On my website I have posted two new commentaries on recent federal appellate cases. One involves the assertion of jurisdiction over the Kingdom of Spain under the Foreign Sovereign Immunities Act. The other involves rejection of alleged personal jurisdiction over DaimlerChrysler AG in a case brought under the Alien Tort Claims Act. The orange box on the left margin of this page is a link to my website.

Dear Readers:
I am en route to Vienna to attend the UNCITRAL Arbitration Working Group Session, in the status of an observer on behalf of the Association of the Bar of the City of New York. The Working Group is in advanced stages of a proposed revision of the UNCITRAL Arbitration Rules. I have been asked by the editors of Transnational Dispute Management (TDM) to post reports on the proceedings to its website. I hope you will look for those reports. www.transnational-dispute-management.com.

Dear Readers: A posting on the Kluwer Arbitration Blog by Francesca Richmond discusses some recent UK case law on merits review of arbitration awards in the courts, and alludes briefly to a pending US enforcement case in which a District Court in Washington is asked to deny recognition out of respect for a judgment of a Qatari court under Qatari law, notwithstanding that the seat of the arbitration was Paris. Reproduced below is the comment I have posted on the Kluwer website.

Francesca —

Your posting inspired me to look at the brief for Respondents in the IITIC/Dyncorp enforcement case, to ascertain on what basis the federal district court in Washington is asked to deny recognition of a French award on the basis of merits review in Qatari courts.

The fulcrum of the DynCorp Respondents’ argument is that ITIIC “is estopped from contesting that the Qatari Court of Cassation was competent to set aside the award.”. That may be a correct legal conclusion based on IITIC’s efforts in the Qatari courts.

But how does this proposition sustain Respondents’ burden to show that one of the Convention grounds for denying recognition and enforcement exists?

Respondents invoke Article V(1)(e) of the Convention, and thus it is their burden to show that the Qatari courts were a “competent authority of the country in which, or under the law of which, the award was made.”. All agree that the ICC validly designated Paris as the seat of arbitration — no seat having been designated in the arbitration agreement. Thus, the award was made in France.

There remains the possibility that the parties might have agreed to proceed before the Paris-seated tribunal under the arbitral procedural law of Qatar. But Respondents do not argue this. And there is no indication in Respondents’ papers that this was agreed or that the Sole Arbitrator understood that he was governed by Qatari lex arbitri.

Respondents argue that the Qatari courts had jurisdiction to review the merits of the award because the controlling Arabic version of the arbitration agreement did not state that the award shall be “final and binding,” and that, under Qatari arbitration law, the omission of these words opens the door to full-bore merits review in the Qatari courts.

But if the lex arbitri in the case was the French law, the significance (if any) of the omission of “final and binding” from the clause is an issue of French arbitration law, at least as far as a U.S. court applying Article V(1)(e) is concerned.

No authority cited by Respondents permits a party to sustain its burden of establishing a defense to enforcement under the New York Convention solely by invoking estoppel principles against the party seeking recognition. Here it is still Respondents’ burden to show prima facie that the lex arbitri was the law of Qatar, and they have not even attempted this.

US federal district judges who do not frequently grapple with the New York Convention and Chapter Two of the FAA, and in many Circuits lack clear appellate guidance, often struggle to apply the terms of the treaty and the statute to novel and unusual situations. A new case in point comes from the US District Court in Maryland, which reached a correct result in denying recognition of a partial award while confirming the final award, but missed an opportunity to make an explicit and persuasive application of Article V of the Convention to justify denying recognition to the partial award. (In the Matter of the Arbitration Between AO Techsnabexport and Globe Nuclear Services and Supply Ltd., 2009 U. S. Dist. LEXIS 77419 (D. Md. Aug. 28, 2009)).

The contract at issue in the underlying arbitration was for sale of uranium from a Russian state-controlled company to a US company whose principal officers were Russian nationals. When the Russian company discontinued sales, the US company commenced a Stockholm Chamber of Commerce arbitration in Sweden. In the meantime, criminal proceedings had been commenced in the US and Russia concerning the acquisition of the controlling interest in the US entity and the execution of the uranium sale contract with the Russian State entity. The US company obtained a partial award on liability, the Tribunal finding a breach of contract by the Russian entity. But in a procedural order that predated the partial award by a full year, the Tribunal had stated that in even after the partial award on liability it would, if appropriate, review the validity of the contract based on evidence developed in the criminal proceedings.

In the criminal proceedings, evidence emerged of serious fraud by the purported principals of the US entity, and fraud by them in the inducement of the uranium sale contract. Based on this evidence, the Tribunal in the final award held, inter alia, that the arbitration had been commenced by unauthorized representatives of the US company, and that the uranium sale contract was invalid or unenforceable as a matter of Swedish law and international public policy.

The court, after faithfully setting forth in full text Article V of the New York Convention, then proceeded with analysis leading to denial of recognition of the partial award, but did this without further mention of Article V. Mentioned most prominently in this analysis is the Tribunal’s procedural order that bifurcated liability and damages and deferred the issue of validity of the contract until after the partial award. The court then stated that the Tribunal’s findings in the final award concerning invalidity of the contract were “also of significant importance.”

Lawyers knowledgeable about New York Convention will find the analysis here unsatisfying, even if the outcome is clearly right. One may question whether the partial award was in fact an award capable of recognition under the Convention, as it did not finally resolve the issue of liability for breach of contract — the Tribunal having beforehand reserved judgment on that issue. But facing up to that issue would have taken the court into a doctrinal thicket: neither the Convention nor the FAA defines “award”; probably the issue of what is an “award” is governed by the lex arbitri, here Swedish law, and deference is probably due to the Tribunal’s determination on that issue. (The Tribunal may be justly criticized for issuing an “award” after having reserved the issue of validity of the contract. An “interlocutory decision” would have sufficed.)

But why did the Court decline to refer expressly to Article V(2)(b) of the Convention? That section provides that recognition may be refused if it would be contrary to the public policy of the country where recognition is sought. As denial of recognition must be based on an explicit ground in Article V, and the public policy ground was the only one offering a clear solution, it is puzzling that the court did not rely on V(2)(b) expressly. Surely if the Tribunal could conclude, as it did, that a fraudulent conspiracy to procure uranium from the Russian Federation violated international public policy, a US court could have reached the same conclusion explicitly as a matter of US public policy. Perhaps the legacy of the case, through an appeal or otherwise, will be as a clear-cut example of a situation where the V(2)(b) public policy exception to recognition may be applied.