Opposition Brief — Northrop Corp. v. Triad International Marketing, S. A.

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No. 87-349 |: YOSEPH &. SPANIOL, JR,

——— = Perce OrerK

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1987

NORTHROP CORPORATION,

Petitioner,

*

TRIAD INTERNATIONAL MARKETING, S.A.,

and TRIAD FINANCIAL ESTABLISHMENT,

Respondents.

BRIEF IN OPPOSITION TO PETITION FOR

A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JOHN R. McDONOUGH*

JOSEPH A. BALL

JOSEPH D. MULLENDER, JR.

BaLL, HUNT, HarRT, BROWN AND

BaERWITZ

4525 Wilshire Boulevard, Third Floor

Los Angeles, California 90010-3886

(213) 937-8999

Counsel for Respondents

Triad International Marketing, S-.A.,

and Trad Financial

Establishment

*Counsel of Record

Bowne of Los Angeles. Inc.. Law Pmnters. (213) 742-6600

QUESTION PRESENTED

Whether an American court or arbitration tribunal is

required to decline to enforce an international contract

which is governed by and valid under American law

merely because the contract is or may be unenforceable

under the law of a foreign country, when the obligation

sought to be enforced is not to be performed in the

foreign country.

PARTIES TO THE PROCEEDING

Pursuant to Rule 28.1, respondent Triad International

Marketing, S.A., states that it is a wholly-owned subsidi-

ary of Triad Holding Corporation.*

*A Khashoggi family trust was established in 1979 (“the Trust’).

The Trust owns the stock of Triad International Corporation, which

owns the stock of Triad America Corporation. Triad America Corpo-

ration has a number of wholly-owned subsidiaries and a few non-

wholly owned subsidiaries, the corporate names of virtually all of

which inelude the word “Triad’’. Respondents do not understand any

of the entities referred to in this footnote to be an “affiliate” of Triad

International Marketing, S.A. or Triad Financial Establishment

within the meaning of Rule 28.1.

li

TABLE OF CONTENTS

QUESTION PRESENTED...................

PARTIES TO THE PROCEEDING...........

TABLE OF AUTHORITIES.............. er

STATEMENT OF FACTS................005-

1. The Facts Giving Rise to Triad’s Claims

Dapumeat Hatta. «6s in vives 50a eee

2. The Arbitration Proceeding..............

3. The Decision of the District Court........

4. The Decision of the Court of Appeals .....

SUMMARY OF ARGUMENT.................

ARGUMIGE 6 vccaccdad sceeasaeeeeee eee

An American Court Or Arbitration Tribunal Is

Not Required To Decline To Enforce An Inter-

national Contract Which Is Governed By And

Valid Under American Law Merely Because The

Contract Is Or May Be Unenforeeable Under

The Law Of A Foreign Country, At Least When

The Obligation Sought To Be Enforced Is Not

To Be Performed In The Foreign Country ....

II

The Publie Policy Dispositive Of Northrop’s Peti-

tion Is That Arbitration Awards For Which

Parties Have Bargained Are Required To Be

Enforced By Federal Courts ................

1]

ill

TABLE OF CONTENTS

Page

II

The U.S. Department Of Defense Does Not Have

A Poliey Against The Payment Of Commissions

To Marketing Representatives By FMS Con-

tractors But Oniy Against The Charging Of

Those Payments To Saudi Arabia, Which Will

DE 22

i Dey aes os 4545 vine ease esas 25

APPENDIX OF STATUTES AND

Ee A-1

lv

TABLE OF AUTHORITIES

Cases

Adickes v. 8S. H. Kress & Co., 398 U.S. 144 (1970)

Alghanim v. Boeing Co., 477 F.2d 143 (9th Cir.

PE ore Rees ete eee PIS ee

Andros Compania Maritima S.A. v. Marc Rich & Co.,

A.G., 579 F.2d 691 (2d Cir. 1978) ............

Arthur Andersen & Co. v. Finesilver, 546 F.2d 338

(10th Cir. 1976), cert. denied subnom., Arthur

Andersen & Co. v. Ohio, 429 U.S. 1096 (1977) ..

Bergesen v. Joseph Muller Corp., 710 F.2d 928 (2d

CE ok s Gara eee ees

Bullock v. Mumford, 509 F.2d 384 (D.C. Cir. 1974)

Delta Airlines, Inc. v. August, 450 U.S. 346 (1981)

F.T.C. v. Grolier Inc., 462 U.S. 19 (1983) ........

G. D. Searle & Co. v. Cohen, 455 U.S. 404 (1982)

Garpeg, Ltd. v. United States, 583 F.Supp. 789

BS it ae te ee oes ree ey

George Day Construction Co. v. United Brotherhood

of Carpenters, 722 F.2d 1471 (9th Cir. 1984)...

Holley v. Seminole County School Dist., 763 F.2d

re COU RE ROOD koe hice we nee eve eee

In re Chase Manhattan Bank, 297 F.2d 611 (2d Cir.

BRI ac cee ta ae ke eee eee eee ae on

ROT cs aera kas A eae eens ee orale ee

In re Grand Jury Proceedings, 532 F.2d 404 (5th

ae MMR ag ale ee ee a ee eek eae aS

In re Grand Jury Proceedings Bank of Nova Scotia,

740 F.20 Gli (ith Ci. 1964) ...........42..

to

ae

18

18

18

Vv

TABLE OF AUTHORITIES

CASES

In re Uranium Antitrust Litigation, 480 F.Supp.

RR Cs Sey PTD Sa ec ksesa ee eeanaeees

M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1

CTTOD Sak nk bn sek cn cess tare PENG eeee

MSP Collaborative Developers v. Fidelity and

Deposit Co. of Maryland, 596 F.2d 247 (7th Cir.

PGES coe cccue ert ee euler ercus ener ears

Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d

BART COR Ca AR 6 in bc cen bere Veen cceeees

Marion Manufacturing Co. v. W.B. Long, 588 F.2d

Se Ge Rabe ROTO? pce kcdseverevacuceueenees

Northrop Corp. v. Triad Financial Establishment,

593 F.Supp. 928 (C.D. Cal. 1984) ............

Northrop Corp. v. Triad International Marketing

§.A., 811 F.2d 1265 (Sth Cir. 1987) ...........

Oneida County, N.Y. v. Oneida Indian Nation, 470

is 2 2) err rr re ee

Parsons & Whittemore Overseas Co. v. Societe Gener-

ale, 508 F.2d 969 (2d Cir. 1974) .............

Partenweederei MS Belgrano v. Weigel, 313 F.2d 423

(9th Cir. 1962), cert. denied, 371 U.S. 830 (1962),

reh’g. denied, 371 U.S. 906 (1962) ............

Rhone Mediterranee Co. v. Lauro, 712 F.2d 50 (3d

Ce, SEE Sak cea wsh awe cack eke nese ees eo

Rogers v. Lodge, 458 U.S. 613 (1982), reh’g. denied,

ro Bs Ok. | ere pene aes

Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974)

Societe Internationale v. Rogers, 357 U.S. 197 (1958)

to

vi

TABLE OF AUTHORITIES

CASES

Page

Societe Nationale v. U.S. District Court, 107 S.Ct.

