In an opinion today, Judge Hellerstein confirmed a nearly $400 million arbitration award in favor of “COMMISA,” an affiliate the Houston-based contracting firm KBR, against “PEP,” a subsidiary of Mexico’s state-owned oil company, notwithstanding that a court in Mexico, where the arbitration was held, ruled the dispute was not arbitrable and nullified the award:
Generally, arbitration awards issued in one nation can be enforced by judgments and executions granted by the courts of another nation. However, arbitration awards also can be nullified, and if nullified by the courts of the nation in which, or according to the law of which, the arbitration was conducted, a conflict is created for the courts of other nations. Which is to be given primacy, the award or the nullifying judgment? This is the issue of the case. . . . I hold, for the reasons discussed below, that the Eleventh Collegiate Court decision violated basic notions of justice in that it applied a law that was not in existence at the time the parties’ contract was formed and left COMMISA without an apparent ability to litigate its claims. I therefore decline to defer to the Eleventh Collegiate Court’s ruling . . . . . . . . In declining to defer to the Eleventh Collegiate Court, I am neither deciding, nor reviewing, Mexican law. I base my decision not on the substantive merit of a particular Mexican law, but on its application to events that occurred before that law’s adoption. At the time COMMISA brought its claims against PEP, there was no statute, case law, or any other source of authority that put COMMISA on notice that it had to pursue its claims in court, instead of in arbitration. COMMISA reasonably believed that it was entitled to arbitrate the case, and the Eleventh Collegiate Court’s decision disrupted this reasonable expectation by applying a law and policy that were not in existence at the time of the parties’ contract, thereby denying COMMISA an opportunity to obtain a hearing on the merits of its claims. The decision therefore violated basic notions of justice, and I hold that the Award in favor of COMMISA should be confirmed.