Houston Federal Court Confirms Consent Award Based on New York Convention

The Southern District of Texas in Houston has confirmed a $14 million arbitration award in an international oil and gas dispute.  In Transocean Offshore Gulf of Guinea VII Ltd., et al. v. Erin Energy Corp., No. H-17-2623 (S.D. Tex. Mar. 12, 2018), the London Court of International Arbitration issued a consent award in favor of Transocean related to a dispute with an oil and gas exploration company, Erin Energy, over a contract for work that was performed off of the coast of Nigeria.

After Erin Energy failed to pay Transocean pursuant to the terms of the consent award, Transocean filed a motion to confirm the award under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “Convention”) in the Southern District of Texas.  In response, Erin Energy claimed the federal court lacked subject matter jurisdiction because the Convention is silent regarding its applicability to consent awards. In addition, the oil and gas exploration company argued “a consent award is fundamentally different from other arbitral awards because an arbitral award represents the tribunal’s conclusions, not the parties’ agreement.”

In a memorandum opinion, the Houston court first examined the requirements for confirmation of a foreign arbitration award under the Convention.  After that, the court discussed challenges to subject matter jurisdiction in the context of the Federal Rules of Civil Procedure.  The federal court then turned to the facts of the case before it.

The Houston court disagreed with Erin Energy’s claim that the Convention does not apply to consent awards based on an opinion that was recently decided by the Southern District of New York:

In 2017, in a case with analogous facts and legal issues, the Southern District of New York held that an award “entered into by consent of the parties, as opposed to being based on an arbitrator’s resolution of the factual and legal disputes,” covered by and subject to the Convention. Albtelecom SH.A v. UNIFI Commc’ns, Inc., 2017 WL 2364365, at *5 (S.D.N.Y. May 30, 2017). The petitioner in Albtelecom sought confirmation of an arbitral award decided by an arbitrator of the International Chamber of Commerce’s International Court of Arbitration. The award was based on the parties’ consent. Id. at *1. The respondent’s “sole argument” against confirmation was that the award was made by the parties’ consent, which the respondent asserted showed that the parties had resolved their dispute “outside of arbitration.” Id. at *5. The Albtelecom court disagreed for two reasons. First, though the parties could have dismissed the arbitration to pursue a private settlement agreement, they instead “affirmatively asked [the arbitrator] to adopt as part of an . . . arbitral Award, in haec verba, the terms of their settlement agreement in the Award.” Id. Second, the respondent cited no case law to support treating a consent award as outside the Convention, or entitled to less preclusiveness or enforceability, than an award entered through an adjudicative proceeding by the tribunal, even if the parties do not agree with the outcome. Id.

. . .

The analysis in Albtelecom is thorough and persuasive. This court reaches a similar result. The parties in this case did not dismiss the arbitration. Rather, they opted to continue the arbitration proceedings even after they came to their own agreement. While the tribunal did not make findings or reach legal conclusions, it made an award that bound the parties, within its power. (Docket Entry No. 25-1 at 7-9). No binding or persuasive statutory language or case law requires a court to hold that a tribunal must reach its own conclusions, separate from the parties’ agreement, to make a valid, binding award subject to the Convention. As the Albtelecom court noted, this rule would dissuade parties from seeking arbitration in the first place or benefitting from the efficiencies it is meant to provide.

The federal court then dismissed Erin Energy’s only remaining argument after determining the London Court of International Arbitration rules “make no distinction between consent awards and other arbitral awards.”

Because the Southern District of Texas in Houston had subject matter jurisdiction in the case and found “no basis to vacate or modify” the consent award, the federal court ultimately confirmed the arbitral award.

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