I. Introduction
There are rules of public international law concerning the enforcement of arbitral awards foreign to the place of enforcement that are almost universally applicable. Most famously, they are contained in the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, adopted in New York in 1958 and thus known as the New York Convention.Footnote 1 States and their organs may be able to assert defences to enforcement arising from rules outside the New York Convention, such as State immunity and diplomatic immunity. Subject to that, the rules reflected in the New York Convention apply equally where enforcement is sought against a State, an emanation of a State or a private entity. The almost uniform applicability of the rules contained in the New York Convention has not brought with it equally uniform observance and implementation of those rules by national courts.
The US Court of Appeals, Second Circuit, in its majority judgment in Figueiredo Ferraz Engenharia de Projeto Ltda v Republic of Peru Footnote 2 declined to confirm an arbitral award against Peru and proceed to its enforcement against Peru's assets in New York. It so declined on the basis that the Federal Court in the Southern District of New York was not a convenient forum for such enforcement. A Peruvian statute provided that where a Peruvian State entity had to pay damages to a private entity, the amount payable annually was capped at 3 per cent of the annual budget of that State entity. The US Court held that this was a ‘principal public interest factor’Footnote 3 indicating that jurisdiction over enforcement should be exercised not in New York, but in Peru, because in Peru the statute capping the amount of damages payable annually by the State entity would apply.
In deploying the doctrine of forum non conveniens in this way the majority of the Second Circuit circumvented the clear requirements of the New York Convention. That Convention contains a list of grounds on which recognition or enforcement of a foreign arbitral award may be declined. That list is exhaustive. This kind of ‘public interest factor’ is not on the list. The New York Convention does permit a court to decline to recognize or enforce a foreign award on the basis that it contravenes the public policy of the enforcement forum, but not on the basis that it contravenes the public policy of the foreign State against which the award was rendered, or that there is otherwise some kind of ‘public interest’ indicating that enforcement should occur elsewhere.
II. Forum Non Conveniens
Forum non conveniens is a common law doctrine that allows a court to decline to hear the merits of a case in favour of an alternative forum. It is applied slightly differently in different common law jurisdictions.
The Supreme Court of the United States has described it as follows:
a plaintiff's choice of forum should rarely be disturbed. However, when an alternative forum has jurisdiction to hear the case, and when trial in the chosen forum would ‘establish … oppressiveness and vexation to a defendant … out of all proportion to plaintiff's convenience,’ or when ‘the chosen forum [is] inappropriate because of considerations affecting the court's own administrative and legal problems,’ the court may, in the exercise of its sound discretion, dismiss the case.Footnote 4
The Supreme Court has indicated that ‘factors of public interest’ are relevant in determining whether a forum is inconvenient:
Factors of public interest also have a place in applying the doctrine. Administrative difficulties follow for courts when litigation is piled up in congested centers instead of being handled at its origin. Jury duty is a burden that ought not to be imposed upon the people of a community which has no relation to the litigation. In cases which touch the affairs of many persons, there is reason for holding the trial in their view and reach, rather than in remote parts of the country where they can learn of it by report only. There is a local interest in having localized controversies decided at home. There is an appropriateness, too, in having the trial of a diversity case in a forum that is at home with the state law that must govern the case, rather than having a court in some other forum untangle problems in conflict of laws, and in law foreign to itself.Footnote 5
The United Kingdom House of Lords has held of the doctrine of forum non conveniens that:
The basic principle is that a stay will only be granted on the ground of forum non conveniens where the court is satisfied that there is some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, ie, in which the case may be tried more suitably for the interests of all the parties and the ends of justice.Footnote 6
The approach of the House of Lords is followed in New Zealand.Footnote 7 The Canadian formulation is slightly different, at least theoretically, requiring that ‘there is another forum that is clearly more appropriate’ before a stay will be granted.Footnote 8 The High Court of Australia applies a higher threshold still before a trial court may decline to exercise its jurisdiction. It requires that the forum seized be ‘clearly inappropriate’,Footnote 9 rather than focusing on any available alternative. That test ‘perhaps, is closer’Footnote 10 to the test applied by the US Supreme Court than it is to that applied by the House of Lords and by courts in New Zealand and Canada, although it should be borne in mind that theoretical differences in wording may not have very much practical impact on the way cases are actually decided. The same facts would very often lead to the same decision notwithstanding the different formulations of the legal test in different jurisdictions.
