United Nuclear Corp., a subsidiary of the Falls Church-based UNC Resources Inc., has been ordered by an arbitration panel to pay at least $750 million to a competitor, General Atomic Co., the latest development in a five-year dispute between the two companies.
The order, considered a major step in the ongoing controversy involving the nation's uranium cartel, was released last week by two arbitrators, Walter Schaefer and Willard Wirtz, the former secretary of labor.
UNC President Keith Cunningham immediately labeled the award "ridiculous" and said the company is "fully confident that it will be set aside."
At issue in the dispute between GAC, an affiliate of Gulf Oil Corp., and UNC is the fate of a contract for about 24 million pounds of uranium that General Atomic contracted for with UNC in 1971 and 1973. But UNC said late in 1973, at a time of rising uranium prices, that it would not honor the contracts because of Gulf's involvement in the international uranium cartel.
The matter was the subject of court proceedings in New Mexico, where both firms operate, and was at the time considered one of the largest private antitrust suits in history. That court awarded the case to UNC by default when GAC did not provide documents relating to the cartel operations.
The arbitration panel was set up in San Diego, under an arbitration clause in the contracts between the two countries, although UNC eventually withdrew from the arbitration talks.
Although UNC claimed that Gulf's handling of the supply agreement was fraudulent, violated Gulf's obligations to UNC and was effectively coercive, the panel said the "arbitration does not support these claims."
The evidence "reflects to the contrary, the negotiation of an agreement between experienced, competent and informed corporate representatives, full participation by both parties in the joint enterprise according to the terms of the agreement, and an arms-length dissolution of that enterprise when it proved unsuccessful," the arbitrators said.
"There is no evidence of UNC's being coerced into action it considered unacceptable at the time it was taken or of its inability at any point to perform its commitments.
"The evidence is rather that when, after two years of performance under the 1973 agreement, the price of uranium rose sharply, UNC decided to break its commitment so that it could sell its uranium at higher prices to other purchasers," the two arbitrators concluded.
After reaching that conclusion, the panel awarded General Atomic $301 million in damages and also ordered UNC to provide General Atomic with about 15 million pounds of uranium which remains to be delivered. The uranium is worth between $450 million and $550 million. UNC has assets of more than $410 million.
UNC yesterday asked a state court in New Mexico to set aside the award, while at the same time GAC has asked a federal court in San Diego to order that the award be granted.
John Bodner, a Washington attorney for GAC, said the arbitration decision "is a further demonstration that, when a fair and impartial tribunal looks at the facts of this case, there is no way that UNC can win."
But Cunningham, noting that Gulf already has pleaded no contest to an antitrust charge relating to the uranium cartel, said the company is "confident that no court will lend its aid to the antitrust conspiracy of which Gulf-GAC stands convicted."