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The 2d U.S. Circuit Court of Appeals has ruled that a section of the Federal Arbitration Act that requires the parties explicitly to consent to judicial confirmation of arbitration awards was trumped by another section of the law that does not. Phoenix A.G. v. Ecoplas Inc., No. 03-9000. The panel’s decision concerned the provisions of the act put in place both before and after the implementation of the Convention on Recognition and Enforcement of Foreign Arbitral Awards. In 1993, Phoenix, a German corporation, granted U.S.-based Ecoplas exclusive license to produce and sell its polyester molding compounds. The venue for arbitration would be the International Chamber of Commerce in Zurich, Switzerland. In 1997, Phoenix told Ecoplas that it had sold its business portfolio to Bakelite A.G. and asked Ecoplas to agree to the transfer of the licensing agreement. Ecoplas asserted that the agreement was terminated, and refused to pay licensing fees in 1997 and 1998. Phoenix filed a complaint in Zurich and prevailed. An arbitrator ruled for Phoenix in 2000. When Ecoplas refused to pay the approximately $100,000 for arbitration costs and legal fees, Phoenix sued in a New York federal court seeking confirmation of the award pursuant to the convention. Ecoplas contended that the arbitration agreement did not reflect an intent to consent to judicial confirmation of the award and that, therefore, the court had no jurisdiction over the dispute. The court disagreed. Writing on behalf of the circuit court, Judge Sonia Sotomayor said that Chapter 1 of the Federal Arbitration Act, 9 U.S.C. 9, “is more restrictive in that it requires prior consent-to-confirmation by both parties. By including a consent-to-confirmation requirement,” she said, quoting 2d Circuit case law, “Congress aimed to ensure that the parties have affirmatively agreed to the application of the federal substantive law contemplated by the Act to the interpretation” of their arbitration agreement. Ecoplas had argued that the lower court should be reversed because the arbitration agreement with Phoenix failed to conform to Section 9′s consent-to-confirmation requirement. But Sotomayor disagreed and referred to Chapter 2, codified in Section 207 of the act when Congress implemented the convention in 1970. “Section 207 does not in any way condition confirmation on express or implied consent,” she said. “Because the plain language of � 207 authorizes confirmation of arbitration awards in cases where � 9′s consent requirement expressly forbids such confirmation, we hold that the two provisions conflict. Accordingly, we hold that � 207 preempts � 9′s consent-to-confirmation requirement in cases under the Convention.”

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