KT Corp. v. ABS Holdings, LTD.

18‐2300‐cv
KT Corp. v. ABS Holdings, LTD.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE
OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A
SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE
FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A
PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED
BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second
Circuit, held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in
the City of New York, on the 12th day of September, two thousand nineteen.
PRESENT: RICHARD C. WESLEY,
DENNY CHIN,
JOSEPH F. BIANCO,
Circuit Judges.
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KT CORPORATION, KTSAT CORPORATION,
Petitioners‐Appellants,
v. 18‐2300‐cv
ABS HOLDINGS, LTD., ABS GLOBAL, LTD.,
Respondents‐Appellees.
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FOR PETITIONERS‐APPELLANTS: PAUL A. WERNER (Imad S. Matini,
Daniel L. Brown, on the brief), Sheppard,
Mullin, Richter & Hampton LLP,
Washington, DC, and New York, New
York.
FOR RESPONDENTS‐APPELLEES: MICHAEL D. NOLAN (Kamel M.
Aitelaj, Brett P. Lowe, on the brief),
Milbank, Tweed, Hadley & McCloy
LLP, Washington, DC.
Appeal from the United States District Court for the Southern District of
New York (Schofield, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the orders of the district court are AFFIRMED.
Petitioners‐appellants KT Corp. and KTSAT Corp. (together, ʺKTʺ) appeal
the district courtʹs opinions and orders confirming two arbitration awards (the
ʺAwardsʺ) in favor of respondents‐appellees ABS Holdings, Ltd. and ABS Global, Ltd.
(together, ʺABSʺ). KT argues that the district court erred because (1) the arbitration
panel exceeded its powers in issuing the Awards, (2) the Awards are based on a
manifest disregard of the law, and (3) the Awards violate public policy. We assume the
partiesʹ familiarity with the underlying facts, procedural history, and issues on appeal.
BACKGROUND
A. The Facts
The facts are largely undisputed. KT is a Korean satellite communications
provider that manages the Korean satellite fleet. ABS is a satellite communications
provider incorporated in Bermuda and headquartered in Hong Kong. In 2010, ABS and
KT entered into two agreements (the ʺAgreementsʺ): (1) a Purchase Agreement
whereby KT agreed to sell to ABS a geostationary satellite (the ʺSatelliteʺ), and (2) an
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Operations Agreement whereby KT agreed to operate the Satellite on behalf of ABS.
Both agreements contained a New York choice‐of‐law provision and a mandatory
arbitration clause. Under the Purchase Agreement, KT was responsible for obtaining
ʺall necessary licenses, consents and approvals for the sale of the Satelliteʺ and for
ʺmaintaining . . . all governmental and regulatory licenses and authorizations requiredʺ
to perform its obligations. App. at 254, 261. The Purchase Agreement further provided
that the title of the Satellite ʺshall transfer to ABS . . . [on] September 4, 2011, provided
that (a) KT receives the required payment . . . and (b) any necessary approvals . . . have
been received.ʺ App. at 260.
On February 18, 2011, KT delivered the Satellite to ABS. In September
2011, ABS paid the $500,000 purchase price and KT delivered two bills of sale
transferring title of the Satellite to ABS.
On December 18, 2013, two years after the completion of the transaction,
the Republic of Koreaʹs Ministry of Science, ICT and Future Planning (the ʺMSIPʺ)
issued an order (the ʺMSIP Orderʺ) that, among other things, declared the Purchase
Agreement ʺnull and voidʺ on the grounds it was ʺin violation of the mandatory law
(Foreign Trade Act)ʺ (the ʺFTAʺ) because KT failed to obtain an export permit. App. at
306. The MSIP Order cancelled KTʹs permission to use certain frequencies to operate
the Satellite and directed KT to return the Satellite to its original operating condition.
App. at 307.
