Reinsurance Focus

Parties to a stock purchase agreement between two British Virgin Islands companies arbitrated a dispute in Miami, Florida. One party was required to pay a $11 million award. The prevailing party applied to the High Court of the British Virgin Islands (“the BVI court”) for enforcement of the award, pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, while the losing party moved to vacate the award in the U.S. District Court for the Southern District of Florida. Although the BVI court offered to stay the action pending the resolution of the district court case if the losing party posted bond, the losing party failed to either provide the requested $7 million security or appeal the order. The BVI court then granted the application and entered a judgment on the award, which the losing party failed to appeal. The BVI court appointed liquidators, who collected enough funds to satisfy the judgment. The losing party then moved to reopen the vacatur proceedings, which the district court had stayed at the liquidators’ request. The district court reopened the case and granted the prevailing party’s motion to dismiss, holding that it did not have subject matter jurisdiction over the motion to vacate the award.

On appeal, the Eleventh Circuit affirmed the dismissal on other grounds, concluding that the case was prudentially moot, as the district court would be unable to provide effective relief, holding that a party may not sit idly by while an arbitration award is confirmed and only then seek to vacate it. Emphasizing the uniqueness of the facts of the present case, the court stated that the failure to act in the BVI court and consent to a stay of the district court proceeding allowed the BVI case to take precedence. Furthermore, the BVI court had indicated that vacatur in the district court would not affect its final judgment, except in the case of fraud or mistake, which, combined with losing party’s own failure to act, made the likelihood of meaningful relief in the district court virtually non-existent. Ingaseosas Int’l. Co. v. Aconcagua Investing Ltd., No. 11-10914 (11th Cir. July 5, 2012).

This post written by Rollie Goss.

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