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BCB Holdings Limited v. The Government of Belize

United States District Court, District of Columbia

June 24, 2015

BCB HOLDINGS LIMITED and THE BELIZE BANK LIMITED, Petitioners/Plaintiffs
v.
THE GOVERNMENT OF BELIZE, Respondent/Defendant.

MEMORANDUM OPINION

COLLEEN KOLLAR-KOTELLY, District Judge.

This matter comes before the Court on review of an arbitration award pursuant to 9 U.S.C. § 207 and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention" or "Convention"). Petitioners BCB Holdings Limited and the Belize Bank Limited ("BBL") (collectively "petitioners") initiated an arbitration on October 16, 2008, before the London Court of International Arbitration ("LCIA") in London, England. The Government of Belize ("GOB") opted to abstain from the arbitration, and the proceedings were conducted ex parte. On August 18, 2009, the arbitral tribunal issued an award in favor of petitioners and concluded that the GOB owed petitioners BZ$40, 843, 272.34 in damages plus interest and costs ("Award").[1] On July 1, 2014, BCB and BBL filed a Petition to Confirm Foreign Arbitration Award and to Enter Judgment or, Alternatively, Complaint to Recognize and Enforce Foreign Money Judgment. See Petition to Enforce (July 01, 2014), Docket No. [1] ("Pet."). On January 30, 2015, the GOB filed a motion to dismiss the petition and complaint[2] ( see Motion to Dismiss (Jan. 30, 2015), Docket No. [26] "Mot.") and a response to the petition ( see Response to Petition (Jan. 30, 2015), Docket No. [28] "Resp. to Pet."). For the reasons explained below, the Court shall GRANT the petition and DENY respondent's motion to dismiss.

I. BACKGROUND

BCB Holdings, previously known as Carlisle Holdings Limited, entered into a Settlement Deed with the GOB on March 22, 2005. See Pet. ¶ 4. The Settlement Deed was subsequently amended on June 21, 2006. See id. The Settlement Deed contains an arbitration clause which memorialized the parties' intention to arbitrate all disputes pursuant to the arbitration rules of the LCIA. See id. ¶ 20. In 2008, a dispute arose between the parties related to Clauses 4.1 and 4.2 of the Settlement Deed, in which the GOB agreed to provide favorable tax treatment[3] to BBL and BCB Holdings.[4] See id. ¶ 21. Specifically, in August 2008, the Belize Commissioner of Income Tax rejected tax returns that were filed by BBL in accordance with the Settlement Deed. See id. ¶ 22. Petitioners considered this rejection a repudiation of the Settlement Deed and sought to engage the GOB in arbitration before the LCIA on October 16, 2008. See id. ¶ 23. The GOB did not participate in the arbitral proceedings. See id. ¶ 24.

The arbitral tribunal, consisting of three arbitrators, unanimously rendered a foreign arbitral award in favor of petitioners on August 18, 2009. See id. ¶ 27. The arbitral tribunal concluded that the GOB had promised to provide certain tax treatment to petitioners and that "[i]n refusing to accept [petitioners'] tax returns based on this treatment, Respondent [GOB] breached its contractual warranty and clearly evinced its intention not to honour the agreement." Award ¶ 97[5]; Pet. ¶ 27. The arbitral tribunal also awarded petitioners BZ$40, 843, 272.34 in damages plus interest and costs to be paid by the GOB for breach of contract. See Pet. ¶ 27.

On August 21, 2009, petitioners sought to enforce the arbitral award in Belize. See id. ¶ 55. Opposing the enforcement of the Award, the GOB argued that the Award was contrary to the law and public policy of Belize. See id. The Supreme Court of Belize enforced the Award in late 2010, and the GOB appealed this decision in early 2011 to the Belize Court of Appeals. See id. ¶¶ 56-57. The appellate court reversed the decision below and held that the Award would not be enforced. See id. ¶ 58. On July 26, 2013, the Caribbean Court of Justice ("CCJ"), Belize's final court of appeal, affirmed on public policy grounds, holding that the implementation of the tax treatment provisions of the Settlement Deed were not legislatively approved, which was "repugnant to the established legal order of Belize." Id. ¶ 59 (quoting BCB Holdings Ltd., et al., v. Attorney General of Belize, CCJ Appeal No. CV 7 of 2012, ¶ 53).

Petitioners also sought enforcement of the Award in England. The High Court of Justice, Queen's Bench Division, Commercial Court, in the United Kingdom, granted petitioners leave to enforce the Award as a judgment and issued a foreign money judgment on February 26, 2013 ("U.K. Judgment"). See Pet. ¶ 84-87. The U.K. Judgment recognized and confirmed the arbitral award and provided pre- and post-judgment interest at an annual rate of 3.38%, compounded annually, and past and future costs of the arbitration. See id. ¶ 87.

On March 31, 2010, the GOB enacted a criminal statute that penalized parties that violated Belize Supreme Court injunctions and those that aided such violations. See id. ¶ 41. Penalties included mandatory fines between $50, 000 and $250, 000 and/or imprisonment for a minimum of five years. See id. ¶¶ 42-43. This statute applied to offenses committed both in Belize and in other jurisdictions. See id. ¶ 43. In the meantime, the GOB initiated litigation to enjoin several enforcement proceedings in any forum other than Belize courts. See id. ¶ 29. According to Petitioners, "the ease with which the GOB obtained injunctive relief in the Belize courts, coupled with the new mandatory penalties for violating such injunctions, had a chilling effect upon companies in Belize asserting legal claims against the GOB outside of Belize." Id.

