Marc J. Goldstein Arbitrator & Mediator NYC
August 23, 2011

Forum Non Conveniens in New York Convention Cases: A Different Complexion, At Least?

The arbitration community should derive much satisfaction from reading a recent thorough and well-annotated application of the New York Convention and the Foreign Sovereign Immunities Act to confirm an arbitration award against a foreign state, authored by an experienced and well-respected U.S. District Court Judge in New York.  Thai-Lao (Thailand) Lignite Coal Ltd. v. Government of Lao People’s Democratic Republic, 2011 WL 3516154 (S.D.N.Y. August 3, 2011)).  I will find one portion of the decision against which to register a complaint: the possibility of applying the doctrine of forum non conveniens to deny consideration of a petition to confirm a Convention award. But this quarrel is not so much with the Court’s decision as it is with the Second Circuit precedent that the Court was constrained to respect. (Arbitration Commentaries has taken issue with the Second Circuit’s position before. SeeDenial of Award Enforcement Under Article III ‘Rules of Procedure’: An Expanded Commentary on Zeevi Holdings v. Republic of Bulgaria,” April 26, 2011).

First, a brief summary of the Thai-Lao decision.   Two private companies in a joint mining venture, one Thai and the other Laotian, arbitrated claims against the Government of Laos under a contract that provided for arbitration under the UNCITRAL Rules in Kuala Lumpur, Malaysia. An all-American arbitral tribunal — two members from New York and the third from the Washington office of a New York firm — made its award at Kuala Lumpur (after merits hearings held there), under New York law as the contract provided, in favor of Claimants for a sum in excess of $40 million.  Claimants petitioned to confirm the award in the Southern District of New York, and the Court did indeed confirm the award after finding:

(1)             that it had personal jurisdiction over the Government of Laos, as Laos had broadly waived sovereign immunity from jurisdiction, attachment, and execution, in the contract; that the FSIA in any event provided an express exception to immunity for proceedings to enforce a Convention award; and that foreign states under Second Circuit law do not enjoy rights under the US Constitution’s due process clause to assert that requiring them to defend an action in a US court violates due process;

(2)             that while the doctrine of forum non conveniens is, under Second Circuit law, a New York Convention Article III “Rule of Procedure” of the forum  whose application could potentially result in the Court declining to entertain to a Convention award-confirmation summary proceeding, the principles governing application of that doctrine did not justify declining to the hear this case; and

(3)             the arbitral tribunal’s decision that the dispute was within the scope of the arbitration agreement made among the parties was an “arbitrability” determination entitled to judicial deference, because a contract calling for arbitration under the UNCITRAL Rules – rules that confer on arbitral tribunals competence to decide whether they have jurisdiction — provides “clear and unmistakable evidence” of an agreement to arbitrate arbitrability, an agreement that under US arbitration law reverses the presumption that arbitrability issues should be decided by courts, either in the first instance or with little deference to an prior view expressed by the arbitral tribunal.

All of these holdings are unquestionably right. But in the application of the doctrine of forum non conveniens, or I should rather say in the analysis leading to the non-application of that doctrine, the District Court assumed that the doctrine of forum non conveniens has the same content in a New York Convention award confirmation summary proceedings as it does when it is raised as an objection to the Court entertaining a case on the merits. Although that view may be implicit in the Second Circuit’s position that the doctrine does apply in Convention cases, there is no necessary reason why a prudential doctrine mixing considerations of comity, competence, and conservation of judicial resources, should be applied uniformly to ordinary litigations and proceedings with the singular characteristics of award-confirmations under the New York Convention.

Petitioners in Thai-Lao – claimants and award-winners in the arbitration — stated that the reason for seeking confirmation of the award in a US court was that the Respondent, the Government of Laos, was believed to have assets in the US that could be applied to satisfy a judgment upon the award. As that is foremost among the reasons that the Convention and FAA Chapter 2 permit an award to be enforced in a US court without regard to the foreign nationality of all of the parties, it seems odd that any further justification should need to be offered to oppose a forum non conveniens motion lodged against a petition to confirm a Convention award.

The Court understood its mandate under Second Circuit law to be that it should apply essentially the same forum non conveniens criteria that have been developed by US courts, mainly in domestic cases, to decide whether a particular US court rather than some other US or foreign court should be the exclusive forum to hear the merits and make findings of fact and conclusions of law. But no such exclusive role is contemplated by Convention confirmation proceedings. The Convention contemplates that recognition and enforcement will be sought in multiple for a – a point noted by the Court. And the very limited and defined grounds on which the courts may refuse recognition and enforcement under the Convention should rarely entail the kind of elaborate evidentiary proceedings whose presumed burdens on courts and witnesses who must travel to the forum justify a resource-conserving doctrine like forum non-conveniens.

Would it not therefore be more appropriate, for so long as forum non conveniens remains relevant in Convention cases, for a court simply to address whether the proceeding has been brought mainly for an award enforcement purpose and not as a device to gain some other tactical advantage from having a proceeding in a US court? If the proceedings  has been brought for that purpose, then there should be a strong presumption in favor of the court entertaining the case.

And then what factors might serve to rebut this presumption? The standard forum non conveniens criteria seem ill-suited. “Forum shopping” into a jurisdiction whose courts apply the Convention in a pro-enforcement fashion is consistent with the Convention’s purposes. The “convenience of parties and witnesses” is not a good fit with a “summary proceeding” (a motion, on papers) that should rarely require either discovery or a live testimonial appearance by a witness. And the presence or absence of connective factors other than the losing party’s assets should not matter very much if there is a good faith belief that assets may be found in the jurisdiction of the court. It should not have been necessary for this Court to note, as it did, that two of the arbitrators were New Yorkers, that a procedural hearing was held in New York, that New York law governed, that the award discussed and cited New York law extensively, that the award was in English, and that the damages were stated in US dollars. Had these factors been absent, while assets of the loser were believed to be present, there should have been no less reason for the US court to hear the case.

Nor does it make very much sense to consider the existence of an “adequate alternative forum” where – unlike litigation on the merits – an inherent aspect of the legal regime of the New York Convention is that the same proceeding will be undertaken concurrently in several jurisdictions. Rather the forum non conveniens doctrine as applied in Convention cases (until the Second Circuit reconsiders or the US Supreme Court considers whether it should be applied) should address whether a particular foreign forum is specially suited, or, stated differently, whether the US court is specially unsuited, to address the legal, factual, or public policy  issues raised.

One can imagine scenarios in which a Convention defense to recognition and enforcement would depend upon a de novo application of foreign law – e.g., the Dallah v Pakistan scenario, where it might have been quite reasonable for the U.K. court to have refrained from deciding, in the first instance, whether Pakistan was a proper party to the arbitration under French arbitration law, thereby virtually requiring Dallah to seek enforcement of the award in France.  But if the issues presented in an award-confirmation case are not clearly more suitable — substantively and in efficiency terms — for exclusive resolution by a foreign court, forum non conveniens dismissal of a confirmation petition where assets to satisfy the award are believed to be present in the US should be possible only in exceptional circumstances.



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