ConocoPhillips Gulf of Paria B.V. v. Corporacion Venezolana Del Petroleo, S.A.

Background

ConocoPhillips Gulf of Paria B.V. filed a petition under Section 207 of the Federal Arbitration Act and the New York Convention, an international agreement governing recognition and enforcement of foreign arbitration awards. It asked the court to confirm and enforce a final arbitration award issued in New York by a tribunal formed under the International Chamber of Commerce.

The arbitration panel found that Corporacion Venezolana Del Petroleo, S.A. and Petroleos De Venezuela, S.A. had failed to repay a loan used to finance their purchase of a 35% interest in an oil field. The award ordered repayment of $33,700,000 and interest from October 22, 2002, until full payment, at “LIBOR plus 1% per annum.” The award also addressed legal fees, tribunal expenses, and other claims.

Disputes Before the Court

The respondents did not oppose confirming the award generally, but the parties disagreed about the meaning of “plus 1% per annum.” ConocoPhillips argued that the award required compound interest, while the respondents argued for simple interest. The court noted that the difference between those interpretations was approximately $8 million.

ConocoPhillips also requested attorneys’ fees and costs incurred in the confirmation proceeding. The respondents asked the court to stay enforcement of any confirming judgment until ConocoPhillips obtained authorization from the Treasury Department’s Office of Foreign Assets Control under applicable Venezuelan sanctions regulations.

The respondents further argued that ConocoPhillips had waived its compound-interest argument by failing to raise it during the arbitration. The court declined to find waiver.

Ruling

The court held that the arbitration award was ambiguous because the interest language was open to more than one interpretation and neither party’s interpretation was clearly correct. It ruled that the appropriate action was to remand the award to the arbitration tribunal for clarification of whether the 1% interest component was simple or compound. The court rejected the parties’ argument that it could resolve the ambiguity by modifying the award under 9 U.S.C. § 11(c), because the competing interpretations could change the result by approximately $8 million and were not merely semantic.

Judge Lorna G. Schofield denied ConocoPhillips’s request for attorneys’ fees and costs because it cited no binding authority supporting that request. The court also denied the respondents’ request to stay execution of the judgment as moot while the award remained subject to clarification.