Important Second Circuit Decision on Enforcement of International Arbitration Awards
Laurence Shore & Conor Doyle
In a significant recent judgment, CBF Industria De Gusa S/A v. AMCI Holdings, Inc. (2d Cir. 2017), the influential U.S. Court of Appeals for the Second Circuit (the Second Circuit) considered an arbitral award's preclusive effects and its ability to bind third parties. In the same decision, the Second Circuit also issued valuable guidance to the lower courts on the correct procedure and terminology for the enforcement of New York Convention awards issued abroad. The Second Circuit handed down its initial opinion in January. However, in a rare move, the Court released a revised opinion earlier this month to "correct" its conclusion on a point of law in the first opinion. This post, unlike much of the online commentary of AMCI Holdings, refers exclusively to the Second Circuit's later opinion.
Background The appellants, a group of Brazilian companies (collectively, CBF) entered into a series of contracts with Primetrade AG, a Swiss company, for the purchase and sale of pig iron. After a deadly shipping accident in 2005, Primetrade transferred its assets, including the contracts with CBF, to another Swiss Company (SBT), which "began operating with the same officers and directors as Primetrade AG and at the same offices." In 2007, a company called AMCI International Gmb (AMCI) acquired SBT and its U.S. subsidiary. The following year, CBF entered into additional purchase and sale contracts with SBT (the Contracts), that notably did not purport to bind any assigns or successorsininterest. The Contracts each contained an agreement providing for ICC arbitration in Paris. In 2008, as commodity prices fell by as much as a third, SBT defaulted on its purchase obligations under the Contracts. CBF submitted the resulting dispute to an ICC arbitration in November 2009 (the Arbitration). CBF later alleged that SBT stalled the Arbitration proceedings in their infancy while it fraudulently transferred its assets to a shell company formed and operated by the principals of SBT (Prime Carbon). In April 2010, SBT, by then virtually assetless, filed for bankruptcy in Switzerland. In March 2011, SBT's bankruptcy administrator informed the ICC tribunal that the company had insufficient funds to participate in the Arbitration and conceded CBF's claims against the company. In November 2011, the tribunal issued a final award in favor of CBF for the amount of $48 million plus interest and costs (the Award). The Award did not grant relief reaching the assets of Prime Carbon or any other third party, as the tribunal held that CBF "did not introduce sufficient evidence . . . to demonstrate the existence of fraud in the bankruptcy proceedings." SDNY Enforcement Action In April 2013, CBF commenced an action in the U.S. District Court for the Southern District of New York against various individuals and corporate entities alleged to be the "alter egos" and "successors in interest" of SBT (the Appellees). In the ensuing proceedings (the