Company says Iraq 'wrongfully' rejected shipment after arrival
By MATEUSZ PERKOWSKI
A global exporter of farm products based in California wants to sue an Iraqi government agency, but it doesn't want to go to court in Iraq.
The Rice Corp. of Fair Oaks, Calif., has been pursuing legal action for several years against the Iraqi Ministry of Trade and its grain distribution agency, the Grain Board of Iraq, for alleged breach of contract.
The exporter claims the distribution agency reneged on an agreement to buy 35,000 metric tons of rice from the company, but judicial jurisdiction in the case has proven to be a point of contention.
According to the complaint, the Iraqi agency "capriciously and wrongfully" rejected the shipment of rice after it had arrived at the port city of Umm Qasr, Iraq, in 2005.
The company claims the rice arrived in "good order and condition" on an ocean carrier and was accompanied by all of the necessary paperwork. The Iraqi agency did not give a reason for refusing to accept the shipment, the complaint said.
The Rice Corp. was forced to ship the rice to Dubai in the United Arab Emirates and sell it at a "substantial loss," the complaint said.
A magistrate judge in a California federal court awarded the company $7 million in damages, but that decision was later overturned by a U.S. district judge who found the venue was improper.
In the contract between the Rice Corp. and the Iraqi agency, it is designated that any disputes would be resolved in Iraqi courts, the judge found.
The export company has now asked the 9th U.S. Circuit Court of Appeals to declare that clause to be unenforceable due to the Iraqi legal system's instability.
"The judiciary still remains subject to outside influence, to executive influence. Corruption is rife," said Jay-Allen Eisen, an attorney for the Rice Corp., during oral arguments on April 13.
Although the contract states that disagreements should be resolved in Iraq, that clause is not compulsory, Eisen said. For the clause to be mandatory, it would have had to exclude all jurisdictions other than those in Iraq, he said.
Steven Miller Schneider, an attorney representing the Iraqi agency, said the clause was clearly intended to be binding. The Rice Corp. wants to bypass contract language it finds inconvenient in retrospect, he said.
"If this isn't a mandatory clause, I don't know what is," Schneider said.