If a State has assets in a foreign jurisdiction, and an arbitral award against that State is presented in that jurisdiction for enforcement against those assets, it is difficult to understand how the question of convenience of forum could properly arise. Arise it did in the decision of the Second Circuit in Figueiredo Ferraz v Peru. If the question of convenience of forum was raised in these circumstances, one would think the answer simple: an application for enforcement of an arbitral award against assets in a particular jurisdiction will, if brought in that jurisdiction, have always been brought in the most convenient forum. That is not what the Second Circuit decided in Figueiredo Ferraz v Peru.
III. Figueiredo Ferraz v Peru
An arbitral award was rendered in Peru. It ordered a Peruvian State entity to pay fees due to Figueiredo Ferraz Consulting for having prepared engineering studies on water and sewage services in Peru.
A Peruvian statute imposed in certain conditions a limit on the damages that a State entity had to pay each year to a party successfully claiming against it. The limit was three per cent of the annual budget of that State entity. The Peruvian State entity in question was paying instalments on the award in accordance with this cap, but they did not approach the amount actually awarded. The award was for $21.6 million.Footnote 11 The State had paid $1.4 million.Footnote 12
Figueiredo Ferraz sought confirmation and enforcement of the award in New York. Peru had assets in New York from its issue of bonds there.Footnote 13 Figueiredo Ferraz brought its petition under the Federal Arbitration Act, which implemented in the US both (i) the New York Convention and (ii) the Inter-American Convention on International Commercial Arbitration of 1989, known as the Panama Convention,Footnote 14 which is substantially similar. The Federal Arbitration Act provided that, given the nationalities of those involved, it was the Panama Convention that applied.Footnote 15 Peru sought dismissal of the action for confirmation and enforcement of the Peruvian arbitral award in New York on the ground that New York was a forum non conveniens.
The trial judge in the Federal Court for the Southern District of New York dismissed Peru's application. His judgment was overturned by the Second Circuit on appeal. Its majority judgment held that ‘the cap statute is a highly significant public factor warranting forum non conveniens dismissal’.Footnote 16 The majority said that: ‘There is … a public interest in assuring respect for a sovereign nation's attempt to limit the rate at which its funds are spent to satisfy judgments.’Footnote 17 The essence of the Second Circuit's reasoning was that:
Although enforcement of such awards is normally a favored policy of the US and is specifically contemplated by the Panama Convention, that general policy must give way to the significant public factor of Peru's cap statute.Footnote 18
No attempt was made to anchor this balancing approach to the way in which public policy is treated in the New York Convention or the Panama Convention. This reasoning was all part of the Court's discussion of whether and how to apply the doctrine of forum non conveniens. Nor could it have been anchored to the treatment of public policy in either of those conventions.
IV. Public Policy of the Forum State
The Second Circuit did not say that the Peruvian cap statute meant that confirmation of the Peruvian award in the US would have been contrary to ‘public policy’. Rather, it said that the applicability of that statute in Peru was a significant ‘public interest factor’ leading it to find that New York was a forum non conveniens for confirmation and enforcement of the award. Neither the New York nor Panama Convention allows a State's courts to decline to recognize or enforce a foreign arbitral award on the basis of ‘public interest factors’ favouring enforcement elsewhere. The closest they come to that is to allow a State court to deny recognition and enforcement on the basis of the ‘public policy’ of the putative enforcement State.
