In Doraleh Container Terminal SA v. Republic of Djibouti, 109 F.4th 608 (D.C. Cir. 2024), the District of Columbia Circuit vacated the district court’s decision to enforce a foreign arbitral award because the respondent, against whom the petitioner sought to enforce the arbitral award, challenged the authority of the petitioner’s attorneys.
This case is related to a long-lasting dispute between Doraleh Container Terminal (“Doraleh”) and the Republic of Djibouti, a country in East Africa (“Djibouti”).
I. Factual Background.
In 2006, Doraleh and Djibouti entered into a Concession Agreement, under which Doraleh agreed to build and develop a container terminal. In exchange, Djibouti granted Doraleh the exclusive right to handle container shipping in the country and committed to pay royalties for any ships that did not dock at the terminal. The Agreement stipulated that any disputes between the parties would be resolved through arbitration under the LCIA Rules.
In 2008, Doraleh finalized the construction of the terminal.
After the terminal became commercially successful, Djibouti sought to take control of it.
This chain of events illustrates how the dispute between Djibouti and Doraleh escalated, eventually bringing Doraleh to a U.S. court to enforce the arbitral award:
2014: Djibouti initiated arbitration at the LCIA to void the Concession Agreement, alleging it had been procured through bribery and corruption.
2014: Doraleh retained the law firm Quinn Emanuel Urquhart & Sullivan, LLP (“Quinn Emanuel”), granting them power of attorney to represent it in the arbitration and “any other related matters.” Doraleh, through its representative Quinn Emanuel, filed a counterclaim against Djibouti for breach of contract, specifically for failure to pay certain royalties and for breach of Doraleh’s exclusivity rights under the Concession Agreement.
2017: The arbitral tribunal dismissed the claims brought by Djibouti to void the Concession Agreement.
September 2018: Following its loss in arbitration, Djibouti nationalized the two-thirds ownership interest in Doraleh, thus becoming Doraleh’s majority shareholder. [This move is essential to understanding why Djibouti challenged the authority of Doraleh’s attorneys in subsequent legal proceedings. Since 2018, Djibouti has been the majority shareholder of Doraleh.]
September 2018: Djibouti requested the Djibouti Court of First Instance to appoint an administrator for Doraleh due to the “tensions” between its shareholders. The court granted this request and appointed a provisional administrator, who was ostensibly independent of both shareholders, to manage Doraleh. [Thus, 2018 not only saw a shift in the majority shareholder but also brought another significant change to Doraleh’s corporate structure: a change of the manager.]
November 9, 2018: The arbitral tribunal held an arbitration hearing on Doraleh’s breach-of-contract counterclaims. Djibouti did not appear.
November 18, 2018: Doraleh’s provisional administrator notified the arbitral tribunal that Quinn Emanuel lacked authority to continue representing Doraleh in the arbitration. Claiming to represent Doraleh, the provisional administrator requested to stay the arbitration. Quinn Emanuel responded, referencing the 2014 power of attorney as evidence of its authority and disputing the validity of the provisional administrator’s appointment.
November 30, December 1, & December 17, 2018: The arbitral tribunal invited Djibouti and Doraleh’s provisional administrator to respond to Quinn Emanuel’s evidence of authority to represent Doraleh and challenges to the provisional administrator’s authority. Djibouti and Doraleh’s provisional administrator failed to respond.
January 3, 2019: The arbitral tribunal rejected the request for a stay and declined to determine the provisional administrator’s authority because there was no request for the arbitral determination of the provisional administrator’s authority and because the arbitration had proceeded to the stage of a hearing on Doraleh’s counterclaims, when further involvement from either party was no longer necessary.
May 3 & July 1, 2019: The arbitral tribunal ruled on Doraleh’s counterclaims, awarding the company over $475 million for Djibouti’s breaches of contract.
It is essential to remember that Doraleh’s majority shareholder and manager changed in 2018, when the arbitration was still in progress. Quinn Emanuel, hired when the arbitration began in 2014, persisted in representing Doraleh throughout the entire process.
II. Quinn Emanuel’s Attempt to Enforce the Arbitral Award.
In 2020, Quinn Emanuel, claiming to represent Doraleh, petitioned to enforce the arbitral award in the District Court for the District of Columbia.
Djibouti raised the defense that the attorneys who filed the petition lacked the authority to do so. Djibouti submitted several declarations from Doraleh’s provisional administrator, stating that she had not authorized the petition, requesting that the case be dismissed, and expressly revoking any remaining authority Quinn Emanuel had to represent Doraleh. According to Djibouti, the lack of authority created several problems: (1) If Doraleh had not authorized the filing, then no valid petition to enforce the arbitral award was made by a “party to the arbitration,” as required by 9 U.S.C. § 207; (2) There was no Article III case or controversy between adverse parties.
