Wartsila Finland OY v. Duke Capital LLC

REVISED February 22, 2008

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit

FILED
February 20, 2008
No. 07-20012
Charles R. Fulbruge III
Clerk
WARTSILA FINLAND OY; WARTSILA GUATEMALA, SA,

Plaintiffs - Appellees
v.

DUKE CAPITAL LLC,

Defendant

DUKE ENERGY INTERNATIONAL GUATEMALA Y CIA., S.C.A., formerly
known as Grupo Generador de Guatemala y Cia, S.C.A.

Intervenor Defendant - Appellant

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

Before REAVLEY, SMITH, and GARZA, Circuit Judges.
EMILIO M. GARZA, Circuit Judge:
Duke Energy International (“DEI”) appeals the district court’s judgment
confirming an arbitration award and denying DEI’s request for a stay of
enforcement. The district court entered a judgment ordering DEI to pay
Wartsila Finland OY and Wartsila Guatemala, SA, (collectively “Wartsila”)
$13,677,951.64 plus pre- and post-judgment interest. The district court enforced
 No. 07-20012

the arbitrator’s award despite the presence of separate, pending arbitration
claims brought by DEI against Wartsila. For the following reasons, we affirm
the judgment of the district court.
I
In 2002, Wartsila contracted with DEI to construct a power plant near
Puerto Quetzal, Guatemala. The contract provided for Wartsila to complete
construction of the power plant in four phases. Pertinent to this case, the
agreement gave DEI certain rights to withhold payment on invoices.
Specifically, Sections 6.9 and 6.10 of the contract provide that:
Any amount of an Invoice which is disputed by [DEI] as provided in
this section 6 shall be resolved in accordance with Section 21. Once
the dispute is resolved in accordance with Section 21, [DEI] shall
pay any amount owing within five (5) Business Days after the date
of the final resolution.

[DEI] may withhold payment on an invoice or a portion thereof in
an amount and to such an extent as may be reasonably necessary,
subject to the dispute resolution provisions of Section 21, to protect
[DEI] from loss because [of]. . . work that has not been remedied.
The agreement also gave DEI certain rights to setoff amounts owed to DEI
against amounts DEI owed Wartsila. Specifically, Section 6.13 states:
Notwithstanding any other provision in this Agreement, and in
addition to its other rights and remedies, [DEI] shall be entitled to
setoff against any amount it owes [Wartsila], or that will become
owed to [Wartsila], under this Agreement, any amount that
[Wartsila] owes [DEI] under this Agreement.
In Section 21, the contract included an arbitration provision which
provided that if disputes could not be resolved by Senior Officers of each party,
then the disputes were to be submitted to arbitration held pursuant to
International Chamber of Commerce (“ICC”) rules. Section 21 states that “any
decision rendered by the arbitrators in any arbitration shall be final and binding

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upon the Parties, and judgment may be entered on the award in any court of
competent jurisdiction.”
In April 2003, prior to completion of phase four of the power plant,
Wartsila sought payment for disputed invoices and filed a demand for
arbitration with the ICC to resolve disputes that had arisen with respect to the
first three phases. The arbitral tribunal conducted a hearing as to these claims
in September 2004. In January 2005, the tribunal instructed Wartsila and DEI
to raise any further claims and counterclaims to be resolved in the arbitration
proceeding. Both parties served memoranda containing their remaining claims
for relief related to phase four. In February, DEI requested more time from the
tribunal, stating that it needed the time to comprehensively address all of its
counterclaims. The tribunal refused the request, but stated that it would allow
DEI to withdraw any claims that it felt should be reserved for a later proceeding.
A second hearing was held in June 2005 to consider all claims and counterclaims
that had not been withdrawn. The tribunal then issued a partial award,
reserving its decision on all undecided claims for further partial awards or a
final award. Because some construction on the project was still ongoing, the
parties asked the tribunal to consider a third set of hearings. The tribunal noted
that a third set of hearings may be necessary but did not set a date for those
hearings.
In September 2005, the tribunal chairman informed the parties that he
had been appointed as a High Court Judge in England and that he would
therefore be unable to continue as an arbitrator. Wartsila and DEI disputed
whether the tribunal should be reconstituted to consider further claims. The
tribunal determined that it would not reconstitute itself for another round of
hearings, but instead would issue a final award as to the claims then before it.
The tribunal allowed DEI to withdraw certain of its claims according to Article

