I. MOCK SCENARIO

 

Following a protracted and hard-fought arbitration in

Puritania, Apex Oil Corp. (“Apex”) has received an award of US$

2.3 billion in its favor against the National Oil Company of

Puritania (“PNOC”). Apex’s victory celebrations have been

interrupted by a phone call from local counsel in Puritania

advising that PNOC has moved the courts of Puritania to have the

award set aside on grounds that the arbitrators “misdirected

themselves” by awarding interest on the sum of damages at a

“usurious” rate of LIBOR + 4% which was neither proper

according to the governing local law nor consistent with

Puritanian public policy. Local counsel has advised that the

award is likely to be set aside by the Puritanian courts, at least at

first instance. Loose drafting of the arbitration statute and some

residual opposition to arbitration in principle has set a precedent

of activist/merits-based review of arbitral awards. That said, the

Puritanian appellate courts have been making an effort to rein

this in, so local counsel is reasonably optimistic that any setting

aside will be overturned on appeal. Given the backlog of cases in

the Puritanian courts, though, the whole thing is likely to take at

least 3-5 years to resolve.

 

 

Apex’s General Counsel has just returned from breaking the

bad news to the CEO with two clear instructions: (1) to determine

what Apex can do to realize some value from the award as soon as

possible; and (2) to determine what Apex can do to put pressure

on PNOC to comply with the award. He has hastily convened a

“brain trust,” including outside counsel and an asset tracing
specialist, to talk through the options.