Belize Bank Limited v. Government of Belize, No. 16-7083 (D.C. Cir. Mar. 31, 2017) [click for opinion]
In 2004, the Prime Minister of Belize signed a confidential agreement on behalf of Appellant, the Government of Belize, which guaranteed a loan made by Appellee, Belize Bank, Ltd. (the "Bank") to a Belizean health services provider. Less than three years later, in 2007, the health services provider defaulted on the loan. In a settlement agreement, Belize agreed to pay the debt in full. When the terms of the settlement agreement became public, a firestorm of protests erupted. In response to the mounting pressure from its citizens, Belize refused to make any payment to the Bank under the settlement agreement, thereby defaulting on its obligations.
Following Belize's default, pursuant to the dispute resolution provision of the settlement agreement, the Bank began arbitration proceedings in London under the Rules of the London Court of International Arbitration ("LCIA"). The arbitral tribunal consisted of three members; one member was to be appointed by each party with the third member appointed jointly by the two party appointed members. Because Belize largely declined to participate in the early stages of the proceedings, the LCIA appointed an arbitrator for Belize.
Five years into the proceedings, Belize discovered that a barrister who was a member in the same English chambers as the LCIA-appointed arbitrator had advised a partial owner of the Bank and represented other interests adverse to Belize in previous unrelated matters. Based on this, Belize challenged the continued service of this arbitrator, questioning his impartiality and alleging that he should not continue to serve because he breached his duty to disclose.
In considering these challenges, the LCIA appointed a three-member division, which rejected Belize's arguments. The division applied the "British Rule," under which barristers in the same chambers are presumed to be independent practitioners. By contrast, under the "American Rule," attorneys in the same firm are presumed to share client confidences. In its conclusion, the division found that Belize's alleged conflict of interest was too attenuated to give rise to a duty to disclose. In response to this ruling, Belize withdrew from the proceedings, which continued without Belize. In 2013, the tribunal found Belize in breach of the settlement agreement and issued a substantial monetary award in favor of the Bank. More than a year later, in 2014, with the award still unpaid, the Bank filed a petition to confirm the foreign arbitration award and to enter judgment in the D.C. District Court. The district court granted the petition and entered judgment in favor of the Bank. Belize subsequently appealed.
On appeal, the D.C. Circuit Court of Appeals limited its consideration to one issue: whether the district court's enforcement of the arbitral award violated the New York Convention because it was contrary to the public policy of the United States. Article V(2)(b) of the New York Convention provides that "[r]ecognition and enforcement of an arbitral award may . . . be refused if the competent authority in the country where recognition and enforcement is sought finds that . . . [t]he recognition or enforcement of the award would be contrary to the public policy of that country." The appellate court stated that "with appropriate deference to other sovereign nations, the 'public policy defense is to be construed narrowly to be applied only where enforcement would violate the [United States'] most basic notions of morality and justice.'"
Belize argued that the LCIA's failure to disqualify or at least require certain disclosures from the LCIA-appointed arbitrator created an unacceptable appearance of impartiality if viewed through the lens of United States public policy. But the appellate court rejected this argument. It explained that Article V(2)(b)'s requirement to replace foreign ethical standards with United States public policy in scrutinizing an arbitral award does not give the court license to replace the facts of a case with an Americanized version thereof. Thus, in weighing the arbitrator's alleged conflicts, the LCIA invoked the British Rule not based on moral and ethical values different from United States public policy; instead, the LCIA simply addressed a different model of legal practice from the American model.
The court emphasized that an English chambers is not an American law firm. Because the chambers model is designed to protect a barrister's independence, the court found no ethical rule that would require conflict imputation in these circumstances. As a result, it held that, without more, a perceived conflict arising from another barrister's practice does not give rise to the duty to disclose or otherwise create an appearance of impropriety.
Similarly, the court found that the arbitrator's membership in the English chambers did not threaten the arbitration process's amicable and trusting atmosphere. Questions about appearance are resolved from the perspective of the parties. Here, Belize, a former British colony, was familiar with the chambers system of barristers acting as independent practitioners. In fact, in an earlier proceeding involving Belize, barristers from the English chambers at issue in this case appeared on opposing sides of the same appeal with no objection from Belize. As such, the court concluded that these factors demonstrate that enforcement of the LCIA arbitral award would not violate the United States' most basic notions of morality and justice. J