ER UOED 000560056 6.0534664640840040 RS RS 18

Trade Development Bank v. Continental Insurance

Co., 469 F.2d 35 (2d Cir. 1972) .............. 16, 19

Underhill v. Hernandez, 168 U.S. 250 (1897) ..... 16,17

United States v. Chase Manhattan Bank, N.A., 584

F.Supp. 1080 (S.D.N.Y. 1984) ............... 18

United States v. First National City Bank, 396 F.2d

SOT (2a Cir. 1968)... tec cece cccccececses 16, 18

United States v. Ross, 302 F.2d 831 (2d Cir. 1962) 16,19

United States v. Vetco, Inc., 644 F.2d 1324 (9th Cir.

1981), amended, 691 F.2d 1281, cert. denied, 454

fie) Bt) 18

W.R. Grace and Co. v. Local Union 759, 461 U.S. 757

DR 9.5 4.4 5.04 64404045 4.06.64 46448464844 E ROOD 13

Wells v. Rushing, 760 F.2d 660 (5th Cir. 1985)... 2

Wilko v. Swan, 346 U.S. 427 (1953)... .......... 21

Statutes

California Civil Code, See. 1511.............. 6, 7, 8, 21

Convention on the Recognition and Enforcement of

Foreign Arbitral Awards, 9 U.S.C. § 201, et seq. 14

Federal Arbitration Act, 9 U.S.C. $1 et seg. ...1, 7, 9, 20

Foreign Military Sales Act, 22 U.S.C. § 2751 et seq. 4

Labor Management Relations Act, $301, 291

U.5.C. $185 (1982)... 0... cw cece cece eens 9

No. 87-349

In the Supreme Court

OF THE

United States

OCTOBER TERM, 1987

NORTHROP CORPORATION,

Petitioner,

Ve

TRIAD INTERNATIONAL MARKETING, S.A.,

and TRIAD FINANCIAL ESTABLISHMENT,

Respondents.

BRIEF IN OPPOSITION TO PETITION FOR

A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

Respondents, Triad International Marketing, S.A. and

Triad Financial Establishment (hereinafter collectively

“Triad”), oppose the petition of Northrop Corporation

(“Northrop”) to this Court to issue a writ of certiorari to

review a decision of the Ninth Cireuit Court of Appeals

issued March 3, 1987. That decision reversed a judgment

of the District Court that vacated in substantial part an

arbitration award which adjudged Northrop liable to

respondents for commissions due under a Marketing

Agreement breached by Northrop in 1975. The Ninth

Cireuit’s reversal was based on the District Court's fail-

ure to aceord the arbitration award the deference re-

quired by §9 of the Federal Arbitration Act, 9 U.S.C. §1 et

seq., Appendix, p. A-1, and controlling decisions of this

Court and the Court of Appeals.

2

The petition should be denied because the “question

presented for review” by Northrop was not raised before

the arbitrators or the District Court and was not timely

raised before the Court of Appeals.’ The question is

therefore not properly before this Court. Oneida County,

N.Y. v. Oneida Indian Nation, 470 U.S. 226 (1985); F.7.C.

v. Grolier Inc., 462 U.S. 19, 23, n.6 (1983); Rogers v.

Lodge, 458 U.S. 613, 628, n. 10 (1982), reh’g denied, 459

U.S. 899 (1982); G. D. Searle & Co. v. Cohen, 455 U.S. 404,

412 n.7 (1982); Delta Airlines, Inc. v. August, 450 U.S.

346, 362 (1981); Adickes v. 8S. H. Kress & Co., 398 U.S.

144, 147, n.2 (1970).

In addition, there is no basis for issuing a writ of

certiorari in this case in light of the considerations gov-

. “ing review on certiorari. S.Ct. R.17. The case involves

a dispute pertaining to a commercial contract that was

'The question was first raised in the Court of Appeals in North-

rop’s petition for rehearing. A court of appeals will not consider an

issue raised for the first time in such a petition. Holley v. Seminole

County School Dist., 763 F.2d 399, 400-01 (11th Cir. 1985); Wells v.

Rushing, 760 F.2d 660, 661 (5th Cir. 1985); Bullock v. Mumford, 509

F.2d 384, 388-89 (9.C. Cir. 1974); Partenweederei MS Belgrano v.

Weigel, 313 F.2d 423, 425 (9th Cir. 1962), cert. denied, 371 U.S. 830

(1962), reh'g denied, 371 U.S. 906 (1962).

Northrop asserts that the Court of Appeals “ruied that a federal

court violates no publie policy when it orders a party to commit an act

illegal under foreign law,” petition at 10, thus implying that the

“question for review” as set forth in its petition was presented to the

Court of Appeals and decided in its Opinion issued on Mareh 3, 1987.

This is simply not true. The question presented in the petition for

certiorari and the eases upon which Northrop now relies, petition at

10-14, were first presented to the Court of Appeais at pages 16-21 of

Northrop’s petition for rehearing. As Northrop acknowledges, its

fundamental defense in the proceedings below was that California

law made the Marketing Agreement unenforceable. Petition for

certiorari at 4.

3

submitted to arbitration and decided in favor of Triad

under California law, the law specified in the contract.

The District Court declined to enforce the arbitration

award because it believed the arbitrators had misinter-

preted the applicable California law. The Court of Ap-

peals reversed on the ground that the District Court had

failed to apply the deferential standard of review required

in arbitration cases. Numerous issues of fact and law

were contested between the parties in the arbitration

proceeding, the District Court, and the Court of Appeals.

Some were decided in favor of each party. Whether the

many rulings made in those eight years of litigation may

have been right or wrong does not warrant review by this

Court.

Tacitly recognizing that the matters decided below do

not merit review on certiorari, Northrop seeks by its

petition to present an issue neither timely raised nor

addressed below, in an effort to create a “question for

review” that might pique this Court’s interest. That at-

tempt should be as unavailing as it is transparent’

Additional reasons why the writ should be denied are

discussed at pages 11-24, infra.

STATEMENT OF FACTS

1. The Facts Giving Rise to Triad’s Claims Against

Northrop

The Triad-Northrop Marketing Agreement and The

Saudi Arabian Peace Hawk Program. In the early 1970's

Northrop, desiring to sell F-5 fighter aircraft and sup-

porting services to Saudi Arabia, appointed Triad as its

marketing representative for that country. The parties

entered into a Marketing Agreement in October 1970

(“the Marketing Agreement’). Pursuant thereto, Triad

4

and Northrop engaged upon a cooperative effort to enable

Northrop to make FMS sales of F-5 fighter aircraft and

support services to the Government of Saudi Arabia.”

This effort was remarkably successful, leading to the

development of what became known as the Saudi Arabian

Peace Hawk Program. As reflected in the contracts be-

tween DOD and the Government of Saudi Arabia, North-

rop’s sales to Saudi Arabia totalled $4.2 billion under

Phases I through VII of the Peace Hawk Program. Triad

was entitled to commissions on these sales from North-

rop, payable to Triad in Switzerland.