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B. Arbitration Proceedings
On December 22, 2013, KT and ABS proceeded to arbitration before the
International Chamber of Commerce (ʺICCʺ) to resolve their disputes arising out of the
Agreements. On July 18, 2017, the three‐member ICC panel (the ʺpanelʺ) issued a
partial award (the ʺPartial Awardʺ), which dealt solely with the issue of title to the
Satellite. The panel concluded that ABS held title to and thus owned the Satellite. The
panel reasoned that title lawfully passed to ABS in 2011 when all the conditions
precedent to the sale were met and the bills of sale were issued because no mandatory
Korean export permit requirement was then in existence. In the alternative, the panel
concluded that even ʺif the MSIP Order was mandatory law, the outcome in the . . . case
would not be changed . . . because the Order was issued ex post facto, retroactively
without time limit, and most importantly, with no notice to the Parties,ʺ which is
ʺclearly in violation of New York law.ʺ App. at 207.
On March 9, 2018, the panel issued a final award (the ʺFinal Awardʺ),
which, by its terms, dealt with ʺall of the issues and Partiesʹ claims not addressed in the
Partial Award.ʺ App. at 793. The panel concluded, inter alia, that KT breached the
Agreements by failing to obtain and maintain all necessary governmental approvals as
required under the Agreements, ABS took reasonable mitigation efforts, and KT was
liable for damages for breaching the Agreements.
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C. Proceedings Below
KT filed a petition to vacate the Partial Award, and ABS filed a cross‐
petition to confirm the it. Thereafter, ABS filed a petition to confirm the Final Award,
and KT filed a cross‐petition to vacate it.
The district court denied KTʹs petition to vacate the Partial Award and
granted ABSʹs cross‐petition to confirm the Partial Award. KT Corp. v. ABS Holdings,
Ltd. (ʺPartial Award Decisionʺ), No. 17‐civ‐7859, 2018 WL 3364390, at *7 (S.D.N.Y. July 10,
2018). Soon after, the district court granted ABSʹs petition to confirm the Final Award
and denied KTʹs cross‐petition to vacate the Final Award. KT Corp. v. ABS Holdings, Ltd.
(ʺFinal Award Decisionʺ), No. 17‐civ‐7859, 2018 WL 3435405, at *6 (S.D.N.Y. July 12, 2018).
This appeal followed.
DISCUSSION
KT argues that the district court erred in confirming and not vacating the
Partial and Final Awards because (1) the panel exceeded its authority, (2) the Awards
are based on a manifest disregard of the law, and (3) the Awards violate public policy.
We are not persuaded.
A. Standard of Review
We review ʺa district courtʹs decision to confirm or vacate an arbitration
award de novo on questions of law and for clear error on findings of fact.ʺ Natʹl Football
League Mgmt. Council v. Natʹl Football League Players Assʹn, 820 F.3d 527, 536 (2d Cir.
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2016). ʺ[A]n arbitration award should be enforced, despite a courtʹs disagreement with
it on the merits, if there is a barely colorable justification for the outcome reached.ʺ
Landy Michaels Realty Corp. v. Local 32B‐32 Serv. Emps. Intʹl, 954 F.2d 794, 797 (2d Cir.
1992) (internal quotation marks omitted).
B. Applicable Law
The parties cross‐petition to vacate or confirm the Awards pursuant to the
1958 Convention on the Recognition and Enforcement of Foreign Arbitral Award (ʺNew
York Conventionʺ) and the Federal Arbitration Act (ʺFAAʺ). ʺ[T]he FAA and the New
York Convention work in tandem, and they have overlapping coverage to the extent
that they do not conflict.ʺ Sole Resort, S.A. de C.V. v. Allure Resorts Mgmt., LLC, 450 F.3d
100, 102 n.1 (2d Cir. 2006) (internal quotation marks omitted). Indeed, the FAA
expressly incorporates the terms of the New York Convention, see 9 U.S.C. § 201 et seq.,
and a court applying the New York Convention may vacate an arbitration award based
on the grounds provided in the FAA, see Scandinavian Reinsurance Co. v. Saint Paul Fire &
Marine Ins. Co., 668 F.3d 60, 70 (2d Cir. 2012).
