Bridas S.A.P.I.C. v. Government of Turkmenistan

United States Court of Appeals
Fifth Circuit
F I L E D
Revised September 12, 2003
September 9, 2003
IN THE UNITED STATES COURT OF APPEALS
Charles R. Fulbruge III
FOR THE FIFTH CIRCUIT Clerk

_______________

No. 02-20929

BRIDAS SAPIC; BRIDAS ENERGY
INTERNATIONAL, LTD; INTERCONTINENTAL
OIL & GAS VENTURES, LTD.; BRIDAS
CORPORATION,

Plaintiffs-Appellees,

v.

GOVERNMENT OF TURKMENISTAN; ET AL.,

Defendants,

GOVERNMENT OF TURKMENISTAN; STATE
CONCERN TURKMENNEFT,

Defendants-Appellants.

Appeal from the United States District Court
for the Southern District of Texas

Before DAVIS and BENAVIDES, Circuit Judges, and RESTANI*,
District Judge.

BENAVIDES, Circuit Judge:

I.

Plaintiffs-appellees, Bridas S.A.P.I.C., Bridas Energy

*
Judge, U.S. Court of International Trade, sitting by
designation.
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International, Ltd., Intercontinental Oil & Gas Ventures, Ltd.,

and Bridas Corporation (collectively, “Bridas”) originally

brought this action to confirm an international arbitration award

rendered in Bridas’s favor against Defendants-appellants,

Government of Turkmenistan (“the Government” or “Turkmenistan”),

Concern Balkannebitgaz-Senegat, and State Concern Turkmenneft

(collectively “Turkmenneft”).

Bridas, an Argentinian corporation, entered into a joint

venture agreement (“JVA” or “the agreement”) on February 10,

1993, with a production association, Turkmenneft, formed and

owned by the Government at the time that the JVA was signed. The

Government itself was not a signatory to the agreement. The JVA

designated Bridas as the “Foreign Party,” and Turkmenneft as the

“Turkmenian Party.” Over time, the Government substituted

various other entities to serve as the Turkmenian Party,

ultimately resting with State Concern Turkmenneft and Concern

Balkannebitgaz-Senegat (collectively, “Turkmenneft”).

The JVA created a joint venture entity called Joint Venture

Keimir (“JVK”). JVK was established “for the purpose of

conducting hydrocarbon operations in an area in southwestern

Turkmenistan, known generally as Keimir.” The relevant part of

Article XXIV of the agreement stipulates that “[a]ny dispute,

controversy or claim arising out of or in relation to or in

connection with th[e] [a]greement...shall be exclusively and

finally settled by arbitration, and any Party may submit such a

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dispute, controversy or claim to arbitration.” The parties

further agreed that any arbitration would be “conducted in

accordance with the Rules of Conciliation and Arbitration of the

International Chamber of Commerce as amended from time to time.”

The law governing the interpretation of the agreement was to be

the law of England.

Bridas claims that in November 1995, the Government “ordered

Bridas to suspend further work in Keimir, and prohibited Bridas

from making imports and exports in or from Turkmenistan.”

Consequently, on April 16, 1996, Bridas initiated an arbitration

proceeding against Appellants with the International Chamber of

Commerce (“ICC”).

On June 21, 1996, Turkmenistan argued to the ICC Court of

Arbitration that it was not a proper party to the arbitration

because, among other reasons, it did not sign the JVA and was

thus not a party to the arbitration clause contained within it.

The ICC Court subsequently confirmed by letter that the

arbitrators themselves would determine whether the Government was

subject to their jurisdiction. The dispute was subsequently

referred to a three-person tribunal. Although the arbitration

agreement contemplated that the arbitration proceeding would be

held in Stockholm, Sweden, the parties instead agreed to

arbitration proceedings in Houston, Texas.

The arbitral proceedings, which began in January 1997,

involved 19 days of hearings, various expert reports, testimony

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concerning damages, and extensive legal briefing. On June 25,

1999, a two-person majority of the Tribunal issued its First

Partial Award (“FPA”). The FPA held that (1) the arbitrators had

jurisdiction to determine whether they had jurisdiction over the

Government, and (2) that “the Government [was] a proper party to

the arbitration.” The Tribunal also ruled that Appellants had

repudiated the JVA. The FPA stated:

[I]f [Bridas] were to accept repudiatory
conduct by the [Defendants] and
[Turkmenistan] and thus to bring the [joint
venture] [a]greement to an end, their damages
would be calculated on a loss-of-bargain
basis, involving 218,560,935 barrels of oil
equivalent at a net-back price of $10.50 per
barrel, using a discount rate of 10.446%
based on a contract term of 25 years.

In a letter dated July 5, 1999, Bridas formally accepted the

Defendant’s repudiation of the JVA.

On October 21, 1999, the arbitrators issued their Second

Partial Award (“SPA”). In its SPA, the same two-person majority

held that the Tribunal had “the jurisdiction to consider and make

an award concerning [Bridas’s] claim for damages arising out of

their acceptance of the repudiatory conduct of the [appellants].”

The Third Partial Award (“TPA”) was rendered on September 2,

2000. In the TPA, the same two-person majority clarified its

previous rulings in the FPA and calculated damages for Bridas.

The majority held that the 10.446% discount rate was the

appropriate rate for calculating damages because “[i]t was higher

than the non-risk [7.5%] discount factor advanced initially by

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[Bridas] and takes into account the various risk referred to by

the parties in the evidence.” The Tribunal then awarded a grand

total of $495,000,000 in damages to Bridas. The Final Award was

issued on January 26, 2001.

Bridas initiated this lawsuit on July 7, 1999, when it filed

its application for confirmation of the FPA.1 The Government and

Turkmenneft, in response, filed motions to dismiss the

application for confirmation and to vacate and refuse

confirmation of the FPA. On December 22, 2000, Turkmenneft,

conditionally joined by the Government, moved to vacate or modify

both the TPA and the Final Award.

The district court denied Appellants’ motions to vacate or

modify the FPA, TPA, and the Final Award.2 The Government and

Turkmenneft appealed the district court’s judgment to this court.

Appellants ask us to resolve the following issues on appeal:

(1) whether the Tribunal had jurisdiction over the Government;

(2) whether the arbitral majority’s rulings on the merits were in

manifest disregard of the law; and (3) whether the arbitral

majority exceeded its authority in calculating the damage award.

