News & Events

On January 19, 2012, Judge Miriam Goldman Cedarbaum of the Southern District of New York denied the petition of VRG Linhas Aéreas S.A. (“VRG”), a Brazilian airline, to enforce in the United States under the United Nations Convention on the Recognition and Enforcement of Arbitral Awards (the “New York Convention”) an International Chamber of Commerce (“ICC”) international arbitration award of US $55 million rendered in Brazil against STB clients MatlinPatterson Global Opportunities Partners II L.P. and MatlinPatterson Global Opportunities Partners (Cayman) II L.P. (collectively, the “MP Funds”).

In 2007, two Brazilian companies indirectly owned by the MP Funds sold their shares in VRG to GTI S.A. (“GTI”), a Brazilian airline, for US $275 million.  Under the Purchase and Sale Agreement (“PSA”), the parties agreed that the US $275 million purchase price would be adjusted at the closing to account for changes in VRG’s working capital between the execution of the PSA and the closing of the transaction.  After the parties were unable to reach an agreement on the purchase price adjustment, GTI commenced ICC arbitration in Brazil pursuant to the PSA’s arbitration clause.  Although the MP Funds signed only an “addendum” to the PSA in which they agreed not to compete with the airline being sold, and not the PSA itself, GTI named the MP Funds as respondents in its request for arbitration of the purchase price adjustment dispute under the PSA.  After rejecting the MP Funds’ jurisdictional challenges and holding an evidentiary hearing on the merits, the tribunal issued a final award in September 2010 finding that VRG, which was merged with GTI during the pendency of the arbitration, was entitled to a purchase price adjustment of US $55 million plus interest and arbitration costs and that the MP Funds were liable for that adjustment amount. 

In January 2011, VRG commenced proceedings in the Southern District of New York to enforce the tribunal’s final award.  By treaty, international arbitration awards are presumptively enforceable in the courts of the United States except under narrow exceptions.  The MP Funds turned to Simpson Thacher to oppose enforcement of the Brazilian arbitration award in the United States.  The Firm filed voluminous submissions, including fact witness and foreign law expert affidavits,  in opposition to VRG’s petition.  On January 19, 2012, Judge Cedarbaum held oral argument.  At the conclusion of the hearing, Judge Cedarbaum denied VRG’s enforcement petition because, as the STB team argued, the MP Funds never agreed to subject themselves to the PSA’s arbitration clause to arbitrate purchase price adjustment disputes, and therefore were not subject to the jurisdiction of the ICC arbitral tribunal in Brazil.

The STB team consisted of Robert Smit, Tyler Robinson, Juan Arteaga and Michelle Hertz.