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Steel Corp. of the Philippines v. International Steel Services

February 6, 2008

STEEL CORPORATION OF THE PHILIPPINES, PLAINTIFF/PETITIONER,
v.
INTERNATIONAL STEEL SERVICES, INC., DEFENDANT/RESPONDENT.



The opinion of the court was delivered by: Ambrose, Chief District Judge

OPINION AND ORDER OF THE COURT

Synopsis

Plaintiff/Petitioner Steel Corporation of the Philippines ("SCP") commenced this action by petition to confirm a foreign arbitration award rendered in favor of SCP against Defendant/Respondent International Steel Services, Inc. ("ISSI"). By opinion and order, dated July 31, 2006 [Docket No. 27], I denied Defendant's motion for judgment on the pleadings. ISSI now has moved for summary judgment [Docket No. 47] dismissing the petition on essentially the same grounds, i.e., that the award: (1) has been set aside or "nullified" by the Philippine Regional Trial Court; (2) violates the United States' public policy against forum shopping; and (3) was not rendered in compliance with the parties' arbitration agreement and violates due process. SCP cross-moves for summary judgment [Docket No. 49] and opposes ISSI's motion [Docket No. 56]. After careful consideration of the papers submitted by the parties, and for the reasons set forth below, I deny ISSI's motion for summary judgment and grant SCP's motion for summary judgment confirming the arbitration award.

OPINION

I. Relevant Undisputed Facts*fn1

SCP is a producer and wholesaler of steel products in the Philippines. ISSI is in the business of designing and constructing acid regeneration plants, which generate and recycle pickle liquor and other wastes from the steelmaking process. On April 1, 1996, ISSI and SCP entered into an Acid Regeneration Plant Supply and Installation Agreement (the "ARP Contract"), in which ISSI was to, inter alia, build a plant for SCP. On April 15, 1997, the parties entered into an Iron Oxide Sales Agreement (the "IOSA Contract"), in which ISSI agreed to buy iron oxide produced by the plant that was the subject of the ARP Contract.

Both the ARP Contract and the IOSA Contract contain identical arbitration clauses. The clauses provide as follows:

The validity, performance and enforcement of this Contract shall be governed by Philippine Laws. The parties agree that any dispute or claim arising out of this Contract shall be settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce. The proceedings on arbitration shall be conducted in Singapore. The arbitral award shall be final and binding on both parties. [Docket No. 50-5, at Art. 10.]

Separate disputes arose under the two contracts. On September 18, 2002, ISSI commenced an arbitration against SCP under the ARP contract. Because the dispute was essentially a construction dispute, ISSI sought arbitration before the Construction Industry Arbitration Commission ("CIAC") of the Philippines, despite the terms of the arbitration provision in the ARP Contract. An award was rendered on August 20, 2003 in favor of ISSI in the amount of $150,000 (the "Philippine Award"). [Docket No. 50-9, at 3.]

A second dispute arose between the parties with respect to purchases of iron oxide from SCP's plant pursuant to the IOSA Contract. On May 5, 2003, SCP submitted the dispute to arbitration in Singapore before the ICC International Court of Arbitration. ISSI participated fully in the arbitration proceeding, which was held in January and February 2004.

The arbitrator, Mr. Woo Tchi Chu, issued an award on liability in SCP's favor on June 24, 2004 [Docket No. 50-6] and a final award on November 3, 2004 [Docket No. 50-4] in the amount of $647,965.50 including interest, costs and expenses (collectively, the "Singapore Award"). The Singapore Award clearly states that the arbitrator applied the Singapore International Arbitration Act to the proceedings, but applied Philippines law to the validity, performance and enforcement of the ARP Contract. [Docket No. 50-4, at 7.]

On August 19, 2004, ISSI filed a petition in a Regional Trial Court of the Philippines to vacate the Singapore Award. Joint Aff., Ex. A. SCP moved to dismiss the petition, which was denied by order dated December 14, 2004. Id., at Ex. D. By order dated January 4, 2006, SCP was declared in default of the petition by the Regional Trial Court and ISSI was "allowed to present its evidence ex-parte." Id., at Ex. G. On January 26, 2006, SCP filed an Urgent Motion for Reconsideration of the Regional Trial Court's January 4th order on default. Id., at Ex. H.

The Regional Trial Court permitted ISSI to file a response thereto, and the issue now has been fully submitted. By order dated April 18, 2007, the Regional Trial Court referred the dispute to mediation, and stayed all further proceedings of the court pending mediation. [Docket No. 59-3.] According to SCP, the parties failed to reach resolution through mediation, the Regional Trial Court's stay is no longer in effect, and the merits of ISSI's petition are before the Regional Trial Court for disposition. (SCP Reply Mem. at 3.)

Meanwhile, on September 13, 2005, ISSI filed with the CIAC a motion for execution of the Philippine Award, which motion was granted by the CIAC by undated order. By order dated September 30, 2005, the CIAC denied SCP's motion for reconsideration and on October 4, 2005, a writ of execution was issued with respect to the Philippine Award. [Docket No. 50-9, at 1-2.] The issuance of the writ was appealed by SCP to the Philippine Court of Appeals.

On appeal, SCP argued that ISSI was not entitled to a writ of execution because the monetary award in its favor (the Philippine Award) was extinguished as a matter of law by the greater award in SCP's favor (the Singapore Award). The Court of Appeals agreed. By decision and order dated July 17, 2007, the Philippine Court of Appeals reversed, set aside and lifted the CIAC's writ of execution against SCP in connection with the Philippine Award. [Docket No. 50-9, at 12.] In so holding, the Court of Appeals explicitly rejected ISSI's argument that the Singapore Award was not due and payable given ISSI's petition to vacate the award filed in the Philippines. Id. at 8-9. The Court of Appeals rejected the argument for a multitude of reasons, including that (1) the IOSA Contract provided that arbitral awards are final and binding on the parties, and such a provision "carries with it a waiver of the right to have it nullified before our local courts"; (2) the petition to ...


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