1
Bridas subsequently withdrew its motion to confirm the FPA.
2
Bridas withdrew its motion to confirm the FPA in February
2000. Appellants’ motions to dismiss the application for
confirmation thus became moot. The only motions that remained
before the district court, therefore, were Appellants’ motions to
vacate or modify the FPA, TPA, and Final Award. The district
court, therefore, erred in ordering “the arbitration awards in
the case...CONFIRMED.”
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 II.

United States federal courts have jurisdiction to hear this

case under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et

seq. We have jurisdiction to hear this appeal under § 16(a)(3)

of the Act. 9 U.S.C. § 16(a)(3) et seq. (permitting appeal of “a

final decision with respect to an arbitration that is subject to

this title.”).

A.

The first issue we address is whether the Tribunal properly

exercised jurisdiction over the Government. In reviewing a

district court’s refusal to vacate an arbitration award on the

ground that one of the parties never agreed to arbitrate the

dispute, the district court’s findings of fact are reviewed for

clear error, while its conclusions of law are reviewed de novo.

First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48

(1995). The district court’s interpretation of the arbitration

agreement, and whether it bound the parties to arbitrate, is a

question of law. R.M. Perez & Assoc., Inc. v. Welch, 960 F.2d

534, 537 (5th Cir. 1992). See MS Dealer Service Corp., v.

Franklin, 177 F.3d 942, 946 (11th Cir. 1999) (noting that a

district court’s denial of a petition to compel arbitration on

the ground that a party was not a signatory to the contract is

reviewed de novo); Coors Brewing Co. v. Molson Breweries, 51 F.3d

1511, 1513 (10th Cir. 1995) (same). The factual findings upon

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which such a determination is based are, of course, subject to

review only for clear error. MAG Portfolio Consultant, GMBH v.

Merlin Biomed Group, LLC, 268 F.3d 58, 61 (2d Cir. 2001). The

parties agree that federal common law governs the determination

of this issue.

B.

In order to be subject to arbitral jurisdiction, a party

must generally be a signatory to a contract containing an

arbitration clause.3 Even though the Government did not sign the

JVA, the Tribunal held that the Government was bound to arbitrate

the dispute with Bridas because (1) the Government had not taken

any steps to extricate itself from the proceedings and (2) its

evaluation of the evidence revealed at least 22 commitments in

the JVA “that only the Government could give or fulfill.”

The district court, because it did not find “clear and

unmistakable” evidence that the parties agreed that the Tribunal

would determine its own jurisdiction, undertook an independent

3
Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th Cir.
2002)(holding that arbitration agreements “must be in writing and
signed by the part[ies]” and may apply to nonsignatories only “in
rare circumstances”). Accord Grigson v. Creative Artists Agency,
L.L.C., 210 F.3d 524, 528 (5th Cir. 2000)(noting that
“arbitration is a matter of contract and cannot, in general, be
required for a matter involving an arbitration agreement
nonsignatory”). Cf. EEOC v. Waffle House, Inc., 534 U.S. 279, 294
(2002)(“Arbitration under the [FAA] is a matter of consent, not
coercion”); Volt Info. Sciences, Inc. v. Bd. of Trustees of
Leland Stanford Junior Univ., 489 U.S. 468, 478 (1989)(“[T]he FAA
does not require parties to arbitrate when they have not agreed
to do so.”).
-7-
review of whether the Government was bound to arbitrate with

Bridas. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,

944-47 (1995). Accord AT&T Technologies, Inc. v. Communications

Worker, 475 U.S. 643, 649 (1986). Whether a party is bound by an

arbitration agreement is generally considered an issue for the

courts, not the arbitrator, “[u]nless the parties clearly and

unmistakably provide otherwise.”4 AT&T Tech., 475 U.S. at 649.

The district court concluded that despite the Government’s non-

signatory status, principles of agency and equitable estoppel

bound the Government to the JVA.

C.

As a preliminary matter, we will address Bridas’s assertion

that the Government waived its right to contest the Tribunal’s

4
This independent review of whether the arbitration panel
had jurisdiction over the Government represents a departure from
the typically deferential review afforded arbitral decisions
pursuant to the federal policy favoring arbitration. First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995).
The presumption in favor of arbitration concerning the scope of
arbitrable issues is not applicable to the question of who should
decide arbitrability, because the purpose of the FAA was to make
arbitration agreements as enforceable as other contracts, not
more so. Id.; Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388
U.S. 395, 404 n. 12 (1967). See Paine Webber Inc. v. Hartmann,
921 F.2d 507, 514 (3d Cir. 1990)(stating it is “per se
irreparable harm if a court were to abdicate its responsibilities
to determine the scope of an arbitrator’s jurisdiction and,
instead, were to compel a party who has not agreed to do so, to
submit to an arbitrator’s own determination of his authority.”);
Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069 (5th Cir.
2002) (noting that ordinary contract principles, rather than the
federal policy favoring arbitration, apply to the determination
of whether there is a valid agreement to arbitrate).
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jurisdiction because: (1) it failed to challenge the Tribunal’s

Order No. 5; and (2) it voluntarily took part in the arbitration

through Turkmenneft.

Both of these arguments are meritless. Under § 172.082(f)

of the Texas International Arbitration Act (“TIAA”), Tex. Civ.

Prac. & Rem. Code § 172.082(f) (Vernon 1997 & Supp. 2003), if a

tribunal makes a preliminary ruling that it has jurisdiction (not

that it has jurisdiction to determine jurisdiction), a party

waives any objection to the ruling, unless it requests the

district court of the county in which the arbitration is taking

place to decide the matter. Tex. Civ. Prac. & Rem. Code §

172.082(f). Order No. 5 states: “[w]e have not yet decided

whether the Government is bound by the commitment to arbitrate.”

The order, thus, did not address whether the Tribunal had

jurisdiction over the Government. § 172.082(f) of the TIAA is

therefore inapplicable.

Second, while it is rare that we are asked to decide a

jurisdictional issue such as this one after the proceedings have

concluded, neither the fact that the Government “allowed the

proceeding to continue” over its objection, nor its “virtual

representation” at the arbitration by Turkmenneft, waive its

right to dispute the Tribunal’s jurisdiction in court. See,

e.g., First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,

946-47 (1995). The cases cited by Bridas to the contrary are

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inapposite.

D.

We begin our review by considering the terms of the JVA.

