construction site

Venco Imtiaz Construction Co. v. Symbion Power LLC, No. 16-1737, 2017 U.S. Dist. LEXIS 82480 (D. D.C. May 31, 2017)

In 2008, the U.S. Agency for International Development (“USAID”) began funding a project to build a power plant in Kabul. USAID hired a U.S.-based firm, The Louis Berger Group/Black & Veatch Special Projects Corporation (“LBG/BV”) to manage the project. LBG/BV then hired Symbion Power LLC (“Symbion”) as is its primary contractor. Symbion in turn hired Venco Imitiaz Construction Company (“Venco”) as a subcontractor responsible for certain portions of the plant construction, namely for the “power blocks” that would house the electrical generators.

LBG/BV and Symbion had a dispute over who was responsible for certain construction delays unrelated to Venco’s work. As a result, LBG/BV withheld payment from Symbion, which in turn, withheld payment from Venco. Symbion argued that its contract with Venco permitted this, i.e., that the contract conditioned payment to Venco on Symbion’s receipt of payment from LBG/BV. Venco took the opposite view.

Venco thereafter obtained an arbitration award requiring Symbion to pay $8.5 million in unpaid invoices plus interest, attorney’s fees, and the cost of arbitration. When Venco sought enforcement of the award, Symbion took the position that the arbitration tribunal interpreted its contract with Venco in a way that was inconsistent with an award in an earlier arbitration between Symbion and LBG/BV. Symbion thus claimed that, because the arbitrators did not apply the doctrine of issue preclusion, the award should not be confirmed under the public policy exception in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 9 U.S.C. § 207 (the “Convention”).

The court did not reach the issue of whether issue preclusion generally is a public policy goal which would require nonenforcement of an award, because it found that issue preclusion was likely not applicable in this case. The two arbitral proceedings did not involve the same parties, and the court found Symbion’s argument that it effectively represented Venco’s interests in the first arbitration unconvincing, noting that “a nonparty cannot be adequately represented by a party whose interests are adverse.” Symbion thus failed to meet its burden as the party challenging the award to show that its enforcement would violate the most basic notions of morality and justice.

Symbion also requested a stay in enforcing the award, based on its pending challenge to the award filed with the U.K. High Court of Justice on August 8, 2016. On March 10, 2017, the High Court of Justice dismissed Symbion’s challenge, but Symbion argued to the district court that it intended to seek leave to appeal that decision. In considering Symbion’s request for a stay, the court considered the factors established in the Second Circuit’s Europcar decision:
(1) the general objectives of arbitration — the expeditious resolution of disputes and the avoidance of protracted and expensive litigation; (2) the status of the foreign proceedings and the estimated time for those proceedings to be resolved; (3) whether the award sought to be enforced will receive greater scrutiny in the foreign proceedings under a less deferential standard of review; (4) the characteristics of the foreign proceedings including (i) whether they were brought to enforce an award (which would tend to weigh in favor of a stay) or to set the award aside (which would tend to weigh in favor of enforcement); (ii) whether they were initiated before the underlying enforcement proceeding so as to raise concerns of international comity; (iii) whether they were initiated by the party now seeking to enforce the award in federal court; and (iv) whether they were initiated under circumstances indicating an intent to hinder or delay resolution of the dispute; (5) a balance of the possible hardships to each of the parties . . . ; and (6) any other circumstances[.]

The court found that the first and second factors weighed in favor of enforcing the award and denying a stay, especially as the “Court has no way of knowing whether an appeal in the U.K. proceeding will be permitted at all, much less how long any appeal might take.” The third factor weighed in favor of a stay, as the U.K. Arbitration Act’s standard of review differs from that of the Convention and would give a U.K. court more leeway to not enforce the award. The fourth factor did not weigh in favor of either party. The fifth factor weighed in favor of denying a stay, especially in light of the need for prompt enforcement of the award. And the sixth factor was irrelevant as no other relevant information had been identified by either party for the court’s consideration. On balance, the court refused to grant a stay.

A version of this post originally appeared in the September 2017 edition of Baker McKenzie’s International Litigation & Arbitration Newsletter, which is edited by David Zaslowsky and Grant Hanessian.

Previous articleDefendants Stay Court Proceedings by Relying on an Arbitration Agreement to Which They were Not a Party
Next articleDistrict court holds that nonsignatory to a charter agreement is not bound to its arbitration clause