Risen Energy Co., Ltd. v. Focus Futura Holding Participacoes S.A.

Background

Risen Energy Co., Ltd. supplied photovoltaic modules, and Focus Futura Holding Participações S.A. was developing a photovoltaic electricity-generating facility. In December 2020, the parties entered agreements under which Risen Energy would supply the modules. The agreements required Risen Energy to provide bank guarantees protecting Focus Futura’s down payment before Focus Futura had to make that payment.

Focus Futura sent a notice to proceed on February 26, 2021. Risen Energy returned a draft guarantee on March 11, 2021, with some information missing and asked Focus Futura to complete it. Focus Futura then notified Risen Energy that it had breached the agreements by failing to provide the guarantees. After the parties unsuccessfully renegotiated pricing, Focus Futura terminated the agreements on June 29, 2021.

Focus Futura began arbitration under the International Chamber of Commerce rules. It argued that Risen Energy materially breached the agreements under New York law. Risen Energy argued that any breach was not material. The arbitration panel found that timely delivery of the guarantees was a material obligation, that Risen Energy materially breached it, and that the breach gave Focus Futura the right to terminate. The panel awarded Focus Futura nearly $60 million in direct damages, additional interest, and approximately $5 million in attorneys’ fees and arbitrators’ fees and costs.

Legal standard

Risen Energy asked the court to vacate, or set aside, the arbitration award. Focus Futura asked the court to confirm the award, which would make it a judgment of the court. The court reviewed the award under the Federal Arbitration Act and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. That review is highly deferential, and the party opposing enforcement bears the burden of proving a recognized defense.

The court also considered whether the panel acted in “manifest disregard of the law.” Under that demanding standard, an award may be set aside only when the arbitrators knew a clearly established and applicable legal rule but refused to apply it or ignored it altogether. An award must be upheld if the arbitrator provided even a barely colorable justification for the result.

Analysis of vacatur and confirmation

The court held that the panel did not manifestly disregard New York law. The panel issued an extensively reasoned, 166-page award and interpreted both the agreements and the facts. It found that the guarantees were a critical part of the parties’ arrangement because Focus Futura’s obligation to make the initial five-percent payment was not triggered without them. Proceeding without the guarantees would have deprived Focus Futura of protections it had negotiated.

The court explained that New York law treats a breach as material when it goes to the root or essence of the contract. It concluded that the panel applied that standard rather than ignoring it. The court stated that its role was not to second-guess the panel’s reasonable interpretation of the agreements and the law.

Attorneys’ fees

The court denied Focus Futura’s request for attorneys’ fees incurred in the federal court proceeding. Federal courts generally cannot award such fees without statutory authority, although fees may be available when the opposing party acts in bad faith or for improper purposes. The court found that, although Risen Energy’s arguments failed, the record did not show bad faith, vexatious conduct, wanton conduct, or oppressive reasons.

The court also rejected Focus Futura’s argument that the agreements required Risen Energy to pay fees for the federal proceeding. The court interpreted the relevant provision as applying to expenses and fees incurred during the arbitration and awarded by the arbitration panel, not fees incurred in later court proceedings. The court further rejected reliance on provisions that would discourage challenges to arbitration awards.

Disposition

Risen Energy’s motion to vacate the award was DENIED. Focus Futura’s cross-motion to confirm the award was GRANTED. Focus Futura’s request for attorneys’ fees was DENIED. The clerk was directed to close the motion and terminate the case.