Fifth Circuit Confirms International Commercial Arbitration Award

In an unpublished opinion, the United States Court of Appeals for the Fifth Circuit held that an International Chamber of Commerce (ICC) arbitral tribunal did not exceed its powers and affirmed the confirmation of the arbitral award. Retired United States Supreme Court Justice Sandra Day O’Connor sat by designation with Circuit Judges Wiener and Stewart.

In Saipem America v. Wellington Underwriting Agencies Limited, No. 08-20247 (5th. Cir. June 9, 2009), Samedan Mediterranean Sea (“Samedan”), later known as Noble Energy Mediterranean, Ltd., contracted with Heerema Marine Contractors Nederland B.V. (“Heerema”) to transport an oil platform from Texas to Israel. The transport of the platform was insured by several underwriters (the “Underwriters”), naming Heerema and Samedan as principal assureds. Heerema subcontracted Saipem America, Inc. (“Saipem”) to serve as Samedan’s Certified Verification Agent and marine warranty surveyor.

The subcontract between Saipem and Heerema provides the following dispute resolution clause:

Any dispute arising out of or in connection with this Subcontract which cannot be amicably settled shall be referred to arbitration in The Hague, The Netherlands, in accordance with the Rules of the International Chamber of Commerce currently in force. Any settlement agreement or arbitral award shall be final and binding upon Parties.

In December 2002, the oil platform suffered extensive damage while in transport. Heerema and Samedan filed insurance claims with the Underwriters for damages. The Underwriters, in turn, made liability claims against Saipem, based on Saipem’s contracts with Samedan. Samedan and the Underwriters submitted their claims to arbitration, pursuant to the arbitration agreement. In particular, they argued that Saipem was guilty of negligent misrepresentation, because Saipem had issued a certificate of approval that the platform could be safely towed from Texas to Israel. The arbitral tribunal found Saipem liable and awarded Underwriters $1,110,657 in actual damages, $399,000 in attorneys’ fees, and $105,000, which corresponds to 50% of the costs of arbitration. The district court confirmed the award and Saipem appeals.

Discussing first the parties’ dispute whether the U.S. Supreme Court’s recent decision in Hall Street Associates, L.L.C. v. Mattel, Inc., 128 S. Ct. 1396 (2008) prevents the court’s review of the arbitration award on nonstatutory grounds (“manifest disregard of the law” or contrary to public policy), the court cited Citigroup Global Markets, Inc. v. Bacon, 562 F.3d 349 (5th Cir. 2009) and concluded that the court may vacate an arbitration award only if a statutory ground supports the vacatur.

Moving to the negligence claim, the court considered Saipem’s claim under Federal Arbitration Act (FAA) Section 10(a)(4). Specifically, Saipem argued that “the arbitrators exceeded their powers” because the award is for a claim of negligence, claim that “it is not rationally inferable from the contract.” The court looked into the contract and the parties’ submissions to the tribunal and found that the parties had agreed to submit the claim to arbitration. Because the parties had granted broad authority to the tribunal, the court concluded that the tribunal did not exceed its authority by deciding the claim of negligence.

Finally, turning to the indemnity claim and in response to Saipem’s argument that the tribunal violated FAA Section 10(a)(4), the court concluded that “[T]he arbitral tribunal made detailed findings which are well-supported by governing law, and it did not exceed its powers or so imperfectly execute them that a mutual, final, and definite award was not made. “

Accordingly, the court affirmed the district court’s judgment confirming the award.

Technorati Tags:

arbitration, ADR, law, Fifth Circuit, Citigroup Global Markets, Hall Street