AAOT Foreign Economic Association (VO) Technostroyexport v. International Development & Trade Services, Inc.

In 1991 and 1992, the International Development and Trade Services (IDTS) (plaintiff/defendant) entered contracts to purchase nonferrous metals from AAOT Foreign Economic Association (VO) Technostroyexport (Techno) (plaintiff). The contracts contained an arbitration agreement, which provided for arbitration before the International Court of Commercial Arbitration of the Chamber of Commerce and Industry of the Russian Federation in Moscow. Disputes arose between the parties, and the parties proceeded to arbitration under the arbitration agreement. IDTS sent an interpreter to Russia to meet with an official of the arbitral tribunal. According to the IDTS interpreter, the official stated he would rig the tribunal in exchange for a payment of $1 million. The interpreter passed this information to IDTS, but IDTS decided to participate in the proceeding in spite of this information. The arbitral tribunal held a hearing between December 1994 and September 1995. In March 1996, the arbitral tribunal entered an award for Techno, and Techno filed a petition in the district court in the United States to confirm the awards. IDTS opposed enforcement of the awards under Article V(2)(b) of the New York Convention as contrary to the public policy of the United States. In its opposition, IDTS also disclosed the alleged corruption of the arbitral tribunal for the first time in support of the argument that enforcement of an award rendered by a corrupt tribunal would be contrary to the public policy of the United States. The district court determined that IDTS waived its right to assert the public-policy exception where it had knowledge of the alleged corruption of the arbitral tribunal but remained silent until an adverse award was rendered. The district court entered a judgment to confirm the arbitration awards, and IDTS appealed to the Second Circuit.