Triad played a vital role in Northrop’s suecess in Saudi

Arabia. On several occasions Northrop representatives

wrote to DOD officials, describing in laudatory terms the

many and diverse services rendered by Triad for the

benefit of Northrop, the U.S. Government, and the Saudi

Arabian Government. Northrop acknowledged that if

Triad had not been retained, the U.S. Government and

Northrop would not have made FMS sales to Saudi

Arabia. :

Saudi Arabian Decree 1275 and Northrop’s Repudia-

tion of its Obligations to Triad. On or about Septem-

ber 17, 1975, the Saudi Arabian Council of Ministers

issued a Decision (‘Saudi Deeree 1275”) which provided

“During the period relevant to this action, Northrop and other U.S.

companies sold armaments and related services to foreign countries

through the U.S. Government, pursuant to the Foreign Military Sales

Act, now entitled the Arms Export Control Act. 22 U.S.C. $2751 et

seq. (“FMS sales’). In such eases, the U.S. Department of Defense

(“DOD”) contracts to sell a product or service to the foreign country

pursuant to a Letter of Offer and Acceptance (“LOA”) entered into

by the two governments. DOD then enters into a seeond contract,

with an American manufacturer or supplier, to purchase the product

or service for delivery to the foreign country customer.

that ‘“[n]o company under contract with the Saudi Ara-

bian Government for the supply of arms or related equip-

ment shall pay any amount of commission to any

middleman, sales agent, representative or broker... .”

Northrop refused thereafter to make the payments due to

Triad under the Marketing Agreement, thus precipitating

a dispute which the parties submitted to arbitration,

resulting in the arbitration award in issue.

Paragraph 13 of the Marketing Agreement. Para-

graph 13 of the Marketing Agreement provides in rele-

vant part:

The validity and construction of this Agreement

shall be governed by the laws of the State of Califor-

nia in the United States of America.... Any contro-

versy or claim between the parties hereto arising out

of or in connection with this Agreement which might

be the subject of any action at law or suit in equity

shall be settled by arbitration in the City of Los

Angeles, State of California, in the United States of

America, under the rules then obtaining of the Amer-

ican Arbitration Association. The award of a majority

of the arbitrators ... shall be final and binding upon

the parties, and judgment upon the award rendered

may be entered in any court having jurisdiction.

Northrop proposed the inclusion of paragraph 13 in the

Marketing Agreement because, as executive Manuel Gon-

zalez of Northrop testified in the arbitration proceeding,

“we are familiar with the laws of California and would

prefer ...in the event of a dispute, to settle it in a forum

which is more convenient [and because] it avoids a

requirement on our part to go and in depth study [for-

eign] laws.”

ee

6

2. The Arbitration Proceeding’

Although the parties had expressly agreed that the

validity and construction of the Agreement “shall be

governed by the laws of the State of California,’ North-

rop nevertheless contended that the arbitrators should

apply Saudi Decree 1275, which Northrop argued pre-

cludes payment to Triad. Northrop asserted that (1) the

parties’ choice of law should be ignored and Saudi Decree

1275 applied and (2) even if California law were applied

in the first instance, the enforceability of Triad’s claims

should be decided under Saudi Decree 1275 because that

result is required by California Civil Code §1511 and

‘The arbitration, which was bifurcated, spanned a period of over

four years. The parties filed with the Arbitrators 89 bound volumes of

documents, briefs, memoranda, and supporting authorities (53 by

Triad and 36 by Northrop) and other motions and memoranda.

Thirty-eight witnesses testified in person, subject to cross-examina-

tion (16 called by Triad and 22 by Northrop). The Arbitration

Tribunal held 45 days of hearings of evidence and oral arguments in

Los Angeles, New York City, Las Vegas, Washington, D.C., and

Frankfurt, Germany, which resulted in a reporter's transcript of

7,072 pages. The Tribunal issued three decisions, totalling 202 pages,

on the merits of the various matters in dispute, in which the arbitra-

tors weighed conflicting evidence, made factual determinations based

thereon, and ruled on the parties’ legal contentions. The three

decisions included a number of rulings for and against each of the

parties. On December 5, 1983, the arbitrators issued a final award,

based on their earlier decisions, in favor of Triad and against

Northrop, in the amount of $31,477,378.

The Arbitration Tribunal consisted of Chairman James A. Finch,

former Chief Justice of the Supreme Court of Missouri. Telford

Taylor, Professor of Law at Columbia University and Cardozo Law

School and, initially, Michael V. DiSalle, a lawyer and former Gover-

nor of Ohio. Mr. DiSalle died in September 1981 and was replaced by

George S. Ives, a lawyer and former member and sometimes chair-

| man of the National Mediation Board.

7

California cases interpreting that statute. The arbitrators

rejected both of Northrop’s contentions. They held that

paragraph 13 of the Marketing Agreement should be

given effect by applying the local law of California to

decide the rights and obligations of the parties. They also

held that Civil Code $1511 did not require a decision

based on Saudi Decree 1275 because the Decree did not

render performance by Northrop impossible, in that

Northrop could still pay the commissions required by the

Marketing Agreement and Triad could still give Northrop

advice, translate documents, make local arrangem nts,

and perform other services required by the Agreen.ent.

Applying California local law, the arbitrators held Triad

was entitled to compensation for its services to the extent

reflected in the arbitration award.

3. The Decision of the District Court

Triad sought confirmation of the arbitration award in

the District Court below pursuant to §9 of the Federal

Arbitration Act, Appendix, page A-1. Northrop moved the

Distriet Court to vacate the award. The District Court

gave effect to the parties’ choice of law and applied the

law of California to determine the enforceability of

Triad’s claims against Northrop. Northrop Corp. v. Triad

Financial Establishment, 593 F.Supp. 928, 933, 936 (C.D.

Cal. 1984). However, the court disagreed with the arbitra-

tors’ interpretation and application of California Civil

Code § 1511 and California cases interpreting that stat-

ute. The court held, contrary to the decision of the

arbitrators, that the California statute requires the appli-

eation of Saudi Decree 1275 in determining the enforce-

ability of Triad’s claims. See id. at 936-37. The court also

held that the Deeree invalidates the Marketing Agree-

ment and that the arbitration award should not be en-

forced on the ground of “publie policy.” See id. at 938-40.

8

The court vacated the award in substantial part, see id. at

942, and awarded Northrop a judgment in the amount of

$253,004, based on the fact that Northrop had made

overpayments in some earlier phases of the Peace Hawk

Program.

4. The Decision of the Court of Appeals

The Court of Appeals reversed the judgment of the

District Court because the lower court had failed to apply

the rule of deferential review applicable to arbitration

awards. The appellate court held that mere error by the

arbitrators in the interpretation of California law would

not be enough to justify refusal to enforce their decision

— and that it was far from evident that the arbitrators

had in fact misread California law. Northrop Corp. v.

Triad International Marketing S.A., 811 F.2d 1265, 1269-

70 (9th Cir. 1987). Concerning the District Court’s con-

clusion that the Saudi Decree prohibited payment of the

commissions in issue, the Court of Appeals pointed out

that the question before the arbitrators was whether

payment was prohibited under California law, not Saudi

law, and that “the answer to that question turned not

upon whether Decree No. 1275 stated a rule of Saudi law

under which the payment would be illegal, but rather

upon whether the existence of such a rule in Saudi law

excused performance under California Civil Code §1511.”

See id. at 1270.

The appellate court rejected Northrop’s contention that

enforcemert of the arbitration award had properly been

denied by the District Court on the ground of “publie

policy” because (1) California does not have a public

policy that contracts unenforceable under the laws of any

other jurisdiction will not be enforced in California, see

id. at 1270; (2) the contention that the publie policy of

9

Saudi Arabia should be applied “flies in the fae» -f the

parties’ agreement that the law of California, ana not

Saudi Arabia, would determine the validity and construc-

tion of the contract,” see id. at 1271; and (3) it is not clear

whether the policy which the District Court found re-

flected in the Saudi Decree was also the policy of the U.S.