Who is actually bound by an arbitration agreement is a function

of the intent of the parties, as expressed in the terms of the

agreement. See Grigson v. Creative Artists Agency, L.L.C., 210

F.3d 524, 528 (5th Cir. 2000)(noting that whether a party is

obligated to arbitrate is a matter of contract); Smith/Enron

Cogeneration Limited Partnership, Inc. v. Smith Cogeneration

International, Inc., 198 F.3d 88, 95 (2d Cir. 1999) (noting that

whether an entity is a party to the arbitration agreement is

included within the broader issue of whether the parties agreed

to arbitrate); McCarthy v. Azure, 22 F.3d 351, 355 (1st Cir.

1994)(noting that federal common law “dovetails precisely with

general principles of contract law,” and “the judicial task in

construing a contract is to give effect to the mutual intentions

of the parties”) (quoting NRM Corp. v. Hercules, Inc., 758 F.2d

676, 681 (D.C. Cir. 1985)).

It is apparent that the four corners of the agreement do not

bind the Government to arbitrate this dispute. The Government

did not sign the JVA, nor was it defined as a party in the

agreement. The agreement describes the framework for the

relationship between two parties: the “Foreign Party,” defined as

Bridas, and the “Turkmenian Party,” defined as Turkmenneft.

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Considering that the purpose of the joint venture was to develop

the hydrocarbon resources of a nation whose economy and land is

dominated by the Government, the Government itself is not

mentioned frequently in the agreement.5 Corporations commonly

elect to establish “liability insulating entities” to enter into

particular types of transactions, and the structure of the JVA

indicates that this was exactly what the Government intended to

do with respect to the JVA. See Westmoreland v. Sadoux, 299 F.3d

462, 467 (5th Cir. 2002). The agreement itself does not signal

an intention to bind the Government to its terms, and thus to

arbitrate this dispute.

E.

Nevertheless, federal courts have held that so long as there

is some written agreement to arbitrate, a third party may be

bound to submit to arbitration. Carolyn B. Lamm & Jocelyn A.

5
Article 3.29, defines “[r]egistration” as “the official
registration of the Joint Venture as a legal entity by the
government of Turkmenistan.” Article 11.8 provides for the
government to receive its royalties from the hydrocarbon
production in-kind, subject to the agreement of the parties, and
Article 11.9 permits JVK to exchange its product for product
produced by Government-owned refineries. Article 22.3 states,
“Interests, rights and obligations of Turkmenistan, as
represented by Turkmenian Party, and interest, rights and
obligations of the Foreign Party under this Agreement, shall be
solely governed by the provisions of this Agreement which may be
altered or amended only by the mutual written agreement of the
Parties to this Agreement.... Article 27.5 permits JVK to rent
property from the Government that may be reasonably necessary for
its operations.

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Aqua, Defining the Party – Who is a Proper Party in an

International Arbitration Before the American Arbitration

Association and Other International Institutions, 34 Geo. Wash.

Int’l L. Rev. 711, 720 (2003).6 Ordinary principles of contract

and agency law may be called upon to bind a nonsignatory to an

agreement whose terms have not clearly done so. See E.I. DuPont

de Nemours & Co. v. Rhone Poulenc, 269 F.3d 187 (3d Cir. 2001);

Thomson-C.S.F., S.A. v. American Arbitration Ass’n, 64 F.3d 773,

776 (2d Cir. 1995). Six theories for binding a nonsignatory to

an arbitration agreement have been recognized: (a) incorporation

by reference; (b) assumption; (c) agency; (d) veil-piercing/alter

ego; (e) estoppel; and (f) third-party beneficiary. Thomson-

C.S.F., S.A. v. American Arbitration Ass’n, 64 F.3d 773, 776 (2d

Cir. 1995); DuPont, 269 F.3d at 195-97 (3d Cir. 2001) . Accord

Javitch v. First Union Securities, Inc., 315 F.3d 619, 629 (6th

Cir. 2003). Bridas has waived arguments premised upon assumption

and incorporation by reference.7 We address the remaining four

6
See International Paper Co. v. Schwabedissn Maschinen &
Anlagen GMBH, 206 F.3d 411, 416-17 (4th Cir. 2000); Thomson-
C.S.F., S.A. v. American Arbitration Ass’n, 64 F.3d 773, 776 (2d
Cir. 1995); Alamria v. Telcor Int’l, Inc., 920 F. Supp. 658, 669
(D. Md. 1996)(finding “there is no strict requirement that only
signatories to an agreement be susceptible to compelled
arbitration).
7
Bridas did not appeal the district court’s holding that
Turkmenistan did not assume the obligation to arbitrate. Bridas
attempted to appeal, in a footnote, the district court’s
determination that there was no separate contractual agreement to
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theories in turn.

1. Agency

The district court held that the Government was bound to

arbitrate the dispute with Bridas because Turkmenneft signed the

JVA as an agent of the Government. The parties dispute whether a

finding that the Government is bound to the JVA by principles of

agency is a matter of law, subject to plenary review, or a

finding of fact that is reviewed merely for clear error. The

Second Circuit has held that “[a]gency is a legal concept.”

Interocean Shipping Co. v. Nat’l Shipping & Trading, 523 F.2d

527, 537 (2d Cir. 1987); Accord American Bureau of Shipping v.

Tencara Shipyard S.P.A., 170 F.3d 349, 353 (2d Cir. 1999). This

court, however, appears to view the decision as a mixed question

of law and fact, dominated by factual determinations and thus

subject to review only for clear error. See American Intern.

Trading Corp. v. Petroleos Mexicanos, 835 F.2d 536, 539 (5th Cir.

1987); George v. C.I.R., 803 F.2d 144, 147 n. 2 (5th Cir. 1986),

vacated by 485 U.S. 973 (1988)(vacated on independent grounds).

See 3 Am. Jur. 2d Agency § 19 (2002)(noting that existence of

agency is a question of fact). We need not decide this question

incorporate by reference into the JVA. Arguments that are
insufficiently addressed in the body of the brief, however, are
waived. See Quick Techs., Inc. v. Sage Group PLC, 313 F.3d 338,
343 n. 3 (5th Cir. 2002); United States v. Hardman, 297 F.3d
1116, 1131 (10th Cir. 2002) (“Arguments raised in a perfunctory
manner, such as in a footnote, are waived”).
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because the district court’s holding that Turkmenneft is an agent

of the Government does not withstand our review, regardless of

the standard applied.

