The PEMEX Case: The Ghost of Chromalloy Past?

By Lorraine M. Brennan, Esq.

The international arbitration community sat up and took notice when a recent decision issued by Judge Alvin K. Hellerstein from the Southern District of New York in the Pemex[1] case ordered that an arbitration award that had been set aside by the Mexican courts could be enforced in the United States.  The case was particularly noteworthy because there is only one other reported case in the United States—Chromalloy[2] from 1996—which ordered the same result, albeit for different legal reasons.

In most cases, awards that have been set aside at the seat of the arbitration are typically not enforced in other countries pursuant to Article V(1)(e) of the New York Convention.  In Chromalloy, the award had been set aside in Egypt, and the court used Article VII and not Article V of the New York Convention to conclude that it must enforce the vacated Egyptian award because to decide otherwise would violate clear U.S. public policy in favor of enforcement of binding arbitration clauses.  While Chromalloy was widely discussed, it was not followed here in the U.S., and several subsequent cases specifically rejected its reasoning.

In Pemex, a panel of arbitrators in Mexico City issued an ICC arbitration award worth approximately $400 million US (including interest) in favor of the petitioner, COMMISA. A subsequent judgment by the Southern District of New York confirmed the award. PEP, the respondent, appealed, and was successful in getting the award annulled in the Mexican court. In ruling, the Mexican court held that the district court for administrative matters and not arbitrators should decide cases such as Pemex, applying a law enacted after PEP and COMMISA entered into their contract. The decision also came after the statute of limitations for COMMISA to file in the district court for administrative matters had run out.

For the rest of Ms. Brennan's discussion on the Pemex case, please read her full article from Law.com by clicking here.