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30(4) of the ICC Rules so that DEI might present the claims in a later
arbitration proceeding.1
In April 2006, the tribunal issued a “Final Award” which dealt with “all
remaining claims and counterclaims, including the remaining claims in Phase
III and those arising in Phase IV.” After correcting computational errors in its
award, the tribunal ordered DEI to pay Wartsila 11,315,385 and Wartsila to
pay DEI $757,085.
Wartsila sought payment in accordance with the final award. DEI refused
to pay, claiming that it was entitled to withhold payment to protect itself from
loss due to defective or unfinished work. DEI also contended that it could set off
the amounts it sought in its withdrawn claims against the amount ordered to be
paid in the tribunal’s final award. In October 2006, DEI made a request to the
ICC for arbitration in order to bring the claims withdrawn from the previous
arbitration. Three days after DEI made this request, Wartsila filed a motion in
federal court to have the tribunal’s award confirmed and enforced under The
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(hereinafter “New York Convention”), see 9 U.S.C. § 207 (providing courts with
jurisdiction to confirm and enforce arbitration awards arising under the New
York Convention).2 DEI filed a cross-motion for confirmation as well as a stay
of the proceedings pending completion of its newly filed arbitration claims.
Because neither party objected to confirmation, the district court confirmed the

1
Article 30(4) of the ICC Rules of Arbitration provides:
When a request for an advance on costs has not been complied with, and after
consultation with the Arbitral Tribunal, the Secretary General may direct the Arbitral
Tribunal to suspend its work and set a time limit, which must be not less than 15 days,
on the expiry of which the relevant claims, or counterclaims, shall be considered as
withdrawn. Should the party in question wish to object to this measure, it must make
a request within the aforementioned period for the matter to be decided by the Court.
Such party shall not be prevented, on the ground of such withdrawal, from
reintroducing the same claims or counterclaims at a later date in another proceeding.

2
The New York Convention, June 10, 1958, 21 U.S.T. 2517 (entered into force with respect to
the United States, Dec. 29, 1970), codified at 9 U.S.C. §§ 201-208.

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award. The district court then rejected DEI’s arguments for a stay and enforced
the award by reducing it to judgment))the judgment required DEI to pay
Wartsila $13,677,951.64.
DEI appeals, contending that the district court erred in refusing to stay
the entry of judgment. DEI presents two arguments in support of a stay. First
DEI argues that the award itself, when properly interpreted, required the
district court to stay enforcement of the award. Second, DEI argues in the
alternative that, even if the award contemplates immediate enforcement, the
district court should have exercised its discretion to stay enforcement of the
award.
II
“This court reviews a district court’s confirmation of an arbitration award
de novo, using the same standards as the district court.” American Laser Vision,
P.A. v. Laser Vision Inst., L.L.C., 487 F.3d 255, 258 (5th Cir. 2007). As to DEI’s
claim seeking a stay of enforcement in spite of the arbitration award, we review
the district court’s decision denying a stay for an abuse of discretion. See Sutter
Corp. v. P & P Industries, Inc., 125 F.3d 914, 917 (5th Cir. 1997) (recognizing
that a district court’s decision whether to stay confirmation of an arbitration
award “is ordinarily reviewed for an abuse of discretion”). Because the only
potential sources of authority for the district court to grant a stay under these
circumstances are discretionary, an abuse of discretion standard is appropriate.
See New York Convention, 21 U.S.T. 2517 at Article VI (stating that in certain
circumstances a court “may, if it considers it appropriate, adjourn the decision
on enforcement of the award”); Hewlett-Packard Co., Inc. v. Berg, 61 F.3d 101,
106 (1st Cir. 1995) (noting that a court may, incidental to its inherent power to
control disposition of the cases on its docket, exercise its discretion to stay
enforcement proceedings under the New York convention).
III

