A party, Pertamina, loses an arbitration in Switzerland.  It reacts by getting an Indonesian court to annul the award, but the Supreme Court of Indonesia reverses the annulment order.  The winning party, Karaha Bodas Company, successfully moves in a Texas federal court to confirm the award.  The Fifth Circuit upholds the confirmation.  KBC registers the federal judgments in New York federal court.  Pertamina files a new lawsuit in the Cayman Islands.  It alleges that the winning party procured the arbitration award by "fraud".  The New York court enjoins Pertamina from proceeding with the Cayman Islands case.  Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, No. 07-0065 (2d Cir. Sept. 7, 2007).

Today, the Second Circuit affirmed.  It held that KBC satisfied the requirements for an anti-foreign-suit injunction under China Trade & Development Corp. v. M.V. Choong Yong, 837 F.2d 33 (2d Cir. 1987).  The court rejected Pertamina’s argument that its Caymans Islands case "is a proceeding ‘separate and independent of the arbitration proceedings and award.’"  Slip op. at 17.  It concluded instead that Pertamina had, in losing its attempt to vacate the award in Texas, actually litigated its claim that Karaha Bodas procured the award by fraud:

Although Pertamina makes new factual allegations in support of its claim that the Award should not have been enforced against it, these new factual allegations are not sufficient to undermine the preclusive effect of several earlier federal court decisions that (1) the Award should be enforced and (2) KBC is entitled to Pertamina’s New York funds in an amount sufficient to satisfy the Award.


Barry Barnett

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