TermoRio S.A. E.S.P. v. Electranta S.P.

487 F.3d 928, 376 U.S. App. D.C. 242, 67 Fed. R. Serv. 3d 1244, 2007 U.S. App. LEXIS 12201, 2007 WL 1515069
CourtCourt of Appeals for the D.C. Circuit
DecidedMay 25, 2007
DocketNo. 06-7058
StatusPublished
Cited by131 cases

This text of 487 F.3d 928 (TermoRio S.A. E.S.P. v. Electranta S.P.) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
TermoRio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 376 U.S. App. D.C. 242, 67 Fed. R. Serv. 3d 1244, 2007 U.S. App. LEXIS 12201, 2007 WL 1515069 (D.C. Cir. 2007).

Opinion

Opinion for the Court filed by Senior Circuit Judge EDWARDS.

EDWARDS, Senior Circuit Judge.

Appellant TermoRio S.A. E.S.P. (“TermoRio”) and appellee Electrificadora del Atlántico S.A. E.S.P. (“Electranta”), a state-owned public utility, entered into a Power Purchase Agreement (“Agreement”) pursuant to which TermoRio agreed to generate energy and Electranta agreed to buy it. When appellee allegedly failed to meet its obligations under the Agreement, the parties submitted their dispute to an arbitration Tribunal in Colombia in accordance with their Agreement. The Tribunal issued an award in excess of $60 million dollars in favor of TermoRio. Shortly after the Tribunal issued its award, Electranta filed an “extraordinary writ” in a Colombia court seeking to overturn the award. In due course, the Consejo de Estado (“Council of State”), Colombia’s highest administrative court, nullified the arbitration award on the ground that the arbitration clause contained in the parties’ Agreement violated Colombian law.

Following the judgment by the Consejo de Estado, TermoRio and co-appellant LeaseCo Group, LLC (“LeaseCo”), an investor in TermoRio, filed suit in the District Court against Electranta and the Republic of Colombia seeking enforcement of the Tribunal’s arbitration award. Appellants contended that enforcement of the award is required under the Federal Arbitration Act, 9 U.S.C. § 201 (“FAA”), which implements the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, opened for signature June 10, 1958, 21 U.S.T. 2517, repyinted in 9 U.S.C. § 201 (historical and statutory notes) (“New York Convention”). The District Court dismissed LeaseCo as a party for want of standing, dismissed appellants’ enforcement action for failure to state a [244]*244claim upon which relief could be granted, and, in the alternative, dismissed appellants’ action on the ground of forum non conveniens. TermoRio S.A. E.S.P. v. Electrificadora Del Atlántico S.A. E.S.P., 421 F.Supp.2d 87 (D.D.C.2006).

We affirm the judgment of the District Court. The arbitration award was made in Colombia and the Consejo de Estado was a competent authority in that country to set aside the award as contrary to the law of Colombia. See New York Convention art. V(l)(e) (“Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked ... if that party furnishes ... proof that: ... [t]he award ... has been set aside ... by a competent authority of the country in which, or under the law of which, that award was made.”). Because there is nothing in the record here indicating that the proceedings before the Consejo de Estado were tainted or that the judgment of that court is other than authentic, the District Court was, as it held, obliged to respect it. See Baker Marine (Nig.) Ltd. v. Chevron (Nig.) Ltd., 191 F.3d 194 (2d Cir.1999). Accordingly, we hold that, because the arbitration award was lawfully nullified by the country in which the award was made, appellants have no cause of action in the United States to seek enforcement of the award under the FAA or the New York Convention.

I. Background

The facts in this case are carefully set forth in the District Court’s published Memorandum opinion. See TermoRio, 421 F.Supp.2d at 89-91. Because the facts relevant to this appeal are undisputed, we have incorporated significant portions of the District Court’s statement as a part of our Background section.

Defendant Republic of Colombia is a foreign state. Defendant [Electranta], incorporated in 1957 to provide electricity services in and around Barranquilla, Colombia, was 87% owned and controlled by Colombia. Consequently, it is an agency or instrumentality of Colombia within the meaning of the Foreign Sovereign Immunities Act (28 U.S.C. § 1603(b)).

In the mid-1990s, Colombia’s Atlantic coast experienced significant electricity shortages. In 1995 LeaseCo entered into discussions with Electranta to modernize Electranta’s operations and build a new power plant in Colombia. A year later, LeaseCo and Electranta formed two Colombian entities seriatim: first, Coenergia, and then TermoRio. Coenergia owned 99.9% of all shares of TermoRio. Initially, LeaseCo and Electranta owned roughly equal shares of Coenergia, so that they accordingly owned roughly equal shares of TermoRio. However, at the time of Electranta’s complaint (in June 2004), LeaseCo and Electranta were transferring sole ownership of the 99.9% of the shares of TermoRio to LeaseCo.

At the heart of this lawsuit is [the Agreement] between TermoRio and Electranta [executed] in June 1997. Under this Agreement, TermoRio agreed to generate energy and Electranta agreed to buy it. In reliance on this Agreement, TermoRio invested more than $7 million to construct a power plant. The Agreement also provided that any dispute between the parties would be resolved by binding arbitration in Colombia.

However, in March 1998, Colombia announced a plan to sell the assets of all its Atlantic Coast utilities, including Electranta, to private owners and other Colombian utilities. On April 16, 1998, Colombia began to privatize by creating a new company, Electrocaribe, to receive and hold [245]*245Electranta’s assets and liabilities. However, at the behest of Colombia, Electranta did not transfer its duties under the Agreement to buy power from TermoRio. Electranta was left with obligations under the Agreement to buy power, but no resources to do so. As a result, Electranta failed to buy power from TermoRio and breached the Agreement. This breach of the Agreement, plaintiffs allege, had a direct effect in the United States affecting the extensive marketing of [Electrocaribe’s] assets in the United States, by affecting the price of these assets, by causing United States purchasers to acquire a substantial interest in these assets, and by eliminating any obligation for Electrocaribe ... to fulfill the [Agreement],

The Agreement’s arbitration clause provides (as translated):

Any dispute or controversy arising between the Parties in connection to the execution, interpretation, performance or liquidation of the Contract shall be settled through mechanisms of conciliation, amiable composition or settlement, within a term no longer than three weeks. If no agreement is reached, either party may have recourse to an arbitral tribunal that shall be governed in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The tribunal shall be made up of three (3) members appointed by the Chamber, and shall be seated in the city of Barranquilla[, Colombia], The award, which shall be binding on the parties, must be rendered within a maximum term of three months.

Pursuant to this provision, after defendants failed to meet their obligations under the Agreement, the parties entered into a long arbitration process. On December 21, 2000, a Tribunal of three arbitrators, applying ICC procedural rules, determined that Electranta breached the Agreement at the direction of Colombia.

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Bluebook (online)
487 F.3d 928, 376 U.S. App. D.C. 242, 67 Fed. R. Serv. 3d 1244, 2007 U.S. App. LEXIS 12201, 2007 WL 1515069, Counsel Stack Legal Research, https://law.counselstack.com/opinion/termorio-sa-esp-v-electranta-sp-cadc-2007.