Ministry of Defense of Iran v. Cubic Defense

The United States has a strong public policy toward the confirmation of foreign arbitration awards that outweighs current restrictive trade policies with Iran. Also, prejudgment interest and legal fees are available in an arbitration confirmation award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

In 1977, the predecessor in interest of Cubic Defense Systems, Inc. (“Cubic”) contracted with the predecessor of appellee, Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran (“Ministry”), for sale and service of an air range to be used by Iran’s military. The Iranian Revolution of 1979 prevented the performance and both parties agreed to discontinue the contracts. In 1991, the Ministry went to arbitration with Cubic before the International Chamber of Commerce (“ICC”) and was awarded over two million dollars in damages plus arbitration costs. Cubic did not pay, and in 1998 a federal district court confirmed the ICC’s award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known as the “New York Convention”). On appeal, Cubic argued that the district court erred in confirming the award as it was contrary to the public policy of the United States, or in the alternative, that the award was not yet binding on the parties. The Court agreed with the United States, who submitted an amicus curiae brief in favor of confirmation, because the U.S. has a strong public policy toward confirmation of foreign arbitration awards that outweighs restrictive trade policies with Iran. The Court also found that the award was binding because all arbitration appeals had been exhausted. Finally, the Court held that the district court erred in concluding that the prejudgment interest and legal fees were not available in an arbitration confirmation award under the New York Convention. AFFIRMED in part, VACATED in part and REMANDED as to the issue of interest and legal fees.