US District Court for the Central District of California confirms New York Convention award rendered by SHIAC

On 5 December 2015, the US District Court for the Central District of California granted petitioner CEEG (Shanghai) Solar Science & Technology Co., Ltd.’s (“SST”) motion to confirm a foreign arbitration award rendered by the Shanghai International Economic and Trade Arbitration Commission (Shanghai International Arbitration Center (“SHIAC”) against Sunvalley Solar, Inc. (“Sunvalley”). The District Court’s judgment confirming the award was entered into on 29 February 2016 (CEEG (Shanghai) Solar Science & Technology Co., Ltd. v. Sunvalley Solar, Inc., Case no. CV15-7339PSG (JPRx) (C.D. Cal. 2016)).

Factual Background

In 2008, Chinese corporation SST entered into a distribution contract for the sale of crystalline photovoltaic modules with Sunvalley, a California corporation. The distribution contract contained an agreement to arbitrate before the SHIAC.

In January 2013, Sunvalley sued SST in the Superior Court of California, alleging that SST had breached the term of the parties’ contract by failing to deliver modules of the standard agreed upon in the contract.

In March 2013, SST initiated arbitration with SHIAC for Sunvalley’s failure to pay for the modules.

Sunvalley failed to participate in the arbitration proceedings and on 10 December 2013, SHIAC issued an award at an amount of USD 1 million in SST’s favor.

Thereafter, SST moved to confirm the award before the US District Court for the Central District of California

Order on Motion to Enforce Judgment and Judgment Confirming the Award

The District Court stated that it must confirm the arbitration award unless Sunvalley met its burden of showing the existence of a defense under Article V of the Convention on Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”).

The District Court noted, however, that Sunvalley had not asserted any of the enumerated defenses under the New York Convention, instead, argued that in 2013 SST violated the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents (“Hague Convention”), by failing to translate an unspecified set of “arbitration documents” into English and by mailing them directly to Sunvalley, rather than sending them through the Central Authority of the United States. Sunvalley argued that because service of the arbitration documents was ineffective and “courts uniformly hold that a judgment is void where the requirements for effective of service have not been satisfied” the arbitration award is void. Sunvalley did not argue that it was unaware of when or where the arbitration would take place.

The District Court was not persuaded with Sunvalley’s argument. It found that the Hague Convention does not designate service through the Central Authority of the United States as the only acceptable means of service. Moreover, Sunvalley did not argue that it was not properly served with a complaint, but with an unspecified “set of arbitration documents” in May, 2013. Although SST cited to numerous nonbinding cases which demonstrate that service is voided if it does not comply with the Hague Convention, none of those cases involve arbitration or the service of unspecified “arbitration documents”.

The District Court noted that most fatal to Sunvalley’s cause was the fact that nowhere in its opposition did it assert any of the seven defenses enumerated in the New York Convention. The Court held that absent at least one of those defenses, it must confirm the award.

The District Court proceeded to agree with SST that at best, Sunvalley’s challenge could be construed as an attempt to assert the second of the New York Convention’s enumerated defenses: that Sunvalley was not given proper notice of the appointment of the arbitrator or the arbitration proceedings, or that it was otherwise unable to present its case.

Although the Convention does not specify what constitutes proper notice of the arbitration proceedings, the rules of SHIAC, the forum in which the parties agreed to arbitrate, provide that “[a]ll documents, notices and written materials in relation to the arbitration may be sent to the parties and/or their representatives in person, or by registered mail or express mail, facsimile, telex, cable, or by any other means considered proper by the Secretariat of this Commission”. Sunvalley did not dispute that it received notification of the arbitration proceedings by mail four months before the arbitration took place and that it was in communication with SHIAC regarding the arbitration during that time. Sunvalley was, therefore, unable to meet its burden of demonstrating that it was not given proper notice of the arbitration proceedings under Art. V(1)(b) of the Convention.

Conceivably, the District Court noted, Sunvalley’s complaint that it was forced to arbitrate despite SHIAC’s refusal to provide it with an English translation of the arbitration documents could be construed as an argument that Sunvalley was “otherwise unable to present its case”. According to the Court, the evidence did not demonstrate that SHIAC refused to provide Sunvalley with documents in English, but that Sunvalley was notified three months in advance of the arbitration that under SHIAC’s laws, the arbitration would be conducted in Chinese and that Sunvalley should have hired a translator or representative to facilitate the arbitration. Sunvalley had three months to obtain a representative who could translate the Chinese documents and conduct arbitration on Sunvalley’s behalf. The District Court was, therefore, unwilling to construe Sunvalley’s refusal to participate as a basis for finding that Sunvalley was unable to present its case.

Because Sunvalley had not met its burden of establishing an enumerated defense under the New York Convention, the District Court confirmed the award and directed SST to prepare a judgment consistent with the Court’s order. The judgment confirming the award was entered into on 29 February 2016.

Amore 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: Original Order Granting Motion to Confirm Arbitration Award and Enter Judgment dated 5 December 2016 and Original Judgment Confirming the Arbitration Award dated 29 February 2016 available at: www.pacer.gov