Fourth Circuit Finds Arbitration Clauses Are Valid and Enforceable, Confirms Chinese Arbitral Award

Carlton Fields
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Carlton Fields

The Fourth Circuit confirmed a foreign arbitration award issued in favor of third-party defendant Chongqing Rato Power Co. Ltd., a Chinese equipment manufacturer, against defendant Roger Leon. The parties negotiated and executed several contracts in China, each containing an arbitration clause requiring any disputes be resolved before a Chinese arbitral commission. Rato commenced arbitration when the relationship soured and the panel issued an award in Rato’s favor, which it sought to confirm in this action. Leon opposed the effort, claiming the contracts, and their arbitration clauses, were invalid because he was not represented by Chinese counsel when the contracts were signed. The district court disagreed and the Fourth Circuit affirmed, agreeing that there was no evidence of fraud, coercion, material misunderstanding, obvious unfairness, or any other situation that would invalidate the agreements.

The Fourth Circuit also affirmed the district court order confirming the award. Leon argued that the award was invalid because the Chinese arbitration proceedings were initiated while Rato’s motion to compel arbitration was still pending in a North Carolina state court. But the Fourth Circuit ruled that a party need not await a ruling on a motion to compel in order to initiate arbitration, whether pursuant to section 4 of the Federal Arbitration Act or otherwise. Leon asserted other defenses under article V of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, each of which was rejected. As such, the district court order was affirmed.

Denver Global Products, Inc. v. Leon, No. 18-1853 (4th Cir. Jun. 8, 2020).

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