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We examine two distinct questions in this appeal: first whether the district
court’s order and judgment are consistent with the arbitration award; and
second, even if the tribunal’s award allows for immediate enforcement, whether
the district court abused its discretion in not staying enforcement of the award.
A
DEI does not challenge the confirmation of the award, nor seek to set aside
the award.3 Instead, DEI contends that the award should be confirmed “as
written.” DEI claims that the district court, in issuing a judgment requiring DEI
to pay the award amount, misinterpreted the arbitration award. DEI argues
that the award did not allow the district court to issue a judgment requiring
payment while DEI still had claims outstanding in a separate arbitration arising
out of the contract.
A district court should enforce an arbitration award as written))to do
anything more or less would usurp the tribunal’s power to finally resolve
disputes and undermine the pro-enforcement policies of the New York
Convention. See Scherk v. Alberto-Culver Co., 417 U.S. 506, 519-20 & n. 15
(1974) (explaining purposes of New York Convention); cf. Brown v. Witco Corp.,
340 F.3d 209, 216 & 220 (5th Cir. 2003) (noting that, in the labor arbitration
context, “a court is required to enforce an arbitration award only as written by
the arbitrator” and addressing the magistrate judge’s “construction” of the
award). Therefore we look to the tribunal’s award in reviewing the district
court’s confirmation order to ensure the district court properly confirmed and
enforced the tribunal’s award. See Folkways Music Publishers, Inc. v. Weiss, 989

3
9 U.S.C. § 207 states that, “[t]he court shall confirm the award unless it finds one of the
grounds for refusal or deferral of recognition or enforcement of the award specified in the said
Convention.” Because U.S. courts are courts of primary jurisdiction (i.e., a court of the country “in
which, or under the [arbitration law of which] an award was made”) in this case, the award could be
annulled or set aside for reasons in accordance with domestic U.S. “arbitral law and its full panoply of
express and implied grounds for relief.” Gulf Petro Trading Co., Inc. v. Nigerian Nat’l Petroleum Corp.,
No. 06-40713, — F.3d —, 2008 WL 62546, at *3 (5th Cir. Jan. 7, 2008). However, DEI raises no
argument against confirmation of the award.

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F.2d 108, 110-11 (2d Cir. 1993) (reviewing contents of arbitration award to
determine whether “the district court properly interpreted the award” in
ordering confirmation).
DEI bases its interpretation of the arbitration award, in part, on the
contents of the agreement between Wartsila and DEI.4 According to DEI, the
tribunal had in mind the contract’s withholding and setoff provisions when
making the final award, such that DEI would be allowed to set off the value of
any future arbitration claims it had against the amount it owed Wartsila under
the arbitration award. Because the value attached by DEI to its claims still
pending in the new arbitration is greater than the amount awarded to Wartsila
in the current award, DEI argues that the award does not contemplate a current
payment from DEI to Wartsila.
In its conclusion, the Final Award plainly states that, “Duke must pay
Wartsila.” Focusing on other aspects of the award, DEI argues that this does not
mean the tribunal contemplated immediate payment by DEI. First, DEI notes
that the arbitration tribunal allowed DEI to withdraw certain claims from this
arbitration in order to reserve them for a later, anticipated arbitration. Because
the tribunal allowed claims to be withdrawn, and because the tribunal was
aware of contract sections 6.9, 6.10 and 6.13, DEI argues that the tribunal could
not have intended DEI to make immediate payment on the award. Instead,
according to DEI, the panel intended that DEI would be able to set off, against

4
The agreement vested in the ICC arbitration tribunal the authority to resolve disputes arising
out of and relating to the agreement. Courts accord strong deference towards an arbitrator’s
interpretation of a contract. See Executone Info Sys., Inc. v. Davis, 26 F.3d 1314, 1320 (5th Cir. 1994)
(recognizing that a court must sustain an arbitration award even where the court disagrees with an
arbitrator’s interpretation of the underlying contract). Furthermore, DEI does not raise any argument
that would require us to go behind the arbitration tribunal’s award to engage in our own interpretation
of the contract, as if for example, DEI had claimed that the arbitrators exceeded their authority under
the contract in issuing the award. See, e.g., Executone, 26 F.3d at 1324-29 (examining agreement to
determine whether arbitrator’s decision “draws its essence” from the contract). In this case, we
determine only whether the district court’s order and judgment properly enforced the award as written.
See Folkway Music, 989 F.2d at 111.

