Kingspan's US compensation award appealed by former owners of Tate

Dominic Coyle

Building materials group Kingspan has suffered a setback in its battle with the former owners of its raised flooring business in the United States.

Mr Daniel Baker, along with the other sellers of Tate Global, has filed an appeal against the outcome of binding arbitration that saw the Co Cavan-based group awarded more than $40 million (€34.8 million) compensation over irregularities relating to the purchase of the Tate business three years ago.

News of the appeal knocked shares in the Irish group, led by Mr Eugene Murtagh, back in Dublin yesterday, with the stock falling 14 cents to €3.62.

The appeal is understood to focus on the amount awarded to Kingspan. Sources familiar with the case say that the parties cannot appeal the substance of the ruling but only the amount of compensation awarded.

A statement from Kingspan yesterday said only that "our US attorney has noted that, under United States law, binding arbitration awards are generally enforceable and the grounds for overturning or modifying them in court are narrow and limited to points of law".

Mr Mark Appel, senior vice-president at the International Centre for Dispute Resolution, confirmed that the grounds for review of the award were very limited.

"The courts are loath to second-guess arbitrators on the facts," he said. "This will not be a retrying of the case. Under federal statute, in order to vacate or modify the award, the courts will have to find that there was failure of due process, bias or prejudice on the part of the arbitrator; or no agreement to arbitrate which would indicate that the arbitrator had exceeded his jurisdiction."

Sources close to the case said the appeal could take up to a year and reintroduces uncertainty for Kingspan. The original arbitration process took 18 months and analysts had given up hope of Kingspan getting recompense.

The first battle is likely to be over jurisdiction. Mr Baker and his colleagues have filed their appeal in the district court in Harrisburg, Pennsylvania, although the original judgment for payment was lodged in Washington DC.

Kingspan bought Tate for $120 million at the end of 2000 but quickly discovered that warranties given by the former owners in relation to orders that were in the pipeline never materialised.

Apart from the $40 million arbitration, Kingspan is also due interest of $5,354.79 for every day the award is not paid, backdated to September 19th last. To date, that has added more than $250,000 to the bill facing the former owners of Tate.