Nothing in New York International Convention Negated Inherent Court Authority.
The Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran won a breach of contract arbitration award against a U.S. corporation, which was confirmed under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). However, the district judge did not believe she had discretion to award attorney’s fees in the action to confirm the award under the Convention.
That determination was reversed in The Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Defense Systems, Inc., Case Nos. 99-56380/99-56444 (9th Cir. Dec. 15, 2011) (for publication).
Because Ministry’s motion for fees was based on what it contends was Cubic’s willful bad faith in failure to abide by the arbitration award, federal courts retain authority to award fees when the losing party has acted in bad faith, vexatiously, wantonly or for oppressive reasons–with a refusal to abide by an arbitrator’s award equating to bad faith activity. (Int’l Union of Petroleum & Indus. Workers v. W. Indus. Maint., Inc., 707 F.2d 425, 428 (9th Cir. 1983).) Although nothing in the New York Convention expressly mandated fees, nothing in it or in federal implementing statutes negated this inherent federal court authority. The case was remanded to have the district court reconsider the fee request.