in Re Aramco Services Company

Opinion issued March 19, 2010

In The

Court of Appeals

For The

First District of Texas

NO. 01-09-00624-CV

IN RE ARAMCO SERVICES COMPANY, Relator

Original Proceeding on Petition for Writ of Mandamus

MEMORANDUM OPINION

By a petition for writ of mandamus, relator, Aramco Services Company

(“Aramco”), challenges three orders of the trial court concerning arbitration.

Aramco contends that the trial court abused its discretion by (1) appointing arbitrators

(2) who are not Muslims or Saudi nationals. We agree that the trial court lacked

authority to appoint arbitrators, and therefore do not reach whether the trial court

abused its discretion by empaneling arbitrators who are not Muslims or Saudi

nationals. Thus, we vacate the trial court’s three orders and conditionally grant

mandamus relief.

Background

Real party in interest, DynCorp International, LLC (“DynCorp”), and Aramco

signed a contract (“the Contract”) for an advanced computer system.

Under the

Contract, DynCorp was to manufacture the computer system in the United States and

then install it at Aramco’s facilities in Saudi Arabia. The Contract contains an

arbitration agreement, written in English, which provides, in part,

1. Choice of Law

The laws of Saudi Arabia shall control the interpretation and the

performance of this Contract and any other agreements arising out

of or relating to it, regardless of where this Contract shall be

entered into or performed.

2. Arbitration

Any dispute, controversy or claim arising out of or relating to this

Contract . . . which is not settled by agreement between the parties

shall be finally settled in accord with the Arbitration Regulations,

Council of Ministers Decision No. 164, dated 21 Jumada II 1403

(“the Regulations”) and the Rules For Implementation of the

Arbitration Regulations effective as of 10 Shawal 1405 (“the

Rules”) and any amendments to either then in force, by one or

more arbitrators appointed in accordance with the Regulations,

the Rules and this Contract.

2.1 Arbitration by One Arbitrator

If the parties agree to a one-arbitrator arbitration, the

parties shall agree upon and appoint an arbitrator, after first

ascertaining that the appointee consents to act, within thirty

(30) days from the date on which written notice of referral

to arbitration by one party is received by the other party

(the “notice date”).

2.2 Arbitration by Three Arbitrators

If the parties are unable to agree on a one-arbitrator

arbitration, or, having so agreed, are unable to agree on the

arbitrator within thirty (30) days from the notice date, then

the arbitration shall be conducted by and before three

arbitrators, who shall be appointed as follows. Each party

shall appoint one arbitrator, after first ascertaining that the

appointee consents to act, and notify the other party in

writing of the appointment withing sixty (60) days from the

notice date. The appointed arbitrators shall agree upon and

appoint the third arbitrator, after first ascertaining that the

appointee consents to act, and notify the parties in writing

of the appointment within ninety (90) days from the notice

date.

2.3 Arbitrator Qualifications

The arbitrator(s) selected shall be impartial, and shall have

had no interest in or previous connection with the matters

in dispute. Neither past or present employees or directors

of either party, legal counsel retained by either party, nor

persons related to these persons shall be selected as

arbitrators.

2.4 Arbitration Procedures

The parties shall agree upon the rules of procedure which

shall govern the arbitration proceedings. If the parties are

unable to agree upon the applicable rules of procedure, the

arbitrators shall by majority vote establish the applicable

rules of procedure.

2.5 Arbitrators Not Conciliators

The parties hereby explicitly consent to the appointment of

arbitrators in accordance with the Regulations and Rules

and this Contract. . . .

. . . .

2.9 Finality

This arbitration provision shall be specifically enforceable

by both parties under the Regulations and Rules, and the

award of the arbitrators shall be final and binding upon the

parties.

The Arbitration Regulations (“the Regulations”), referenced repeatedly in the

Contract, are written in Arabic, and they provide, in part:

Article 8

The Secretariat of the Authority originally competent to hear the dispute

shall be in charge of all the summons and notices provided for in this

Decree.

. . . .

