The reasoning is based on the presumption that state-owned corporations are juridical entities, which are distinct and separate from the foreign state. If a state-owned corporation is separate from the foreign state, FSIA provides a statutory basis for the court to exercise personal jurisdiction. The petitioning party must, nonetheless, demonstrate that the court has jurisdiction over the person or property consistent with constitutional due process.
A party seeking to enforce a foreign arbitral award against a state-owned corporation may avoid the burden of demonstrating that the court has acquired personal jurisdiction consistent with due process if it can present sufficient evidence to overcome the presumption that the state and the state-owned entity are separate. The presumption of separateness can be overcome if the state so extensively controls the instrumentality that a relationship of principal and agent is created or if adhering blindly to the corporate form would cause an injustice.
While the United States' judicial system can provide an efficient and predicable forum to enforce foreign and nondomestic arbitral awards, a party petitioning for enforcement can face significant hurdles. These hurdles including potential challenges to the award itself, in the case of nondomestic arbitral awards, and objections to personal jurisdiction in actions under the New York or Panama Convention can be managed through an arbitration agreement. Notably, the parties can add predictability to a future enforcement action by consenting to the jurisdiction of U.S. courts and conducting the arbitration hearing in the United States.
Benjamin Escobar is a partner in Beirne, Maynard & Parsons in Houston. His practice focuses on resolution of commercial disputes. It includes litigation before state and federal courts, state and federal agencies, and arbitration tribunals. He has represented clients in a variety of commercial disputes within the energy industry.