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With clients increasingly entering into international commercial agreements that contain arbitration clauses, arbitration awards involving entities from more than one country are multiplying across the globe. Although much has been written on the pros and cons of international arbitration, one stage of the dispute-resolution process that many parties and practitioners often fail to focus on deserves to be discussed: post-arbitration enforcement proceedings. More specifically, there has been a recent trend in the federal judiciary to limit the ability of parties to enforce foreign arbitration awards in the United States. In an attempt to set uniform rules concerning enforcement of foreign arbitration awards, to promote the use of arbitration in the international commercial context, and to provide a level of certainty that arbitral awards would be “final,” the United Nations organized the Convention on the Recognition and Enforcement of Foreign Arbitration Awards of June 10, 1958, known as the New York Convention. That convention has been adopted by 137 countries, including the United States. Chapter II of the Federal Arbitration Act (FAA) implements the convention and provides for jurisdiction in the federal courts for proceedings falling under it. 9 U.S.C. 201-08. The United States is also a signatory to the Inter-American Convention on International Commercial Arbitration (known as the Panama Convention), which has been adopted by 17 other countries in North and South America. The Panama Convention takes precedence over the New York Convention if a majority of the parties are from countries that have ratified the Panama Convention. That being said, for purposes of enforcement of awards, the conventions are very similar. Thus, we focus here on the more widely used New York Convention. The New York Convention contemplates two types of post-arbitration proceedings: an action by the prevailing party to enforce an award made pursuant to an arbitration agreement falling under the convention; and an action by the losing party to vacate an award. A party may bring enforcement proceedings in multiple signatory countries if needed to seek full satisfaction of the award. Substantively, those proceedings are governed by the convention, but each country may set its own procedural rules, so long as they are not “substantially more onerous” than the conditions for enforcement of domestic awards. Thus, issues such as venue and statutes of limitation are determined by each country. In the United States, enforcement proceedings may be brought in any district court that would have been a proper venue if the parties did not have an arbitration agreement or in the district where the arbitration took place. The statute of limitations to enforce an award is three years. 9 U.S.C. 204, 207. Art. IV of the convention identifies the requirements a petitioner must satisfy for a court to have subject-matter jurisdiction. A petitioner must supply at the time of the application a certified copy of the award, the “agreement to arbitrate” and certified translations of those two documents, if necessary. To fall within the scope of the convention, pursuant to Art. II, the agreement to arbitrate must, among other things, be “in writing,” defined as “in an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.” Defenses to enforcement If the party seeking enforcement meets its Art. IV burden, then courts, pursuant to Art. III, “shall recognize arbitral awards as binding,” subject, however, to the respondent’s ability to demonstrate by clear and convincing evidence one or more of the seven enumerated affirmative defenses set out in Art. V. These defenses to enforcement reflect the convention’s concern about ensuring due process and fairness in the arbitral procedure, but are narrowly tailored to promote the finality of the award. Specifically, the first set of exceptions, listed in Art. V(1), covers (a) the validity of the arbitration agreement; (b) the propriety of the respondent’s notice; (c) the scope of the arbitration agreement; (d) the composition of the arbitral body; and (e) whether the award was vacated in the country where it was made. The second set, listed in Art. V(2), permits courts to refuse to enforce an award if (a) it covers something not subject to arbitration in the country where enforcement is sought, or (b) it violates that country’s public policy. More expansive defenses that may apply to domestic arbitration awards are inapplicable to foreign awards. For example, in many circuits, courts allow parties to block enforcement of domestic awards if they can prove the award was made in “manifest disregard of the law.” They have uniformly found, however, that such defenses are not available to oppose enforcing a foreign award. See, e.g., M&C Corp. v Erwin Behr GmbH & Co., 87 F.3d 844, 850-851 (6th Cir. 1996). One recent decision highlights the necessity that a petitioner meet all the criteria of the convention in order to have its award confirmed. The U.S. District Court for the District of Columbia recently dismissed a petition to enforce an award rendered in favor of Moscow Dynamo, a professional hockey club in Russia, against Alexander Ovechkin, one of its former star players who left Russia to play in the National Hockey League (NHL). The award had given Dynamo the right to force Ovechkin to play for it instead of in the NHL. Moscow Dynamo v. Ovechkin, 412 F. Supp. 2d 24 (D.D.C. 2006). The court found that the club had failed to establish subject-matter jurisdiction because it could not point to an actual exchange of written communications indicating Ovechkin’s assent either to enter into a new agreement to play for Dynamo after his contract expired or to arbitrate any dispute about such agreements. The convention allows a losing party to seek to vacate or annul an award only in the courts of the country where the award was made or the country whose procedural laws were utilized for the arbitration. Arts.V.1.