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CURACAO v. SOLITRON DEVICES

February 14, 1973

The ISLAND TERRITORY OF CURACAO, Petitioner,
v.
SOLITRON DEVICES, INC., Respondent


Wyatt, District Judge.


The opinion of the court was delivered by: WYATT

WYATT, District Judge.

This is a motion by petitioner The Island Territory of Curacao (Curacao) for an order confirming an arbitration award and enforcing a judgment.

 Curacao is a political entity which is part of the Netherlands Antilles, which in turn is a separate political entity and a part of the Kingdom of the Netherlands.

 Respondent Solitron Devices, Inc. (Solitron) is a New York corporation with its principal place of business in Rockland County in this District. Solitron makes and sells semiconductor devices for the electronics industry.

 The award was made by three arbitrators at Willemstad in Curacao on August 13, 1970. Solitron did not participate in the arbitration. The award was in favor of Curacao and, among other things, directed Solitron to pay to Curacao some 445,000 guilders (the local currency; something over $250,000), with interest and costs. The award was "deposited" at the Registry of the Court of First Instance in Curacao and on August 14, 1970 a Judge of that Court issued a "writ of execution" which declared that the award was "enforceable".

 On February 10, 1972, Curacao filed in this Court a petition "to confirm arbitration award and to enforce the judgment entered thereon". Curacao then caused service to be made on Solitron of the summons and petition and also of notice of the present motion (the exhibits described in the petition are in fact annexed to the motion papers).

 The petition invokes the "Convention on the Recognition and Enforcement of Foreign Arbitral Awards", the enforcement of which is provided for in Chapter 2 (§§ 201-208) of Title 9 of the Code. Jurisdiction seems clearly conferred by 9 U.S.C. § 203; diversity jurisdiction is also asserted. There is a "related claim" based on New York law, specifically, CPLR Article 53 (§§ 5301-5309), "Recognition of Foreign Country Money Judgments".

 Solitron filed an answer asserting many defenses and with a counterclaim for money damages.

 The matter was pending before Judge McLean at the time of his death, was thereafter reassigned to me, and duly came on to be heard.

 1.

 A written agreement was executed in triplicate in Curacao on January 12, 1968. Solitron and Curacao were parties; the Netherlands Antilles, the government entity for all the Dutch islands in that area and referred to in the agreement as the "Central Government", was also a party. (The geographical area and the government entity of Netherlands Antilles will sometimes be referred to simply as the "Antilles".) The agreement was apparently in Dutch. A translation is part of the moving papers; Solitron has submitted nothing to cast doubt on the accuracy of this translation; a certain awkwardness is noticed as to a few of the words in translation.

 The aims of the parties are evident. The principal competitors of Solitron had been manufacturing their devices "offshore", outside the United States, "in places where labor is available . . . at far less than prevailing wage rates in the United States." (Friedman opposing affidavit, p. 1) There was "heavy price competition" in the industry, "pressures on Solitron mounted" (Friedman, pp. 1, 2), and Solitron believed a plant in Curacao would give it the needed advantages. On their part, Curacao and Antilles wanted to attract industry to the islands and thus to create jobs. There were no representations in the agreement, however, as to wage rates -- past, present, or future -- or as to anything else.

 Curacao had initiated the contact with Solitron, whose President "expressed interest in locating a manufacturing facility in Curacao" (Friedman, p. 2). The negotiations for the agreement then took place in Curacao. Solitron's president was in Curacao in August 1967 where he met "all of the top governmental and judicial officials of the island" and "many of its business leaders and bankers" (Friedman, p. 2). He was there again before and at the signing of the agreement and undoubtedly Solitron had counsel in Curacao for all needed advice.

 The agreement goes into some detail but for present purposes only the principal provisions which affected the award need be outlined.

 Curacao set aside ("destines" is the word used in the translation) for an industrial park about 60 acres near the airport (Art. 1).

 Curacao agreed to construct two factory buildings in the park, one ("the larger") of about 30,000 square feet and the other ("the smaller") of about 20,000 square feet. These are to be built according to plans submitted by Solitron and approved by Curacao. Presumably the buildings were to be erected at the expense of Curacao, but there is a statement that when the plans are approved, "a written agreement shall be concluded" between the parties specifying what costs were to be for Curacao and what for Solitron. (Art. 9) Presumably such an agreement was made because, as will later appear, Curacao did in fact bear many expenses and Solitron did in fact send in a substantial amount of material for the buildings.

 Curacao agreed to build an access road to the park and other roads within the park up to the building sites (Art. 8). Curacao agreed at its expense to lay pipes to supply the park with distilled sea water (Art. 5).