Department of Defense’, but even if it was, that policy

was not “well defined and dominant,” as it would have to

be to justify refusal to enforce an arbitration award. See

id. at 1271.°

SUMMARY OF ARGUMENT

The petition for certiorari should be denied because the

question presented for review was not timely raised be-

low. See supra p. 2.

Northorp’s contention that an international contract

governed by and valid under American law must be

denied enforcement by an American court or arbitration

tribunal merely because the contract is or may be unen-

‘DOD has not adopted a policy inconsistent with the payment of

commissions to marketing representatives by FMS contractors. See

infra, pp. 22-24.

°Northrop cites no case in which an arbitration award sought to be

enforced pursuant to § 9 of the Federal Arbitration Ac* was denied

enforcement on the ground of publie policy. All of the cases cited by

Northrop which held arbitration awards unenforceable on public

policy grounds involved awards that were issued by lay arbitrators in

labor arbitration proceedings. Petition at 9. Enforcement of the

awards was sought pursuant to § 301 of the Labor Management

Relations Act, 291 U.S.C. § 185 (1982). In each of these cases the

award was found to conflict with a well-defined and dominant public

policy expressed in a federal or state statute or, in one case, in a

controlling decision of this Court. In three of the cases, there were

dissenting opinions.

10

forceable under the law of a foreign country should not be

adopted by this Court. The contention departs from long-

established methods of adjudicating international conflict

of laws cases, is wrong in principle, and is inconsistent

with the publie policy of the United States reflected in its

adoption of the Convention on the Reeognition and En-

foreement of Arbitral Awards. Moreover, the contention

should be rejected for application in this case because

(1) Northrop is no. required by the arbitration award to

perform any act in Saudi Arabia, (2) the public policy

allegedly reflected in the Saudi Decree is not well-defined

and dominant, if it exists at all, (3) noncompliance with

the Decree is not a eri.ninal offense and there is no

evidence that it is subject to any other Saudi penalty or

<unetion, (4) there is no evidence that enforcement of the

award would affront the Government of Saudi Arabia or

disturb the foreign relations of the United States with

that country and (5) the cases relied upon by Northrop

deal with unrelated matters and are therefore inapposite

to the question presented for review. See infra. pp.11-20.

The petition should be denied because enforcement of

the arbitration award is required by the strong public

policy reflected in the Federal Arbitration Act in favor of

the nonjudicial resolution of disputes by arbitration and

the very limited judicial review of arbitration awards to

that end. The Court of Appeals’ reversal of the District

Court judgment, based on that policy, was therefore

correct. Subjecting arbitration awards to the type of

judicial review proposed by Northrop would discourage

both American and foreign businessmen from agreeing to

arbitrate disputes arising out of international contracts

and transactions. See infra. pp. 20-22.

The petition should be denied because the U.S. Depart-

ment of Defense does not have a policy against the

1]

payment of agent’s fees by FMS contractors with Saudi

Arabia (and Iran, Kuwait and Israel) as long as the cost

thereof is not charged to the foreign country purchaser,

which will not occur in this case. See infra. pp. 22-24.

ARGUMENT

I. An American Court Or Arbitration Tribunal Is Not

Required To Decline To Enforce An International

Contract Which Is Governed By And Valid Under

American Law Merely Because The Contract Is Or

May Be Unenforceable Under The Law Of A For-

eign Country, At Least When The Obligation

Sought To Be Enforced Is Not To Be Performed In

The Foreign Country.

The operative language of Saudi Decree 1275 with

respect to those commission agreements that were in

effect when the Decree was promulgated in September

1975, is that “[a]ny commission arrangement already

concluded ... shall be considered void.” The Decree does

not inelude any criminal or civil penalty or other sanction

for noncompliance therewith. There was substantial evi-

«dence in the arbitration proceeding that there is no Saudi

law providing criminal penalties for failure to comply

with a decree issued by the Saudi Arabian Council of

Ministers. There was no evidence that there is any other

Saudi penalty or sanction for such noncompliance. Nor

was there evidence of any threatened Saudi reprisal if

Northrop were to make the payments due to Triad under

an arbitration award. Hence, the legal effect of the Saudi

Decree as to marketing agreements in existence when the

Decree was issued was simply to render them unenforce-

able in Saudi Arabia after September 1975.

12

Assuming, arguendo, that the Saudi Decree is applica-

ble in this ease’, the consequence is that the Marketing

Agreement is valid and enforceable under California law,

as determined by the arbitrators and upheld by the Court

of Appeals, and was rendered unenforceable in Saudi

Arabia after September 1975. Thus, the first issue

presented to the arbitrators for decision was the question

which is raised whenever a contract is enforceable under

the law of one interested jurisdiction and unenforceable

under the law of the other, 7.e., which law shall be chosen

to decide the rights and liabilities of the parties? In this

case, paragraph 13 of the Marketing Agreement and

controlling decisions of this Court’ made it clear that the

local law of California should be applied, and that is what

the arbitrators did.

Northrop argues, in effect, that even though the arbitra-

tors correctly concluded that the Marketing Agreement is

governed by and valid under California law, they should

nevertheless have permitted Northrop to escape liability

thereunder because to enforce the contract might “af-

front” the Saudi Arabian Government. Petition at 10.

This argument should be rejected, both in principle and

because no such “affront”? would in fact be involved.

1. Triad is not aware of any case (and Northrop has

eited none) in which a federal (or other) court has

initially chosen the law of a U.S. state to decide a ease,

found the plaintiff entitled to recover thereunder, and

then denied recovery because a judgment for the plaintiff

‘There was substantial evidence that the only purpose of the

Decree was to prohibit charging the cost of agents’ fees to the Saudi

Government, which will not occur in this ease.

"Scherk v. Alberto-Culver Co., 417 U.S. 506, 516-20 (1974) and M/S

Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972).

13

would be inconsistent with the publie policy of a foreign

country. Such a decision would depart from the decision

of conflict of laws eases by American courts from time

immemorial. Moreover, it would be wrong in principle.

Every rule of law — foreign or domestic, statutory or

decisional — embodies or reflects a public policy respect-

ing the subject with which it is concerned. Hence, where

in an international conflict of laws case the substantive

rules of an American state and a foreign country differ,

an American court’s choice of its own rule — and thus its

policy — to decide a dispositive issue in the case necessa-

rily produces a result which is inconsistent with the law

and publie policy of the foreign country involved. This has

never heretofore been thought to require the American

court to defer to the other country’s policy at the expense

of its own. If conflict of laws cases were so decided, it

would mean that a forum court could never apply its own

law and policy to decide a case where the other jurisdic-

tion’s law or policy was different. No court has ever

adopted or writer advocated such a decisional methodol-

ogy, in either domestic or international conflict of laws

eases. Yet that is necessarily what Northrop contends

should be done in this case.

2. A decision to vacate the arbitration award on the

basis of Saudi publie policy would also be wrong because

that policy is not “well defined and dominant,” as re-

quired by this Court’s decision in W.R. Grace and Co. v.

Local Union 759, 461 U.S. 757, 766 (1983). The Saudi

Decree is not a statement of fundamental Saudi law, but

essentially a procurement regulation, the application of

which to this ease is at least uncertain, as concluded by

14

the Court of Appeals’. Accordingly, the Saudi Decree

should not have been given dispositive weight by the

arbitrators or the courts below for the same reasons that

the Court of Appeals declined to give such weight to the

law of Kuwait in Alghanim v. Boeing Co., 477 F.2d 143

(9th Cir. 1973).