The district court entered judgment for Doraleh and confirmed the arbitral award. Doraleh Container Terminal SA v. Republic of Djibouti, 656 F. Supp. 3d 223, 236 (D.D.C. 2023). The district court made the following findings:
The issue of Doraleh’s authority was forfeited because Djibouti failed to raise it to the arbitrators. Id. at 233 (“Despite an invitation from the arbitral tribunal to comment on [Doraleh’s] authority, Djibouti declined to respond, and instead raises its argument here for the first time. … But it is not this Court’s job to engage with questions that could have been addressed before the arbitrator. … And as other courts have held, ‘[i]f a party fails to raise an issue … to the arbitrators, that issue is forfeited.’”). [It was Doraleh’s provisional administrator, not Djibouti, who notified the arbitral tribunal that Quinn Emanuel lacked authority to continue representing Doraleh and who requested to stay the arbitration. Djibouti was invited to comment on the authority issue, but failed to do so. “Any lost opportunity to be heard therefore was self-inflicted.” Belize Bank Ltd. v. Gov’t of Belize, 191 F. Supp. 3d 26, 39 (D.D.C. 2016), aff’d, 852 F.3d 1107 (D.C. Cir. 2017).]
The lack of attorney authority is “not one of the explicit grounds upon which a Court can deny an arbitral award under the New York Convention.” 656 F. Supp. 3d at 234 (citations omitted).
Based on the foregoing, the district court granted Doraleh’s petition to confirm the arbitral award.
Djibouti appealed.
III. The District of Columbia Circuit’s Opinion.
The District of Columbia vacated the district court’s judgment and remanded the case, instructing the district court to determine Quinn Emanuel’s authority to represent Doraleh.
The Court stated that “[w]hen a party requests the court inquire into the lawyer’s authority and presents evidence showing ‘sufficient ground to question the authority,’ the request is ‘always granted.’” Doraleh, 109 F.4th at 614 (quoting W.A. Gage & Co. v. Bell, 124 F. 371, 380 (W.D. Tenn. 1903); McKiernan v. Patrick, 5 Miss. 333, 335 (Miss. Err. & App. 1840)). The Court found that the declarations from Doraleh’s provisional administrator, stating that she had not authorized the petition, were “sufficient ground to question the authority [of Quinn Emanuel to represent Doraleh].” Id.
Quinn Emanuel argued that their authority should not be considered for the following reasons: (1) Djibouti forfeited any challenge to Quinn Emanuel’s authority by not raising it during arbitration; (2) The lack of attorney authority is not listed in the New York Convention as one of the reasons for denying the enforcement of an arbitral award.
In response to these arguments, the District of Columbia Circuit made the following findings:
When cases are filed without authorization, the fairness of judicial proceedings is so affected that it justifies an exception to the traditional forfeiture rules. Here, if the provisional administrator lawfully holds control over Doraleh, both she and Doraleh have a strong interest in having the case dismissed, as evidenced by her declarations. Should Djibouti’s lack of action result in the loss of right to challenge authority, it would harm the rights of the provisional administrator and Doraleh. Accordingly, “the general rule [is] that a defendant’s failure to timely raise an authority issue does not forfeit a potentially unrepresented plaintiff’s rights.” 109 F.4th at 615. “’[T]he objection’ to an attorney’s authority ‘is good at any time.’” Id. (quoting Sutherland v. Int’l Ins. Co. of New York, 43 F.2d 969, 972 (2d Cir. 1930)).
Even under the traditional forfeiture rules, Djibouti did not forfeit its authority challenge. As a general rule, issues not raised before arbitrator are waived in enforcement proceeding. 109 F.4th at 616 (quoting Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 315 (2d Cir. 1998)). The Court found that this rule was not applicable to this enforcement proceeding. During the arbitration, Djibouti could not have challenged Quinn Emanuel’s authority because this issue was irrelevant to the merits of the arbitration, as Quinn Emanuel argued and the arbitral tribunal agreed. In this enforcement proceeding, however, Quinn Emanuel’s argument of “irrelevance to the merits” no longer applies. Thus, the reasons for challenging Quinn Emanuel’s authority in this Court are based on new facts not addressed during the arbitration.
“While it is true that attorney authority does not explicitly appear [in Article V of the New York Convention] as a ground for denying enforcement [of an arbitral award], it remains a basic principle that filings made by attorneys without the party’s consent are a ‘nullity.’” 109 F.4th at 616 (quoting Meredith v. The Ionian Trader, 279 F.2d 471, 473 (2d Cir. 1960)). “If Doraleh did not authorize this petition, then there is no petition on which to grant or deny enforcement of the arbitral award.” Id.
The District of Columbia Circuit concluded that the district court, when presented with the declarations from Doraleh’s provisional administrator, had an obligation to determine whether Doraleh authorized Quinn Emanuel to file this petition. The District of Columbia Circuit therefore vacated the judgment and remanded for the district court to determine Quinn Emanuel’s authority to represent Doraleh.
The district court will need to address the issues of foreign corporate governance law to determine the attorneys’ authority to represent Doraleh. Does this result align with the traditionally narrow scope of enforcement proceedings under the New York Convention? Should the district court resolve the authority dispute despite the parties’ contractual commitment to resolve such corporate governance issues through arbitration? Is it proper to allow one party to challenge the other party’s authority during enforcement proceedings, even though this party had opportunity—and was even invited—to raise this issue during arbitration? These questions remain unresolved.
The information provided in this article is intended for informational purposes only and does not constitute legal advice. It should not be relied upon or applied without consulting an attorney to address your specific circumstances. Please note that this article was published on the date indicated and may not reflect subsequent changes in the law.