 The two buildings were required to be "delivered" within 12 months of approval of the plans and to be leased "forthwith" to Solitron for 20 years at a rent, the amount of which was specified (Art. 9). It was agreed that Solitron would operate in the larger building and could use the smaller building also or could sublease it.

 Solitron agreed "to put its electronic manufacturing industry into operation" within 12 months of delivery of the larger building and "shall create" at least 100 jobs (presumably within the 12 month period). (Art. 3)

 Solitron agreed that before January 1, 1974 it would establish (presumably in the park) "manufacturing industries" which, with Solitron's own employment, would "provide employment for at least three thousand (3000) persons born in the Netherlands Antilles . . .". (Art. 3)

 It was provided that "the laws of the Netherlands Antilles shall be applicable" (Art. 12).

 There were detailed provisions in Article 12 for arbitration of any dispute between the parties. Since these provisions are of significance to the present motion, it may be well to quote them in full:

 
"2a. All disputes arising between the CENTRAL GOVERNMENT and/or the ISLAND GOVERNMENT, and SOLITRON as a consequence of or in connection with the present agreement or further agreements for the implementation of the present agreement, legal as well as factual, shall be submitted to a board of arbitration. The decision of this board shall be binding on all parties involved in the dispute.
 
"b. A dispute shall be considered to exist if one of the parties notifies the other party by registered letter that he is of opinion that such is the case. In the case of such a dispute each of the parties shall appoint an arbitrator and both arbitrators so designated shall jointly appoint a third one. Should one of the parties or both parties not designate an arbitrator within one month or should both arbitrators not reach an agreement on the choice of the third arbitrator, then the third arbitrator shall at the request of the willing party be appointed by the President of the Court of Justice of the Netherlands Antilles.
 
"c. The arbitrators shall have to render an award within four months after the day on which the third arbitrator has accepted his appointment.
 
"d. The arbitrators shall judge and give an award like good men and true, taking into account that which has been stipulated by contract between parties without being bound by rigid rules of the laws of the Netherlands Antilles. The procedure with respect to the settlement of the dispute shall be determined by the arbitrators.
 
"e. The fee due to the arbitrators shall be borne by the CENTRAL GOVERNMENT and/or the ISLAND GOVERNMENT, and SOLITRON, on a fifty/fifty basis. All other costs arising from the arbitration shall be chargeable to the party found to be in error. The arbitrators are entitled to set off these costs against each other wholly or partially, should both parties be found to be partially in error."

 Finally, there was a provision which reads as follows:

 
" Article 13
 
SOLITRON shall invariably choose domicile for everything pertaining to the execution of the present agreement and further agreements made for the implementation or supplementation of the present agreement, as well as for all acts of judicial execution at the office of notary-public Mr. E. L. Joubert, Kerkstraat 11A, Wilemstad, Curacao."

 The word "invariably" seems to be a poor translation. According to counsel for Curacao, the Dutch word "onveranderlijk"; this same word is also used in the award (Exhibit I, p. 1) and is there translated "irrevocably" (Exhibit J, p. 1). The meaning conveyed, even by "invariably", is that Solitron submits itself to the jurisdiction of Curacao and designates, without power of change, a resident of Curacao as its agent on whom notice or process can be served.

 It seems that the local resident agent of Solitron, Notary Public Joubert, was in fact the attorney in Curacao for Solitron.

 2.

 From the papers submitted (other than the arbitration award), it is not clear what happened between the execution of the agreement on January 12, 1968, and the initiation of arbitration by Curacao on April 13, 1970. For purposes of the present motion, this is of no moment. Some things do appear from the papers without any serious dispute and, at least for background, it may be well to mention them.

 Solitron did submit plans for the two buildings and the plans were approved.

 Solitron shipped to Curacao structural steel, air conditioning and other equipment, and work tables; this was for the two buildings and Solitron says it was "worth" $221,855 (this is the subject of Solitron's counterclaim).

 The two buildings were completed and, except for the material shipped in by Solitron, was at the expense of Curacao. When the buildings were completed, does not appear; on April 13, 1970, the Lieutenant Governor stated flatly: ". . . we completed the two factory buildings at an expense to us of NAf. [local currency] 1,500,000".

 In May 1969 and for a time thereafter, widespread disorders occurred in Curacao, probably caused by unemployment, low wages, and social unrest. Government did not break down, but there was some change in government personnel and policies. As one of the new policies, there was a new minimum wage law which, according to Solitron, "immediately raised minimum wages by two and one-half times" (Friedman, p. 4).

 The new minimum wage law caused Solitron to lose interest in Curacao and in the agreement; it determined that it would not carry out the agreement. As counsel for Solitron later and frankly put it: "The new wage rate destroys the economic advantage of manufacturing in Curacao".

 The president of Solitron was in Curacao in November 1969, apparently attempting to get ...


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