Republic of the Philippines v. Westinghouse Electric Corp.

714 F. Supp. 1362 (1989)

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Republic of the Philippines v. Westinghouse Electric Corp.

United States District Court for the District of New Jersey
714 F. Supp. 1362 (1989)

Facts

In 1973, Ferdinand Marcos announced the decision to build the Philippines’ first nuclear powerplant. Westinghouse Electric Corporation (Westinghouse) (defendant) sought the contract to build the plant, and Burns & Roe (defendant) sought the architectural contract. Given that Marcos was ruling through martial law, Westinghouse and Burns & Roe concluded the contracts required the retention of a special sales representative (SSR) who had influence with Marcos. Allegedly, this SSR would offer Marcos a “piece of the action” to ensure the contracts for Westinghouse and Burns & Roe. Marcos directed the National Power Corporation (NPC) (plaintiff), the government agency responsible for electric power, to negotiate with Westinghouse and Burns & Roe. NPC alleged that Westinghouse informed its representatives that it had Marcos’s support and NPC had to agree to its proposed terms. The contract included an arbitration clause over the NPC’s objections and lacked any procedural protections for the NPC. After the Marcos regime collapsed in 1986, NPC brought suit against Westinghouse and Burns & Roe alleging fraud. Westinghouse and Burns & Roe filed a motion for a stay of litigation and sought to compel arbitration under Section 3 of the Federal Arbitration Act (FAA). Relying on Cancanon v. Smith, NPC argued that by bribing Marcos through the SSR, Westinghouse and Burns & Roe perpetrated a fraud in factum that vitiated NPC’s agreement to the contract. Relying on Prima Paint Corp. v. Flood & Conklin Mfg. Co., Westinghouse and Burns & Roe asserted the arbitral tribunal should consider the bribery allegations.

Rule of Law

Issue

Holding and Reasoning (Debevoise, J.)

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