BCB Holdings, BBL, and other companies challenged this criminal statute in legal proceedings in Belize. See id. ¶ 47. Although the Belize Supreme Court upheld the law, the Belize Court of Appeals and the CCJ concluded in 2012 and 2014 respectively, that the sections of the law that created a criminal offense with mandatory penalties for violating Belize Supreme Court injunctions were unconstitutional and unenforceable. See id. ¶¶ 49-50. In its final decision on the validity of the 2010 criminal statute, the CCJ outlined limited circumstances in which the Belize Supreme Court could issue injunctions related to arbitration proceedings. See id. ¶ 52.

Between early 2009 and January 2014, while the mandatory penalties on parties who violated Belize court injunctions were still in effect, the GOB obtained numerous injunctions against parties with claims against the GOB. See id. ¶ 54. One such injunction was obtained against the British Caribbean Bank ("BCB Bank"), a subsidiary of BCB Holdings. BCB Bank had filed a treaty arbitration against the GOB in 2010, but the GOB filed a claim in Belize Supreme Court seeking a declaration that the Belize Supreme Court was the proper forum for addressing a dispute between the parties. See id. ¶¶ 39-40. In so doing, the GOB obtained an anti-arbitration injunction against BCB Bank that restrained BCB Bank from pursuing the arbitration outside of Belize. See id. ¶ 40. This injunction was only discharged by the CCJ in 2013. See id. ¶¶ 51-52. The GOB did not request or obtain a similar injunction against BCB Holdings or BBL.

Petitioners filed this action on July 1, 2014, to confirm the arbitral Award pursuant to Section 207 of the Federal Arbitration Act ("FAA"), convert the Award plus costs and interests to United States dollars, and enter judgment in favor of petitioners. In the alternative, petitioners filed a complaint to recognize and enforce a foreign money judgment (U.K. Judgment) pursuant to the District of Columbia Foreign-Money Judgments Recognition Act of 2011, D.C. Code § 15-361 et seq.

The GOB timely filed a motion to dismiss the petition and motion to dismiss or strike the complaint. In addition, the GOB also submitted a response to the petition. In these two filings, the GOB lodges a series of arguments why this Court should not confirm the arbitral award or enforce the U.K. judgment. Namely, the Settlement Deed containing the arbitration clause is invalid; enforcement would violate the revenue rule; the Award is against U.S. public policy; the New York Convention does not apply to the dispute between the parties; the Court lacks subject-matter jurisdiction because Belize is entitled to foreign sovereign immunity; the Court lacks personal jurisdiction; the petition is time barred; the doctrines of res judicata, collateral estoppel, or international comity preclude enforcement of the Award; and there is a more convenient alternative forum. See Resp. to Pet. at 1; Mot. at 1. In addition, the GOB urges the Court to dismiss the complaint to recognize the U.K. Judgment because it was improperly joined with this confirmation action, the Court lacks subject matter and personal jurisdiction, res judicata and international comity must be applied, the foreign judgment is against public policy, and it conflicts with the final CCJ judgment. See Mot. at 2. Petitioners oppose all of these arguments. See Pet'r Opp. to Mot. (Mar. 2, 2015), Docket No. [29]; Opp. to Resp. to Pet. (Mar. 2, 2015), Docket No. [30].

II. LEGAL BACKGROUND

United States federal courts have a robust history of enforcing arbitral awards. Indeed, the Supreme Court has recognized an "emphatic federal policy in favor of arbitral dispute resolution." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985); see also Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 217 (1985) (noting that there is a "strong federal policy in favor of enforcing arbitration agreements.") In 1970, the United States acceded to the New York Convention. The New York Convention was implemented in the United States by amendment of the FAA. See Act of July 31, 1970, Pub.L. 91-368, 84 Stat. 692, codified at 9 U.S.C. §§ 201-208.

This Court has jurisdiction to enforce an arbitral award against a foreign state pursuant to the Foreign Sovereign Immunities Act, 28 U.S.C. § 1330, et seq ("FSIA"). See 28 U.S.C. § 1330(a) ("The district courts shall have original jurisdiction without regard to amount in controversy of any nonjury civil action against a foreign state as defined in section 1603(a) of this title as to any claim for relief in personam with respect to which the foreign state is not entitled to immunity."). It is undisputed that the GOB is a foreign state under 28 U.S.C. § 1603(a). Under the FSIA,

[a] foreign state shall not be immune from the jurisdiction of courts of the United States in any case -... in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship... or to confirm an award made pursuant to such an agreement to arbitrate, if... the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards.

28 U.S.C. § 1605(a), (a)(6), & (a)(6)(B). "The New York Convention is exactly the sort of treaty Congress intended to include in the arbitration exception." Creighton Ltd. v. Gov't of the State of Qatar, 181 F.3d 118, 121 (D.C. Cir. 1999).

United States courts have little discretion to refuse to confirm an award under the FAA. The FAA provides that in exercising its original jurisdiction over enforcing international arbitral awards, the district 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... Convention." 9 U.S.C. § 207. See Yusuf Ahmed Alghanim & Sons, W.I.L. v. Toys "R" Us, Inc., 126 F.3d 15, 20 (2d Cir. 1997) ("There is now considerable case law holding that, in an action to confirm an award rendered in, or under the law of, a foreign jurisdiction, the grounds for relief enumerated in Article V of the Convention are the only grounds available for setting aside an arbitral award."). The grounds for refusal enumerated in the Convention are as follows:

1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement... were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of ...

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