The FAA provides that an arbitration award may be vacated when ʺthe
arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final,
and definite award upon the subject matter submitted was not made.ʺ 9 U.S.C.
§ 10(a)(4). An award will not be vacated even where there is ʺserious error,ʺ but only
where the panel ʺeffectively dispense[s] [its] own brand of industrial justice.ʺ Stolt‐
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Nielsen S.A. v. AnimalFeeds Intʹl Corp., 559 U.S. 662, 671 (2010) (internal quotation marks
omitted). Under the FAA, an award may be vacated ʺwhen an arbitrator has exhibited a
manifest disregard of law.ʺ Jock v. Sterling Jewelers Inc., 646 F.3d 113, 121 (2d Cir. 2011).
Vacatur on this ground requires a showing that (1) ʺthe arbitrators knew of a governing
legal principle yet refused to apply it or ignored it altogether,ʺ and (2) ʺthe law ignored
by the arbitrators was well defined, explicit, and clearly applicable to the case.ʺ Zurich
Am. Ins. Co. v. Team Tankers A.S., 811 F.3d 584, 589 (2d Cir. 2016).
The New York Convention provides that a court may refuse to confirm an
award where, among other things, ʺ[t]he recognition or enforcement of the award
would be contrary to the public policy of [the confirming] country.ʺ New York
Convention, Art. V(2)(b). This affirmative defense ʺmust be construed very narrowly to
encompass only those circumstances where enforcement would violate our most basic
notions of morality and justice.ʺ Telenor Mobile Commcʹns AS v. Storm LLC, 584 F.3d 396,
411 (2d Cir. 2009) (internal quotation marks omitted). The party seeking to ʺvacate an
arbitration award has the burden of proof, and the showing required to avoid
confirmation is very high.ʺ STMicroelectronics, N.V. v. Credit Suisse Sec. (USA) LLC, 648
F.3d 68, 74 (2d Cir. 2011). Accordingly, the defense is frequently invoked but rarely
successful, in view of the strong policy favoring arbitration. Telenor, 584 F.3d at 407‐10.
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C. Application
We discuss the Partial and Final Awards in tandem and conclude that the
district court did not err in confirming the Awards and in denying KTʹs petition and
cross‐petition to vacate the Awards.
1. Exceeding Authority
KT argues that the panel exceeded its authority in concluding that the
MSIP Order was ʺunauthorized,ʺ ʺultra vires,ʺ and in violation of due process principles.
It argues that this conclusion was essential to the panelʹs determinations that ABS held
title to the Satellite and that KT breached the Agreements. We are unconvinced.
Despite arguing that the panel exceeded its authority, counsel for KT refused to
challenge the MSIP Order before either an agency or court in the Republic of Korea, and
represented to counsel for ABS that ʺthe validity of the Purchase Contract is a subject
matter to be conclusively determined in the arbitration proceedings pending between
[KT] and ABS.ʺ App. at 611‐12. And even assuming these statements regarding the
MSIP Order did exceed the panelʹs authority, the panelʹs conclusions did not rest on
them; they were part of the panelʹs alternative holding in ʺa coda at the end of the
[Partial] Award.ʺ Partial Award Decision, 2018 WL 3364390, at *4; see also App. at 206
(noting that ʺthe foregoing is sufficient to ground the majorityʹs decisionʺ and
proceeding to discuss validity of MSIP Order).
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The panelʹs principal holding in the Partial Award was that title passed to
ABS in 2011 after the parties agreed that all conditions precedent to the passing of title
were satisfied and bills of sale transferred, and that no later‐passed law or regulation
affected the legal passage of title to ABS. The panelʹs conclusion in the Final Award was
that KT breached the Agreements by failing to ʺcompl[y] with [its] obligation to obtain
and maintain authority from the Korean government to operate the Satellite on ABSʹs
behalfʺ as required under the Agreements. App. at 748. These conclusions, based on
the application of New York law to the Agreements between the parties, at least
ʺarguably constru[ed] or appl[ied] the contractʺ and thus did not exceed the panelʹs
authority. See E. Associated Coal Corp. v. United Mine Workers of Am., 531 U.S. 57, 62
(2000).
