A federal court in Houston has confirmed a $734 million arbitration award in a case between two oil and gas companies that clashed over whether a contract between them was obtained through alleged bribery, revealed through “Operation Car Wash,” a public corruption investigation in Brazil.

The award in the case, Vantage Deepwater Company v. Petrobras America Inc., comprises a $622 million award and $112 million in interest, according to the May 22 final judgment.

U.S. District Judge Alfred H. Bennett of the U.S. District Court for the Southern District of Texas explained in a May 17 order that the plaintiffs, Vantage Deepwater Co. and Vantage Deepwater Drilling Inc., went through arbitration proceedings with the defendants, Petrobras America Inc., Petrobras Venezuela Investments & Services and Petroleo Brasileiro.

Petrobras had terminated a drilling services agreement early, and Vantage wanted the company to pay for the remainder of the term.

“Maybe they will be reasonable and pay,” said Karl Stern, managing partner of the Houston office of Quinn Emanuel Urquhart Sullivan, who represented Vantage.

Yet a statement by Petrobras said, “The order is subject to appeal and Petrobras will continue to take all measures to defend its interests.”

The statement added that Operation Car Wash revealed that corruption was involved in procuring the drilling services agreement with Vantage. The operation, started in 2014, revealed $5 billion in illegal payments to company executives and political parties, reported The Guardian.

Stern said Vantage owns a fleet of drilling rigs used to provide drilling services to exploration and production companies such as Petrobras. There were allegations that a former Vantage investor and board member had paid bribes to get Petrobras to use his drilling rig, the Titanium Explorer. Later, Vantage purchased the Titanium Explorer. Stern said Petrobras had no evidence of bribery, that Vantage didn't know about or participate in bribery and that Petrobras knew of the bribery allegations in 2013, and nevertheless amended its drilling services agreement with Vantage.

The judge's order explained the background of the case.The eight-year agreement started in December 2012 with the delivery of the Titanium Explorer, an ultra-deepwater driling rig, to the Gulf of Mexico. Petrobras tried to terminate the agreement in August 2015, which prompted Vantage to begin the arbitration proceeding.

A three-person arbitration tribunal issued a ruling in late June 2018, finding Petrobras was liable for $615 million for terminating the agreement, and 15.2% in interest until the company paid the award.

In July 2018, Vantage filed its case in federal court to confirm the arbitration panel's award. Petrobras filed a motion to vacate the final award and to oppose the award's confirmation.

Petrobras argued at length about “the alleged bribery scheme,” but the court order noted the same thing was argued during arbitration, and these arguments about the merits of the dispute don't apply to the court's determination of whether the law allows the court to vacate the award.

Among other things, the company claimed one of the arbitrators showed bias by aggressively questioning Petrobras's witnesses, and being hostile to Petrobras's lawyer by making off-the-record snide and snarky comments like “ridiculous,” and “asked and answered.” For a party to think an arbitrator is rude is not grounds to vacate the award, said the order, and there's nothing in the record to show the witness questioning was improper. The order added that the record didn't support other allegations by Petrobras about the arbitrator assuming the role of Vantage's lawyer, being disengaged from the proceeding or acting aggressive toward the other two arbitrators.

The court dismissed Petrobras's argument that it's contrary to U.S. public policy to confirm an arbitration award for a contract that was obtained through bribery. It found Petrobras ratified the agreement when it amended it twice.

The order said, “It does not violate public policy to enforce an arbitration award against parties who were alleged to have mutually engaged in some misconduct during the formation of a contract, particularly when that contract was later ratified.”

Read the court's order.