ORDER AND OPINION GRANTING MOTION TO CONFIRM AND DENYING MOTION TO VACATE THE ARBITRATION AWARD This case arises out of a contractual dispute and subsequent arbitration between Petitioners Aquadrill US Gulf LLC, Aquadrill Gulf Operations Vela LLC, and Aquadrill Gulf Operations Auriga LLC (collectively “Petitioners”) and Respondent BP Exploration & Production, Inc. (“Respondent”). The Parties entered into three seven-year contracts (the “Contracts”), under which Petitioners provided drilling rigs and personnel to Respondent for its use in offshore drilling operations in the Gulf of Mexico. The Parties dispute the interpretation of a section in the contracts, involving changes in legislation and regulations. Under Petitioner’s reading, Respondent must pay for Petitioner’s tax liabilities under the Base Erosion Anti-Abuse Tax (“BEAT”), 26 U.S.C. §59A (2017), which disallows deductions for payments from U.S. taxpayers to foreign affiliates. Pursuant to Section 10(a)(3)-(4) of the Federal Arbitration Act (“FAA”), 9 U.S.C. §§201 et seq., Petitioner asks me to vacate the arbitral award rejecting Petitioner’s interpretation, and to remand for the appointment of a new tribunal. ECF No. 1. Respondent asks me to confirm the Award. For the reasons below, the petition is denied and the Award is confirmed. BACKGROUND The relevant facts are as follows. The Parties entered into three seven-year contracts (the “Contracts”) pursuant to which Petitioners provided deepwater drilling rigs for Respondent’s use in the Gulf of Mexico. Final Arbitral Award (the “Award”) 9, ECF No. 1-1. Petitioners provided rigs to Respondent’s specifications and a trained crew to operate them, for which Petitioners received an all-inclusive daily rate. Id. 61, 64. As relevant here, the contracts each included a provision — Section 12.6 — which required Respondent to reimburse Petitioners for “cost[s] for performance of the WORK” performed by Petitioners. ECF No. 1-35, at 19; ECF No. 1-47, at 21; ECF No. 1-56, at 21-22. In relevant part, Article 12.6, as it appeared in all three Contracts, provided: [I]f any…applicable legislation, regulations, requirements or orders or the matter in which such legislation, regulations, requirements or orders are enforced or interpreted…are amended or otherwise changed after the CONTRACT EFFECTIVE DATE, and if such amendments or changes result in an increase or a decrease in CONTRACTOR cost for performance of the WORK (including but not limited to any changes to import duties), COMPANY shall issue a VARIATION to fully compensate the respective Party for such change in cost. Award 105. In the latter two Contracts, the Parties added a second paragraph to Article 12.6: In the event that [Petitioners] conclude[] that the increased cost associated with any changes to the US Tax Code, the Jones Act or any federal regulation promulgated after the CONTRACT EFFECTIVE DATE as they impact the CONTRACT would require a substantial restructuring of [Petitioners], then [Petitioners] shall notify [Respondent] of the expected cost impact of such changes, and shall within a reasonable period notify [Respondent] of [Petitioners'] plans to mitigate the impact of such changes on [Petitioners'] costs. In such event [Respondent] may elect to exercise any rights available to [Respondent] under this Agreement, including but not limited to: i. pay the associated increased cost to [Petitioners] in accordance with this Subarticle 12.6; ii. terminate the CONTRACT for convenience in accordance with Sub-article 17.9; or iii. change the locale of the WORK in accordance with Article 33. Award 153. After execution of the contracts, Petitioners restructured the ownership of their rigs to minimize U.S. income tax liability; this involved transferring ownership of the rigs to Swiss branches of newly-created Hungarian affiliates, which leased the rigs back to Petitioners, permitting Petitioners to deduct the lease payments from its taxable income. Award 63-64. In 2017, Congress enacted the BEAT, which imposed an alternative minimum tax on corporations that would otherwise “have the ability to reduce U.S. tax liabilities by making deductible payments to foreign related parties.” 84 Fed Reg. 66968, 67008 (Dec. 6, 2019). Petitioner estimated that the BEAT would increase its annual tax liability by over $50 million dollars, and following its enactment, invoked Article 12.6, demanding that Respondent pay for the increased tax liability as a “cost for performance of WORK.” After Respondent refused the demands, Petitioner commenced an arbitration proceeding on September 23, 2019, seeking an order directing Respondent to pay the tax liabilities. Id. 23. Pursuant to the Contracts, each Party appointed one arbitrator, and those two jointly chose the third member and chairperson of the arbitral tribunal (the “Tribunal”). Id.1 Following consultation with the Parties, the Tribunal issued an order establishing the arbitral procedure, which allowed the parties to submit openings written briefs, witness statements, expert reports, and documentary evidence, and afforded both sides an opportunity to review the materials submitted by their counterparties. Id.
27-33. Accordingly, prior to the evidentiary hearing, Petitioner submitted: (i) a 30-page memorial, accompanied by an 18-page appendix and dozens of pages of witness statements; (ii) a 61-page reply memorial, accompanied by a 32-page expert report, and dozens more pages of witness statements from 4 witnesses; (iii) 174 evidentiary exhibits; and (iv) 108 legal exhibits. See id.
