The Errors of Comity: Forum Non Conveniens Returns to the Second Circuit
Alan Scott Rau
University of Texas at Austin School of Law; University of Texas - School of Law, The Center for Global Energy, International Arbitration, and Environmental Law
April 24, 2012
American Review of International Arbitration, August 2012 (Forthcoming)
Energy Center Research Paper No. 12-04
U of Texas Law, Law and Econ Research Paper No. 229
U of Texas Law, Public Law Research Paper No. 217
What a federal court is expected to do when asked to enforce a foreign arbitral award --- what constraints the Conventions impose on its normal course of adjudication --- is of course a vast question. But there is one small piece of the puzzle that recurs frequently, and which has in particular been troublesome to the Second Circuit.: What remains of the inherent power of a common-law court to defer or dismiss litigation of a Convention case on the grounds that it constitutes an “inconvenient” forum?
A decade ago a federal district court in Monde Re, “relying on the doctrine of forum non conveniens,” dismissed a petition to confirm a foreign arbitral award, and the Second Circuit affirmed. The received wisdom ever since has been quite hostile --- uniformly to the effect that the obligations imposed by the New York and Panama Conventions make any recourse to the doctrine inappropriate. Despite the fact that the Convention in art. III allows contracting states to continue to use their “rules of procedure” in recognizing or enforcing foreign awards, that is a category of very weak explanatory power: While litigants may have to take local courts as they find them, the one thing art. III cannot be intended to do, is to permit local courts to devise rules that compete with, or undermine, or put up obstacles to, the rules of decision under which the Convention expects them to assess the legitimacy of awards.
Now in Monde Re itself the respondent, the state of Ukraine, had not been a signatory to the contract nor did it participate in the arbitration: Its defense --- “I was never a party to any agreement to arbitrate” --- would indeed constitute an art. V ground for the refusal of recognition and enforcement. The inquiry then becomes, “just how do we go about answering the question?” --- or more precisely, “just who is best placed to evaluate whether these ‘grounds’ are present? Or perhaps, “just who is to make the decision?” It is a familiar notion that the grounds for decision, and the identity of the appropriate decisionmaker, are likely to call for entirely distinct inquiries, and it seems plausible to say that the former may be so intertwined with the need to obtain foreign-source evidence, and with the need to assess foreign law, that it may become prudent to defer the decision to a foreign court.
But by contrast the Second Circuit’s latest venture into the area, in Figueiredo Ferraz, is astonishing: Here the court deferred the enforcement of a Peruvian award on the basis of the “public interest factors” called for in the usual forum non conveniens analysis --- and these “factors” did not refer in any way to any supposed difficulties a U.S. court might face in establishing the identity of the “proper party.” Instead the “public interest” was entirely that of Peru, for Peruvian legislation imposed a limit on what a government agency was permitted to pay annually in satisfaction of a judgment against it. Apparently such “public factors” were closely congruent with considerations of international comity. But none of this even comes close to being an art. V ground for the refusal of recognition and enforcement, and in a Convention case the usual recourse to a court’s “discretion” must be foreclosed: While by its terms the Convention may allow a contracting state to enforce awards even where the canonical art. V grounds are present, it extends no leeway whatever to refuse to do so when they are not.
Whether on a motion to confirm a Convention award --- or at an earlier stage on a motion to stay litigation or compel arbitration --- a doctrine of forum non conveniens must in the structure of our law have only the most marginal presence. Anything more robust would be in considerable tension with the goals of the Convention to increase the currency of awards by limiting challenges and expediting enforcement. But although forum non must play a slender role of only intermittent interest, it has a role nonetheless, whenever a Convention defense is in play and the identity of the appropriate decisionmaker is in doubt. The trick is to preserve the classic virtues of prudence and restraint and economy of means in adjudication, while at the same time managing to respect the structure of the Convention, and being alert to the policies in support of the arbitral process that the Convention seeks to advance.
Number of Pages in PDF File: 42
Keywords: arbitration, forum non conveniens, comity, public policy, Panama Convention, New York Convention, awards
JEL Classification: K12, K20, K33, K40, K41Accepted Paper Series
Date posted: April 24, 2012
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