The D.C. Circuit has approved a backdoor challenge to the validity of an international arbitration award, finding that a challenge to counsel's authority to enforce an award can never be forfeited.
In 2020, Quinn Emanuel Urquhart & Sullivan LLP sought to enforce an international arbitration award against Djibouti in favor of the Djiboutian company Doraleh Container Terminal ("DCT") in the U.S. Court of Appeals for the D.C. Circuit. Djibouti opposed enforcement, claiming Quinn Emanuel lacked authority to represent DCT. After expropriating DCT during the arbitration, Djibouti appointed an administrator who attempted to revoke the law firm's representation. The arbitral tribunal nevertheless found it could continue without deciding Quinn Emanuel's authority and awarded DCT $474 million.
The District Court rejected Djibouti's argument that Quinn Emanuel lacked enforcement authority. It found that the New York Convention did not list lack of authority as a reason not to enforce a valid award. Plus, Djibouti could have raised this argument in the arbitration but did not, so the argument was forfeited.
Djibouti appealed, and the D.C. Circuit vacated and remanded with instructions to determine Quinn Emanuel's enforcement authority. It found that although the New York Convention does not list lack of attorney authority as an exception to the general rule that awards must be enforced, the Convention requires enforcement "in accordance with the rules of procedure of [each] territory." The D.C. Circuit cited century-old precedent for the principle that, in federal court, if a defendant "presents evidence showing sufficient ground to question" an attorney's authority to initiate a case, the defendant's request to review that authority must "always [be] granted." Because such a challenge is antecedent to whether there is a case and controversy, it cannot be forfeited.
Judge Judith Rogers penned a forceful dissent. She emphasized that the international community's "avowedly pro-arbitration regime" is designed to prevent local-court questioning of valid awards. She would have enforced the award and found that Djibouti's challenge to Quinn Emanuel's authority was simply a "'disguise' to avoid forfeiture." Judge Rogers added that the dusty precedent unearthed by the majority did not require courts to "always" entertain authority challenges, but only when "necessary for the ends of justice."
This D.C. Circuit decision raises the issue of whether a party's internal ownership changes during arbitration proceedings may be used to block future enforcement of otherwise valid arbitral awards. To mitigate this risk, parties should resolve any potential issue regarding their counsel's authority during the arbitration.
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