The Second Circuit's decision not to confirm the Peruvian award on the basis of ‘a public interest in assuring respect for a sovereign nation's attempt to limit the rate at which its funds are spent to satisfy judgments’Footnote 19 appears to have been a substantive assessment of matters of public policy, not of the relative convenience of two potential jurisdictions that could have heard applications for confirmation and enforcement of the award. In a footnote the majority asserted that a ‘public interest of this sort is considerably broader than the colloquial understanding of the word “convenient,” which may be one reason why the phrase forum non conveniens is best rendered in Latin’.Footnote 20 Deciding that Peru was a preferable jurisdiction for enforcement because a statute applicable there would limit the damages available is not a proper application of the Latin word conveniens, or of the English word convenient, to the question of whether an enforcement action in the United States should have been allowed to proceed.Footnote 21 It is a substantive value judgment that a State should be permitted to limit the rate at which it pays awards, not only within its own jurisdiction, but also to have award creditors who approach foreign courts in an attempt to avoid that limitation sent back to it so that the limitation may be applied. Since the Second Circuit appears to have acted on this policy preference, it is appropriate to consider whether, notwithstanding the different nomenclature, the ‘public interest factor’ that led the Second Circuit to decline to confirm the Peruvian award amounted to a ‘public policy’ justification under the New York and Panama Conventions to decline to recognize and enforce the award.
The New York Convention allows the courts of the country asked to recognize and enforce a foreign award to refuse to do so if it ‘would be contrary to the public policy of that country’.Footnote 22 Those last three words are important—and they are the same in the equivalent provision in the Panama Convention.Footnote 23 A court of the US has no business declining to enforce an award because it thinks that to do so would be contrary to the public policy of Peru. As is clear from the plain terms of both conventions, it may only do so if it is contrary to the public policy of the enforcement jurisdiction,Footnote 24 here the US. Burrough J famously said of public policy that it ‘is a very unruly horse, and when once you get astride it you never know where it will carry you’.Footnote 25 However unruly, it must at least be your own horse.
This limitation cannot properly be circumvented by saying that it is contrary to the public policy of the US to contravene the public policy of Peru. This was not a case where the arbitral award on its face ratified a contract that was illegal in the place of putative performance.Footnote 26 The public policy exception in the New York and Panama Conventions exists to ensure that if the application of the lex contractus or some other aspect of the arbitral award produces a result contrary to the public policy of the jurisdiction in which it is presented for enforcement, that a court of that jurisdiction may decline to do so. It is not a license for a renvoi to the public policy of some other place, even one intimately connected with the parties’ dispute. That is not to say that the ordre publique of the place of performance of the contract or the place of arbitration may be ignored. They may not be. But their consideration is a matter for the arbitral tribunal in deciding the merits of the dispute in accordance with any applicable mandatory laws. Once the arbitral tribunal has rendered its award, recognition and enforcement may be resisted on the basis of public policy only if it is the public policy of the place of putative enforcement.
In its earlier decision in Parsons & Whittemore Overseas Co v Société Générale de l'Industrie du Papier the Second Circuit had emphasized that the New York Convention's ‘public policy defense should be construed narrowly’.Footnote 27 It noted that ‘enforcement of foreign arbitral awards may be denied on this basis only where enforcement could violate the forum State's most basic notions of morality and justice’.Footnote 28 Since in Figueiredo Ferraz v Peru the majority concentrated on ‘public interest’ factors for the purposes of a forum non conveniens analysis, rather than ‘public policy’ for the purpose of an analysis under Article 5 of the Panama Convention, it did not acknowledge that accurate statement of the law.
That State entities that have judgments rendered against them should only have to pay the debt imposed by the judgment at a maximum annual rate of three per cent of the annual budget of that entity is not a precept of morality and justice in the US. It follows that it could not have been a basis for a court in the US to decline to recognize the arbitral award in Figueiredo Ferraz's favour on grounds of public policy, and that it should not have been a basis to avoid a strict approach to public policy by proceeding instead under the banner of public interest factors as part of a forum non conveniens analysis having no basis in either of the New York or Panama Conventions.
