Ministry of Defense of Iran v. Cubic Defense Systems, Inc.

In 1977 a predecessor to Cubic Defense Systems, Inc. (Cubic), a United States corporation, entered into a contract with the predecessor to the Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran (Ministry), under which Cubic agreed to sell and service an air-combat defense-maneuvering range. However, the Iranian Revolution prevented performance of the contract. Cubic and Ministry agreed to discontinue the contract, and the parties would settle accounts at a later date after Cubic tried to resell the military equipment. Cubic later sold the equipment to Canada. Ministry filed a request for arbitration before the International Court of Arbitration of the International Chamber of Commerce (ICC). The ICC awarded $2,808,519 plus pre-award interest to Ministry, along with the costs of arbitration, which Cubic failed to pay. Ministry subsequently filed an action in federal district court to confirm the award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), and it sought prejudgment interest for the period between the ICC award and the district court’s judgment. The district court confirmed the ICC’s award, but it denied Ministry’s request for prejudgment interest. Both parties appealed the district court’s decision. Among other arguments, Cubic asserted that the ICC award should not be confirmed because it was against United States public policy against the transfer of wealth to the Islamic Republic of Iran. Cubic pointed to the United States government’s sanctions against the country of Iran as well as the prohibition of payment to the government of Iran without a special license issued by the United States government. In turn, Ministry argued that the district court erred in failing to award it prejudgment interest. The United States filed an amicus curiae brief in support of confirming the award in favor of Ministry.