In Daesang v. The NutraSweet Co. (May 2017), the New York State Supreme Court partially vacated a $100 million International Chamber of Commerce (ICC) arbitral award on the grounds of manifest disregard of the law. Justice Charles E. Ramos, who is designated to hear all international arbitration disputes before the Commercial Division of New York County, granted NutraSweet’s motion to vacate an arbitral award in favor of the South Korean food group Daesang. Justice Ramos found that the arbitral tribunal had manifestly disregarded the law when it dismissed some of NutraSweet’s counterclaims, calling the tribunal’s failure to consider the merits of one counterclaim an “egregious dereliction of duty.” The decision has strategic implications for how parties will invoke the doctrine of manifest disregard of the law when contesting future arbitral awards. The decision could also potentially affect New York’s reputation as a seat for the reliable enforcement of international arbitral awards, and as a venue with courts that respect and support this alternative dispute resolution process.
Background: A rotten deal or a breached contract? In 2003, amid a rise in global demand for sugar substitutes, NutraSweet agreed to buy Daesang’s aspartame business for $79 million. Under a provision of the parties’ Joint Defense and Confidentiality Agreement (JDA), NutraSweet retained the right to rescind the transaction within five years of the agreement if any customer with annual global purchases in excess of one million pounds of aspartame filed an antitrust action in connection with Nutrasweet’s newly acquired business. NutraSweet made an initial $5 million payment at the time of closing and was to follow up with installment payments over five years. After completing the first two installments, NutraSweet defaulted on its payments to Daesang. In March 2007, upon learning of an antitrust action initiated in federal court in Pennsylvania, NutraSweet exercised its contractual right to rescind the transaction.
