May 19, 2019

Offshore drilling contractor wins confirmation of award against Petrobras despite bribery claims

On May 17, 2019, the U.S. District Court for the Southern District of Texas issued an order confirming an arbitration award won by Vantage Deepwater Company and related entities against Petrobras America Inc. and related entities.  

The arbitration award arose from a dispute over an eight-year drilling services agreement (DSA) entered into in 2012, and a 2014 novation and amendment to the DSA expressing the parties’ agreement to submit future disputes to arbitration.  After Petrobras attempted to terminate the DSA in August 2015, Vantage initiated arbitration proceedings to obtain damages for the remaining portion of the DSA.  Petrobras claimed that the cancellation was due to operational failures by Vantage, and that the DSA was, in any event, unenforceable because it was procured through bribery.  In June 2018 the arbitration tribunal found that Petrobras terminated the DSA without proper justification and ordered it to pay Vantage $615.62 million.  In July 2018, Petrobras filed a petition in U.S. District Court for the Southern District of Texas to vacate the arbitration award, while Vantage petitioned the Court to confirm the final award. 

In its May 17, 2019 order, the Court found that Petrobras’ arguments regarding the merits of the alleged bribery were irrelevant and that there were no grounds to vacate the award under the Federal Arbitration Act.  As a result, the Court denied Petrobras’ motion and confirmed the arbitration award.