Foreign arbitration award

Federal District Court Opinions

SURALEB v. PRODUCTION ASSN. “MINSK TRACTOR WORKS,”,
(N.D.Ill. 12-5-2006) SURALEB, INC., Petitioner, v. PRODUCTION ASSOCIATION “MINSK TRACTOR WORKS,” REPUBLIC OF BELARUS, Respondent. 06 C 3496. United States District Court, N.D. Illinois, Eastern Division. December 5, 2006

MEMORANDUM OPINION AND ORDER

GEORGE MAROVICH, District Judge

Petitioner Suraleb, Inc. (“Suraleb”) filed this action to
confirm a foreign arbitration award resulting from an
arbitration between it and respondent Production
Association “Minsk Tractor Works,” Republic of Belarus
(“MTW”). Petitioner has filed a motion to confirm the
arbitration award. For the reasons set forth below, the
Court grants the motion and confirms the arbitration award.

I. Background

At about the turn of the century, Suraleb and MTW entered
an agreement whereby Suraleb agreed to help MTW collect
certain debts in the United States. In 2003, the parties
disputed the proper fee for services and, pursuant to an
arbitration agreement, submitted the dispute to an
arbitration proceeding in Sweden.

On May 31, 2006, in Stockholm, Sweden, the arbitrators
rendered a final award (the “Award”). They rendered the
following award: Page 2

7 AWARD

7.1 Production Association “Minsk Tractor Works” shall
pay the sum of 2,166,555.00 United States dollars to
Suraleb, Inc. against delivery of the assets collected by
Suraleb, Inc. on behalf of Production Association “Minsk
Tractor Works”, as those assets are currently.

7.2 Suraleb, Inc. shall deliver to Production Association
“Minsk Tractor Works” assets collected by Suraleb, Inc. on
behalf of Production Association “Minsk Tractor Works” as
those assets are currently against payment of 2,166,555.00
United States Dollars.

7.3 Production Association “Minsk Tractor Works” is
ordered to pay simple interest (not compounded) to
Suraleb, Inc. on the sum of 2,166,555.00 United States
Dollars from 13 April 2003 until the date of this award at
the rate of 5 percent per annum.

7.4 Production Association “Minsk Tractor Works” is
ordered to pay to Suraleb, Inc. the sum of 987,224.61
United States Dollars as compensation for the cost of
legal representation in this arbitration.

7.5 Production Association “Minsk Tractor Works” is
ordered to pay to Suraleb, Inc. the sum of 1,203,761
Swedish Kronor representing costs of arbitration.

7.6 Suraleb, Inc. shall be free to seek post award
interest under applicable rules.

7.7 The costs of arbitration and the liability for them
shall be as set out at paragraph 6.6 above.

7.8 All other claims are denied.

(Award at 38-39). Paragraph 6.6 of the award stated that
“[t]he parties shall be jointly and severally liable for
[the costs of the arbitration]. As between the parties they
shall be ultimately borne by MTW.” (Award at 38).

Suraleb filed a petition to confirm the foreign
arbitration award and a motion to confirm. In addition,
each party also seeks an award of pre-judgment (post-award)
interest against the other party. Page 3

II. Discussion

A. Petitioner’s motion to confirm

The statute adopting the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards (a/k/a the New York
Convention) provides:

Within three years after an arbitral award falling under
the Convention is made, any party to the arbitration may
apply to any court having jurisdiction under this chapter
for an order confirming the award as against any other
party to the arbitration. The court shall confirm the
award unless it finds one of the grounds for refusal or
deferral of recognition or enforcement of the award
specified in the said Convention.

9 U.S.C. § 207 (emphasis added). Section 203 grants
federal jurisdiction over “such an action or proceeding.” 9
U.S.C. § 203. The New York Convention covers
“arbitral awards made in the territory of a State other
than the State where the recognition and enforcement of
such awards are sought.” See New York Convention Art. I
Sect. 1. The parties implicitly agree that because the
arbitration was conducted in Sweden, it is covered by the
New York Convention.

