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Telcordia Tech Inc. v. Telkom SA Ltd.

August 14, 2006

TELCORDIA TECH INC., IN THE MATTER OF THE ARBITRATION OF CERTAIN CONTROVERSIES BETWEEN, APPELLANT
v.
TELKOM SA LTD.



On Appeal from the United States District Court for the District of New Jersey (D.C. No. 04-cv-02463) District Judge: Hon. John C. Lifland.

The opinion of the court was delivered by: Roth, Circuit Judge

PRECEDENTIAL

Argued on January 13, 2006

Before: SCIRICA*fn1, FUENTES and ROTH*fn2, Circuit Judges.

OPINION OF THE COURT

We review here two orders by the District Court of New Jersey. In the first, the District Court granted Telkom SA Ltd.'s motion to dismiss Telcordia Technologies Inc.'s petition to confirm a partial arbitral award. Specifically, the District Court dismissed Telcordia's petition with prejudice because of issue preclusion or estoppel resulting from a previous decision by the D.C. Circuit Court of Appeals dismissing a similar petition by Telcordia without prejudice. In the alternative, but still in the first order, the District Court dismissed the petition without prejudice because the court chose to exercise "its discretion not to enforce the award at this time."

In the second order, the District Court dismissed the petition for lack of personal jurisdiction over Telkom and denied Telcordia's request for jurisdictional discovery. For the reasons that follow, we find that the District Court does have personal jurisdiction over Telkom. Furthermore, we find that considerations of comity and the proper interpretation of the New York Convention dictate that the petition be dismissed without prejudice.

I. Background

Telcordia, with a principal place of business in Piscataway, New Jersey, entered into a multimillion dollar contract with Telkom, a South African telecommunications company that was formerly the state-owned telephone monopoly.*fn3 Pursuant to the agreement, Telkom was to pay Telcordia more than $249 million for customized telecommunications software. Unfortunately, the performance of the contract was racked with disputes, mainly with respect to whether the software complied with certain contractual specifications.*fn4

Pursuant to the parties' contract, the two companies entered into binding arbitration in South Africa according to the rules of the International Chamber of Commerce (ICC). The arbitrator was Anthony Boswood, QC, of Fountain Court Temple, London, England. During the proceedings, Telkom sought intervention from the South African High Court to correct alleged errors in the arbitration.*fn5 Specifically, Telkom concluded that the arbitrator was viewing issues from the perspective of English law, instead of South African law, as required by the parties' agreement. Before the High Court could act, on September 27, 2002, the arbitrator held that Telkom was liable to Telcordia for breach of contract. On September 30, 2002, the ICC's International Court of Arbitration formally issued its final award in favor of Telcordia and directed the parties to give it effect.

Shortly thereafter, Telcordia petitioned the United States District Court for the District of Columbia to confirm the arbitral award pursuant to the New York Convention.*fn6

Contemporaneously, Telkom had filed a separate action in the South African High Court to have the award set aside or annulled pursuant to Section 33 of the South African Arbitration Act. Article III of the New York Convention provides that each state party "shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon." The setting aside or annulment of the arbitral award by the South African Court would be grounds for other courts to refuse recognition and enforcement of the arbitral award pursuant to Article V of the New York Convention. Specifically, Article V(1)(e) provides that:

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:

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

In July 2003, the D.C. District Court dismissed the case without prejudice on the grounds that it lacked personal jurisdiction over Telkom and, alternatively, that the case could not proceed under the doctrine of forum non conveniens. Telcordia appealed to the U.S. Court of Appeals for the D.C. Circuit. That court affirmed on the alternative ground that under Article VI of the New York Convention the District Court should have adjourned its proceeding and awaited the outcome of the pending action in South Africa.*fn7 Article VI provides a mechanism by which courts asked to enforce an arbitral award can adjourn to await the type of proceeding in the situs jurisdiction referenced in Article (V)(1)(e). Accordingly, the D.C. Circuit dismissed the petition without prejudice.

On November 27, 2003, and while the case was on appeal in the D.C. Circuit, the South African High Court issued a decision setting aside the award and ordering a new arbitration. On November 29, 2004, the Supreme Court of Appeal of South Africa agreed to hear Telcordia's appeal from ...


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