PepsiCo Inc. v. Oficina Central De Asesoria y Ayuda Tecnica, C.A.

PepsiCo, Inc., a United States corporation, owned the subsidiary Venezuelan company Pepsi-Cola Panamericana, S.A. (collectively, PepsiCo) (plaintiffs). Oficina Central de Asesoria y Ayuda Tecnica, C.A. (Oficina) (defendant) was a Venezuelan company that managed a group of bottling companies owned by Diego Cisneros (the Cisneros bottling companies). In 1988 PepsiCo executed exclusive bottling-rights contracts with the Cisneros bottling companies. Paragraph 23 of the contracts stated that if a contract was terminated early, the terminating party owed damages. Under paragraph 30, Venezuelan law governed the contracts, disputes were to be arbitrated pursuant to the rules of the International Chamber of Commerce, and arbitration would take place in New York subject to New York law. The Cisneros bottling companies terminated the contracts with PepsiCo before the contracts expired. PepsiCo demanded that Oficina pay it damages. Oficina filed suit in Venezuelan court seeking a declaration that the amount of damages Oficina owed was less than the amount demanded by PepsiCo. Oficina also argued that the arbitration agreement in paragraph 30 was inoperative. PepsiCo petitioned in United States federal district court for immediate relief, seeking compelled arbitration and an injunction preventing Oficina from proceeding with litigation in Venezuela. Oficina conceded that the United States federal district court had jurisdiction to compel arbitration but asked that the court defer jurisdiction to the Venezuelan court. Both the United States and Venezuela were members of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the convention).