
The message in RSM Production Corporation v. Gaz du Cameroun SA: According to the federal Fifth Circuit, an arbitration tribunal’s construction of a contract and the arbitration rules governing the dispute “hold, however good, bad, or ugly.” Translation: Good for one party, bad or ugly for the other, just like the courthouse.
RSM was granted an oil concession with the Republic of Cameroon giving RSM the right to explore and develop hydrocarbons in the Logbaba Block. RSM and Guz du Cameroun (GdC) entered into farmin and joint operating agreements. GdC was the operator. The farmin granted RSM 100% participating interest in the concession in exchange for GdC’s agreement to operate. After GdC recovered 100% of drilling costs out of 100% of production revenues (“Payout”), the would share 60% to GdC, 40% to RSM.
A dispute arose over the payout calculation. The parties arbitrated, applying Texas Law and International Chamber of Commerce Rules. RSM had three claims. The tribunal ruled in favor of RSM on “Claim 1” and awarded $10 million+ in damages. The tribunal deemed RSM’s Claims 2 and 3 as moot, having ruled for RSM on Claim 1.
GdC contested the Partial Final Award. An Addendum to Partial Final Award corrected Claim 1 and considered Claims 2 and 3. GdC prevailed on the merits of the contested claims, reducing RSM’s award by $4 million+.
Under ICC Rule 36, an arbitrator may correct a clerical, computational, or typographical error “or errors of similar nature”. Was GdC’s request a correction of law, which would exceed the tribunal’s authority, or a correction of a fact, which was within the bounds of Rule 36?
RSM sued in district court to vacate to the Addendum. That court vacated the part of the Addendum that reduced RSM’s recovery, concluding that the tribunal exceeded its powers by conducting a “merits re-do”.
GdC appealed, maintaining that the district court failed to apply the courts’ well-established, highly deferential approach to judicial review of arbitral awards. The court of appeal reversed, upholding the tribunal’s Addendum.
The court’s saw its task as determining the limits of an arbitrator’s power to reconsider a previously issued decision. (FYI, ICC Rule 36 is similar to the American Arbitration Association Rule 40.) So long as an arbitral award draws its essence from the contract, a court must uphold the award even if it was based on error. Convincing a court of even a grave error is not enough to justify vacatur.
Rule 36 prohibits redetermination of the merits of a dispute. The court concluded that the tribunal not only had the contractual authority to correct computational errors but also had the authority to determine what constituted a computational error in the first place.
The tribunal classified its error in the Partial Final Award as computational. The agreement established the tribunal’s authority to construe the meaning of the ICC rules themselves and whether an error truly is computational or not.
The tribunal had both the authority to correct computational errors and the more foundational authority to determine what counted as one in the first place. Rule 36 was broad enough to authorize the tribunal to analyze its ruling regarding RSM’s Claim 1 to determine whether a computational error occurred. The tribunal concluded that the authority to correct computational errors is within Rule 36’s purview and the tribunal had the authority to determine whether the error was computational or something else.
Musical interludes: artists you could have seen had you attended the 2025 30A Songwriters Festival:
Chuck Cannon (Chuck wrote it. It’s a “songwiters” festival)