2. Manifest Disregard of the Law
KT argues that the panelʹs failure to give effect to the MSIP Order
manifestly disregarded Korean law, New York contract law, and a presumption in
favor of the validity and regularity of agency actions. KT also argues that the panelʹs
conclusion that KT is not entitled to damages for technical engineering fees under the
Operations Agreement manifestly disregarded New York contract law and equitable
principles. These arguments fail for substantially the reasons given by the district court
in its thorough and well‐reasoned decisions. See Partial Award Decision, 2018 WL
3364390, at *5; Final Award Decision, 2018 WL 3435405, at *4‐5. Under Korean law, the
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mandatory and retroactive nature of the MSIP Order is far from ʺwell defined, explicit,
and clearly applicable.ʺ Zurich Am. Ins. Co., 811 F.3d at 589; see App. at 170 (KTʹs own
legal expert noting that the MSIP Order was a ʺcontroversial and debatable
interpretation of [Korean] lawʺ). The panel applied New York law to the Agreements, it
did not ignore any well‐defined and clearly applicable law, Zurich Am. Ins. Co., 811 F.3d
at 589, and there was at least a ʺcolorable justificationʺ for the outcome reached, Landy
Michaels Realty Corp., 954 F.2d at 797.
3. Public Policy
KT argues that public policy requires deference to foreign rulings and
decrees and the panel violated public policy by concluding that the MSIP Order did not
serve to unwind the transaction. Appellantʹs Br. at 48 (arguing that the panel was ʺnot
free simply to disagree with Koreaʹs laws and enforcement actionsʺ). We disagree.
The public policy defense ʺis limited to situations where the contract as
interpreted [by the arbitrators] would violate some explicit public policy that is well
defined and dominant, and is to be ascertained by reference to the laws and legal
precedents and not from general considerations of supposed public interests.ʺ United
Paperworks Intʹl Union v. Misco, Inc., 484 U.S. 29, 43 (1987) (emphasis added) (quotation
marks and citations omitted). Though it is the well‐defined and dominant public policy
of the United States to enforce foreign court judgements not repugnant to U.S. policy,
see Voorhees v. Jackson, 35 U.S. 449, 472 (1836); Ackermann v. Levine, 788 F.2d 830, 841 (2d
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Cir. 1986), the extent to which this policy extends to the enforcement of foreign
regulatory actions is unclear. In any event, even assuming it is well‐defined policy to
give effect to foreign administrative decrees, see Bank of Augusta v. Earle, 38 U.S. 519, 589
(1839) (noting that ʺCourts of justice presume the tacit adoption of [foreign laws]ʺ), it is
far from clear that the MSIP Order was an enforceable administrative decree under
Korean law. Indeed, KTʹs legal expert declared that the position taken by MSIP that the
Satellite is a Korean export subject to the FTA is ʺa controversial and debatable
interpretation of the law,ʺ and ABSʹs legal expert testified that ABSʹs ʺfailure to obtain
an FTA export permit prior to transferring title did not violate the FTA.ʺ App. at 170.
Given this legal uncertainty, the panelʹs conclusion that the MSIP Order did not apply
retroactively to unwind the Agreements does not ʺviolate our most basic notions of
morality and justice.ʺ Telenor, 584 F.3d at 411.
Accordingly, the district court did not err in confirming the Awards and
in denying KTʹs petitions to vacate the Awards.
* * *
We have considered KTʹs remaining arguments and find them to be
without merit. For the reasons set forth above, we AFFIRM the judgment of the district
court.
FOR THE COURT:
Catherine OʹHagan Wolfe, Clerk of Court
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