Article 10

If the parties have not appointed the arbitrators, or if either of them fails

to appoint his arbitrator(s) . . . and there is no special agreement between

the parties, the Authority originally competent to hear the dispute shall

appoint the required arbitrators upon request of the party who is

interested in expediting the arbitration , in the presence of the other

party or in his absence after being summoned to a meeting to be held for

this purpose. The Authority shall appoint as many arbitrators as are

necessary to complete the total number of arbitrators agreed to by the

parties; the decision taken in this respect shall be final.

(Emphasis added.)

The Rules for Implementation of the Arbitration Regulations (“the Rules”),

also referenced repeatedly in the Contract, are written in Arabic, and they provide, in

part:

Article 3

The Arbitrator must be a Saudi national or a Moslem foreigner chosen

amongst the members of the liberal professions or other persons. He

may also be chosen amongst state officials after agreement of the

authority on which he depends. Should there be several arbitrators, the

Chairman must know the Shari’a, commercial laws and the customs in

force in the Kingdom.

. . . .

Article 12

The notice must be in Arabic. . . .

. . . .

Article 25

Arabic is the official language and must be used for all oral or written

submissions to the arbitral tribunal. The arbitrators as well as any other

persons present shall only speak in Arabic and a foreigner unable to do

so must be accompanied by a sworn translator who shall sign with him

the record of his oral arguments in the minutes.

. . . .

Article 39

The award is made by the arbitrators who are only bound to comply with

the rules of procedure contained in the Arbitration Act and its

Implementation Rules [i.e., the “Rules” and “Regulations”]. The award

must comply with the provisions of the Shari’a and the laws in force.

DynCorp sued Aramco in Houston, Texas, asserting entitlement to certain

funds in a letter of credit opened pursuant to the Contract. On March 25, 2008,

Aramco moved to compel arbitration, which the trial court granted on November 13,

2008. Subsequently, DynCorp filed its own motion to compel arbitration.

Specifically, Dyncorp sought arbitration before JAMS or the American Arbitration

Association (“AAA”). The trial court granted DynCorp’s motion in part and denied

it in part in an order dated April 16, 2009. The order provides, in part:

[T]he Court determines that the motion should be granted in part as

follows:

1. On November 13, 2008, this Court ordered the Plaintiff to submit

its claims in this lawsuit to arbitration in accordance with the

arbitration provision in the contract at issue in this case.

2. The Arbitration provision in the contract provides generally that

disputes arising out of or relating to the Contract shall be finally

settled in accord with the Arbitration Regulations . . . (“the

Regulations”) and the Rules For Implementation of the

Arbitration Regulations . . . (“the Rules”) and any amendments to

either then in force, by one or more arbitrators appointed in

accordance with the Regulations, the Rules and this Contract.

3. More specifically thereafter, the Contract provides that, in the

absence of an agreement to a one-arbitrator arbitration, “[e]ach

party shall appoint one arbitrator . . . and notify the other party in

writing of the appointment within sixty (60) days from the notice

date—that is, the date on which written notice of referral to

arbitration by one party is received by the other party.”

4. Under any computation of the “notice date,” whether Defendant’s

March, 2008 motion to compel arbitration; this Court’s

November, 2008, order granting that motion; or Plaintiff’s pre-December, 2008, Demand for Arbitration. More than sixty days

have elapsed from the notice date.

5. Defendant has not appointed an arbitrator. Although Plaintiff has

notified Defendant of its desire to arbitrate with neutrals

associated with JAMS, Plaintiff has not appointed an arbitrator.

6. Thus, the Contract refers to the Regulations, Rules and the

Contract for appointment of arbitrators.

7. Article 10 of the Regulations provides that if the disputants fail

to appoint the arbiters . . . “the authority originally responsible for

looking into the case shall appoint the necessary arbiters in

response to a request by the party who is interested in expediting

the procedure and the arbitration. . . .”

8. If necessary for this Order, the Court specifically determines that

this Court is “the authority originally responsible for looking into

the case.” The parties have each acknowledged this Court’s

authority by request of this Court, through competing motions to

compel arbitration, for Order regarding arbitration.

Thus, granting, in part, the motion of Plaintiff and in enforcement of this

Court’s prior order, the Court compels arbitration and orders each party

to submit, no later than May 18, 2009, the name, address, and

qualifications of one or more arbitrators who consent to act as arbitrators

in this matter. Absent agreement of the parties, this Court will consider

appointment of arbitrators on the Court’s June 15, 2009 submission

docket. A party’s failure to submit one or more proposed arbitrators will

be treated by this Court as a waiver of that party’s right to complain of

the Court’s selection of arbitrators.