(e) and VI. Consequently, although a U.S. court can decline to enforce a foreign award if it has been vacated by a competent court in the country in which the award was made or another defense to enforcement has been established, it cannot itself vacate that foreign award (unless U.S. procedural law applied). A court may also stay enforcement proceedings if the losing party has initiated an action to vacate the award in the appropriate country. Courts, however, do not have to provide any deference to a foreign court’s order purporting to vacate an award if that court is not one with “primary jurisdiction.” In Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274 (5th Cir.), cert. denied, 543 U.S. 917 (2004), the 5th U.S. Circuit Court of Appeals affirmed enforcement of an award even when an Indonesian court had annulled the award and enjoined the prevailing party from enforcing the award elsewhere. The court held that the only court that could issue such an order was a court in Switzerland, where the arbitration took place, and held that the Indonesian court’s orders were of no force and effect. Limits on convention’s reach Notwithstanding the convention’s goal of allowing parties to enforce awards in any signatory country, recent case law suggests an unwillingness of some U.S. courts to entertain actions that have little relationship with the districts where they sit. One of the more controversial issues is whether the doctrine of forum non conveniens applies to enforcement proceedings under the convention. In Monegasque De Reassurances S.A.M. ["Monde Re"] v. Nak Naftogaz of Ukraine, 311 F.3d 488 (2d Cir. 2002), the 2d Circuit found that, because Art. III of the convention states that “each contracting state shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon,” and because forum non conveniens is a procedural rule, courts are permitted to dismiss cases if there is an adequate alternative forum and if the movant can meet the familiar factors in favor of dismissal set forth in Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947). The Monde Re court found that the parties and the dispute had no connection to New York and affirmed a forum non dismissal. Perhaps Monde Re should be limited to its peculiar facts, which included an attempt by the petitioner to enforce the award against the government of Ukraine, which was not a signatory to the agreement and did not participate in the arbitration, under a veil-piercing theory. The court, however, did not limit its holding to these facts. At least one court has disagreed with Monde Re. In Higgins v. SPX Corp., 2006 WL 1008677 (W.D. Mich. April 18, 2006), the court held that, even though the Gulf Oil factors strongly favored a dismissal for forum non conveniens in favor of a previously filed suit in Brazil (the situs of the arbitration) to vacate the award, such a dismissal was unwise. Rather, the court stayed enforcement proceedings, finding it was a proper and convenient forum to enforce the award (once the Brazilian court rejected the application to vacate) because the respondent had assets in Michigan. That case supports the policy behind the convention, which is to allow ready enforcement of a foreign arbitral award in any signatory country where there may be assets of the losing party. Another attack on the limited grounds to refuse enforcement of foreign arbitral awards is the recent trend of dismissing suits based on lack of personal jurisdiction. In two separate, but almost entirely similar, decisions concerning the same parties and same arbitration award, the 3d and 4th circuits held that a court must have personal jurisdiction over the parties in order to entertain a petition to enforce a foreign arbitration award. Base Metal Trading Ltd. v. OJKS “Novokuznetsky Aluminum Factory,” 283 F.3d 208 (4th Cir. 2002), and 47 Fed. Appx. 73 (3d Cir. 2002). Both circuits undertook a traditional analysis of personal jurisdiction and found that, because the petitioner could not establish the respondent’s minimum contacts with the jurisdiction, the court could not enforce the award. The petitioner had identified property in states in each circuit that belonged to the respondent, but both courts found that insufficient for jurisdictional purposes because the property was not related to the underlying dispute. The 3d Circuit recognized that, had the petitioner argued for in rem jurisdiction over the property, a district court may have been able to enforce the award to the extent assets were available to satisfy the award. The 9th Circuit reached a similar result in Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarian Co., 284 F.2d 1114 (9th Cir. 2002), holding that the petitioner could not establish the respondent’s requisite contacts with the jurisdiction to afford personal jurisdiction, and finding that the petitioner had not identified any assets in the jurisdiction to allow quasi in rem jurisdiction. Many practitioners believe that these decisions, although perhaps constitutionally sound, greatly reduce the power of the convention and the goal of international consistency. Further, they argue, these decisions reduce the United States’ credibility when it engages in treaty negotiations. The purpose of enforcement is to be able to satisfy, at least in part, an arbitral award using assets wherever they may be found. Requiring personal jurisdiction for what is simply an execution proceeding arguably inappropriately limits a prevailing party’s rights under the convention. Further, it may allow a losing party to shield assets from execution, especially if the nature of those assets in the jurisdiction is not known. When entering into international commercial transactions, parties need to consider not only whether they want to arbitrate any dispute arising out of the transaction, but also the laws and procedural rules of each of the countries where recognition and enforcement of any future award may be sought. Although U.S. courts generally enforce awards in a summary manner, as this article makes clear, recent decisions by a number of circuit courts have created pitfalls and loopholes in the New York Convention’s goal to achieve uniform and ready recognition and enforcement of foreign awards in all signatory states. Appropriate contractual waivers in the underlying arbitration agreements are thus critical. Peter J.W. Sherwin is a partner at Proskauer Rose and head of its international arbitration practice group. He splits his time between the firm’s New York and Paris offices. He represented Alexander Ovechkin in the case brought by Moscow Dynamo. Jordan B. Leader is an associate in the firm’s New York office and a member of the practice group.

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