3. The fundamental publie policy of the United States

regarding the enforcement of arbitration awards arising

out of international contracts and transactions is re-

flected in this country’s adoption in 1970 of the Conven-

tion on the Recognition and Enforcement of Foreign

Arbitral Awards, 9 U.S.C. §201, et seq., (‘the Conven-

tion’), Appendix, p. A-3. The nations adopting the Con-

vention thereby agreed that “[e]ach Contracting State

shall recognize arbitral awards as binding and enforce

them,’’ unless “the competent authority in the country

where recognition and enforcement is sought finds that...

recognition or enforcement of the award would be con-

trary to the public policy of that country.” (Articles III,

V). (emphasis added). The Convention does not provide,

\

“Northrop contends that the Court of Appeals did not disturb the

District Court's “findings” that the Saudi Decree “imposed a flat ban

on payment of commissions to agents like Triad and that the Decree

was formulated specifically with the Northrop-Triad ageney relation-

ship in mind.” Petition at 7. Of course, the District Court's rulings on

these issues were not findings of fact, but reflected the court's

interpretation of the Saudi Decree. The rulings were therefore deci-

sions on questions of law that were before the Court of Appeals for de

novo review. Nor did that court simply aecept them. The Court of

Appeals noted and implicitly affirmed the arbitrators’ determination

that “in this case despite the issuance of Decree No. 1275, Northrop

could sull pay Triad the commissions the Marketing Agreement

ealled for, and Triad could still give advice, translate decuments.

make local arrangements, and perform the other services the agree-

ment required,” see 811 F.2d at 126%,—an interpretation of the

Saudi Decree clearly at variance with that of the District Court.

15

however, that enforcement of a foreign arbitral award

may be refused if such enforcement would be contrary to

the public policy of any other foreign country. Thus, if the

present dispute had been arbitrated by agreement in

England or France instead of California, if the same

award had been issued, and if enforcement of that award

had been sought in the District Court pursuant to the

Convention, enforcement could not have been denied on

the ground that it might ‘affront’ Saudi Arabia.

The nations adopting the Convention were doubtless

aware that arbitration awards respecting international

contracts are likely to be inconsistent with the laws or

policies of one of the countries involved in the underlying

transaction — but also aware that to make such inconsis-

tency a basis for nonenforeement would severely impair

the very purpose of the Convention, which is to promote

the nonjudicial resolution of such disputes.” In not mak-

ing inconsistency with foreign law a basis for refusal to

enforce arbitration awards, the Convention signatories

implicitly recognized that the occasions are few, if any,

when judicial enforcement of an arbitrator's decision of a

private commercial dispute is likely to be regarded as an

“affront” by a foreign country, much less one likely to

disturb the “delicate area of foreign affairs” Petition at 1,

14.

4. There is no reason to believe that enforcement of

the arbitration award would in fact “affront” the Saudi

Arabian Government. The Saudi Government has not

asserted any position in this dispute. Moreover, the re-

cord strongly indicates that the Saudis are not concerned

9Rhone Mediterranee Co. v. Lauro, 712 F.2d 50, 53-54 (3d Cir.

1983); Bergesen v. Joseph Muller Corp., 710 F.2d 928, 933-34 (2d Cir.

1983): Parsons & Whittemore Overseas Co. v. Societe Generale, 508

F.2d 969, 974 (2d Cir. 1974).

16

with whether payments are made to marketing represent-

atives, but only with whether the cost thereof is charged

to the Saudi Government. Indeed, Samir Shamma,

Triad’s expert witness on Saudi law, testified in the

arbitration proceeding that the Decree itself should be so

interpreted. Moreover two senior Northrop officials testi-

fied before the arbitrators that Prince Sulian, head of the

Saudi Arabian Ministry of Defense and Aviation, told one

of them in 1971 and the other in 1975 that he had nothing

against agents as such but if Northrop wanted to have

agents, it should pay for them itself and not charge the

Saudi Government. By reason of action taken by DOD in

July 1975, see infra pp. 23-24, Triad’s commissions were

not included in the charges made by DOD to the Saudi

Arabian Government after that date. A fortiori, North-

rop’s payment of a judgment in favor of Triad will not be

charged to Saudi Arabia.

5. To support its new contention Northrop relies prin-

eipally upon In re Chase Manhattan Bank, 297 F.2d 611

(2d Cir. 1962); Trade Development Bank v. Cortinental

Insurance Co., 469 F.2d 35 (2d Cir. 1972); United States v.

First National City Bank, 396 F.2d 897 (2d Cir. 1968);

and United States v. Ross, 302 F.2d 831 (2d Cir. 1962)."°

‘Northrop also cites Underhill v. Hernandez, 168 U.S. 250, 252

(1897) and Mannington Mills, Inc. v. Congoleum Corp., 595 F.2d 1287

(3d Cir. 1979). Underhill held, under the act of state doctrine, that

‘the head of a foreign country could not be held liable in an American

court for an act committed in that country. In Mannington the court

(1) held that the aet of state doctrine did not require deference to

patents issued in foreign countries and (2) remanded the case for

determination whether the exercise of extraterritorial jurisdiction

under the U.S. antitrust laws with respect to patent application

activities of the defendant in foreign countries was warranted on the

facts of the case.

17

These cases are inapposite to the issue which Northrop

seeks to raise.

A. The cases were not concerned with the question

whether an international contract which is governed by

and valid under American law must be denied enforce-

ment merely because the contract is or may be unenforce-

able under the law of a foreign country. They involved,

instead, the entirely different question of whether and

when documents and information in a foreign country

(“foreign evidence’) must be produced in the course of

an investigative or discovery proceeding in an American

court, against the objection that production would violate

the law of the foreign country. The answers to the ques-

tions have markedly different consequences. The answer

to the first question determines finally the substantive

rights and obligations of the parties. The answer to the

second question concerns only matters of procedure and

evidence, the effect of which on the outcome of any ease is

conjectural at best. Accordingly, the considerations faver-

ing the application of American law in the choice of law

cases are much stronger than those applicable in the

foreign evidence cases.

B. Determining whether and when foreign evidence

must be produced in an American court proceeding,

against the contention that such production would violate

the law of the foreign country, has proved to be a vexing

problem, on aspects of which this Court has spoken at

Neither Underhiil nor Mannington has any application here. The act

of state doctrine does not apply in this case because Triad does not

challenge the validity of the Saudi Decree in Saudi Arabia; indeed, its

very validity there required the choice of law made by the arbitrators

pursuant to paragraph 13 of the Marketing Agreement. Nor is the

exercise of extraterritorial jurisdiction under American law involved

in this case, because enforcement of the arbitration award will not

require any act by Northrop in Saudi Arabia.

18

least twice'’. Societe Nationale v. U.S. District Court, 107

S.Ct. 2542 (1987); Societe Internationale v. Rogers, 357

U.S. 197 (1958). The lower federal courts have in some

eases resolved that question by excusing such production.

They have in other cases required production to be made,

either because they were unpersuaded of the alleged

violation of foreign country law or because they deter-

mined that production was justified in the circumstances

of particular cases, even if inconsistent with foreign

country law’”. The varying results reached in these cases

dealing with the production of foreign evidence hardly

yield a principle suitable for resolution of the wholly

different question that Northrop seeks belatedly to raise

in this ease.