Confirmation of the arbitral award is mandatory unless the
respondent establishes one of the bases for refusal or
deferral of recognition. See Employers Ins. of Wausau v.
Banco De Securos Del Estado, 199 F.3d 937, 942 (7th Cir.
2000); Europcar Italia SpA v. Maiellano Tours, Inc., 156
F.3d 310, 313 (2d Cir. 1998); Alto Mar Girassol v.
Lumberman’s Mutual Cas. Co., Case No. 04 C 7731, 2005 WL
947126 (N.D. Ill. Apr. 12, 2005). Article V of the New York
Convention sets out the grounds for refusing to confirm an
award. In simple terms, the Court must confirm the award
unless the respondent establishes one of the following: (a)
the party was incapacitated or the agreement was invalid
under applicable law; (b) lack of proper notice; (c) the
dispute was not covered by the arbitration agreement; (d)
the arbitration procedure was contrary to law of the
country in which it took place; (e) the award is not yet
binding; (f) the Page 4 subject matter is not arbitrable
under U.S. law; or (g) enforcement of the award would be
contrary to public policy. See New York Convention Art. V.

Respondent fails to establish any of the grounds for
refusal to confirm a foreign arbitral award. Accordingly,
confirmation is mandatory, and the Court hereby confirms
the Award. This will not disappoint MTW, which not only
concedes that the Award should be confirmed but also
requests such confirmation.

B. The Parties’ requests for prejudgment, post-award
interest

Although no United States statute governs prejudgment,
post-award interest with respect to confirmation of foreign
arbitral awards, the federal common law allows such awards.
See Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte
GmbH, 141 F.3d 1434, 1446 (11th Cir. 1998). In the Seventh
Circuit, prejudgment interest is “presumptively available”
because “[w]ithout it, compensation of the plaintiff is
incomplete and the defendant has an incentive to delay.”
Gorenstein Enterprises, Inc. v. Quality Care-USA, Inc., 874
F.2d 431, 436 (7th Cir. 1989). There being no statutory
rate for prejudgment interest, the Seventh Circuit
“suggests that district judges use the prime rate for
fixing prejudgment interest.” Id.

In this case, both parties have failed to comply with the
terms of the arbitral award. MTW has failed to transfer
money, and Suraleb has failed to transfer property. Only
Suraleb has been deprived of the use of its money. The
Court does not want to provide MTW any additional incentive
to delay payment, so it grants Suraleb prejudgment
interest. The Court will not compensate MTW for the loss of
use of its property, because the Court thinks that if MTW
were truly concerned about the return it could be earning
on its property, it would have paid Suraleb by now. Page 5

The Court grants Suraleb prejudgment interest on the
arbitral award from May 31, 2006 to December 5, 2006 (the
date judgment is to be entered). Although the Seventh
Circuit recommends using the Prime Rate (which is 8.25%),
the parties agree that 4.99% is an appropriate rate for
prejudgment interest in this case. Accordingly, the Court
awards Suraleb prejudgment interest in the amount of
$88,777.96.[fn1]

C. 28 U.S.C. § 1610(c)

As the parties have pointed out, the Foreign Sovereign
Immunities Act provides, in relevant part, that a foreign
state’s property within the United States cannot be
attached “until the court has ordered such attachment and
execution after having determined that a reasonable period
of time has elapsed following the entry of judgment . . .”
28 U.S.C. § 1610(c). The parties seem to want the
Court to decide now what a reasonable amount of time would
be. Given that no judgment has entered, this issue is not
yet ripe for decision. Even were it ripe, in making the
decision, the Court is to consider such factors as “the
procedures necessary for the foreign state to pay the
judgment (such as the passage of legislation), evidence
that the foreign state is actively taking steps to pay the
judgment, and evidence that the foreign state is attempting
to evade payment of the judgment.” See Ned Chartering &
Trading, Inc. v. Republic of Pakistan, 130 F. Supp.2d 64,
67 (D. D.C. 2001). The parties have submitted no admissible
evidence on these subjects. Thus, even were the issue ripe,
the Court has no basis upon which to make the necessary
determination. Page 6

IV. Conclusion

For the reasons set forth above, the Court grants
petitioner’s motion to confirm. The clerk is directed to
enter a judgment (1) confirming the May 31, 2006 arbitral
award and (2) granting petitioner Suraleb, Inc. $88,777.96
in prejudgment interest.

[fn1] This amount is based on (1) the exchange rate of .1477
U.S. dollars per Swedish Kronor (the exchange rate listed
in the December 4, 2006 Wall Street Journal); and (2)
quarterly compounding of interest.