Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, No. 14-8163-cv (S.D.N.Y. Mar. 4, 2015) [click for opinion]
Defendant, Venezuela, sought modification of a prior order of the court (the "Opinion") which confirmed Plaintiff's $1.6 billion International Centre for Settlement of Investment Disputes ("ICSID") arbitral award. Defendant argued in a motion to amend the Opinion that, inter alia, the post-judgment interest rate should be modified to reflect the rate provided under 28 U.S.C. § 1961 (“§ 1961”), and not the higher rate of 3.25% compounded annually as provided in the ICSID tribunal's award.
The court found that Defendant's requested relief "is flatly precluded by the principles governing recognition of ICSID awards." Congress adopted the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the "ICSID Convention") in 1966 and passed the enabling statute, 22 U.S.C. § 1650a. Under the statute, the court stated, U.S. courts are "required to recognize all aspects of awards issued by ICSID" and cannot "undertake substantive review of such awards." Furthermore, the court added, it is not empowered to review or re-assess the merits of the award.
The court analyzed the enabling statute and the ICSID Convention, concluding that both obligate the court to recognize the pecuniary obligations of an ICSID award, and that interest is certainly pecuniary.
In addition, Defendant's motion requested "clarification" of the award, however the court noted that there was nothing unclear about the award's grant of compound interest from the date of expropriation to the date of payment in full. If the court were permitted to modify the tribunal's award of interest, "[i]t would create the possibility, indeed the likelihood, of different interest rates applying in different countries in which an arbitral award creditor sought to recognize and enforce the same ICSID award." The court reasoned that the uniform enforcement of ICSID awards by all signatory countries, including the interest rate set by the tribunal, is necessary to avoid "incongruous, confusing, and potentially discordant" results.
Lastly, the court addressed Defendant's reliance on cases applying § 1961 to Federal Arbitration Act ("FAA") arbitration awards. The court first cited the enabling statute, which prohibits application of the FAA to enforcement of ICSID awards, and then noted that the statute does not provide for any substantive review or amendment of an award. In fact, courts have more commonly applied the ICSID tribunal's interest rate rather than modify it, as requested by Defendant. The court concluded by admonishing Defendant for attempting to argue against application of the very same arbitral rules it chose to resolve this dispute.
Andrew Riccio of the New York office contributed to this summary.