Turkmenneft is entitled to a “presumption of independent

status.” Hester International Corp. v. Federal Republic of

Nigeria, 879 F.2d 170, 176 (5th Cir. 1989). Bridas, therefore,

carried the burden of proving that Turkmenneft signed the JVA as

an agent of the Government. Id.; Hofherr v. Dart Indust., Inc.,

853 F.2d 259 (4th Cir. 1988). Agency is "the fiduciary relation

which results from the manifestation of consent by one person to

another that the other shall act on his behalf and subject to his

control, and consent by the other so to act." Restatement

(Second) of Agency § 1(1) (1958). An agency relationship may be

demonstrated by “written or spoken words or conduct, by the

principal, communicated either to the agent (actual authority) or

to the third party (apparent authority).” Hester, 879 F.2d at

181. See Arriba Limited v. Petroleos Mexicanos, 962 F.2d 528,

536 (5th Cir. 1992). If Turkmenneft indeed signed the JVA in its

capacity as the Government’s agent, the Government would be bound

by the JVA’s arbitration requirement. See Srivastava v. C.I.R.,

220 F.3d 353, 369 (5th Cir. 2000).

The district court primarily relied upon three pieces of

evidence to support its determination that Turkmenneft signed the

JVA as the Government’s agent. First, it pointed to a letter

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from Mr. Suyunov, Deputy Chairman of the Council of Ministers of

Turkmenistan, and Mr. Ishanov, Chairman of the Turkmenian Party,

that confirmed, during negotiation of the JVA, that “all Joint

Venture Keimir rights...established in the organization documents

are fully and completely guaranteed by the Government, and there

is no additional need for any further decisions, decrees, or

approvals.”8 Second, the district court referred to Article 22.3

of the JVA which states that the “[i]nterests, rights and

obligation of Turkmenistan” are represented by the Turkmenian

Party. See supra note 6. Third, the district court relied upon

a statement made in a 1996 letter by the Government’s Ministry of

Oil and Gas to the director general of JVK and JVY (another joint

venture with Bridas), that “the Ministry is the Turkmenian

Party.”9

Given the language and structure of the JVA, these

evidentiary findings are insufficient to support an agency

8
To the extent that the district court implied that the
contents of this letter were contained within the JVA, it clearly
erred.
9
The letter from the Ministry was addressed to Mr.
Schreiterer, the Director General of both JVK and JVY, in
reference to both of the joint ventures. The district court
distorted the meaning of the statement that “the Ministry is the
Turkmenian Party” by inserting a reference in the middle of the
quoted statement to JVK. In reality, the statement could easily
have been in reference to JVY, not JVK. The district court,
however, chose to interpret the statement as referring to JVK,
and in the absence of firmer evidence to the contrary, we accept
its interpretation.

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determination. First, typically a guarantor cannot be compelled

to arbitrate on the basis of an arbitration clause in a contract

to which it is not a party. Interocean Shipping Co. V. Nat’l

Shipping & Trading Co., 523 F.2d 527, 539 (2d Cir. 1975). Accord

Hester, 879 F.2d at 176, 180-81 (holding that an instrumentality

of Nigeria was not the government’s agent for purposes of an

agreement between the instrumentality and an American corporation

despite a guarantee by the Nigerian government for all loans

necessary for offshore financing). Second, a statement of

representation, such as that in Article 22.3, in the midst of a

provision regarding oral modifications of the agreement, is not

remarkable. “All corporations to some degree represent their

owners,” and Turkmenneft is an oil company wholly owned by

Turkmenistan. Hester Intern. Corp v. Federal Republic of

Nigeria, 879 F.2d 170, 180 (5th Cir. 1989). As we have held in

the past, such a statement does not establish an agency

relationship. Id. at 180. And third, the 1996 letter from the

Ministry, while probative of how the Government conceived of its

role in JVK in 1996, does not overcome the fact that the preamble

to the JVA defines the Turkmenian Party as Turkmenneft – a “legal

entity within the meaning of the laws of Turkmenistan” – not the

Government or the Ministry. The JVA was signed in 1993, before

the Ministry penned the letter that Bridas claims demonstrates

that Turkmenneft signed the JVA as an agent.

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 Arbitration agreements apply to nonsignatories only in rare

circumstances. Westmoreland v. Sadoux, 299 F.3d 462, 465 (5th

Cir. 2002).10 We are simply unable to conclude that the parties,

one a multi-national corporation who has negotiated joint venture

agreements in the past, and the other, a sovereign nation, both

represented by able counsel, intended Turkmenneft to sign the JVA

as an agent of the Government in the absence of clearer language

to that effect.

The mere fact that one is dealing with an
agent, whether the agency be general or
special, should be a danger signal, and, like
a railroad crossing, suggests the duty to
stop, look, and listen, and he who would bind
the principal is bound to ascertain, not only
the fact of agency, but the nature and extent
of the authority[.]

Standard Acc. Ins. Co. V. Simpson, 64 F.2d 583, 589 (4th Cir.

1933). Accord Racicky v. Farmland Indus. Inc., 328 F.3d 389, 393

(8th Cir. 2003). Had Bridas truly felt that Turkmenneft was

signing the agreement not for itself but on behalf of the

Government, it had the obligation to make that fact clear on the

10
The Government argues that Westmoreland does not permit us
to use agency principles to bind a nonsignatory to an arbitration
agreement. The Government reads Westmoreland too broadly.
There, we held that a nonsignatory could not compel arbitration
merely because he was an agent of one of the signatories. 299
F.3d at 466. This is a distinctly different question from
whether a signatory may compel the principal of a signatory agent
to arbitrate under an agreement that the agent signed as an
authorized representative of the principal. Westmoreland,
therefore, does not bar us from considering this claim.

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face of the agreement. This could have been accomplished in a

myriad of ways. Bridas could have requested that the Government

sign the agreement, or inserted a prominent and direct statement

as to Turkmenneft’s status. Bridas has not presented any

evidence that would permit us to excuse such an oversight.

Bridas was doubtlessly well aware of the risks inherent in

investing in countries of the former Soviet Union in 1993, and

the possibility that its investment would be swept away in

political turmoil. We will not bind the Government to the

agreement, simply because Bridas lost a gamble that it was

willing to take. To do otherwise would vitiate the

predictability of the legal backdrop against which the parties

voluntarily agreed to do business. See Westmoreland, 299 F.3d at

467.

Bridas has set forth ample evidence regarding the extent to

which Turkmenneft was controlled by the Government subsequent to

the signing of the JVA. Such evidence, however, does not

establish that Turkmenneft had the apparent authority to bind the

Government in 1993. Bridas did not satisfy its burden in this

regard, and the district court’s holding that Turkmenneft signed

the JVA as an agent of the Government was clearly erroneous.

