Recent $455 Million Payment Reaffirms Certainty of International Arbitral Awards

by Wilson Sonsini Goodrich & Rosati
Contact

One of the most often overlooked features of arbitration in the context of international commercial disputes is the certainty provided by a final award. Recently, Dow Agrosciences paid Bayer Cropscience more than $455 million to satisfy an arbitral award rendered by an International Chamber of Commerce (ICC) tribunal. On July 6, 2017, the U.S. District Court for the Eastern District of Virginia released the supersedeas bond securing that payment.1

Background

The parties' dispute originated in 2012, when Bayer sued Dow for patent infringement in the Eastern District of Virginia. The district court stayed the case pending arbitration, which eventually included both patent infringement claims under U.S. law and contract claims under French law. The ICC tribunal rendered its final award on October 9, 2015, awarding Bayer $455,459,187.

Dow first sought to have the district court vacate the arbitral award. However, on January 15, 2016, the district court denied Dow's motion to vacate and granted Bayer's motion to confirm the award. The district court entered judgment in favor of Bayer in the full amount of the arbitral award and also ordered Dow to pay post-award interest.

Next, Dow appealed the Eastern District of Virginia's decision to the U.S. Court of Appeals for the Federal Circuit. Pending appeal, the district court granted a motion by Dow for a supersedeas bond and to stay enforcement of the arbitral award. On March 1, 2017, a three-judge panel for the Federal Circuit affirmed the district court's decision to confirm the arbitral award.

After the Federal Circuit panel affirmed the decision to confirm the arbitral award, Dow filed a combined petition for panel rehearing and rehearing en banc, which the Federal Circuit denied on May 12, 2017. Although Dow filed a motion to stay the issuance of the mandate, the Federal Circuit denied it the next day. Dow then indicated its intent to file a petition for certiorari with the U.S. Supreme Court.

Following the Federal Circuit's denial of Dow's motion to stay issuance of the mandate, Bayer moved the district court to enforce the supersedeas bond. The district court did not have to enforce the bond, however, because Dow made full payment of the award amount and indicated that it would not file a petition for certiorari. On July 6, 2017, the district court released the supersedeas bond.

The Difficulty in Challenging Arbitral Awards

Dow's lack of success in challenging the ICC's arbitral award is not surprising. In the United States, a court's power to vacate an arbitral award is severely limited under the Federal Arbitration Act (FAA). Under the FAA, a court can vacate an arbitral award only if it finds: (1) fraud in procuring the award; (2) partiality on the part of the arbitrators; (3) gross misconduct by the arbitrators; or (4) failure of the arbitrators to render a mutual, final, and definite decision.2 A court cannot vacate an award merely because it would have reached a different conclusion; rather, the arbitrators must have failed to do their job in order to warrant such a drastic remedy.3

Further, under the so-called "New York Convention"—promulgated by the United Nations and adopted by more than 150 contracting states around the world to facilitate enforcement of arbitral awards made in other contracting states—any party to arbitration may apply to any court with jurisdiction for an order confirming the arbitral award within three years of its issuance.4 A court must confirm the award unless the party against whom the award has been issued can prove: (1) the parties to the arbitration agreement were legally incapacitated or the agreement is invalid under the law governing the agreement; (2) the party was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings, or was otherwise unable to present his case; (3) the award deals with a dispute not contemplated or falling within the terms or scope of the agreement to arbitrate; (4) the award or arbitral procedure was not in accordance with the agreement of the parties or with the law governing the agreement; or (5) the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country, or under the law of which, that award was made.5 Additionally, a court may refuse to enforce an arbitral award if the dispute was not capable of being settled by arbitration under the laws of the country governing the arbitral agreement, or if enforcement of the award would be contrary to the public policy of that country.6

Making arbitral awards difficult to challenge encourages arbitration and leads to more efficient and less costly resolution of disputes.

Practical Effects

Dow's payment of the more than $455 million set forth in the ICC's arbitral award in Bayer Cropscience AG v. Dow Agrosciences LLC—and its repeated inability to successfully challenge that award—underscores the certainty of final arbitral awards. The certainty that comes from final arbitral awards is a feature of arbitration that clients, particularly those that engage in international commercial transactions, should consider in drafting dispute resolution clauses in their agreements. The relative unlikelihood that a U.S. court would vacate an arbitral award provides enhanced certainty to the parties, as compared to court decisions, which are more likely to be modified on appeal.


1See Bayer Cropscience AG v. Dow Agrosciences LLC, Case No. 2:12-cv-00047 (E.D. Va.).
2 9 U.S.C. § 10(a) (2016).
3United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987).
4 9 U.S.C. § 207 (2016).
5 United Nations Conference on International Commercial Arbitration, Convention on the Recognition and Enforcement of Foreign Arbitral Awards art. V, June 10, 1958, 330 U.N.T.S. 38.
6Id.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wilson Sonsini Goodrich & Rosati | Attorney Advertising

Written by:

Wilson Sonsini Goodrich & Rosati
Contact
more
less

Wilson Sonsini Goodrich & Rosati on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.