United States: Second Circuit Might Reconsider Forum Non Conveniens And Foreign Arbitration Awards

First Tuesday Update is our monthly take on current issues in commercial disputes, international arbitration, and judgment enforcement. This month we cover a case pending before the United States Court of Appeals for the Second Circuit involving the New York Convention and the doctrine of forum non conveniens, which allows a court to dismiss a case if it finds another forum is more appropriate. In Olin Holdings Limited v. Libya, Case No. 22-825, the State of Libya is appealing an order from the Southern District of New York (SDNY) confirming a foreign arbitral award in favor of Olin, a Cyprus-based company. Libya is appealing on the basis that it contends it did not waive sovereign immunity and did not consent to arbitrate. Libya is also contending the district court erred in denying its forum non conveniens motion. This update focuses on the forum non conveniens doctrine. Olin has argued that if the Second Circuit is inclined to consider forum non conveniens, it should overrule two of its prior decisions allowing dismissals on that basis, asserting that the doctrine has no application as it relates to foreign arbitral awards. This case could potentially represent an examination of forum non conveniens as it relates to the recognition of foreign arbitral awards, which the Second Circuit has not reconsidered in 25 years.

On March 23, 2022, in Olin Holdings Limited v. State of Libya¸ Case No. 1:21-cv-04150-JGK (S.D.N.Y.), the district court granted Olin's Petition to Confirm Foreign Arbitral Award, and denied Libya's Motion to Dismiss under the forum non conveniens doctrine. The district court found clear evidence that Libya agreed to arbitrate with Olin in its original Treaty. Dkt. No. 25 at 17. Furthermore, the district court confirmed the Award, finding that the Tribunal's 143-page Award was "thoughtful. . . fair and reasonable" and that Libya did not meet its burden when requesting the case be dismissed under the forum non conveniens. Id. at 17, 26. When finding Libya did not meet its burden, the district court held that the private interest factors (there were no difficulties associated with conducting discovery or trial aboard) and the public interest factors (summary proceedings only contributed mildly to court congestion and posed no burden on the local community in connection with the jury trial) did not weigh in favor of having the case dismissed. Id. at 26. The Final Judgment directed Libya to pay Olin over $27 million, including interest. Dkt. No. 34. Libya noticed an appeal.

In its brief, Olin asked the Second Circuit to uphold the district court's ruling, but should forum non conveniens have any application, Olin asked the Second Circuit to overrule two of its previous decisions in Monegasque¹ and Figueiredo². Olin argued that "those decisions have not been followed by any other federal court, and beyond that have been the subject of significant criticism from practitioners and academics on the ground that they are inconsistent with the New York Convention and the United States' obligations thereunder." Id. at 46.

Libya replied that Second Circuit binding precedent holds that courts should dismiss cases when another venue is better suited to hear the case; here, Libya argues the venue should be Paris, where the Tribunal granted its Award. Id. Libya stressed that in Figueiredo, "the United States submitted an amicus brief stating that '[t]he district court correctly held that forum non conveniens is an available ground for dismissal brought pursuant to the Panama Convention' and citing Monegasque in support of its assertion. Brief for the United States of America as Amicus Curiae in Support of Vacatur and Remand ("US Amicus Br.") at 21, Figueiredo Ferraz e Engenharia de Projeto Ltda v. Republic of Peru, 665 F.3d 384 (2d Cir. 2011) (Nos. 09-3925-CV(L), 10-612-cv (CON))." Dk. No. 64 at 32.

To date, the Second Circuit has not set this case for oral argument.

Although no other jurisdiction has applied or upheld the forum non conveniens doctrine in relation to Foreign Arbitral Awards, the Second Circuit has historically upheld forum non conveniens in relation to Foreign Arbitral Awards, finding that certain Conventions, specifically the New York Convention, list defenses [See N.Y. Convention art. V(1)] to enforcing Arbitral Awards as a substantive matter, allowing the courts to either uphold or dismiss a petition to enforce an Arbitral Award on procedural grounds, such as the forum non conveniens. Monegasque, 311 F. 3d at 496 (relying on Am. Dredging Co. v. Miller, 510 US 443, 453, (1994), which classifies the forum non conveniens as procedural).

Other jurisdictions, however, such as the DC Circuit, have held the opposite, finding that the forum non conveniens is "not available in proceedings to confirm a foreign arbitral award." TMR Energy Ltd. v. State Prop. Fund of Ukraine, 411 F.3d 296, 303–04 (D.C. Cir. 2005) (finding that even if a party does not have present assets in the United States to attach an Award to, it may in the future, and therefore it would be improper to dismiss under the forum non conveniens); see also Tatneft v. Ukraine, 21 F.4th 829, 840 (D.C. Cir. 2021); see also LLC SPC Stileks v. Republic of Moldova, 985 F.3d 871, 876 n.1 (D.C. Cir. 2021).

Moreover, critiques of the Second Circuit as it relates to forum non conveniens, notably the American Bar Association (ABA), argue that the doctrine undercuts Article 5 of the New York Convention, noting that the New York Convention [and the Panama Convention] were created "to establish uniform enforcement of international arbitration awards in the courts of the contracting parties." ABA Resolution 107C, Aug. 12-13, 2013 at 1. Allowing forum non conveniens into the New York Convention's "rules of procedure defeats the exclusivity of Article V and prohibits uniform enforcement under the Convention[]" Id.

Although there may be pressure on the Second Circuit to overrule its previous decisions in Monegasque and Figueiredo, if the Second Circuit upholds the district court's ruling, it will not have to address its previous holdings. In light of this pending litigation (and the potential the issue could be left undisturbed by the Second Circuit), parties should make sure to clearly include in their arbitration agreements that the parties consent to recognition and enforcement of arbitral awards in any appropriate forum. We have substantial experience with seeking recognition of and/or enforcing arbitral awards. If we can be of any assistance, please feel free to contact us.

Footnotes

1. Monegasque De Reassurances S.A.M. v. Nak Naftogaz of Ukr., 311 F.3d 488 (2d Cir. 2002).

2. Figueiredo Ferraz E Engenharia de Projeto Ltda. v. Republic of Peru, 665 F.3d 384 (2d Cir. 2011).

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