"Contrary to Northrop’s assertion, petition at 14, ef seq., there is

no conflict between the decisions of the Ninth Circuit and the Second

Cireuit or any other circuit respecting the considerations which are

relevant in deciding foreign evidence cases. Umited States v. Vetco,

Inc., 644 F.2d 1324, 1330-33 (9th Cir. 1981), amended, 691 F.2d 1281,

cert. denied 454 U.S. 1098 (1981) (IRS summons enforeed despite

possible criminal liability under Swiss seerecy laws, after court

considered same factors as held to be relevant by other courts of

appeals).

"Im re Grand Jury Proceedings Bank of Nova Scotia, 740 F.2d 817

(llth Cir. 1984); United States v. Vetco, Inc., 644 F.2d 1324 (9th Cir

1981), amended, 691 F.2d 1281, cert. denied, 454 U.S. 1098 (1981); In

re Grand Jury Proceedings, 532 F.2d 404 (5th Cir. 1976); Arthur

Andersen & Co. v. Finesilver, 546 F.2d 338 (10th Cir. 1976), cert.

denied subnom., Arthur Andersen & Co. v. Ohio, 429 U.S. 1096 (1977);

United States v. First National City Bank, 396 F.2d 897 (2d Cir. 1968);

United States v. Chase Manhattan Bank, N.A., 584 F.Supp. 1080

(S.D.N.Y. 1984); Garpeg, Ltd. v. United States, 583 F.Supp. 789

(S.D.N.Y. 1984); In re Grand Jury 81-2, 550 F.Supp. 24 (W.D. Mich.

1982); In re Uranium Antitrust Litigation, 480 F.Supp. 1138 (N.D. Ill.

1979).

19

C. In the only cases cited by Northrop wherein liti-

gants were not required to produce foreign evidence it

was because the American courts were persuaded that

such production would require conduct in foreign coun-

tries violative of their criminal laws. In re Chase Manhat-

tan Bank, 297 F.2d 611, 613 (2d Cir. 1962); Trade

Development Bank v. Continental Insurance Company, 469

F.2d 35, 40 (2d Cir. 1972); United States v. Ross, 302 F.2d

831, 834 (2d Cir. 1962). Those cases are not applicable

here because

— whether payment to Triad would violate the Saudi

decree is at least doubtful, see supra pp. 15-16,

— payment to Triad will not require Northrop to

perform any act in Saudi Arabia,

— payment to Triad would not violate any criminal

law in Saudi Arabia,

— there is no evidence that payment to Triad would

ineur any other Saudi penalty or sanction, and

— there is no evidence that the Saudi government

would in fact be offended by a payment to Triad

made pursuant to a judgment of an American

eourt confirming an arbitration award issued af-

ter a lengthy arbitration proceeding.

D. In the eases relied upon by Northrop, the conten-

tion that production of foreign evidence should not be

required was raised in the trial court at the outset of the

proceeding, where evidence bearing on the issue could be

produced and considered. In this case the issue now

sought to be presented by Northrop was not raised either

before the arbitrators or in the District Court and was not

timely raised in the Court of Appeals. Northrop should

not be permitted to raise the issue now, more than

20

eight years after the arbitration proceeding was

commenced.

II. The Public Policy Dispositive Of Northrop’s Peti-

tion Is That Arbitration Awards For Which Parties

Have Bargained Are Required To Be Enforced By

Federal Courts.

The decision of the Court of Appeals was correct

because it gave effect to the strong public policy, reflected

in the Federal Arbitration Act, that nonjudicial resolution

of disputes through arbitration is highly desirable and is

to be given support by federal courts at every stage of an

arbitration proceeding.

1. Northrop proposed that paragraph 13 be ineluded in

the Marketing Agreement to make sure that any dispute

between the parties would be decided under California law

as interpreted and applied in an arbitration proceeding

conducted in Los Angeles, California. In the arbitration

award which was issued on December 5, 1983, Northrop

got exactly what it had bargained for. Yet, for almost

four years since Northrop has sought desperately to avoid

that result. Northrop’s effort must be rejected if the

policies and objectives of the Federal Arbitration Act are

to be achieved in this ease.

2. The temptation of a party who loses in arbitration to

attempt to retry the case in the federal courts is under-

standable. But such retrial is clearly precluded by $9 of

the Federal Arbitration Act, Appendix, p. A-l, which

provides that an order enforeing an arbitration award

“must” be granted unless that award is vacated on a

ground set forth in $10 of the Act, Appendix, p. A-2.

None of those grounds is applicable in this ease.

3. Northrop received a lengthy and fair hearing by an

eminently qualified arbitration tribunal, in the course of

21

which Northrop was given the opportunity to present

every ground upon which it might wish to contend that

the Marketing Agreement should not be enforced. North-

rop contracted to accept and abide by the arbitrators’

decision. Yet, Northrop now petitions this Court to order

nonenforcement of the arbitration award on the basis of

an argument that was never made and of cases that were

never cited to the arbitrators — or to the courts below for

that matter, prior to their tardy inclusion in Northrop’s

petition for rehearing in the Court of Appeals. To permit

Northrop thus to engage in a series of seriatim, piecemeal

attacks on the arbitration award would make a mockery of

the Federal Arbitration Act and its public policy of

promoting this nonjudicial method of dispute resolution.

4. The Court of Appeals was clearly right in reversing

the District Court because of its failure to aceord defer-

ence to the arbitrators’ interpretation of California Civil

Code §1511 and the California decisions upon which the

arbitrators relied. Arbitrators decisions on questions of

law are not subject to de novo review by federal courts.

George Day Construction Co. v. United Brotherhood of

Carpenters, 722 F.2d 1471, 1476-77 (9th Cir. 1984); An-

dros Compania Martima 8.A. v. Marc Rich & Co., A.G., 579

F.2d 691 (2d Cir. 1978); MSP Collaborative Developers v.

Fidelity and Deposit Co. of Maryland, 596 F.2d 247 (7th

Cir. 1979); Marion Manufacturing Co. v. W.B. Long, 588

F.2d 538, 541, n.3 (6th Cir. 1978).”° :

'5In Wilko v. Swan, 346 U.S. 427, 436-37 (1953), this Court

suggested that an arbitrator's interpretation of law might be review-

able if he acted in “manifest disregard” of the law. Northrop has not

contended nor did either court below hold that the arbitrators in this

ease acted in manifest disregard of the law. The record makes clear

that they did not.

22

Northrop contends that unless the federal courts re-

view arbitration awards to determine whether they “in-

trude on U. S. foreign policy interests” the willingness of

domestic and foreign parties to commit to arbitration will

be undereut. Petition at 17. The truth is, of course,

exactly the opposite: the willingness of American and

foreign businessmen to agree to arbitrate disputes arising

under international contracts and transactions will quite

obviously be inversely proportional to the risk that such

awards could be denied enforcement by American courts

on any ground, and particularly a ground as amorphous

as whether enforcement will intrude on U.S. foreign

policy interests.

III. The U.S. Department Of Defense Does Not Have

A Policy Against The Payment Cf Commissions To

Marketing Representatives By FMS Contractors

But Only Against The Charging Of Those Pay-

ments To Saudi Arabia, Which Will Not Occur In

This Case.

Northrop repeatedly states or implies that the U.S.

Department of Defense (‘‘DOD”’) has forbidden payment

of commissions to marketing representatives by FMS

contractors and that this alleged DOD action constitutes

the publie policy of the Executive Branch of the Federal

Government on that subject.’ Petition at 3-4, 6, 10, 15.