2. Alter Ego

Courts occasionally apply the alter ego doctrine and agency

principles as if they were interchangeable. See House of Koscot

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Dev’t Corp. V. American Line Cosmetics, Inc., 468 F.2d 64 (5th

Cir. 1972). The two theories are, however, distinct. Under the

alter ego doctrine, a corporation may be bound by an agreement

entered into by its subsidiary regardless of the agreement’s

structure or the subsidiary’s attempts to bind itself alone to

its terms, “when their conduct demonstrates a virtual abandonment

of separateness.” Thomson-C.S.F., 64 F.3d at 777. This is due

to the doctrine’s strong link to equity. See Harrell v. DCS

Equip. Leasing Corp., 951 F.2d 1453, 1458 (5th Cir. 1992).

Accord McCarthy v. Azure, 22 F.3d 351, 362-3 (1st Cir.

1994)(holding that the alter ego doctrine can be invoked “only

where equity requires the action to assist a third party”). The

laws of agency, in contrast, are not equitable in nature, but

contractual, and do not necessarily bend in favor of justice.

Courts are thus comparatively free from the moorings of the

parties’ agreements when considering whether an alter ego finding

is warranted.

This is not to say that the decision to apply the alter ego

doctrine to bind a parent is made routinely. “Courts do not

lightly pierce the corporate veil even in deference to the strong

policy favoring arbitration.” ARW Exploration Corp. V. Aguirre,

45 F.3d 1455, 1461 (10th Cir. 1995). The corporate veil may be

pierced to hold an alter ego liable for the commitments of its

instrumentality only if (1) the owner exercised complete control

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over the corporation with respect to the transaction at issue and

(2) such control was used to commit a fraud or wrong that injured

the party seeking to pierce the veil. American Fuel Corp. v.

Utah Energy Dev’t Co., Inc., 122 F.3d 130, 134 (2d Cir. 1997).

Accord First Nat’l City Bank v. Banco Para El Comercio Exterior

de Cuba, 462 U.S. 611, 629-30 (1983); Gardemal v. Westin Hotel

Co., 186 F.3d 588 (5th Cir. 1999). Cf. Matter of Sims, 994 F.2d

210 (5th Cir. 1993)(holding that an element of fraud must be

present before courts will pierce the corporate veil in a case

based upon a contract).

The district court held, in a brief paragraph, that the

Government was not the alter ego of Turkmenneft. After finding

that the evidence reveals that Turkmenneft was controlled by the

Government, the court stated,

[d]espite this control...Bridas has not
offered evidence proving “an absence of
corporate formalities.” Moreover, there is no
indication of “an intermingling of corporate
finances and directorship” between
Turkmenneft and the government. Thus,
Turkmenistan cannot be bound under an alter
ego theory.

Alter ego determinations are reviewed in this circuit only

for clear error. Zahra Spiritual Trust v. U.S., 910 F.2d 240,

242 (5th Cir. 1990). Errors of law, however, are not entitled to

deference. W.H. Scott Const. Co., Inc. v. City of Jackson, 199

F.3d 206, 219 (5th Cir. 1999). Accord United States v. Delgado-

Nunez, 295 F.3d 494, 496 (5th Cir. 2002)(noting that a mistake of

-20-
law is, by definition, an abuse of discretion); In re Coastal

Plains, Inc., 179 F.3d 197, 205 (5th Cir. 1999)(same).

The district court erred in premising its conclusion solely

upon the existence of corporate formalities and an absence of

comingling of funds and directors. Alter ego determinations are

highly fact-based, and require considering the totality of the

circumstances in which the instrumentality functions. Estate of

Lisle v. C.I.R., — F.3d —, 2003 WL 21752801, at *8 (5th Cir.

2003). No single factor is determinative. This should be

apparent from the extensive list of circumstances that courts

have developed to guide alter ego determinations. See id; Markow

v. Alcock, 356 F.2d 194, 197-98 (5th Cir. 1966); American Fuel

Corp., 122 F.3d at 134; MAG Portfolio Consultant, GMBH, v. Merlin

Biomed. Group LLC, 268 F.3d 58, 63 (2d. 2001). Because the

district court failed to take into account all of the aspects of

the relationship between the Government and Turkmenneft, it

committed an error of law and must reconsider the issue on

remand.11

11
Once it has been determined that the corporate form was
used to effect fraud or another wrong upon a third-party, alter
ego determinations revolve around issues of control and use. See
Estate of Lisle, — F.3d —, 2003 WL 21752801, at *8 (5th Cir.
2003). On remand, the court should explore the totality of the
environment in which Turkmenneft operated, including those
factors normally explored in the context of parent-subsidiary
alter ego claims, such as whether:

(1) the parent and subsidiary have common stock
ownership; (2) the parent and subsidiary have common
-21-
 directors or officers; (3) the parent and subsidiary
have common business departments; (4) the parent and
subsidiary file consolidated financial statements; (5)
the parent finances the subsidiary; (6) the parent
caused the incorporation of the subsidiary; (7) the
subsidiary operated with grossly inadequate capital;
(8) the parent pays salaries and other expenses of
subsidiary; (9) the subsidiary receives no business
except that given by the parent; (10)the parent uses
the subsidiary's property as its own; (11) the daily
operations of the two corporations are not kept
separate; (12) the subsidiary does not observe
corporate formalities.
Id. at *8 n.16 (citing Oxford Capital Corp. v. United States, 211
F.3d 280, 284 n.2 (5th Cir. 2000)). Additional factors include:
(1) whether the directors of the “subsidiary” act in the primary
and independent interest of the “parent,”; (2) whether others pay
or guarantee debts of the dominated corporation; and (3) whether
the alleged dominator deals with the dominated corporation at
arms length. Markow, 356 F.2d at 197-98; American Fuel Corp.,
122 F.3d at 134.
While the preceding considerations are adaptable to a
certain degree to the context of a sovereign government and its
instrumentality, the district court should also consider the
factors that we take into account when determining if a state
agency is the “alter ego” of a state for 11th amendment sovereign
immunity purposes:
(1) whether state statutes and case law view
the entity as an arm of the state; (2) the
source of the entity's funding; (3) the
entity's degree of local autonomy; (4)
whether the entity is concerned primarily
with local, as opposed to statewide,
problems; (5) whether the entity has the
authority to sue and be sued in its own name;
and (6) whether the entity has the right to
hold and use property.

