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US Court Rules for Iran's Defense Ministry, Against Local Firm

A decision filed yesterday in the United States Court of Appeals, Ninth Circuit, affirms a $2.8 million judgment against San Diego-based Cubic Corporation, a supplier of military technology and training. Prevailing in the suit is the Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran.

In 1977, Cubic contracted with Iran’s Ministry of War “for sale and service of an air combat maneuvering range for use by Iran’s military.” The subsequent Iranian Revolution resulted in Cubic’s nonperformance on the contract. In 1979 the parties agreed to discontinue the contract, and in 1981 Cubic sold a modified version of the equipment to Canada.

In 1982, the Ministry filed a breach of contract claim against Cubic at the Hague with the Iran-United States Claims Tribunal. It took until 1987 for the tribunal to decide it lacked jurisdiction to hear the matter, and in 1991 Iran requested arbitration through the International Court of Arbitration of the International Chamber of Commerce. In 1997 the Chamber awarded Iran $2,808,519, plus interest, and ordered Cubic to pay $60,000 in arbitration costs.

Cubic failed to pay the award, and in June 1998 the Ministry filed a petition in federal court to affirm the Chamber’s ruling. The petition was granted that December. The Ministry then requested interest from the date of the Chamber’s original award, which was granted in August 1999.

Cubic appealed the award, and Iran filed a cross appeal. Proceedings were suspended while it was resolved whether creditors of the Ministry could lay claim to the award. With that litigation concluded, oral arguments were heard by the appellate court in February 2011.

Cubic’s argument was that confirmation of the award is “contrary to the public policy of the United States,” which is no longer allied with the Iranian government. The company also contested the post-judgment interest, because the district court did not specify the dollar amount of the confirmed award. The Ministry, in its cross appeal, argued the district court abused its discretion.

In the appeals court’s ruling, the award to the Ministry was affirmed, as well as all claims for interest. A Reader inquiry to Cubic seeking comment did not receive an immediate response.

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A decision filed yesterday in the United States Court of Appeals, Ninth Circuit, affirms a $2.8 million judgment against San Diego-based Cubic Corporation, a supplier of military technology and training. Prevailing in the suit is the Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran.

In 1977, Cubic contracted with Iran’s Ministry of War “for sale and service of an air combat maneuvering range for use by Iran’s military.” The subsequent Iranian Revolution resulted in Cubic’s nonperformance on the contract. In 1979 the parties agreed to discontinue the contract, and in 1981 Cubic sold a modified version of the equipment to Canada.

In 1982, the Ministry filed a breach of contract claim against Cubic at the Hague with the Iran-United States Claims Tribunal. It took until 1987 for the tribunal to decide it lacked jurisdiction to hear the matter, and in 1991 Iran requested arbitration through the International Court of Arbitration of the International Chamber of Commerce. In 1997 the Chamber awarded Iran $2,808,519, plus interest, and ordered Cubic to pay $60,000 in arbitration costs.

Cubic failed to pay the award, and in June 1998 the Ministry filed a petition in federal court to affirm the Chamber’s ruling. The petition was granted that December. The Ministry then requested interest from the date of the Chamber’s original award, which was granted in August 1999.

Cubic appealed the award, and Iran filed a cross appeal. Proceedings were suspended while it was resolved whether creditors of the Ministry could lay claim to the award. With that litigation concluded, oral arguments were heard by the appellate court in February 2011.

Cubic’s argument was that confirmation of the award is “contrary to the public policy of the United States,” which is no longer allied with the Iranian government. The company also contested the post-judgment interest, because the district court did not specify the dollar amount of the confirmed award. The Ministry, in its cross appeal, argued the district court abused its discretion.

In the appeals court’s ruling, the award to the Ministry was affirmed, as well as all claims for interest. A Reader inquiry to Cubic seeking comment did not receive an immediate response.

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Comments
1

Just another example of why "the law is an ass." There was no way, given the conditions in Iran circa 1980, that Cubic could have fulfilled the contract. Then there were orders that US corporations were prohibited from doing business with entities in Iran in the post-Shah era. This whole thing is just nutty, and hinges on obscure and arcane legal fine-lining that should have no place in the real world.

Dec. 16, 2011

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