EFFORTS TO ESCAPE ARBITRATION for a dispute in the Dominican Republic failed
Smith Cogeneration had a contract to supply power to the government utility, Compañia Dominicana de Electricidad, or “CDE.” It faced strong competition from Enron. The two companies decided to form a joint venture. Smith was to put the power contract and some capital into the joint venture, but when it came time to contribute the capital, Smith had trouble raising funds. Enron sought to submit the dispute to binding arbitration in keeping with a mandatory arbitration clause in the joint venture agreement. Smith tried to block the arbitration by filing a lawsuit in the Dominican Republic. Enron went to court in the United States.
Smith argued that the arbitration clause in the joint venture agreement could not be enforced, among other reasons, because the US courts had no jurisdiction over the joint venture.
It lost before a federal district court and lost again on appeal before the 2d circuit court of appeals in December. The appeals court ordered Smith not only to submit to arbitration, but also enjoined the lawsuit in the Dominican Republic.