Perez v. Region 20 Educ. Service Center, 307 F.3d 318, 326-27
(5th Cir. 2002). Accord Vogt v. Bd. of Comm’r of Orleans Levee
Dist., 294 F.3d 684, 688-89 (5th Cir. 2002).

-22-
 3. Estoppel

The use of equitable estoppel is within a district court’s

discretion. Grigson, 210 F.3d at 528; Hill v. G.E. Power

Systems, Inc., 282 F.3d 343, 348 (5th Cir. 2002). We, therefore,

review the district court’s decision to apply equitable estoppel

only to ensure that the court did not abuse its discretion. Id.

“To constitute an abuse of discretion, the district court’s

decision must be either premised on an application of the law

that is erroneous, or on an assessment of the evidence that is

clearly erroneous.” Id.

The district court, relying on Grigson v. Creative Artists

Agency, L.L.C., 210 F.3d 524, 527 (5th Cir. 2000), held that a

nonsignatory may be equitably estopped from asserting that it is

not bound by an arbitration agreement when the signatory raises

allegations of substantially interdependent and concerted

misconduct against both a nonsignatory and one or more of the

signatories to the contract.

As the Government correctly points out, the district court

misapplied the “intertwined claims” theory of equitable estoppel.

Grigson does not stand for the proposition stated by the district

court. In Grigson, we estopped a signatory plaintiff from

relying upon the defendants’ status as a nonsignatory to prevent

the defendants from compelling arbitration under the agreement.

-23-
210 F.3d at 526-28. We justified applying equitable estoppel in

Grigson in part because to do otherwise would permit the

signatory plaintiff to “have it both ways.” Id. at 528. See

Hill, 282 F.3d at 349 (5th Cir. 2002). “[The plaintiff] cannot,

on the one hand, seek to hold the nonsignatory liable pursuant to

duties imposed by the agreement, which contains an arbitration

provision, but, on the other hand, deny arbitration’s

applicability because the defendant is a nonsignatory.” Grigson,

210 F.3d at 528.12

The rationale of Grigson does not apply to the circumstances

of this case. Here, the Government, unlike the estopped party in

Grigson, did not sign a contract containing an arbitration

provision and never sued Bridas on the agreement. The

distinction is not one without a difference. E.I. Dupont De

Nemours & Co. v. Rhone Poulenc Fiber & Resin Intermediates,

S.A.S., 269 F.3d 187, 202 (3d Cir. 2001). The Second Circuit has

expressly stated that the Grigson version of estoppel applies

only to prevent “a signatory from avoiding arbitration with a

12
Grigson, and the 11th Circuit decision that it relied upon,
have been referred to as misguided deviations from traditional
estoppel theories. See J. Douglas Uloth & J. Hamilton Rial, III,
Equitable Estoppel as a Basis for Compelling Nonsignatories to
Arbitrate – A Bridge Too Far?, 21 Rev. Litig. 593, 603-04 (2002).
See also Grigson, 210 F.3d at 531 (Dennis, J.,
dissenting)(“[N]early anything can be called estoppel. When a
lawyer or a judge does not know what other name to give for his
decision to decide a case in a certain way, he says there is an
estoppel.”).
-24-
nonsignatory when the issues the nonsignatory is seeking to

resolve in arbitration are intertwined with the agreement that

the estopped party has signed.” Thomson-CSF, S.A., 64 F.3d at

779 (emphasis added). “[B]ecause arbitration is guided by

contract principles, the reverse is not also true: a signatory

may not estop a nonsignatory from avoiding arbitration regardless

of how closely affiliated that nonsignatory is with another

signing party.” MAG Portfolio Consult, GMBH, 268 F.3d at 62.

The Third Circuit reached the same conclusion in DuPont. 269 F.3d

at 202.

As the Government correctly notes, the result in Grigson and

similar cases makes sense because the parties resisting

arbitration had expressly agreed to arbitrate claims of the very

type that they asserted against the nonsignatory. See J.

Douglas Uloth & J. Hamilton Rial, III, Equitable Estoppel as a

Basis for Compelling Nonsignatories to Arbitrate – A Bridge Too

Far?, 21 Rev. Litig. 593, 633 (2002). “It is more foreseeable,

and thus more reasonable, that a party who has actually agreed in

writing to arbitrate claims with someone might be compelled to

broaden the scope of his agreement to include others.” Id. The

simple fact that Bridas’s claims against Turkmenneft and the

Government are inextricably intertwined (a finding of the

district court which is not clearly erroneous) is insufficient,

standing alone, to justify the application of equitable estoppel

-25-
to the Government’s assertion that it is not subject to the

Tribunal’s jurisdiction. Were this to become the case, this

expanded version of equitable estoppel would “threaten to

overwhelm the fundamental premise that a party cannot be

compelled to arbitrate a matter without its agreement.” Id. at

632. The district court thus abused its discretion in applying

the intertwined claims theory of equitable estoppel to this case.

Bridas, however, contends that the district court’s decision

may nonetheless be affirmed on the basis of the “direct benefits”

version of estoppel.13 Direct benefits estoppel applies when a

nonsignatory “knowingly exploits the agreement containing the

arbitration clause.” DuPont, 269 F.3d at 199. See Deloitte

Noraudit A/S v. Deloitte Haskins & Sells, U.S., 9 F.3d 1060, 1064

(2d. Cir. 1993)(holding that non-signatory local affiliate, who

used a trade name pursuant to an agreement that it ratified which

contained an arbitration clause, was estopped from relying on its

nonsignatory status to avoid arbitrating under the agreement);

American Bureau of Shipping v. Tencara Shipyard S.P.A. 170 F.3d

349, 353 (2d Cir. 1999)(binding non-signatory to a contract under

13
See DuPont, 269 F.3d at 195 (3d. Cir. 2001); American
Bureau of Shipping v. Tencara Shipyard S.P.A, 170 F.3d 349, 351-
53 (3d. Cir. 1999); Deloitte Noraudit A/S v. Deloitte Haskins &
Sells, U.S., 9 F.3d 1060, 1062-64 (2d. Cir. 1993); International
Paper Co. v. Schwabedissen Maschinen & Anlagen GMBH, 206 F.3d
411, 418 (4th Cir. 2000); Sam Reisfield & Son Import Co. v. S.A.
Eteco, 530 F.2d 679, 681 (5th Cir. 1976); Westmoreland, 299 F.3d
at 467.
-26-
which it received direct benefits of lower insurance and the

ability to sail under the French flag).

