United States: Enforcement Of International Arbitral Awards In The U.S. – Could A Court Abstain Due To "Inconvenience"?

Forum non conveniens is one of several judicial abstention doctrines, applied from time to time by U.S. courts, that permit a court to dismiss (without prejudice) a plenary action in its discretion.  In a forum non conveniens case, the court's jurisdiction is not in question, but the relative legal "inconvenience" of having the matter heard in that court, as opposed to another court of competent jurisdiction, is deemed sufficient for the U.S. court to abstain from exercising its authority.  A defendant seeking abstention on forum non conveniens grounds typically is required to establish that an adequate alternative forum is available, and that a balancing of interests strongly favors dismissal by the U.S. court in favor of that other forum.  

But can – or should – such a court-made doctrine properly be a defense in a non-plenary proceeding brought by an arbitration awardee seeking enforcement vis-à-vis assets in the United States?  Could a court outside the U.S. grant that remedy instead?  And in any case, do the applicable international conventions afford U.S. courts the latitude to enforce arbitral awards in their discretion?

Federal courts in the United States have varied views regarding the matter.  Two prominent United States Courts of Appeals – the Second Circuit (which allows the forum non conveniens defense in an enforcement proceeding) and the District of Columbia Circuit (which does not) – take opposite views on the subject, and the U.S. Supreme Court recently declined to resolve the split.  Therefore, the viability of the forum non conveniens defense in connection with the enforcement of arbitral awards varies and is uncertain in U.S. courts.

Should the forum non conveniens doctrine ever be a factor in a non-plenary proceeding to enforce an arbitral award?  Arguably "no."  The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), to which the U.S. is a party, was designed to facilitate the enforcement of international arbitration awards by means of more or less uniform judicial criteria and streamlined processes.  Article V identifies seven grounds, meant to be exclusive, upon which recognition and enforcement of intentional arbitral awards may be refused.  The Federal Arbitration Act (the "FAA") provides, in the chapter implementing the New York Convention, that a court "shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified" in the New York Convention.  9 U.S.C. § 207 (emphasis added).  The defense of forum non conveniens, as it is understood in the U.S., is not among the seven grounds provided in the New York Convention.  Therefore, in accordance with the FAA, one would expect that forum non conveniens should not be entertained as a defense to the enforcement of an international arbitration award.

Second, it seems illogical that a non-plenary proceeding regarding recognition and enforcement of an arbitral award in the U.S., contemplating collection from assets here, could be better adjudicated or adjudicated at all in another country.

Nevertheless, the Second Circuit applied the forum non conveniens doctrine in 2002 to reject enforcement of an arbitration award in In re Arbitration between Monegasque de Reassurances SAM v. Nak Naftogaz of Ukraine, 311 F.3d 488 (2d Cir. 2002) ("Monde Re").  In Monde Re, the Ukrainian government-owned respondent argued that the enforcement proceeding in the United States should be dismissed because Ukraine was a better forum for such a proceeding.  The Second Circuit first analyzed the New York Convention's authorization to party-states to enforce arbitral awards "in accordance with the rules of procedure of the territory where the award is relied upon".  The Court noted that the U.S. Supreme Court considers forum non conveniens to be a procedural, rather than a substantive, defense.  Therefore, the Court decided that the New York Convention and the FAA permit a defense to enforcement based on the forum non conveniens doctrine.  In concluding, the Second Circuit opined that

"[f]orcing the recognition and enforcement in Mexico, for example, in a case of an arbitral award made in Indonesia, where the parties, the underlying events, and the award have no connection to Mexico, may be highly inconvenient overall and might chill international trade if the parties had no recourse but to litigate, at any cost, enforcement of arbitral awards in a petitioner's chosen forum."  Monde Re, 311 F.3d at 496-97.

But should any of those factors matter in a proceeding merely to recognize and enforce an arbitration award?

