ArcelorMittal Ostrava in ICC Arbitration Win

March 29, 2016

Cleary Gottlieb won dismissal of all claims brought by U.S. construction and engineering firms Kaiser Group International and Kaiser Engineers against ArcelorMittal Ostrava, a subsidiary of leading steel company ArcelorMittal, in an ICC arbitration.  The Arbitral Tribunal issued its Final Award on March 29, 2016.

Kaiser filed its Request for Arbitration in 2010, seeking to recover more than $11 million from ArcelorMittal Ostrava in connection with its predecessor’s 2001 draw on a letter of credit that had been provided in its favor by Kaiser Netherlands, a subsidiary of Kaiser Group International.  The letter of credit was provided in the context of a 1997 agreement between Kaiser Netherlands and Nova Hut (acquired by ArcelorMittal in 2002), for the design and construction of a steel mini-mill in the Czech Republic.  The letter of credit was fully collateralized by Kaiser Group International, which also provided a guarantee of Kaiser Netherland’s performance under the 1997 agreement.  Nova Hut drew down on the letter of credit following Kaiser Netherland’s failure to deliver a mini-mill that passed the performance tests required under the agreement.

Kaiser’s 2010 Request for Arbitration followed Kaiser Netherland’s loss in a 2006 ICC arbitration against ArcelorMittal Ostrava, in which it alleged, inter alia, the same claims.  Cleary Gottlieb also represented ArcelorMittal Ostrava in the 2006 arbitration.

In 2011, ArcelorMittal Ostrava requested that the arbitral proceedings be bifurcated and that the Tribunal first adjudicate three preliminary defenses ArcelorMittal Ostrava had raised, namely, that Kaiser lacked standing, that its claims were time-barred, and that its claims were barred by estoppel and res judicata, having already been conclusively decided in the 2006 arbitration.  On January 23, 2012, the Tribunal granted the request for bifurcation.

Following a stay of the proceedings, a one-day hearing to consider ArcelorMittal Ostrava’s preliminary defenses was held in Zurich in November 2015, during which the arbitrators heard arguments from Kaiser’s and ArcelorMittal Ostrava’s counsel on the preliminary defenses.

In the Final Award, the Tribunal dismissed  Kaiser’s claims for damages on the basis that they were time-barred, and dismissed Kaiser’s unjust enrichment claim for lack of standing.

In addition to dismissing all of Kaiser’s claims with prejudice, the Arbitral Tribunal ordered Kaiser to pay ArcelorMittal Ostrava 90% of its ICC costs and 80% of its legal costs, resulting in a Final Award of more than € 1.2 million to ArcelorMittal Ostrava.