V. Forum Non Conveniens as a Rule of Procedure?
The grounds listed in the New York Convention that may justify a refusal to recognize or enforce an arbitral award are exhaustive. Article V(1) states that recognition and enforcement may be refused ‘only if’ one of the conditions there set forth is met.Footnote 29 Article V(2) provides the only other two bases on which recognition and enforcement of an award ‘may also be refused.’Footnote 30 Exactly the same is true for paragraphs 1 and 2 of Article 5 of the Panama Convention. Prior to Figueiredo Ferraz v Peru, the International Commercial Disputes Committee of the Association of the New York Bar considered that ‘application of the forum non conveniens doctrine to awards governed by the New York Convention should be foreclosed by the exclusivity of the grounds for non-enforcement set forth in article V of the Convention’.Footnote 31 Indeed the Second Circuit had itself previously acknowledged that the Article V exceptions to the obligation to recognize and enforce foreign arbitral awards are exhaustive.Footnote 32
Without referring to its previous acknowledgement that the Article V exceptions are exhaustive, in Figueiredo Ferraz v Peru the Second Circuit based its decision to deploy the doctrine of forum non conveniens to decline to confirm or enforce the Peruvian arbitral award on a different provision of the New York and Panama Conventions. That was the provision that says that States 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.’Footnote 33 This language ‘was intended to deal only with the issue of how awards are to be enforced under the treaty, not whether such awards are to be enforced.’Footnote 34
The Second Circuit relied on previous US case law decided in different contexts that observed that forum non conveniens is a doctrine of ‘procedure’.Footnote 35 It held that because the procedure of the enforcement jurisdiction is applicable to the confirmation and enforcement of a foreign arbitral award in that jurisdiction, so, in the US, is the doctrine of forum non conveniens.Footnote 36 In this respect the Second Circuit relied on its own approach in In Re Arbitration between Monegasque de Reassurances (Monde Re) v Nak Naftogaz and the State of Ukraine.Footnote 37 In that case the Second Circuit opined that States parties to the New York Convention:
simply are free to apply differing procedural rules consistent with the requirement that the rules in Convention cases not be more burdensome than those in domestic cases. If that requirement is met, whatever rules of procedure for enforcement are applied by the enforcing State must be considered acceptable, without reference to any other provision of the Convention.Footnote 38
In Monegasque, as in Figueiredo Ferraz, the Second Circuit considered that this was a basis to rely on the doctrine of forum non conveniens to decline to enforce an award altogether.
VI. Distinguishing Monegasque: whether the State was a Party to the Arbitration
There are important differences between Monegasque and Figueiredo Ferraz v Peru. In Monegasque, the Second Circuit acknowledged that the defences to enforcement of an arbitral award listed in Article V of the New York Convention are exhaustive, but noted that this restriction existed only ‘against those who are parties to an arbitration agreement’.Footnote 39 In that case enforcement was sought not only against the award debtor, Nak Naftogaz, but also against the State of Ukraine, which had not been party to the arbitration. The award creditor argued in the enforcement action that the Ukrainian State had extensive control over, and had identity of interests with Nak Naftogaz and that Ukraine was therefore equally responsible for satisfying the award.Footnote 40 That was a point calling for evidence and argument going far beyond the simple enforcement of an arbitral award against the unsuccessful party to the arbitration.Footnote 41 Neither the factual nor legal arguments essential to that point had anything to do with the US.
In connection with enforcement against the State of Ukraine, there are arguments that could fairly be had about whether there was any role for the forum non conveniens doctrine. As against the award debtor, Nak Naftogaz, the position should have been simple. There was an award against it and that award was presented for recognition and enforcement in accordance with the New York Convention. As in Figueiredo Ferraz, the question of convenience should not have arisen in connection with the award debtor. Stating that enforcement is to occur in accordance with local procedure for enforcement does not grant a court with jurisdiction the right to decline to exercise its jurisdiction to enforce an award at all simply because it thinks that enforcement would be more appropriately sought somewhere else.
