January 15, 2012

An Appellate Rescue for the New York Convention

The US Court of Appeals in Washington, DC holds that the New York Convention supplies the exclusive grounds for a federal district court to adjourn an award confirmation proceeding, and that such grounds do not include a pending proceeding to nullify the award against a foreign State, in its courts, when that State was not the place of arbitration. Not new news you say — quite rightly.

But yesterday’s decision by the DC Circuit (Belize Social Development Ltd. v. Government of Belize, 2012 WL 104462 (D.C. Cir. Jan. 13, 2012), is significant for at least two reasons.

First, the federal appellate system functioned effectively to correct an egregious error by the federal district court in a Convention award enforcement case. The district court had entered a stay of the enforcement case based on the proceedings pending in the Belize court, a stay intended to last for the duration of the Belize proceedings. Such a stay order is not ordinarily appealable, but the DC Circuit agreed (with appellant) that the Writ of Mandamus should be invoked to permit interlocutory review of a district court order that the district court was clearly without power to enter.

Second, the Court’s opinion bears no trace of consideration of the sovereignty of Belize, or reference to “comity,” as a possible basis to hesitate in applying the New York Convention. Rather, even though faced with judicial proceedings brought by a sovereign State under its own substantive law in its own courts, in which the Belize court had granted an anti-enforcement injunction, and despite Belize have legislated criminal sanctions of increased severity to back this injunction, the DC Circuit focused on the “international commitments”  of the United States that result from the New York Convention’s adoption and implementation through Chapter Two of the Federal Arbitration Act.

Indeed, the Court — perhaps aware of the Second Circuit’s recent dismissal of a Convention award enforcement case against an agency of Peru, under the doctrine of forum non conveniens — took pains to invoke the principle that it is “the virtually unflagging obligation” of the federal courts “to exercise the jurisdiction given them.” That principle, as applied to the jurisdiction conferred by FAA Chapters Two and Three to enforce the New York and Panama Conventions, counsels against invocation of a discretionary doctrine like forum non conveniens (the issue before the Second Circuit in Figuereido) as much as it weighs against (as the DC Circuit held) a stay of enforcement proceedings based on the “inherent power” of the district court to regulate proceedings. 

Readers of the DC Circuit’s opinion will also be heartened by the Court’s citation of the Restatement of International Arbitration Law, in its most recent draft, in support of the proposition that only a vacatur proceeding in a court at the seat of the arbitration or under the arbitration law that governed the arbitration will support an adjournment of a confirmation case. While that proposition was well-established in case law before the Restatement, the Restatement appears to serve as a de facto codification that enables courts to apply arbitration law with a confidence and decisiveness not generally seen in prior years.

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