The opinion of the court was delivered by: JAMES ROBERTSON, District Judge
International Bechtel Company Limited ("Bechtel") petitions this
American court for judicial confirmation of an arbitration award issued
on February 20, 2002, under the laws of Dubai. The Department of Civil
Aviation of the Government of Dubai ("DCA"), the other party to the
arbitration, moves to dismiss. The motion raises jurisdictional
questions, which I have resolved in petitioner's favor, and a question of
international comity, which need not be decided at this time. Further
proceedings in this matter will be stayed pending a decision on Bechtel's
appeal of the decision of the Dubai Court of First Instance invalidating
the award, now pending before the Dubai Court of Cassation.
Page 2
On March 30, 1992, Bechtel and the DCA entered into a written Project
Management Services Agreement for the design and construction of a theme
park and adjacent commercial and residential developments in Dubai. The
parties agreed, inter alia, that any disputes arising from the
Agreement would be decided by arbitration. In 1999, a dispute did arise:
Bechtel claimed that the DCA had failed to pay Bechtel amounts due and
owing to it for services rendered and expenses incurred under the terms
of the Agreement; and the DCA counterclaimed that Bechtel had breached
its contractual obligations under the Agreement and was liable in damages
to the DCA and/or needed to make restitution of payments already received
from the DCA. See Final Award, dated February 20, 2002, at 2.
Pursuant to the Agreement, on July 26, 2000, the parties met with and
began arbitration before Dr. Georg von Segesser, who had been appointed
sole arbitrator of the dispute.
On February 20, 2002, the arbitrator issued an extensive written
opinion, awarding Bechtel approximately $24.4 million in damages, costs
and legal fees, and dismissing the DCA's counterclaims for approximately
$42 million. On April 7, 2002, after the DCA had failed to satisfy the
award, Bechtel filed a petition in the Dubai Court of First Instance to
confirm the arbitration award.
Page 3
On April 22, 2002, the DCA filed a complaint in the same Dubai court,
seeking to overturn the award. In a written opinion dated November 16,
2002, the Court of First Instance rejected five of the six arguments put
forth by the DCA but overturned the award on the sixth, finding that
witnesses in the arbitration had not taken oaths in the form prescribed
by Dubai law:
As for the last ground in the suit statement
concerning the invalidity of the award on the
ground that the witnesses did not take oath prior
to hearing their statements[,] . . . the
arbitrator . . . is bound to comply the
procedures stipulated in the Arbitration Chapter.
As such, . . . the violation of such
requirement renders the procedure invalid, which
affects the award.
. . . Article 41/2 of the [Civil Procedure]
Law determined the form of the oath to be taken by
a witness, namely: "I swear by the Almighty to
tell the truth and nothing but the truth". Upon
taking the oath, the religion of the witness shall
take into consideration, if the witness requires
the same. The purpose of stipulating to take the
oath or to put a witness to oath . . . is to
give such statement a frame leading to the truth
with the exclusion of lying, deviation or fancy,
so that the statement becomes a satisfactory
decisive evidence, and satisfaction arises from
taking the oath. The statement of a witness will
not be valid and certain unless the witness takes
the oath . . . [nor will] anything that relies
on such statement, as it becomes ineffective and
cannot, accordingly, be relied upon, particularly
if such statement is the evidence on which the
award relied. It is imperative that the arbitrator
puts a witness on oath prior to giving his
statement, which may not be ignored or made other
than in the form provided by the law, as above
quoted. It is established from the award, the
subject matter of the suits, that the arbitrator
did not address the oath in the above form as
provided in the law upon hearing witnesses William
G. Leuing, Tilak Raj Billo, Christopher
Page 4
Hertzell, Steven Martin, Keith Kennedy, Ann
Saha, Christopher Brown, Mohamed Saleh Al Saleh,
HH Sheikh Ahmed Bin Saeed Al Maktoum, Abdullah Al
Hashimi, Simon Azzam, Surish Kumar, Masood Hasan
Dariwala, Robert Burnett and W. Michael. As such,
the requirements for the validity of the
respective statements of the above witnesses were
not available, which renders the said statements
invalid and also renders everything established on
such statements invalid. Whereas the award relied
on the statements of the above witnesses without
putting them to oath as above quoted, the award,
the subject matter of the suits, is invalid
because it relied on an invalid procedure.
Int'l Bechtel Co. Ltd. v. Dep't of Civil Aviation of Gov't of
Dubai, case No. 288/2002 [Court of First Instance], at 6-8. The
court rejected Bechtel's arguments that the DCA had waived its objection
to the form of the oaths by failing to object on that ground during the
arbitration, or by agreeing in advance that the arbitration award would
be final and binding and that there would be no appeal to any court.
