Dutch court stays the enforcement of an arbitration award of USD 622 million against Petrobras

Vantage’s request for permission for the enforcement of an arbitration award requiring Petrobas to pay USD 622 million plus interest, has been stayed by the Dutch court until further notice. Litigation attorney Onno Hennis explains the decision in more detail.

Background to the case

Vantage and Petrobras entered into an agreement for the exploration of oil fields in 2009. Petrobras cancelled the agreement in 2015. Vantage subsequently initiated arbitration proceedings in the United States for unlawful cancellation of the contract. In an arbitration award from 2018, Petrobras was ordered to pay USD 622 million plus costs and (penalty) interest.

Annulment procedure

Petrobras disagreed with the arbitration court’s decision and consequently initiated proceedings in the United States to set the arbitration award aside. In May 2019, the US court dismissed Petrobras’ request to annul the arbitration award. Petrobas then started appeal proceedings against this decision.

Enforcement actions

Vantage took enforcement actions both in the United States and in the Netherlands pursuant to the arbitration award. In the summer of 2018, for example, Vantage requested and obtained permission to seize Petrobras assets The assets of a Dutch company reflect the value of all that the company possesses
» Meer over assets assets located in the Netherlands. The permission was used by Vantage for a successful seizure of share The portion of registered capital of a private or public limited company
» Meer over share shares and to levy a third-party attachment.

Judicial permission

As an arbitration award can only be enforced (i.e. the levied attachments can only be executed) after a Dutch court has given authorisation (an exequatur), Vantage started proceedings in October 2018 for the recognition and enforcement of the arbitration award. The workings and requirements of exequatur proceedings were previously explained here.

New York Convention

Since the arbitration award was issued in the United States, a request for its recognition and enforcement is assessed by the Dutch court on the basis of the New York Convention. The request will only be refused if one of the grounds for refusal listed in Article V of the New York Convention applies to the matter. A request for an exequatur is therefore generally granted. The enforcement court does not re-assess the factual aspects of the matter.

Stay of enforcement

However, when an arbitration award is pending in the country where the arbitration proceedings were held, Article VI of the New York Convention provides that the requested court may suspend the request for recognition and enforcement. The underlying idea is that the enforcement of an arbitration award may be refused if “the award has not yet become binding on the parties, or has been set aside or has been suspended by a competent authority of the country in which, or under the law of which, that award was made” (Article V sub e of the New York Convention).

Unanimous request from the parties

During the enforcement procedure, Vantage and Petrobras – apparently in relation to ongoing settlement negotiations between them – asked the Dutch court to defer the decision on the exequatur request. The court subsequently informed the parties that a decision on a suspension based on Article VI of the New York Convention would achieve the same objective. After all, both a deferment and a decision under Article VI of the New York Convention would have the effect of a temporary stay of the decision on recognition and permission for enforcement until one of the parties would (still) want a decision on the factual aspects of the matter.

Court order

The two parties subsequently let the court know that they effectively wanted a court order, in which the court would stay the decision on the exequatur on the basis of Article VI of the New York Convention, which was consequently pronounced yesterday.

(Partial) settlement on the payment

Before the issue of the court order, a publication had revealed that – possibly with regard to the seizures levied in the Netherlands and the ruling of the American court – Petrobas had reached a (partial) settlement with Vantage regarding the payment. According to a press release, Petrobras paid an amount of USD 700 million to Vantage. In return, Vantage has lifted the seizures. The (partial) settlement includes a provision that the appeal proceedings will be continued.

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