Northrop’s contention is unfounded, both because the

DOD procurement regulation on which Northrop’s con-

tention is based hardly constitutes a “well-defined and

dominant” publie policy of the Executive Branch and

*Triad does not believe that this issue is included in the “question

for decision” presented by Northrop’s petition and addresses it only

out of an abundance of caution.

23

because the DOD regulation did not in fact prohibit such

payments.’°

A revised Defense Acquisition Circular, issued by DOD

in July 1975 and applicable to Saudi Arabia, Iran, Kuwait

and Israel, is set forth at page A-7 of the Appendix. As is

self-evident on the face of the Circular, the only concern

of DOD with payments made by an FMS contractor to a

marketing representative, in the case of Saudi Arabia

(and Iran, Kuwait and Israel), is that such payments not

be claimed by the contractor as an allowable item of cost

under its contract with DOD, in which event they would

be included in DOD’s charges to the contracting foreign

country. The policy expressed in the Circular was contem-

poraneously interpreted not to preclude payments to

agents if they were not charged to the foreign govern-

ments. A DOD Assistant Counsel for International Af-

fairs issued an opinion in 1976 which stated that a

eontractor may pay commissions “out of its general prof-

its or other assets available to it’. A Northrop official

opined in 1974, with respect to the original Cireular which

‘Northrop contends that the Court of Appeals did not disturb the

District Court’s “finding” that DOD required Northrop to comply

with the Saudi Decree. Petition at 7, 14. The District Court’s ruling

on this issue was a decision on a question of law that was before the

Court of Appeals for de novo review. The Court of Appeals disagreed

with the District Court’s determination that DOD required Northrop

to comply with the Saudi Decree, holding that “[i]t is not clear from

the evidence before the arbitrators and the District Court what policy

the Department of Defense adopted.” The Court of Appeals noted,

without rejecting, Triad’s argument that “both Decree No. 1275 and

the Department of Defense policy were aimed at prohibiting commis-

sions that added to the cost of Saudi procurement, and that in any

event the Department of Defense was unable to determine the

Decree’s exact application, even assuming the Department of De-

fense wished to mirror its policy.” Triad Intern. Marketing S.A., 811

F.2d at 1271.

24

was applicable only to Iran, that “commissions are accept-

able if paid from profit.”

The District Court misinterpreted the July 1975 De-

fense Acquisition Circular, supposing that it precludes

payment of agents’ fees. But, as its language makes clear,

Appendix pp. A-7-8, the Circular only requires a certifica-

tion that the FMS contractor is not seeking reimbursement

for such payments, to be charged ultimately to Saudi Arabia

(or Iran, Kuwait or Israel). That was, indeed. the specific

certification required of Northrop by DOD in the Letters

of Offer sent to the Saudi Arabian Ministry of Defense in

the Peace Hawk Program.’® That DOD policy is wholly

irrelevant to this case because there is no contenticn that

Saudi Arabia will be asked to reimburse Northrop for

monies paid in satisfaction of the arbitration award or a

judgment based thereon.

‘The Phase III E Letter of Offer originally contained the standard

clause set forth in the revised Defense Cireular. In July 1975,

Northrop proposed and DOD agreed that the Letter of Offer be

changed to require assurances by Northrop that no agent’s fees

would be paid in Phase III E. When this contributed to an impasse

between Northrop and Triad that threatened to jeopardize Phase

III E and the Peace Hawk Program, DOD proposed that a new Letter

of Offer be prepared, providing that any agents fees ‘‘are the sole

responsibility of Northrop and will not in any manner be passed

through to the [the Saudi Arabian Government]. Northrop there-

upon proposed and DO” agreed to restore the original certification

language to the Phase III E Letter of Offer. Because the impasse was

otherwise resolved, that change was not made. All of DOD’s Letters

of Offer for later phases of the Peace Hawk Program required only

the standard certification, that Northrop would not claim compensa-

tion paid to a marketing agent as an allowable item of cost and would

not include it in the contract price. Triad Financial Establishment,

593 F. Supp. at 933.

i oo

25

CONCLUSION

Triad respectfully submits that Northrop’s petition for

writ of certiorari should be denied for the reasons dis-

cussed above.

DATED: September 28, 1987

JOHN R. McDoONouGH*

JOSEPH A. BALL

JOSEPH D. MULLENDER, JR.

BALL, HUNT, HART, BROWN AND

BAERWITZ

4525 Wilshire Blvd., Third Floor

Los Angeles, California 90010

(213) 937-8999

Counsel for Respondents Triad

International Marketing, 8S.A.,

and Triad Financial

Establishment

*Counsel of Reeord

APPENDIX OF STATUTES AND REGULATIONS

oe ee ee

A-1

APPENDIX

UNITED STATES CODE

TITLE 9

ARBITRATION

CHAPTER 1 — GENERAL PROVISIONS

* * *

§2. Validity, irrevocability, and enforcement of agree-

ments to arbitrate

A written provision in any maritime transaction or a

contract evidencing a transaction involving commerce to

settle by arbitration a controversy thereafter arising out

of such contract or transaction, or the refusal to perform

the whole or any part thereof, or an agreement in writing

to submit to arbitration an existing controversy arising

out of such a contract, transaction, or refusal, shall be

valid, irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the revocation of

any contract.

July 30, 1947, ce. 392, 61 Stat. 670.

* * *

$9. Award of arbitrators; confirmation; jurisdiction;

procedure

If the parties in their agreement have agreed that a

judgment of the court shall be entered upon the award

made pursuant to the arbitration, and shall specify the

court, then at any time within one year after the award is

made any party to the arbitration may apply to the court

so specified for an order confirming the award, and

thereupon the court must grant such an order unless the

award is vacated, modified, or corrected as prescribed in

A-2

sections 10 and 11 of this title. If no court is specified in

the agreement of the parties, then such application may

be made to the United States court in and for the district

within which such award was made. Notice of the applica-

tion shall be served upon the adverse party, and there-

upon the court shall have jurisdiction of such party as

though he had appeared generally in the proceeding. If

the adverse party is a resident of the district within which

the award was made, such service shall be made upon the

adverse party or his attorney as prescribed by law for

service of notice of motion in an action in the same court.

If the adverse party shall be a non-resident, then the

notice of the application shall be served by the marshal of

any district within which the adverse party may be found

in like manner as other process of the court.

July 30, 1947, ce. 392, 61 Stat. 672.

$10. Same; vacation; grounds; rehearing

In either of the following cases the United States court

in and for the district wherein the award was made may

make an order vacating the award upon the application of

any party to the arbitration —

(a) Where the award was procured by corruption,

fraud, or undue means.

(b) Where there was evident partiality or corruption in

the arbitrators, or either of them.

(ec) Where the arbitrators were guilty of misconduct in

refusing to postpone the hearing, upon sufficient cause

shown, or in refusing to hear evidence pertinent and

material to the controversy; or of any other misbehavior

by which the rights of any party have been prejudiced.

(d) Where the arbitrators exceeded their powers, or so

imperfectly executed them that a mutual, final, and defi-

A-3

nite award upon the subject matter submitted was not

made.

(e) Where an award is vacated and the time within

which the agreement required the award to be made has

not expired the court may, in its discretion, direct a

rehearing by the arbitrators.

July 30, 1947, ce. 392, 61 Stat. 672.

CHAPTER 2— CONVENTION ON THE RECOGNI-

TION AND ENFORCEMENT OF FOREIGN ARBI-

TRAL AWARDS.