There is an important distinction, however, between cases

where the courts seriously consider applying direct benefits

estoppel, and the case at bar. In the former, the nonsignatory

had brought suit against a signatory premised in part upon the

agreement. See, e.g., DuPont, 269 F.3d at 199; Deloitte, 9 F.3d

at 1064; Int’l Paper Co. v. Schwabedissen Maschinen & Anlagen

GMBH, 206 F.3d 411, 418 (4th Cir. 2000); Tencara, 170 F.3d at

351. Here, it is undisputed that the Government has not sued

Bridas under the agreement. The Government has thus not

“exploited” the JVA to the degree that the cases that consider

applying this version of estoppel require.

4. Third-Party Beneficiary

Nor is the third-party beneficiary doctrine availing. While

very similar to estoppel, the third-party beneficiary doctrine is

distinct:

Under third party beneficiary theory, a court
must look to the intentions of the parties at
the time the contract was executed. Under
the equitable estoppel theory, a court looks
to the parties’ conduct after the contract
was executed. Thus, the snapshot this Court
examines under equitable estoppel is much
later in time than the snapshot for third
party beneficiary analysis.

DuPont, 269 F.3d at 200 n. 7. It is not enough, therefore, that

the Government benefitted from the existence of the JVA. “[T]he

-27-
fact that a person is directly affected by the parties’ conduct,

or that he may have a substantial interest in a contract’s

enforcement, does not make him a third-party beneficiary.” Id.

See DuPont, 269 F.3d at 196-97 (noting the fact that a parent

derived benefits from a contract executed by its subsidiary is

insufficient to make it a third-party beneficiary).

Parties are presumed to be contracting for themselves only.

Fleetwood Enterprises, Inc. v. Gaskamp, 280 F.3d 1069, 1075-76

(5th Cir. 2002). This presumption may be overcome only if the

intent to make someone a third-party beneficiary is “clearly

written or evidenced in the contract.” Id. Accord McCarthy v.

Azure, 22 F.3d 351, 362 (1st Cir. 1994)(“[t]he crux in third-

party beneficiary analysis...is the intent of the parties.”).

For the same reasons given supra, the JVA simply does not

evince the requisite clear intent to benefit the Government,

other than to the degree ordinarily expected when an

instrumentality of a sovereign enters into a contract to develop

the country’s natural resources. The JVA’s integration clause,

moreover, specifies that the terms of the agreement apply only to

the parties, defined as the Turkmenian Party (i.e. Turkmenneft)

and Bridas. See, e.g. Lester v. Basner, 676 F. Supp. 481, 484-85

(S.D.N.Y. 1987)(refusing to find a third-party beneficiary

relationship generating an obligation to arbitrate where the

contract itself “is silent as to whether [its] terms” apply to

-28-
the purported third-party beneficiaries).

Furthermore, we are again reluctant to bind the Government

to the terms of the JVA on a third-party beneficiary theory

because the Government has never filed a claim against Bridas

premised upon the agreement, or otherwise sought to enforce its

terms. See, e.g., DuPont, 269 F.3d at 192; Industrial

Electronics Corp. Of Wisconsin v. iPower Distribution, Inc., 215

F.3d 677 (7th Cir. 2000); TAAG Linhas Aereas de Angola v.

Transamerica Airlines, Inc., 915 F.2d 1351, 1354 (9th Cir. 1990).

Bridas has not brought to our attention a case where a third-

party beneficiary has been bound to arbitrate a dispute, arising

under an agreement to which it is not a party, that the third-

party itself did not initiate in court. We decline to do so for

the first time today.

III.

The next question presented in this appeal is whether the

district court erred in upholding the Tribunal’s award of damages

in the TPA for breach of contract. This circuit recognizes the

venerable rule announced by the Supreme Court in Wilko v. Swan,

346 U.S. 427, 436-37 (1953), in which it was held that only a

“manifest disregard of the law” warrants vacating an arbitration

award. Prestige Ford v. Ford Dealer Computer Services, Inc., 324

F.3d 391, 395 (5th Cir. 2003). In Prestige Ford, we expounded

the deferential standard first articulated in Wilko:

-29-
 [m]anifest disregard clearly means more than
error or misunderstanding with respect to the
law. The error must have been obvious and
capable of being readily and instantly
perceived by the average person qualified to
serve as an arbitrator. Moreover, the term
“disregard” implies that the arbitrator
appreciates the existence of a clearly
governing principle but decides to ignore or
pay no attention to it. To adopt a less
strict standard of judicial review would be
to undermine our well established deference
to arbitration as a favored method of
settling disputes when agreed to by the
parties. Judicial inquiry under the
“manifest disregard” standard is therefore
extremely limited. The governing law alleged
to have been ignored by the arbitrators must
be well defined, explicit, and clearly
applicable.

Id. (quoting Merrill Lynch, Pierce, Fenner & Smith, Inc. v.

Bobker, 808 F.2d 930, 933-34 (2d Cir. 1986)).

To determine whether the Supreme Court’s “manifest disregard

of the law” standard has been satisfied, we apply a two-prong

inquiry (the “manifest-disregard test”). Williams v. Cigna Fin.

Advisors, Inc., 197 F.3d 752, 762 (5th Cir. 1999). We held in

Williams that

[f]irst, where on the basis of the
information available to the court it is not
manifest that the arbitrators acted contrary
to the applicable law, the award should be
upheld. Second, where on the basis of the
information available to the court it is
manifest that the arbitrators acted contrary
to the applicable law, the award should be
upheld unless it would result in significant
injustice, taking into account all the
circumstances of the case, including powers
of arbitrators to judge norms appropriate to
the relations between the parties.

-30-
Id. See also Harris v. Parker College of Chiropractic, 286 F.3d

790, 792 n.1 (5th Cir. 2002) (applying the manifest-disregard

test articulated in Williams). Furthermore, it is settled in

this circuit that this “extraordinarily narrow”14 standard of

review applies to claims brought pursuant to the FAA, such as the

instant matter. Id. at 761; Williams, 197 F.3d at 759.

The district court’s refusal to vacate or modify the

arbitration award is reviewed under the same standard as any

other district court decision, with findings of fact that are not

clearly erroneous accepted and questions of law considered de

novo. Id. We thus review de novo the district court’s

application of the manifest-disregard test.

We now confront the first prong of the manifest-disregard

test and address whether the arbitration panel applied the

appropriate discount rate to convert projected lost revenues to

present value. As an initial matter, the parties do not dispute

that English law governs in determining the proper amount of

damages to be awarded for this breach of contract and,

accordingly, that is the law that we apply. See Guaranty Nat.