In contrast, the Court of Appeals for the District of Columbia Circuit ("DC Circuit") rejected another Ukrainian governed-owned respondent's forum non conveniens defense to enforcement there of an arbitral award.  In TMR Energy Ltd v. State Property Fund of Ukraine ("TMR Energy"), 411 F.3d 296 (D.C. Cir. 2005), respondent argued that enforcement proceedings should be dismissed in favor of more convenient fora — Sweden and Ukraine — where petitioner had commenced other actions against the Ukrainian State Property Fund.  The DC Circuit rejected respondent's forum non conveniens defense because only a U.S. court could authorize attachment of a foreign nation's property located in the United States.  Thus, no other forum could grant the enforcement relief sought by the petitioner in the proceeding below.  Indeed, the DC Circuit opined that dismissal on forum non conveniens grounds would be inappropriate even when a respondent does not have attachable property in the United States, as the respondent may acquire such property subsequent to an enforcement order.

TMR Energy and Monde Re each have progeny in their respective circuits.  Monde Re was followed in the Second Circuit by Figueiredo Ferraz e Engenharia de Projeto Ltda. v. Republic of Peru, 665 F.3d 384 (2d Cir. 2011).  In Figueiredo, respondent Peru argued that enforcement in the United States should be denied on forum non conveniens grounds because Peru was a better forum for enforcement.  The case was brought under the Panama Convention which, like the New York Convention, identifies a limited set of permitted defenses to enforcement of an award, but allows that an award may be enforced "in accordance with the procedural laws of the country where [the award] is to be executed."  The District Court, in effect adopting the reasoning of TMR Energy, rejected the defense of forum non conveniens, finding that only a United States court could adjudicate a matter involving the attachment of a foreign nation's property in the United States.  However, the Second Circuit reversed, relying on Monde ReSee, Figueiredo, 665 F.3d at 390.  In doing so, the Court opined that when judgment and execution on a respondent's assets is sought, the relevant question for forum non conveniens purposes is not whether the assets located in the United States could be attached from another jurisdiction, but whether the respondent has some assets in the jurisdiction of the alternate forum, even if petitioner stands to recover less in the alternate forum than it would in the United StatesId. 

But a dissent by Second Circuit Judge Lynch provided a forceful and cogent rejection of the majority's reasoning.  First, he noted that forum non conveniens was not viable because it was not one of the New York Convention's enumerated defenses to enforcement.  Second, he opined that permitting a respondent to avoid enforcement in the U.S. on forum non conveniens grounds undermined the express goal of "unifying the standards" by which "arbitral awards are enforced in signatory countries," and instead afforded precedent to all New York and Panama Convention signatories that wished to avoid their international treaty obligations.  Finally, he rejected the Monde Re reasoning as flawed, pointing out that the drafters of the two similar arbitration conventions came from various legal traditions, and would not have considered or intended to permit the unique American doctrine of forum non conveniens as an effective defense when creating a global framework for the enforceability of arbitral awards.

After TMR Energy, the D.C. Circuit reviewed three related enforcement actions against the Belize government.  In each case, the D.C. Circuit rejected Belize's forum non conveniens argument and upheld enforcement of the award.  Respondent Belize filed a petition for certiorari to the U.S. Supreme Court, which gave the high court an opportunity to resolve the relevant split between the Second and D.C. Circuits.  But after prolonged consideration, the Supreme Court declined to grant the petition to hear the case.

Should the Supreme Court (or the Second Circuit) have occasion to revisit this issue in the future, one hopes that it will support the views expressed in TMR Energy or in Judge Lynch's dissent in Figueiredo, and hold that forum non conveniens is not an available defense in enforcement proceedings brought pursuant to the New York or Panama Conventions.  Notably, the Third Restatement of International Commercial Arbitration echoes Judge Lynch's dissent in stating that an action to enforce a foreign award "is not subject to a stay or dismissal in favor of a foreign court on forum non conveniens grounds."  (Emphasis added).  Second, the New York and Panama Conventions identify a limited set of defenses to enforcement of arbitral awards, and forum non conveniens is simply not one of them Third, the doctrine is merely a discretionary abstention tool, which is typically applicable at the outset of a plenary action in U.S. courts, and we submit that this American invention is misplaced in connection with the enforcement of international arbitral awards.  Finally, as Judge Lynch stated, the application of the doctrine will have a chilling effect on the enforcement of arbitral awards globally, and most especially in certain parts of the United States.

For the moment, until the U.S. Supreme Court takes this issue on (or the Second Circuit reconsiders it), prudent awardee-petitioners are well advised to seek the recognition and enforcement of an international arbitral award in the more reliable federal courts of the D.C. Circuit than in a federal court of the Second Circuit.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions