On Appeal from the United States District Court for the District of New Jersey (D.C. Civ. No. 01-03481) Honorable Dennis M. Cavanaugh, District Judge
Before: Alito, Fuentes, and Greenberg,
The opinion of the court was delivered by: Greenberg, Circuit Judge.
This matter comes on before this court on an appeal by the Chi Mei Corporation ("Chi Mei") from the district court's order entered June 11, 2002, granting the motion of China Minmetals Import & Export Co. ("Minmetals") to confirm and enforce a foreign arbitration award and from the judgment entered on August 26, 2002, in favor of Minmetals and against Chi Mei in the amount of $4,040,850.41. For the reasons stated herein, we will vacate the district court's order and judgment and will remand the case for further proceedings.
Chi Mei is a New Jersey corporation and Minmetals is a corporation formed and existing under the laws of the People's Republic of China ("PRC").*fn1 Production Goods and Materials Trading Corp. of Shantou S.E.Z. ("Shantou"), which also is implicated in this action, likewise is a corporation formed and existing under the laws of the PRC.
This dispute arises out of a transaction involving Chi Mei, Minmetals, and Shantou. The parties dispute almost every detail of the transaction; for example, Chi Mei refers to it as a "currency conversion transaction"*fn2 while Minmetals calls it a contract for purchase by Minmetals of electrolytic nickel cathode. Moreover, we do not find the parties' descriptions of the transactions to be completely clear, a problem that fortunately does not impede our ability to decide this case. Chi Mei argues that it never intended nor agreed to sell anything to Minmetals and alleges that the contracts on which Minmetals relies were forged. On the other hand, Minmetals argues that Chi Mei failed to deliver the goods it promised to sell after receiving payment by drawing on a line of credit of several million dollars.
According to Chi Mei, on or about June 12, 1997, Shantou sought out Chi Mei to discount a certain sum of US dollars. J.A. at 119.*fn3 Chi Mei orally agreed to provide discounting services for a.7% commission of the amount of US dollars before discount. Minmetals was to obtain the funds by way of a letter of credit obtained from the Bank of China, as the PRC apparently authorized Minmetals to engage in currency conversion transactions. Chi Mei asserts, however, that Shantou did not disclose its relationship with Minmetals to it and that it was unaware of Minmetals' role in the transaction until after the delivery of the proceeds of the letter of credit to Shantou. Chi Mei subsequently was to transfer the funds to accounts Shantou designated, and Chi Mei did so. By contrast, Minmetals asserts that the transaction involved an agreement to purchase electrolytic nickel cathode alloy, it issued letters of credit worth several million dollars to Chi Mei, and Chi Mei knowingly submitted to a New York bank numerous false documents evidencing the sale, including an invoice, weight packing list, quality certificate, and bill of lading, in order to collect funds under the letters of credit. Minmetals contends that Chi Mei did not deliver the goods described in the contracts.
Two contracts submitted to a bank in the PRC that purport to be contracts for the sale of nickel by Chi Mei to Minmetals for a sum equal to the amount of the letters of credit (the "Sale of Goods contracts") are central to this dispute. Chi Mei alleges that the two contracts were entirely fraudulent, containing a forged signature of a nonexistent Chi Mei employee as well as a forged corporate stamp. Chi Mei further alleges that it was unaware of the existence of these contracts until it appeared at the arbitration that is the subject of this dispute. The contracts provide for binding arbitration of any disputes in connection with the contracts before the China International Economic and Trade Arbitration Commission ("CIETAC"). App. at 33.
According to Chi Mei, it performed its duties under the oral agreement governing the currency discounting transaction and delivered the funds to Shantou after collecting its.7% commission.*fn4 Shantou then allegedly misappropriated the funds, refusing to remit any of them to Minmetals.*fn5
On or about November 14, 1997, Minmetals initiated an arbitration proceeding before CIETAC against Chi Mei pursuant to the arbitration clauses contained in the Sale of Goods contracts.*fn6 Chi Mei repeatedly objected to CIETAC's jurisdiction but, nevertheless, appeared before it, submitting evidence that the contracts which contained the arbitration clause on which Minmetals relied were forged. Chi Mei also argued that Minmetals' flouting of Chinese law should prevent its recovery in the arbitration. Id. at 44-45.
The arbitration tribunal held that Chi Mei failed to meet its burden of showing that the contracts at issue were forged, and that even if Chi Mei's signature and stamp had been forged, its actions, such as providing documents to the New York bank and drawing on the letters of credit, constituted "confirmation of the validity of the contracts." Id. at 49. On August 30, 2000, the CIETAC panel awarded Minmetals an amount in excess of $4 million.
In July 2001, Minmetals moved in the district court for an order confirming and enforcing the arbitration award. Chi Mei opposed the motion and filed a cross-motion to deny the relief Minmetals sought, submitting numerous documents and affidavits, including the affidavit of Jiaxiang Luo, the Chi Mei president. Minmetals did not submit any contrary affidavits. The district court heard oral argument on the motions and, without conducting an evidentiary hearing, on June 11, 2002, entered an order granting Minmetals' motion to confirm and enforce the award and denying Chi Mei's cross-motion. The court, however, did not file an opinion explaining its decision and, accordingly, we do not know the basis for its entry of the order. On August 26, 2002, the district court entered judgment in favor of Minmetals in the amount of $4,040,850.41. This appeal followed.
II. JURISDICTION AND STANDARD OF REVIEW
The district court had jurisdiction pursuant to 9 U.S.C. § 203 and 28 U.S.C. § 1331, and we have jurisdiction pursuant to 28 U.S.C. § 1291.*fn7 Ordinarily, in reviewing a district court's order confirming an arbitration award, we would review the district court's factual findings for clear error and its legal conclusions de novo. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48, 115 S.Ct. 1920, 1926 (1995). Here, however, inasmuch as the court, at least explicitly, did not make findings of fact, and we, in any event, are deciding the case on a legal basis, our entire review is plenary.
The primary issue in this case is whether the district court properly enforced the foreign arbitration panel's award where that panel, in finding that it had jurisdiction, rejected Chi Mei's argument that the documents providing for arbitration were forged so that there was not any valid writing exhibiting an intent to arbitrate. This issue actually involves two distinct questions. First, we must consider whether a foreign arbitration award might be enforceable regardless of the validity of the arbitration clause on which the foreign body rested its jurisdiction. In this regard, Minmetals points out that the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention") differs somewhat from the general provisions of the Federal Arbitration Act ("FAA"), and particularly argues that Article V of the Convention requires enforcement of foreign awards in all but a handful of very limited circumstances, one of which is not the necessity for there to be a valid written agreement providing for arbitration. If we conclude, however, that only those awards based on a valid agreement to arbitrate are enforceable, we also must consider who makes the ultimate determination of the validity of the clause at issue. Thus, in considering the second question, we must examine the district court's role, if any, in reviewing the foreign arbitral panel's finding that there was a valid agreement to arbitrate.
Within three years after an arbitral award falling under the Convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The 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.
The Convention is incorporated into the FAA in 9 U.S.C. § 207 and appears at 9 U.S.C.A. § 201 historical n. Article V of the Convention provides:
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or....
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which ...