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any award made by the panel, the alleged value of the withdrawn claims yet to
be arbitrated. The panel allowed DEI to withdraw and reserve claims under
Article 30(4) of the ICC Rules. However, the fact that the panel allowed DEI to
withdraw claims does not necessarily strengthen DEI’s argument. DEI’s
argument assumes that the arbitration panel interpreted the contract’s
withholding and setoff provisions consistent with DEI’s own interpretation. The
panel’s award does not support this assumption.
In arguing that the panel interpreted the contract as allowing DEI to set
off amounts against payment of its award, DEI focuses our attention on
paragraph forty seven of the Final Award, wherein the arbitration panel
reproduced its letter to the parties written July 15, 2005. The July 15 letter was
sent to the parties as part of the tribunal’s consideration of a third round of
hearings))the tribunal knew at this point that DEI wished to withdraw some
of its claims. The letter stated in pertinent part:
In the absence of any remaining claims, the Tribunal would
normally make these Awards as Final Awards. However, on the
basis that the parties wish the Tribunal to remain constituted to
deal with further new claims in 2006, the Tribunal would be
prepared to make the Award in Arbitration 12682/KGA/CCO [i.e.,
the second round of hearings] as a Second Partial Award but only on
the basis that it contained an Award of final payment to one party
of the other arising out of the current remaining claims and
counterclaims including costs. The Second Partial Award would
then require one party to pay the other party. [DEI] raised the
possibility that it may wish to withhold sums against any such
Award. The Tribunal does not consider that it can or should become
involved with subsequent matters of enforcement of the Award or
entitlement to set-off. Such issues are for the parties and, if
payment is not made, will depend upon the laws of the country in
which the Award is to be enforced.
DEI notes that the arbitration panel expressly abstained from deciding the legal
question of whether DEI was entitled to withhold sums against the panel’s
award. DEI is correct, in that the tribunal noted that it did not have the

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authority to enforce the award and that enforcement would depend upon, in this
case, U.S. law concerning enforcement of international arbitration awards.
However, the tribunal’s July 15 letter undermines DEI’s position as it concerns
the tribunal’s understanding of the effect of the contract’s setoff provisions on
the tribunal’s authority to issue an award requiring payment. In the July 15
letter, the tribunal expressly states that its award arising from the second round
of hearings would “contain an Award of final payment to one party or the other
arising out of the current remaining claims and counterclaims, including costs”
and would “require one party to pay the other party.” The tribunal intended this
to be so even if its award had been merely a “Second Partial Award.” However,
because the tribunal did not consider any further claims, it instead issued a
Final Award encompassing all of the claims it had heard up to that point.
Counter to DEI’s argument, the July 15 letter suggests that the tribunal
understood its authority as including the ability to issue an award which
required payment from one party to the other at the close of the arbitration
proceeding.
When calculating the amount of the award, the tribunal took into account
any deductions that DEI was allowed to make based on its ability to withhold
payment for work not remedied. Where the tribunal found Wartsila’s work to
be unremedied, it reduced the amount owed by DEI based on the cost to remedy
Wartsila’s defective work. DEI argues that the tribunal’s references to contract
sections 6.9 and 6.10 in its calculation of the award amount suggest that the
panel recognized DEI’s right to withhold. However, the tribunal’s award
calculation undercuts DEI’s position. As indicated above, Section 6.10 allows
DEI to withhold payment on disputed invoice amounts in order to protect itself
from loss for work that has not been remedied. The tribunal’s references to
Section 6.10 and DEI’s ability to withhold amounts for unremedied work do not
support DEI’s claim that it could withhold payment or make setoffs against the

