Shook, Hardy & Bacon Partners John Barkett, Frank Cruz-Alvarez, Sergio Pagliery and Consultant Marike Paulsson recently authored an article titled “Perspectives on the New York Convention Under the Laws of the United States Forum Non Conveniens as a Stopper to Enforcement” for the Kluwer Arbitration Blog.
Noting that the New York Convention is the “engine that makes international arbitration an effective mechanism to resolve disputes,” the authors examine the Second Circuit Court of Appeals’ 2011 ruling in Figueiredo Ferraz e Engenharia de Projeto Ltda. v. Republic of Peru, asserting the court’s conclusion was “inconsistent with the United States’ treaty obligations under the New York Convention” because the forum non conveniens doctrine (FNC) under the convention is a specified ground allowing refusal of the recognition and enforcement of foreign arbitrals.
Figueiredo, a Brazilian company, received a $21.6-million arbitral award in Peru against that nation’s Ministry of Housing, Construction and Sanitation. The Ministry appealed the award, a Peruvian appellate court dismissed the appeal and Figueiredo asked for enforcement of the award under the New York and Panama conventions before the Southern District of New York. The Ministry opposed its enforcement on several grounds, including the FNC, relying on a mandatory Peruvian law that limits the amount of judgments and awards paid in actions against government agencies to not more than 3 percent of the government’s annual budget. After the district court refused to apply the FNC, the Ministry appealed and the Second Circuit held that the Peruvian statutory cap must be considered in a FNC analysis. Thus, the court rejected the plaintiff’s request for award enforcement in the United States, concluding that Peru was an adequate alternate forum.
“Courts which are bound by the Figueiredo decision to apply the forum non conveniens doctrine to arbitral enforcement actions should apply it narrowly and tailor the analysis to the purpose and summary nature of enforcement proceedings,” according to the Shook authors. “One day,” they further assert, “a circuit split may place the issue before the Supreme Court for resolution if the Second Circuit itself does not have the opportunity to readdress the matter. It seems likely then that the Supreme Court will hold that the forum non conveniens doctrine is not a recognized basis for refusing the recognition or enforcement of foreign arbitral awards under the New York Convention, and that its use would undermine the United States policy favoring the enforcement of foreign arbitral awards.”