VII. Forum Non Conveniens applies only to Adjudication of the Merits
Forum non conveniens is—or at least should be—a doctrine concerned with where the merits of a dispute are to be decided. The US Supreme Court has indicated that the question is where the ‘trial’ should take placeFootnote 42 and, even more clearly, that a trial court may dismiss a case on grounds of forum non conveniens if ‘a foreign tribunal is plainly the more suitable arbiter of the merits of the case’.Footnote 43
In Figueiredo Ferraz v Peru, the merits had already been decided in the Peruvian arbitration. The New York court was called upon simply to enforce the award consistently with the international law obligations of the US to do so, and subject only to the limitations contained in the relevant treaties. As Judge Lynch said in dissent:
The adjudication of the merits had already taken place, in the arbitral forum that the parties themselves contractually selected, and the plaintiff has prevailed. What Figueiredo seeks now is simply the right to enforce the award that it has already received from the arbitration panel and that the United States has committed by treaty to honor.Footnote 44
The majority judgment of the Second Circuit in Figueiredo Ferraz v Peru used a doctrine concerning the most convenient place to adjudicate the merits of a dispute to deny recognition and enforcement of an arbitral award that had already adjudicated the merits of the dispute. That is not an approach with any support in the text of the New York or Panama Conventions or in common sense. Nor can any support for it be found in the authorities dealing with forum non conveniens relied upon by the majority of the Second Circuit, since they all dealt with where the merits of a dispute were to be adjudicated.Footnote 45
The majority postulated that:
It is no doubt true that only a United States court may attach a defendant's particular assets located here, but that circumstance cannot render a foreign forum inadequate. If it could, every suit having the ultimate objective of executing upon assets located in this country could never be dismissed because of FNC.Footnote 46
Indeed. If a foreign State has assets in the US and an application for confirmation and enforcement of a foreign arbitral award against that State is brought in the US in connection with those assets, then whatever other reasons might lead any particular application to fail, forum non conveniens should not be one of them.
Peru had assets in New York. Figueiredo Ferraz was the beneficiary of an arbitral award against Peru. The question of whether New York was a convenient forum simply should not have arisen.Footnote 47 If it did, it should have been limited to the question of whether New York was a convenient forum for the enforcement of that award against those assets. Of course it was.Footnote 48
A factual peculiarity in the Figueiredo Ferraz v Peru case must be noted. In the Peruvian arbitration the claimant had presented itself as a Peruvian company, claiming against a Peruvian State entity. In the New York enforcement proceedings, it presented itself as a Brazilian company. That the successful party in the Peruvian arbitration had presented itself in that arbitration as Peruvian evidently influenced the majority of the Second Circuit:
With the underlying claim arising (1) from a contract executed in Peru (2) by a corporation then claiming to be a Peruvian domiciliary (3) against an entity that appears to be an instrumentality of the Peruvian government, (4) with respect to work to be done in Peru, the public factor of permitting Peru to apply its cap statute to the disbursement of governmental funds to satisfy the Award tips the FNC balance decisively against the exercise of jurisdiction in the United States.Footnote 49
If a decision was being made about where most sensibly to adjudicate the merits, the relevance of these factors would be clear. But the merits had already been adjudicated—in Peru—and the only thing the New York court was being called upon to do was to enforce the final award against Peru's assets in New York.
VIII. The Applicability of the New York Convention to Arbitral Awards Foreign to the Enforcement Jurisdiction but Domestic to the Seat of Arbitration
Whether the claimant was Peruvian or Brazilian should have been irrelevant to recognition and enforcement under the New York Convention, even if the entire dispute and all parties to it were Peruvian. The New York Convention applies to ‘foreign’ arbitral awards, but they need be foreign only to the jurisdiction in which recognition or enforcement is sought. Whether the parties are foreign to each other, or foreign to the seat of the arbitration, does not affect the application of the New York Convention.
