Republic of Guatemala v. IC Power Asia Development Ltd.

Background

Guatemala petitioned to confirm an arbitration award issued in the United Kingdom on October 7, 2020. The award rejected all of IC Power Asia Development Ltd.’s claims against Guatemala and ordered IC Power to pay Guatemala USD 243,826.92 in arbitration costs and USD 1,559,215.69 in legal costs. Guatemala sought a federal judgment for USD 1,803,042.61, plus interest, costs, and attorney’s fees.

IC Power did not appear in the federal action. A certificate of default issued, and Guatemala moved for default judgment under Federal Rule of Civil Procedure 55(b)(2). The court emphasized that default judgment is not automatic and that it had an independent duty to determine subject-matter jurisdiction, personal jurisdiction, and proper service before entering judgment.

Subject-Matter Jurisdiction

The court held that it had subject-matter jurisdiction under the New York Convention and Chapter 2 of the Federal Arbitration Act. The arbitration involved foreign parties and arose from a commercial legal relationship: IC Power’s investment through the purchase of two Guatemalan electricity-distribution companies. The court noted that the investment transaction was commercial and that the arbitration tribunal had also described the dispute as commercial.

Personal Jurisdiction

The court rejected Guatemala’s argument that IC Power was subject to general personal jurisdiction in New York. IC Power was incorporated in Israel, did not have its principal place of business in New York, and its contacts with New York were not so continuous and systematic that it could be considered essentially at home there.

The court nevertheless held that it had specific personal jurisdiction. Under New York’s long-arm statute, a single purposeful New York transaction can support jurisdiction when the claim substantially relates to that transaction. The court found that IC Power submitted its bid through New York-based parties, the acquisition closed in New York, the agreement was governed by New York law, and the parties agreed to New York jurisdiction and venue provisions. The arbitration dispute arose from that acquisition. The court also concluded that exercising jurisdiction satisfied constitutional due-process requirements because IC Power purposefully conducted the transaction in New York and could have expected to be sued there in connection with it.

Service of Process

The court held that Guatemala’s personal service on Lawrence N. Charney, an officer of IC Power’s parent company, did not constitute service on IC Power. The record did not show that the parent company acted as IC Power’s agent in New York, and the court treated the parent and subsidiary as separate corporations. The fact that the parent did business in New York and traded on the New York Stock Exchange did not establish the required agency relationship.

Guatemala also attempted to serve IC Power through the New York Secretary of State under New York Business Corporation Law § 307. The court held that this method was available because IC Power was subject to specific jurisdiction under New York law, but Guatemala did not comply with the statute’s additional procedures. It used first-class mail rather than registered mail with a return receipt, did not establish that it had used the required address for service, and did not timely file the required affidavit of compliance and proof of service.

Disposition

Judge Colleen McMahon denied Guatemala’s motion for default judgment and vacated the Clerk’s Certificate of Default. The court granted Guatemala 30 additional days from the date of the order to properly serve IC Power under New York Business Corporation Law § 307. The court stated that Guatemala may renew its motion for default judgment if IC Power does not answer after proper service. The Clerk was directed to close the motion at Docket Number 29.