Commodities & Minerals Enterprise Ltd. v. CVG Ferrominera Orinoco, C. A.

Background

Commodities & Minerals Enterprise Ltd. (CME) sought confirmation of an international arbitration award against CVG Ferrominera Orinoco, C.A. (FMO) under Chapter 2 of the Federal Arbitration Act (FAA) and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly called the New York Convention. CME and FMO had entered into a charter contract under which CME time-chartered the M/V General Piar to FMO to transport iron ore. The contract contained a broad arbitration clause requiring disputes to be resolved by three arbitrators in New York under the rules of the Society of Maritime Arbitrators.

CME initiated arbitration over unpaid invoices, lost profits, and attorneys’ fees. FMO opposed CME’s claims and asserted setoff rights and counterclaims. FMO argued that the charter contract was void because it was allegedly obtained through corruption and lacked approvals required by Venezuelan law. The arbitration panel rejected those arguments and issued a final award of $12,655,594.36, with post-award interest at 5.50% per year from December 20, 2018. A later corrected award fixed clerical errors.

CME filed this federal court proceeding to confirm the award. FMO initially did not respond, but after the court ordered it to explain why the petition should not be treated as unopposed, FMO retained counsel and opposed confirmation. The court concluded that service of the petition was proper under the parties’ agreed arbitration rules.

Legal standard and jurisdiction

The court explained that confirmation ordinarily converts an arbitration award into a court judgment. Review is highly deferential, and a court generally must confirm an award unless one of the limited defenses in Article V of the New York Convention applies. The party opposing enforcement bears the burden of proving such a defense.

The court found both subject-matter and personal jurisdiction. The New York Convention supplied federal jurisdiction because the parties were foreign corporations arbitrating in the United States. The parties’ agreement to arbitrate in New York and to allow a court of competent jurisdiction to enter judgment also established consent to this forum.

FMO’s objections

Authority to arbitrate. FMO argued that the arbitration panel lacked authority to decide the dispute and that the court should independently review whether a valid arbitration agreement existed under Venezuelan law. The court held that the clause covering “any dispute arising out of or in connection with” the charter was broad enough to show clear and unmistakable agreement that the arbitrators could decide questions about their own authority. The court therefore gave the panel’s decision highly deferential review.

The panel had applied the contract’s choice-of-law provision calling for United States maritime law. It also considered evidence about Venezuelan law and found that FMO had not proved that the charter lacked required approvals or was void. The court found no basis to disturb that conclusion and rejected FMO’s authority objection.

Issues beyond the arbitration agreement. FMO argued that the panel exceeded the scope of the arbitration by deciding how FMO’s earlier payments to CME should be allocated among several contracts. The court held that this dispute fell within the broad arbitration clause. It found no reason to disturb the panel’s allocation of payments, noting that an alleged error—even a serious one—is not enough to refuse enforcement unless the arbitrators had departed from interpreting and applying the agreement. The court also noted that FMO had agreed to a consolidated proceeding involving multiple contracts.

Corruption and public policy. FMO argued that enforcing the award would violate public policy because the underlying charter was allegedly obtained through corruption. The court held that the public-policy defense focuses on whether enforcement of the award itself, rather than enforcement of the underlying contract, would conflict with a clearly defined and dominant public policy. FMO did not explain how enforcement of the award would create that kind of conflict.

The court also found that the arbitration panel had considered the corruption allegations, allowed FMO broad discovery, and determined that the evidence presented was insufficient. The court found no public-policy concern and rejected this objection.

Ruling

Judge Andrew L. Carter, Jr. granted CME’s petition to confirm the arbitration award. He directed the Clerk of Court to enter judgment against FMO for $12,655,594.36, with interest at 5.50% per year from December 20, 2018 through the date of judgment and the statutory rate afterward. The court also granted CME’s requests for costs and attorneys’ fees arising from the proceeding. CME was required to file its fee motion by December 21, 2020, after which FMO could oppose it and CME could reply.