See Agreement, at ¶ 19B. The court explained:
[T]he party who is originally required to comply
with the procedures stipulated under the law, is
the arbitrator, but not the litigants.
Administering oath on witnesses is an imperative
requirement under Article 211 of the Civil
Procedures Law, which the arbitrator should comply
with even if the litigants have agreed otherwise.
. . .
Article 216/2 of the Civil Procedures Law . . .
provides that "The acceptance of a request to
invalidate an award shall not be affected by the
waiver of a litigant of its right to such
invalidation prior to the issuance of the award".
Moreover, it may not be held to the request to
invalidate the award before the arbitrator himself
but such request may be held thereto either under
a separate suit or during the hearing of
Page 5
the suit brought before the court to confirm
such award.
Int'l Bechtel, [Court of First Instance], at 9.
Bechtel appealed the Court of First Instance ruling to the Dubai Court
of Appeal on December 14, 2002. While that appeal was pending, on
February 19, 2003, Bechtel filed its petition in this Court. On June 8,
2003, the Dubai Court of Appeal affirmed the decision of the Court of
First Instance. Bechtel has taken that decision to the highest court of
Dubai, the Court of Cassation, where Bechtel's appeal remains
pending.*fn1
I. SUBJECT MATTER JURISDICTION
Bechtel has invoked this Court's jurisdiction under
28 U.S.C. § 1330 (a),*fn2 asserting that the DCA is a foreign state as
defined in § 1603(a) of the Foreign Sovereign Immunities Act of 1976,
28 U.S.C. § 1602 et seq. ("FSIA"), and that its claim falls
Page 6
under two of the FSIA's exceptions to immunity: for commercial
activities, 28 U.S.C. § 1605(a)(2), and for arbitration awards,
28 U.S.C. § 1604 (a)(6).*fn3
The DCA's jurisdictional argument does not meet Bechtel's
jurisdictional allegations. It focuses instead on the Federal Arbitration
Act, 9 U.S.C. § 1 et seq. ("FAA"), and maintains that
"Bechtel seeks to invoke jurisdiction here solely under the
FAA . . . [b]ut the FAA does not apply because the Agreement explicitly
states that Dubai law governs, and Dubai law expressly designates the
Dubai Court as the exclusive forum for confirmation of the arbitration
award." Resp't Mem., at 4-5 (emphasis in original). But Bechtel does not
assert that the FAA confers subject matter jurisdiction in this Court,
and clearly it does not.*fn4 It is the FSIA that "provides the sole
basis for
Page 7
obtaining jurisdiction over a foreign state in the courts of this
country," Argentine Republic v. Amerada Hess Shipping Corp.,
488 U.S. 428, 443 (1989); see also id. at 434 ("Sections 1604
and 1330(a) work in tandem: § 1604 bars federal and state courts from
exercising jurisdiction when a foreign state is entitled to immunity, and
§ 1330(a) confers jurisdiction on district courts to hear suits
brought by United States citizens and by aliens when a foreign state is
not entitled to immunity." (emphasis omitted)).
"At the threshold of every action" against a foreign state, the Court
must satisfy itself that it has jurisdiction by "apply[ing] the detailed
federal law standards set forth in the [FSIA]." Verlinden B.V. v.
Cent. Bank of Nigeria, 461 U.S. 480, 493-94 (1983). The DCA has not
responded to Bechtel's petition on the merits. Its motion to dismiss does
not assert immunity under the FSIA or challenge the facts upon which
Bechtel relies in invoking the commercial activities and arbitration
award FSIA exceptions. The D.C. Circuit has held that "if the sovereign
makes a `conscious decision to take part in the litigation,' then it must
assert its immunity under the FSIA either before or in
Page 8
its responsive pleading.'" Phoenix Consulting Inc. v. Republic
of Angola, 216 F.3d 36, 39 (B.C. Cir. 2000) (quoting
Foremost-McKesson, Inc. v. Islamic Republic of Iran,
905 F.2d 438, 443-45 (D.C. Cir. 1990)). This is because "failure to assert the
immunity after consciously deciding to participate in the litigation may
constitute an implied waiver of immunity, 28 U.S.C. § 1605(a)(1),
which invests the court with subject matter jurisdiction under
28 U.S.C. § 1330(a)." Id. (citing H.R. Rep. No. 94-1487, at 18
(1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6616-17); but
see id. at 39 n.*.
I make no ruling as to whether the BCA has consciously decided to take
part in this litigation. Suffice it to say that there is nothing now of
record to indicate that this Court does not have ...