Further, Plaintiff’s motion to compel, to the extent it asks this Court to

determine any procedure for the conduct of the arbitration (language,

venue, etc.), the motion is denied, as the Contract does not provide this

Court with the authority to resolve the arbitration procedure disputes.

Aramco filed a motion to clarify and for reconsideration of the trial court’s

April 16, 2009 order. The motion for clarification and reconsideration contained the

affidavit of Mohammed Al-Sheikh, an attorney practicing in Riyadh, Saudi Arabia

with an expertise in Saudi Arabian law. The affidavit provides, in part,

The paramount body of law in The Kingdom of Saudi Arabia is the

Shari’ah . The Shari’ah is comprised of a collection of fundamental

principles derived from a number of different sources, which include the

Holy Qu’ran and the Sunnah .

. . . .

The legal regime in The Kingdom of Saudi Arabia includes Sharia’ah

principles that are often expressed in general terms, providing a Saudi

Arabian adjudicatory body with considerable discretion as to how to

apply such principles. Previous decisions of Saudi Arabian adjudicatory

bodies are not considered to establish a binding precedent for the

decision of later cases; the principle of stare decisis is not accepted in

The Kingdom of Saudi Arabia. In addition, decisions of various Saudi

Arabian adjudicatory bodies are not generally or consistently indexed

and collected in a central place or made publicly available.

. . . .

For the reasons set forth below, Saudi Arabian law, including its

Arbitration Law, contemplates that the authority originally competent to

hear the dispute is a Saudi Arabian court.

. . . .

Council of Ministers Decision No. 221, dated 6 Ramadan 1423

(corresponding to 11 November 2002) grants to Board of Grievances

jurisdiction over any Saudi Aramco commercial disputes (including

arbitration). . . . Thus, in my opinion, the Saudi Board of Grievances is

the authority originally competent to hear this dispute. . . .

The trial court denied Aramco’s motion for clarification and reconsideration

on June 2, 2009. Aramco complied with the April 16, 2009 order by designating Dr.

Sherif Hassan, a Muslim, as an arbitrator. DynCorp proposed Ted Akin, Levi Benton,

and Trey Bergman, all non-Muslims, as arbitrators. Aramco filed an objection to

DynCorp’s designation of arbitrators on grounds that the arbitrators proposed by

DynCorp were unqualified to serve under the Regulations and Rules because they

were neither Muslims nor Saudi nationals. On June 22, 2009, the trial court signed

an order that overruled Aramco’s objections and appointed Dr. Sherif Hassan, Ted

Akin, and Trey Bergman as arbitrators.

Standard of Review

The mandamus relief here sought is available only when a trial court “reaches

a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error

of law” and there is no adequate remedy by appeal. Walker v. Packer , 827 S.W.2d

833, 839 (Tex. 1992) (orig. proceeding) (citing Johnson v. Fourth Court of Appeals ,

700 S.W.2d 916, 917 (Tex. 1985) (orig. proceeding)). The reviewing court may not

substitute its judgment for that of the trial court when reviewing factual issues. Id.

at 839–40. Even if the reviewing court would have decided the issue differently, it

cannot disturb the trial court’s decision unless the decision is shown to be arbitrary

and unreasonable. Id. at 840. Mandamus relief is proper when a trial court

improperly designates an arbitrator. See In re La. Pac. Corp. , 972 S.W.2d 63, 65

(Tex. 1998).

The Arbitration Agreement Aramco contends that the trial court should not have designated itself as the

“Authority” referenced in Article 10 of the Regulations. Specifically, Aramco asserts

that “[b]ecause the term ‘Authority’ is not expressly defined in the Regulations, resort

to other Saudi law is necessary to determine its meaning.” Aramco states that the

term “Authority” is referenced in the Regulations and Rules in a context that does not

anticipate application to the trial court. Aramco also asserts that the trial court should

have relied on, but instead disregarded, Mohammed Al-Sheikh’s affidavit stating that

the Authority is the Saudi Board of Grievances. Finally, Aramco contends that the

trial court could not designate arbitrators because neither party had requested it to do

so. DynCorp responds that the trial court properly determined that it was the

“Authority” referenced in Article 10, that DynCorp had, in fact, requested the trial

court to designate arbitrators in its motion to compel arbitration before JAMS and the

AAA, and that Texas procedural laws should apply to the Contract . DynCorp also

contends that the Contract is ambiguous and therefore improper for mandamus

review.