Professor van den Berg has commented that international enforceability of arbitral awards purely domestic to the place of their seat was a ‘harmless “side-effect” of the broad definition of the scope’ of the New York Convention.Footnote 50 He noted in 1981 that it ‘scarcely occurs in practice’ and had ‘not occurred in any of the reported cases’.Footnote 51 One example where it may occur is where the respondent is a State whose assets may be easier to enforce against abroad than at home. Although the New York Convention applies to the foreign recognition and enforcement of awards purely domestic to the seat of arbitration, it has been said that the Panama Convention does not.Footnote 52
IX. Forum Non Conveniens Applications as a Cause of Complication, Delay and Expense
Where the award debtor has assets in a jurisdiction and enforcement proceedings against the award debtor are commenced against those assets in that jurisdiction, then a forum non conveniens defence should never be successful. The fact that forum non conveniens has now been used to prevent recognition and enforcement of arbitral awards in such circumstancesFootnote 53 means that the point is raised by States and other defendants seeking to resist enforcement in the US. Contrary to the goals of the New York Convention, this adds to the complication, time and cost of the recognition and enforcement process, even in cases where such challenges are ultimately unsuccessful.Footnote 54 If an application for enforcement was brought in circumstances where the award debtor did not have any assets in the jurisdiction, then different considerations might apply,Footnote 55 but where the award debtor does have assets in the jurisdiction, forum non conveniens should not apply. Objections to the invocation of forum non conveniens in response to applications to recognize and enforce arbitral awards thus include practical ones as well as ones of principle.
X. The Swiss Rule on Connection of the Underlying Claim to Switzerland
In other jurisdictions in which the doctrine of forum non conveniens exists it does not appear to have been applied to applications for the recognition or enforcement of arbitral awards. Only jurisdictions in the US appear to have made that error. Although it is often remarked that forum non conveniens is a common law doctrine anathema to civil law jurisdictions, and certainly to the European Court of Justice,Footnote 56 in the context of enforcement of debts against States, Swiss law contains an even stricter jurisdictional rule. It provides that a debt owed by a State, whether under an arbitral award or otherwise, may not be enforced against that State's assets in Switzerland unless there is a sufficient connecting factor between the underlying claim and Switzerland.Footnote 57
A prominent example of the application of this rule was Socialist People's Libyan Arab Republic Jamahiriya v Libyan American Oil Company.Footnote 58 In an arbitration seated in Geneva, LIAMCO obtained an award against Libya. LIAMCO then sought to enforce that award against assets of the Libyan State held in banks in Zurich. The Swiss Federal Supreme Court overturned the first instance decision, which would have allowed this to occur, demanding ‘that the legal relationship involved have a sufficient domestic relationship (Binnenbeziehung) to the territory of Switzerland’.Footnote 59 The court considered that:
there is no reason, and does not substantively make any sense, to permit legal action against foreign States if a somewhat intensive domestic legal relationship is lacking. The interests of Switzerland do not require such a procedure; they could, on the contrary, easily cause political and other difficulties.Footnote 60
That the arbitration was seated in Geneva was not considered to be enough. It would be enough ‘if the debt was contracted or is to be settled in Switzerland or if the foreign State as debtor has engaged in actions suited to establish venue in Switzerland’.Footnote 61 It would be enough if the underlying obligation was to be performed in Switzerland.Footnote 62 The court in LIAMCO was explicit that: ‘The mere fact that assets of the debtor are located in Switzerland cannot create such a relationship.’Footnote 63 This narrow approach, requiring a ‘rattachement suffisant’ of the underlying obligation to Switzerland, has been maintained more recently.Footnote 64 A cynic might regard this unusual approach to enforcement of arbitral awards as the product of heightened sensitivity of the Swiss legal system to the protection of funds held by foreign States in Swiss bank accounts.Footnote 65 It is no longer, however, uniquely Swiss.
XI. An Equivalent Decision in the United Arab Emirates
A recent case decided by the Dubai Court of Cassation appears to follow a similar pattern to the Swiss rule. Dubai is of course a civil law jurisdiction and there is accordingly no mention of forum non conveniens in the judgment. The Dubai court did, however, use domestic jurisdictional rules concerning the circumstances in which an action may be brought against a foreigner not domiciled in the United Arab Emirates to decline to enforce a foreign arbitral award against a foreign State with assets in the jurisdiction. In CCI France v Ministry of Irrigation of the Democratic Republic of Sudan Footnote 66 the Dubai courts were asked to enforce an arbitral award rendered against the government of Sudan in France concerning the non-performance of a contract for the construction of a canal in Sudan. Having not performed the contract, the Government of Sudan did not honour the arbitral award ordering it to pay damages either.
