Kramer Levin Obtains D.C. Circuit Reversal of $486 Million Judgment on Foreign Arbitration Award

On July 30, 2024, the U.S. Court of Appeals for the D.C. Circuit reversed a district court’s confirmation of a foreign arbitration award and entry of a $486 million U.S. judgment against the Republic of Djibouti on the basis of that award. Supreme Court and Appellate Litigation partner and deputy chair Matthew Madden argued the appeal for Djibouti.

Djibouti was the two-thirds majority owner of a public-private joint venture, Doraleh Container Terminal SA, that constructed and operated a busy container-ship port on Djibouti’s Red Sea coast. For a time, Doraleh’s private, minority owner had governance rights over it, including to appoint counsel and commence legal action. But disputes eventually arose between that minority owner and Djibouti over the country’s construction of another port and other alleged violations of the parties’ joint-venture agreements. When those disagreements proved to be intractable, and came to stymie Doraleh’s corporate operations, a Djiboutian court appointed an independent provisional administrator to oversee Doraleh with full governance rights.

Notwithstanding that appointment, Doraleh’s minority owner, through its counsel, continued to press forward to obtain an arbitral award in Doraleh’s name. And then, in the U.S. District Court in the District of Columbia, the same counsel filed a petition, in Doraleh’s name but without its administrator’s authorization, to confirm Doraleh’s arbitration award and obtain a U.S. judgment on it. Doraleh’s administrator rejected that counsel appearing for Doraleh was authorized to do so, and asked that the unauthorized petition be dismissed. Djibouti thus moved for dismissal of the unauthorized petition. The district court, however, held that counsel’s authority to act for Doraleh was not relevant to whether the petition should be granted, and that Djibouti had forfeited any authority objection during the arbitration.

The D.C. Circuit reversed, by a 2-1 vote, in a published decision. It held that counsel’s authority to act for Doraleh is relevant and that a challenge to counsel’s authority can be made at any time. It further held that, in any event, Djibouti had not forfeited its authority objection during the arbitration. The D.C. Circuit therefore vacated the $486 million judgment against Djibouti and order confirming the foreign arbitration award, and remanded the case for further proceedings on the authority issue.