§ 201. Enforcement of Convention

The Convention on the Recognition and Enforcement of

Foreign Arbitral Awards of June 10, 1958, shall be en-

foreed in United States courts in accordance with this

chapter.

(Added Pub.L. 91-368, § 1, July 31, 1970, 84 Stat. 692.)

CONVENTION ON THE RECOGNITION AND ENFORCEMENT

OF

FOREIGN ARBITRAL AWARDS

Article I

1. This Convention shall apply to the recognition and

enforcement of arbitral awards made in the territory of a

State other than the State where the recognition and

enforcement of such awards are sought, and arising out of

differences between persons, whether physical or legal. It

shall also apply to arbitral awards not considered as

domestie awards in the State where their recognition and

enforcement are sought.

2. The term “arbitra! awards” shall inelude not only

awards made by arbitrators appointed for each case but

soldier

A-4

also those made by permanent arbitral bodies to which the

parties have submitted.

3. When signing, ratifying or aceeding to this Conven-

tion, or notifying extension under article X hereof, any

State may on the basis of reciprocity declare that it will

apply the Convention to the recognition and enforcement

of awards made only in the territory of another Con-

tracting State. It may also declare that it will apply the

Convention only to differences arising out of legal rela-

tionships, whether contractual or not, which are consid-

ered as commercial under the national law of the State

making such declaration.

Article II

1. Eaeh Contracting State shall recognize an agree-

ment in writing under which the parties undertake to

submit to arbitration all or any differences which have

arisen or which may arise between them in respect of a

defined legal relationship, whether contractual or not,

concerning a subject matter capable of settlement by

arbitration.

2. The term ‘agreement in writing” shall inelude an

arbitral clause in a contract or an arbitration agreement,

signed by the parties or contained in an exchange of

letters or telegrams.

3. The court of a Contracting State, when seized of an

action in a matter in respect of which the parties have

made an agreement within the meaning of this article,

shall, at the request of one of the parties, refer the parties

to arbitration, unless it finds that the said agreement is

null and void, inoperative or ineapable of being

performed.

A-5

Article III

Each Contracting State 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, under the conditions laid down in the following

articles. There shall not be imposed substantially more

onerous conditions or higher fees or charges on the

recognition or enforcement of arbitral awards to which

this Convention applies than are imposed on the recogni-

tion or enforcement of domestic arbitral awards.

Article IV

1. To obtain the recognition and enforcement men-

tioned in the preceding article, the party applying for

recognition and enforcement shall, at the time of the

application, supply:

(a) The duly authenticated original award or a duly

certified copy thereof;

(b) The original agreement referred to in article II or

a duly certified copy thereof.

2. If the said award or agreement is not made in an

official language of the country in which the award is

relied upon, the party applying for recognition and en-

forcement of the award shall produce a translation of

these documents into such language. The translation shall

be certified by an official or sworn translator or by a

diplomatie or consular agent.

Article V

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

A-6

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

(b) The party against whom the award is invoked was

not given proper notice of the appointment of the arbitra-

tor or of the arbitration proceedings or was otherwise

unable to present his case; or

(ec) The award deals with a difference not contem-

plated 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 ean be

separated from those not so submitted, that part of the

award which contain decisions on matters submitted to

arbitration may be recognized and enforced; or

(d) The composition of the arbitral authority or the

arbitral procedure was not in accordance with the agree-

ment of the parties, or, failing such agreement, was not in

accordance with the law of the country where the arbitra-

tion took place; or

(e) The award has not yet become binding on the

parties, or has been set aside or suspended by a compe-

tent authority of the country in which, or under the law of

which, that award was made.

2. Reeognition and enforcement of an arbitral award

may also be refused if the competent authority in the

country where recognition and enforcement is sought

finds that:

en

A-7

(a) The subjeet matter of the difference is not capable

of settlement by arbitration under the law of that county;

or

(b) The recognition or enforcement of the award would

be contrary to the publie policy of that country.

UNITED STATES DEPARTMENT

OF DEFENSE

DEFENSE ACQUISITION CIRCULAR

Department of the Air Force

Headquarters United States Air Force

Washington, D.C.

1 Jul 1975

Reply to

Attn of: LGPC

Subject: Agent’s Fees/Commissions for Foreign Military

Sales

To: ALMAJCOM/ PROCUREMENT

1. The following provision to be published in a forth-

coming DPC is effective immediately and supersedes

Item X of DPC 74-1:

a. One of the following provisions shall be included in

all eontraets for FMS requirements of the Governments

of Iran, Israel, Kuwait and Saudi Arabia unless the

agent's fee/commission has been identified and payment

thereof approved by the respective Governments before

contract award:

(1) For firm fixed price contracts or fixed price con-

tracts with escalation:

A-8

“The Contractor certifies that the contract price does

not include any direct or indirect cost of agent’s

fees/commission for contractor sales agents involved

in Foreign Military Sales to the Government of

”?

(2) All other types of contracts:

“Notwithstanding any other provision of this con-

tract, any direct or indirect costs of agent’s fees/

commissions for contractor sales agents involved in

Foreign Military Sales to the Government of

shall be considered as an unallowable

item of cost under this contract.”

2. For all FMS cases involving countries other than

those named in 1. above, the policies set forth in Item IX

of DPC 74-1 are modified as follows: Whereas DPC 74-1

presently requires the contracting officer to obtain a

“Contractor's Statement of Contingent or Other Fees”

(SF 119) and make the ASPR 1-505 determination of a

bona fide agency relationship and the “reasonableness” of

the fee at the time the contract is negotiated, the new

policy will require these actions prior to the submission of

the Letter of Offer to a foreign government. If the reason-

ableness of potential Agent’s Fees/Commissions for pro-

posed Foreign Military Sales Programs eannot be

determined, such charges will be identified in writing by

the most appropriate means, to officials of the foreign

government prior to or in consonance with the presenta-

tion of the Letter of Offer for the proposed sale. The

acceptance of the Letter of Offer involved, after appropri-

ate presentation of the statement of Agent’s Fees, will be

eonstrued by the Department of Defense as the foreign

government’s approval of the Agent’s Fees/Commissions

involved.

A-9

Nt RU a enlace Oe

3. All correspondence with foreign governments con-

cerning Agent’s Fees/Commissions will be forwarded to

the foreign country by Departmental Headquarters with

DSAA coordination.

BERTON J. ROTH

Deputy Assistant for ASPR

Directorate, Procurement

Policy

PROOF OF SERVICE BY MAIL

I am a citizen of the United States and a resident of the

City and County of Los Angeles; I am over the age of

eighteen years and not a party to the within action; my

business address is: 1706 Maple Avenue, Los Angeles,

California.

On September 28, 1987, I served the within Opposition to

Petition for a Writ of Certiorari in re: “Northrop Corpo-

ration vs Triad International Marketing, S.A.” in the

United States Supreme Court, October Term 1987, No.87-

349; on the Parties in said action, by placing Three copies

thereof enclosed in a sealed envelope with postage fully

prepaid, in the United States post office mail box at Los

Angeles, California, addressed as follows:

Ronald L. Olson

Munger, Tolles, & Olson

355 South Grand Avenue 35th Floor

Los Angeles, California 90071-1560

All parties required to be served have been served.

re ,

te a -

ee taney yore

= j ¥

—

I certify (or declare), under penalty of perjury, that the

foregoing is true and correct.

Executed on September 28, 1987, at Los Angeles,

California

CE CE MEDINA