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tribunal’s final arbitral award. Even after taking into account DEI’s ability to
withhold invoice amounts, the tribunal issued an award requiring DEI to pay
Wartsila.
Instead of supporting DEI’s ability to set off future claims against the
award amount, the award reflects the tribunal’s intent to resolve the specific
disputes then before it and issue a final award such that a monetary payment
would be made regarding those specific disputes. The fact that DEI was allowed
to withdraw claims and reserve them for a later arbitration does not provide
guidance as to whether the panel understood those future claims to provide a
setoff amount against any award it may issue. The mention of DEI’s right to
setoff found in the tribunal’s July 15 letter to the parties suggests that the
arbitration panel did not see setoff as an impediment to its issuing an award
requiring payment. The tribunal’s references to DEI’s contractual right to
withhold invoice amounts suggest that despite DEI’s right to withhold, it still
must pay Wartsila the final award amount. Finally, the panel’s unambiguous
mandate that “Duke pay Wartsila” suggests that the tribunal required payment,
with no strings attached to enforcement of the award. Therefore, the district
court’s order and judgment were consistent with the award as written. Nothing
in the tribunal’s award prevented the district court from confirming and
enforcing the award by reducing it to a money judgment in favor of Wartsila.
B
Though we find that the award did not require the district court to issue
a stay, DEI alternatively argues that the district court should have exercised its
discretion to grant a stay of enforcement. In seeking a discretionary stay, DEI
relies upon the First Circuit’s decision in Hewlett-Packard Co., Inc. v. Berg, 61
F.3d at 105-06. In Berg, the First Circuit recognized that certain equitable
considerations could lead a district court to exercise its inherent authority to
grant a stay of enforcement. See id. at 106. Without deciding whether we would

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recognize the same authority on the part of the district court, we note that DEI’s
request for a stay does not fall within the limited parameters described in Berg.
In Berg, Hewlett-Packard was involved in arbitration proceedings arising
out of two separate contracts, one from 1982 and one from 1984, between its
subsidiary, Apollo Computer, and Dicoscan. By the time of arbitration, Dicoscan
had become insolvent. The tribunal arbitrated the claims arising out of the 1984
contract. The arbitrators did not allow Hewlett-Packard to bring its claims from
the 1982 contract as counterclaims in the same arbitration proceeding.
Arbitration of the 1984 disputes resulted in an award against Apollo without any
determination of its claims under the 1982 agreement. After the district court
confirmed the award, Hewlett-Packard appealed the district court’s decision to
“confirm the award in full” rather than grant a stay of the confirmation pending
the results of arbitration of the 1982-contract disputes. Id. at 105. The district
court held that it did not have authority to grant a stay because of the
limitations imposed by the New York Convention. Hewlett-Packard argued that
it should not have to pay the full amount of the 1984 award because of
Dicoscan’s insolvency and the minimal likelihood that Hewlett-Packard would
recover anything on its claims from the 1982 agreement, even if the claims prove
meritorious. The First Circuit determined that “Dicoscan’s bankruptcy gives
Hewlett-Packard a very substantial prudential argument” in support of a stay.
Id. Because the district court “acted under a misapprehension of its authority”
the appeals court vacated its decision and remanded for reconsideration of the
stay issue. Id. at 106. Still, the First Circuit cautioned that “a stay of
confirmation should not be lightly granted,” because “[a] central purpose of the
Convention. . . was to expedite the recognition of foreign arbitral awards with a
minimum of judicial interference.” Id.
Even were we to recognize the inherent authority of the district court to
issue a stay, DEI does not present the same “prudential” case that existed in

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Berg. While DEI has outstanding arbitration claims against Wartsila, it has
presented no evidence of Wartsila’s insolvence or that DEI will have trouble
recovering on its claims. Further, in Berg, the First Circuit noted that the
arbitration panel prevented Hewlett-Packard from asserting its claims in the
same arbitration. Id. at 105. In this case, DEI unilaterally withdrew its claims
in order to reserve them for a later proceeding. Therefore, the district court did
not abuse its discretion in refusing to grant DEI’s motion for stay of enforcement
on the grounds laid out in Hewlett-Packard v. Berg.
IV
The district court properly interpreted the tribunal’s award when it
determined that the award contemplated summary confirmation and
enforcement by the court. The district court did not abuse its discretion in
denying DEI’s request for a stay of enforcement. Accordingly, we AFFIRM the
judgment of the district court.

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