By: Brian Tan

On May 8, 2008, Intel Capital (Caymen) Corporation, Intel Capital Corporation, Deutsche Telekom, and AG (“Petitioners”) entered into a business relationship and contract with Yi Shan (“Respondent”). The parties found themselves in a dispute in November 2012, which was to be resolved by arbitration in Hong Kong per their business contract. Petitioners sent a Notice of Arbitration on November 12, 2012, however service was initially unsuccessful as Respondent’s address changed. Petitioners continued to serve Respondent at the address and fax number listed pursuant to the contract’s terms, claiming Respondent never updated his contact information.

Attorney Peter Yuen Attorney Peter Yuen represented Respondent in the arbitration until April 14, 2014, however, Respondent claimed that he had not authorized Yuen to represent him when Yuen had filed the Answer to the Notice of Arbitration. Once Yuen rescinded his representation of Respondent, however, Respondent still took no action in the arbitration. The arbitrator in the case attempted to contact Respondent by e-mail, which were unsuccessful; Respondent claimed this was a personal e-mail account which he did not check or notice before the arbitration. Eventually, the arbitration tribunal unsuccessfully resorted to a consulting firm to find the address of Respondent.

The arbitration tribunal continued on June 9, 2014 with only Petitioners in attendance. Thus, the arbitrator awarded a default arbitration award to Petitioner $139 million dollars against Respondent.

Petitioner moved to confirm its arbitration award against Respondent in the Eastern District of Michigan.[1] The standard of review for motions to confirm arbitration awards is found in the Federal Arbitration Act[2] and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the New York Convention”), June 10, 1958.[3] A party may move to confirm the award in a federal court of the place designated in the contract. A court should generally confirm the arbitral award unless there are any valid grounds for refusal or deferral of the award.[4] A possible ground for refusal from the Convention is if the party was not given proper notice of the arbitration proceedings. However, it is generally understood that parties who have contractually agreed to settle their disputes via arbitration rather than litigation should not expect the same procedures as the federal judicial system.

Ultimately, the court found that Respondent failed to show he was not given proper notice of Petitioner’s claim. Petitioner physically delivered to Respondent’s only known or confirmed address based on the business contract. It made a good-faith effort and did everything reasonably possible to identify the proper contact information of Respondent, even hiring a consulting firm to trace other possible addresses Respondent was connected to.

In the contract, both parties stipulated the method of notice in the event of a dispute, yet the Respondent failed to provide the Petitioner with a written notice of address change. Following Yuen’s involvement, Respondent still failed to take action with the arbitration proceedings. The court concluded that Respondent’s rescinded representation by Yuen and e-mails sent to his personal account were not valid explanations upon Respondent’s burden of proof of improper notice of arbitration proceedings from Petitioner. As a result, the court granted the Petitioners’ Motion to Confirm the Arbitration Award of $139 million.

Any business, foreign or domestic, should consider their contracts and arbitration clauses carefully. The statutes implicated by this case are the Federal Arbitration Act and The New York Convention. These laws potentially provide many defenses for foreign businesses or contractors in the result of dispute or arbitration, but notice is not under the strict rules of procedure. A business can be held liable if the conditions from the original business contract and dispute/arbitration clause regarding contact information are not satisfied. An arbitration award of $139 million in Hong Kong that is confirmed by the U.S. federal district court demonstrates to the business community that missed communications are no excuse for failing to comply with contractual agreements.

[1] Fed. R. Civ. P. 78(b)

[2] 9 U.S.C. sec 1. et seq.

[3] 21 US.T. 2517, T.I.A.S. No. 6997.

[4] See 9 U.S.C. sec. 207.


Share this post