Ins. Co. v. Azrock Industries Inc., 211 F.3d 239, 243 (5th Cir.

2000) (citing N.K. Parrish, Inc. v. Southwest Beef Indus. Corp.,

638 F.2d 1366, 1370 n.3 (5th Cir. 1981)). Turkmenneft argues

14
Gateway Technologies, Inc. v. MCI Telecommunications
Corp., 64 F.3d 993, 996 (5th Cir. 1995). See also Harris, 286
F.3d at 792.
-31-
that the arbitration panel erred by failing to apply what it

calls a market-based discount rate, adjusted only by excluding

consideration of internal political risk, in determining the

present-value equivalent of the estimated future income lost as a

result of the breach. In short, Turkmenneft asserts that the

arbitrator downplayed or ignored market forces when setting the

discount rate. And, because the arbitrator’s decision called for

a discount rate that resulted in damages ostensibly greater than

necessary for full compensation, Turkmenneft argues that the

arbitrator’s decision runs counter to English law, which limits

recovery to actual damages. See, e.g., Robinson v. Harmon, 1

Exch. 850, 855 (1848); Ruxley Electronics & Const. Ltd. v.

Forsyth, [1995] 3 All. E.R. 268 (H.L. 1995); Attorney General v.

Blake, [2001] 1 A.C. 268, 282 (H.L. 2000). At bottom, then,

Turkmenneft’s appeal challenges the merits of the arbitrators’

determination of the discount rate, and specifically requests

that this court second-guess the arbitrators’ determination in

that regard.

It has been determined in this circuit that the selection of

a discount factor “is a question of fact to be determined by the

trier of fact.” Huggs, Inc. v. LPC Energy, Inc., 889 F.2d 649,

657 (5th Cir. 1989) (citing Monessen Southwestern Ry. Co. v.

Morgan, 486 U.S. 330 (1988)). The force of this language is

strengthened by the rigors of the manifest-disregard test, which,

-32-
as discussed, supra, endows arbitrators with wide discretion.

See, e.g., Williams, 197 F.3d at 762.

Turkmenneft cites no English law that compels the use of a

particular discount rate, or establishes a methodology for

calculating the same.15 And, there is simply no merit to

Turkmenneft’s assertion that the arbitrator’s selected discount

rate cannot, as a matter of law, possibly establish present-value

damages equivalent to the stream of revenues projected to have

been lost as a result of the breach. Present-value

determinations are not an exact science; competent experts and

competent arbitrators can adopt highly divergent opinions without

being deemed incorrect as a matter of law. Here, the Tribunal

considered a variety of evidence and considered the factors that

it deemed most appropriate for this particular income stream: the

risk inherent in the venture, potential inflation, and the time-

value of money. Thus, given that (i) Turkmenneft can cite no

legal authority indicating that the arbitrator misapplied the

law, (ii) an arbitrator’s determination of a discount rate is a

question of fact that will depend on the case’s unique

circumstances and on differing opinions regarding financial or

15
Indeed, Turkmenneft cites, only a statement from a
treatise that loss-of-the-bargain damages are generally
approximated by the market-value of the property, money, or
services that the plaintiff was entitled to have received under a
contract. See Harvey McGregor, McGregor on Damages § 26 (16th
ed. 1997).
-33-
economic theory, and (iii) the high degree of deference we afford

arbitral decisions of this kind, it is clear that Turkmenneft

cannot satisfy the first-prong of the manifest-disregard test.

Because it is clear that the first prong of this test is not

satisfied, we need not address the second. Accordingly, the

district court’s determination upholding the arbitrator’s

discount rate is affirmed.

IV.

The final issue of this appeal is whether the district court

correctly refused to vacate the Tribunal’s award on the ground

that it exceeded its authority by awarding punitive damages.

Punitive damages were expressly forbidden by the terms of the

JVA.16 Acknowledging that (i) discount rates are generally

employed to determine compensatory damages, not punitive damages,

and (ii) the arbitrator’s decision did not explicitly award

punitive damages, an undeterred Turkmenneft argues that the

Tribunal implicitly awarded punitive damages by setting the

discount rate too low, and thus exceeded its authority.

Section 10(a) of the FAA provides that a court may vacate an

award if an arbitral tribunal exceeds its powers during the

course of arbitration. 9 U.S.C. § 10(a). It is well-settled in

this circuit that, as a general proposition, arbitral action

16
Article 24.4(H) of the JVA explicitly limits the damages
that may be awarded, stating that “consequential, punitive, or
other similar damages shall not be allowed.”
-34-
contrary to express contractual provisions is not entitled to

deference upon review. See American Eagle Airlines, Inc. v. Air

Line Pilots Ass’n, Intern., — F.3d —, 2003 WL 21940716, at *3

(5th Cir. 2003); Delta Queen Steamboat Co. v. Dist. 2 Marine

Eng’rs Beneficial Ass’n, 889 F.2d 599, 602 (5th Cir. 1989).

Thus, if punitive damages were indeed awarded in this case, it

would be incumbent upon us to vacate such an award, in spite of

the discretion typically granted to arbitral decisions.

No plausible argument, however, can be made that the

Tribunal awarded punitive damages. Under English law, punitive

damages are those that extend “beyond mere compensation of the

claimant.” 1 Chitty on Contracts § 27-017 (H.G. Beale, gen. ed.,

28th ed. 1999). See also Attorney General v. Blake, [2001] 1

A.C. 268, 282 (H.L. 2000). Thus, any award that does not further

the goal of compensation is impermissible under the terms of the

agreement. Turkmenneft’s bald claims to the contrary, there is

simply no colorable argument that an award of punitive damages

was embedded in the arbitrator’s determination of the discount

rate, given our conclusion, supra, that the arbitrator did not

manifestly disregard the law in setting the discount rate. Thus,

because there was no explicit award of punitive damages and the

discount rate, a device used for setting compensatory damages,

was not selected in manifest disregard of the law, we reject

Turkmenneft’s argument that the arbitrator awarded punitive

-35-
damages. Accordingly, the district court’s determination on this

issue is also affirmed.

CONCLUSION

For the foregoing reasons, the district court’s decision

refusing the vacate the FPA because the Government was subject to

the jurisdiction of the Tribunal is VACATED and REMANDED. The

district court’s refusal to vacate or modify the TPA or Final

Award is AFFIRMED.

VACATED and REMANDED in Part, AFFIRMED in Part

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