When the award creditor sought enforcement of the award in Dubai, the Dubai Court of First Instance, Court of Appeal and Court of Cassation all declined to do so. The Court of Cassation acknowledged that ‘the UAE acceded to the New York Convention of 1958 which therefore has to be applied to the facts of the dispute’,Footnote 67 but then, like the Second Circuit in the United States, relied on Article III of the New York Convention in observing that ‘arbitral awards are enforced in accordance with the rules of procedure of the forum state’. The Court then relied on the provisions in Article 21 of the UAE Civil Procedure Law governing when the ‘courts shall have jurisdiction to hear actions against a foreigner who does not have a domicile or place of residence’ in the UAE to hold that:
UAE courts have no jurisdiction over cases against an alien who maintains no domicile or residence in the UAE unless the case involves an obligation concluded, performed or was supposed to be performed in the UAE or, in the case of foreign juridical person whose head office is abroad, it has a branch in the UAE and the dispute relates to a matter pertaining to that branch.
In conjunction with this the court also remarked that ‘the international jurisdiction of courts is a matter of public policy’, without explaining what it meant by that or what significance that might have. The court concluded by asserting that its reasoning was consistent with the New York Convention and that the ‘challenges raised are entirely baseless’.
Insofar as the New York Convention is concerned, a similar analysis applies to the approach taken by the courts of Switzerland and Dubai as it does to the approach of the Second Circuit discussed above. When the New York Convention says that awards are to be recognized and enforced in accordance with local procedure, it does not mean that a State can refuse even to entertain their enforcement on the basis that the parties or the claims they made and which were adjudicated on the merits in the arbitral award are unrelated to the putative enforcement jurisdiction. That undermines the very goals of the New York Convention, leaving the award creditor with a valid arbitral award and assets of the award debtor in a State party to the New York Convention, but whose courts are unwilling to grant the enforcement at which the New York Convention is directed because they consider that there is an insufficient connection between their jurisdiction and one or both of the claim underlying the award and the parties to it.
Apart from the Second Circuit in the US, Swiss law and one recent case in the United Arab Emirates, there do not appear to be other prominent examples of courts that have seen fit to decline to recognize an arbitral award against a State or enforce it against assets of that State within the jurisdiction of the court on the grounds that there is an insufficient connection to the jurisdiction in which enforcement is sought, or a greater connection to some other jurisdiction.
XII. Conclusion
Lord Mustill said that the New York Convention:
has been the most successful international instrument in the field of arbitration, and perhaps could lay claim to be the most effective instance of international legislation in the entire history of commercial law.Footnote 68
It provides uniform rules on recognition and enforcement of arbitral awards applicable to 150 States.
Diverging interpretations of the same rules, adopted by different courts in different places, can still serve to defeat the goal of uniformity. That is what happened in the case of Figueiredo Ferraz v Peru. It avoids the rule that the public policy exception applies only to the public policy of the State asked to recognize or enforce the award. It ignores that the rule permitting a national court to enforce an arbitral award in accordance with its own procedure does not authorize the court seized to decline to enforce it altogether on the grounds that it would prefer if enforcement were pursued somewhere else. It places the US in breach of its treaty obligations.
The US Supreme Court has observed of the doctrine of forum non conveniens that ‘The discretionary nature of the doctrine, combined with the multifariousness of the factors relevant to its application … make uniformity and predictability of outcome almost impossible.’Footnote 69 It is therefore a particularly unhappy bedfellow for the New York Convention, of which elsewhere the same court has recalled that the:
goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries.Footnote 70
It is thus to be hoped that the unfortunate and now repeated deployment of the doctrine of forum non conveniens by the Second Circuit in the context of applications for confirmation and enforcement of arbitral awards against award debtors, and their assets within the jurisdiction, will not be followed by other US Circuits, and that the US Supreme Court will eventually overrule it. It is also to be hoped that the approach of courts in Switzerland and Dubai in declining to enforce arbitral awards on the grounds that the claims underlying them lack sufficient connection to the putative enforcement jurisdiction will not gain currency in other civil law jurisdictions, and, given the significant assets held in those two jurisdictions, will be reversed in their own.
