially from the Escrow Amount, which Offshore later instructed Morgan Stanley to release, triggering disputes.
- A Supplemental Interim Award (December 1, 2013) held Offshore could not satisfy the Interim Award with escrow funds, and the parties proceeded to merits proceedings on Savia’s VAT liability; the Purchasers moved to confirm both Interim Awards, and Offshore moved to vacate the Supplemental Award.
- This action challenges and seeks enforcement of the Interim and Supplemental Interim Awards under the Convention and the FAA, with the court granting confirmation and denying vacatur.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Interim and Supplemental Interim Awards are final and confirmable under the FAA and Convention. | Purchasers: awards are final, enforceable provisional relief that resolves a discrete independent claim. | Offshore: awards are not final or improperly based on jurisdiction/interpretation issues. | Interim and Supplemental Interim Awards are final and confirmable. |
| Whether the Supplemental Interim Award was issued within the arbitral panel’s jurisdiction under the SPA. | Purchasers argue Section 10.7 broad arbitration clause covers disputes arising under the SPA, including the escrow issue. | Offshore contends the issue falls under the Escrow Agreement or lacks jurisdiction. | Panel had jurisdiction under the SPA; Supplemental Interim Award not vacated for lack of jurisdiction. |
| Whether the Supplemental Interim Award can be vacated for manifest disregard of the law. | Purchasers contend the award was proper under ICDR rules and contractual interpretation. | Offshore asserts manifest disregard for NY law and forum/arbitration interplay. | Vacatur denied; panel’s interpretation of ICDR rules and arbitration clauses upheld. |
| Whether the Interim Awards should be remanded due to alleged incompleteness. | Remand denied; awards sufficiently definite to confirm. | ||
| Whether the Awards can be confirmed notwithstanding potential offset or future adjustments to liability. | Purchasers rely on finality of the immediate payment obligation. | Offshore reserves rights to offsets/deductions post-issuance of final award. | Finality for purposes of confirmation preserved; potential offsets do not defeat finality of the interim awards. |
Key Cases Cited
- Zeiler v. Deitsch, 500 F.3d 157 (2d Cir.2007) (interim awards may be final for purposes of confirmation if they require specific action)
- Metallgesellschaft AG. v. M/V Capitan Constante, 790 F.2d 280 (2d Cir.1986) (finality of an award can exist for independent claims despite other unresolved issues)
- Michaels v. Mariforum Shipping, S.A., 624 F.2d 411 (2d Cir.1980) (partial liability resolutions can be final for purposes of confirmation)
- D.H. Blair & Co., Inc. v. Gottdiener, 462 F.3d 95 (2d Cir.2006) (heavy scrutiny of confirmation grounds under FAA; limited vacatur standard)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010) (manifest disregard standard; limits on reviewing arbitration awards)