Corporate veil piercing to enforce arbitral awards (Compagnie Des Grands Hôtels D’Afrique v Starman Hotel Holdings)

Article summary

Arbitration analysis: Compagnie Des Grands Hôtels D’Afrique (Compagnie) is the owner of a five-star hotel in Morocco. The hotel was managed by Woodman under a long-standing management agreement. For years the inadequately funded Woodman underperformed. Finally, it stopped paying rent. In 2015, Compagnie obtained an arbitral award in England against Woodman for c.US$55m but Woodman could not pay. Compagnie therefore sought to enforce the award against Woodman’s Delaware parent company, Starman Hotel Holdings LLC (Starman) under the New York Convention. However, the Delaware District Court held that Compagnie had failed to show that Starman was Woodman’s corporate alter ego. Parties must satisfy a stringent twofold test before courts will agree to ‘pierce the corporate veil’. In addition to showing that two companies operated as a single economic entity, fraud or fraud-like abuse of the corporate structure must also be shown. This Compagnie failed to do. Its inability to recover from Woodman was just the result of...