No violation of due process under Article V(1)(b) - Intel Capital (Cayman) Corporation, Intel Capital Corporation, Deutsche Telekom, AG v. Shan YI, United States District Court, Eastern District of Michigan, Southern Division, 13 November 2015
On 13 November 2015, the United States District Court for the Eastern District of Michigan granted a petition to confirm an award rendered in favour of the Petitioners – Intel Capital (Cayman) Corporation, Intel Capital Corporation and Deutsche Telekom, AG – dismissing Respondent’s – Shan Yi’s – Article V(1)(b) objection that no proper notice of the arbitration in Hong Kong was given.
Background:
In 2005, Respondent invested in a business enterprise with Shuying Huang and was one of the five founders of the resulting business, Airway Communications Holding Company Ltd.
In May 2008, the Petitioners and Respondent entered into a contractual relationship defined by the Second Amended and Restated Investors’ Rights, Put Option and Indemnity Agreement, which provided for arbitration in Hong Kong in case of any dispute.
In November 2012, a dispute arose between the Parties, and the Petitioners filed a Notice of Arbitration pursuant to the contractual agreement between them. The Notice of Arbitration, however, was returned undeliverable to Respondent’s address, because Respondent had moved. Peter Yuen represented the business and its founders in the arbitration but Respondent argued that he did not authorize him to represent him. Peter Yen then rescinded his representation and requested that Respondent be notified of future communication via the addresses listed in the Parties’ contractual arrangement. Respondent and his fellow founders took no action in the arbitration. Correspondence to Respondent’s address was undeliverable and an email sent by the arbitral tribunal to Respondent’s email address did not elicit any response. The arbitral tribunal also retained the services of FTI Consulting to trade the addresses of the founders. FTI Consulting did not retrieve the business address of Respondent.
The arbitral tribunal conducted the arbitration in the absence of Respondent and rendered an award of approximately USD 13 million in favour of the Petitioners.
The Petitioners sought the confirmation of the arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitration Awards of 1958 (New York Convention). Respondent opposed the petition, arguing that he was not given proper notice of the arbitration, raising the defense of Article V(1)(b) of the New York Convention.
District Court Opinion:
In referring to Article V(1)(b) of the New York Convention which provides that a court may refuse to recognize or enforce an arbitral award, if the “party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or otherwise unable to present his case”, the District Court noted that appellate courts have interpreted this to mean that the arbitrator must “provide a fundamentally fair hearing”, which “meets the minimal requirements of fairness – adequate notice, a hearing on the evidence, and an impartial decision by the arbitrator” (Slaney v. The Int’l Amateur Athletic Fed’n, 244 F. 3d 580, 592 (7th Cir. 2001) (quoting Sunshine Mining Co. v. United Steelworkers, 823 F. 2d 1289, 1295 (9th Cir. 1987)). The District Court added that arbitration proceedings need not adhere to formal rules of procedure, though parties should have an opportunity to present their cases.
The District Court found that Respondent failed to carry his burden of establishing that he falls under the narrowly construed defenses to enforcement of arbitration awards under the New York Convention. According to the District Court, the Petitioners provided Respondent with proper notice as was agreed in their contractual arrangement. Further, the Petitioners and the arbitral tribunal made a reasonable inquiry into Respondent’s whereabouts, including hiring a consultant to find his address and emailing him, although Respondent failed to read the email prior to the arbitration proceedings.
As a result, the District Court granted the Petitioners’ motion to confirm the arbitration award.
A more detailed summary and an excerpt of this decision, indexed and searchable according to the list of topics published in http://www.newyorkconvention.org/court+decisions/description will be published in the 2016 volume of the Yearbook Commercial Arbitration, published by the International Council of Commercial Arbitration (ICCA).
Source: District Court’s Opinion in www.fastcase.com