“Arbitration agreements are interpreted under traditional contract principles.”

J.M. Davidson, Inc. v. Webster , 128 S.W.3d 223, 227 (Tex. 2003). “In construing a

written contract, the primary concern of the court is to ascertain the true intentions of

the parties as expressed in the instrument.” Coker v. Coker , 650 S.W.2d 391, 393

(Tex. 1983). “To achieve this objective, courts should examine and consider the

entire writing in an effort to harmonize and give effect to all the provisions of the

contract so that none will be rendered meaningless.” Id. (emphasis supplied). “No

single provision taken alone will be given controlling effect; rather, all the provisions

must be considered with reference to the whole instrument.” Id. “Texas courts

generally apply Texas procedural law even while applying the parties’ contractual

choice of law for substantive matters.” Nexen, Inc. v. Gulf Interstate Eng’g Co. , 224

S.W.3d 412, 417 (Tex. App.—Houston [1st Dist.] 2006, no pet.). “When the only

evidence before the court is the uncontroverted opinions of a foreign law expert, a

court generally will accept those opinions as true as long as they are reasonable and

consistent with the text of the law.” Ahumada v. Dow Chemical Co. , 992 S.W.2d

555, 559 (Tex. App.—Houston [14th Dist.] 1999, pet. denied).

The determination of whether a contract is ambiguous is a question of law for

the court to decide by examining the contract as a whole in light of the circumstances

present when the contract was entered. Universal Health Servs. v. Renaissance

Womens Group , 121 S.W.3d 742, 746 (Tex. 2003). If contract language can be given

a certain or definite meaning, then it is not ambiguous and should be interpreted by

the court as a matter of law. DeWitt County Elec. Coop. v. Parks, 1 S.W.3d 96, 100

(Tex. 1999). On the other hand, a contract is ambiguous when it is susceptible to

more than one reasonable interpretation. Frost Nat'l Bank v. L & F Distribs. , 165

S.W.3d 310, 312 (Tex. 2005). Lack of clarity does not create an ambiguity, and “ not

every difference in the interpretation of a contract . . . amounts to ambiguity. ”

Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994). “Whether a contract

is ambiguous is a question of law, subject to de novo review.” Bowden v. Phillips

Petroleum Co., 247 S.W.3d 690, 705 (Tex. 2008). A court should construe an

unambiguous contract according to the plain meaning of its express wording. Lyons

v. Montgomery , 701 S.W.2d 641, 643 (Tex. 1985).

Here, “no party . . . interested in expediting the arbitration” requested that the

trial court appoint arbitrators under Article 10 of the Regulations. Even if the request

contemplated by Article 10 had been presented to the trial court, the trial court is not

the “Authority” empowered to appoint arbitrators. For example, Article 8 of the

Regulations provides that the “Secretariat” of the “Authority . . . shall be in charge

of all the summons and notices,” and Article 12 of the Rules specifies that notice

must be provided in Arabic. Article 9 of the Rules provides that the clerk of the

“Authority” will act as “secretary of the arbitral proceedings,” which Article 25

specifies are to be conducted in Arabic. Unrebutted expert testimony accepted into

evidence by the trial court suggested that the “Authority” had to be a court of Saudi

Arabia. In the face of such evidence and the plain provisions of the Contract, the

Rules, and the Regulations, the trial court erred when it concluded that it could act

as the “Authority.” In light of our conclusion that the trial court could not be the “Authority”

empowered to appoint arbitrators pursuant to the parties’ agreement, we do not reach

the question concerning the empanelment of non-Muslim arbitrators.

Conclusion

The trial court improperly designated arbitrators in the instant matter. We

therefore conditionally grant the petition for writ of mandamus, and direct the trial

court to vacate its April 16, 2009, June 2, 2009, and June 22, 2009 orders.

Jim Sharp

Justice

Panel consists of Justices Keyes, Sharp, and Massengale.