## Facts

- Northrop Corporation and Triad International Marketing, S.A. entered a 1970 marketing agreement making Triad Northrop’s exclusive representative to solicit Saudi Air Force aircraft-related contracts in exchange for commissions.
- The agreement included (1) a California choice-of-law clause and (2) a broad arbitration clause providing for final and binding arbitration of disputes arising out of the agreement.
- After Northrop made sales to Saudi Arabia and paid commissions, Saudi Arabia issued Decree No. 1275 (1975), which prohibited commissions in connection with armaments contracts and directed that such commissions be suspended and deducted from contract payments for the Saudi government’s account.
- Northrop stopped paying Triad and asserted the decree made further commission payments illegal.
- Triad demanded payment, and the parties arbitrated; the arbitrators awarded Triad recovery in part and denied recovery in part.
- In federal court, Triad sought confirmation of the award and Northrop sought vacatur; the district court vacated portions of the award on the theory that payment was prohibited by the Saudi decree and that enforcement would violate public policy.
- Triad appealed; Northrop did not cross-appeal rulings that the dispute was arbitrable and that the Foreign Corrupt Practices Act did not retroactively apply to Triad’s pre-enactment conduct.

## Issues

1. Whether the district court properly vacated portions of the arbitration award on a public-policy theory based on Saudi Decree No. 1275.
2. Whether, under California law (including doctrines excusing performance when it becomes unlawful), the decree required nonenforcement of the commission obligations.
3. How limited judicial review of arbitral awards constrains a court’s ability to reexamine arbitrators’ contract and illegality determinations.

## Decision

- The Ninth Circuit reversed the district court’s partial vacatur and reinstated the arbitration award.
- The court held that the district court exceeded the narrow scope of permissible review by effectively substituting its own interpretation of the decree and contract for the arbitrators’.
- The court concluded the award did not violate an explicit, well-defined, and dominant U.S. public policy.
- The court accepted that, applying the contract’s California choice-of-law clause, the arbitrators could determine the decree did not render Northrop’s payment obligation illegal in the manner required to excuse performance under California law.

## Legal Principles

- Judicial review of arbitration awards under the Federal Arbitration Act is highly limited; courts may not reweigh evidence or revisit the merits of arbitrators’ contract interpretation.
- A court may refuse to enforce an arbitral award on public-policy grounds only when enforcement would violate an explicit, well-defined, and dominant public policy; general disagreement with the arbitrators’ legal analysis is insufficient.
- Where a contract contains a choice-of-law clause, arbitrators act within their authority in applying the chosen law to questions of illegality and excuse, including the asserted effect of foreign governmental measures.
- A foreign decree that affects the economic consequences of performance does not necessarily make performance “illegal” under the governing domestic contract law, as determined by the arbitrators within their delegated interpretive role.

## Conclusion

The Ninth Circuit reinstated an arbitration award for Triad, holding that Saudi Decree No. 1275 and generalized public-policy objections did not justify vacating the award, and reaffirming that courts must defer to arbitrators’ contract and choice-of-law determinations absent a clear violation of a dominant public policy.


N. Corp. v. Triad Int’l Mktg. S.A., 811 F.2d 1265 (9th Cir. 1987)