This ICC arbitration concerns arbitration and RICO claims, arising in the context of a plant built in Brazil.
By way of background, a Contract was entered into in 1972. The Contract was governed by Brazilian law and the seat of arbitration was agreed to be Paris. The parties, Furnas, a Brazilian company (Claimant) and a US contractor (Respondent) disagreed as to the scope and purpose of the contract, as well as to their obligations thereunder. A variety of problems delayed the execution of the project. The Parties came to a settlement agreement, which was embodied in a Protocol, and Claimant accepted the plant.
Claimant, however, argued that two major components of the project were not specifically settled in the Protocol. Claimant sought damages resulting from alleged defects in those components, requesting findings of failure, breach of guarantee, dol and fraud. Claimant also sought treble damages, plus interest and attorney’s fees, relying on the US RICO statute.
Claimant had filed suit in the Court of New York, bringing RICO claims. However, the parties were ordered to go to arbitration, in view of the presence of the arbitration agreement in the contract.
The Tribunal decided first on the question of its jurisdiction regarding the RICO claims, and found that they were encompassed by the arbitration agreement. Indeed, the contract referred to liability arising from the “contract, tort or otherwise”. The contract also provided that “the contractual warranties and remedies are in lieu of all warranties and damages, including statutory ones”. The arbitration clause referred to disputes concerning contractual obligations or the interpretation of contractual provisions.
The Tribunal also made reference to the Supreme Court’s decision in Mitsubishi, where it found that treble damage claims under RICO statute were arbitrable. It also cited a decision by the 2nd Circuit that confirmed the arbitrability of RICO claims and reinstated an award (Kerr-McGee Refining Corp. v. Triumph Tankers Ltd.) as well as a decision by the 5th Circuit that mandated arbitration, which resulted in the arbitral tribunal granting treble damages under the RICO statutes (Trade&Transport, Inc. v. Valero Refining Company, Inc.).