Under the New York Convention, recognition and enforcement of foreign arbitral awards may be refused only upon proof of one of seven specified grounds. “Forum non conveniens” (FNC) is not one of the seven grounds. Nonetheless, FNC has been invoked by litigants in the United States seeking to enforce or nullify arbitration awards, and a split in the circuits has resulted.
First, a brief explanation of FNC. The FNC doctrine allows trial courts to decline to hear a case that would be more convenient to try in a foreign forum, notwithstanding that the court has jurisdiction over both the parties and the subject matter of the dispute.2
Because both personal and subject matter jurisdiction exists, the use of FNC to dismiss enforcement actions under the New York Convention has been the subject of criticism.2 Hence, it should not be surprising that courts have diverged on the doctrine’s applicability in enforcement proceedings. We highlight here the split between courts in the D.C. and Second Circuits.
In Belize Social Development Ltd. v. Government of Belize, 5 F. Supp. 3d 25 (D.C. D.C. 2013), Belize Social Development Ltd. (“BSDL”) obtained an arbitral award in London against the Government of Belize (“GOB”) and sought to enforce the award under the New York Convention.
The GOB moved to dismiss the petition on several grounds including FNC. But it had a problem. In TMR Energy Limited v. State Property Fund of Ukraine, 411 F.3d 296 (D.C. Cir. 2005), the D.C. Circuit had held that a FNC defense was not available where there was no other forum in which a successful arbitrant could reach a losing arbitrant’s property and that was the case when the losing arbitrant was a foreign nation. The district court acknowledged the conflict between TMR Energy and the Second Circuit decisions in In re Arbitration Between Monegasque de Reassurances S.A.M. v. Nak Naftogaz of Ukraine, 311 F.3d 488 (2d Cir.2002) (“Monde Re”) and Figueiredo Ferraz E Engenharia de Projeto Ltda. v. Republic of Peru, 665 F.3d 384 (2d Cir.2011), but, obviously, decided to follow TMR Energy since it “is the controlling law in our Circuit.” Id. at 34.
The district court then explained that under TMR Energy, it was required to conduct a FNC analysis and balance the private and public interest factors only if an adequate alternative forum exists. Id. at 34. “Unfortunately for GOB, there is no adequate alternative forum for this case because ‘only a court of the United States (or of one of them) may attach the commercial property of a foreign nation located in the United States.’” Id. at 34, quoting TMR Energy, 411 F.3d at 303. Continuing, the district court held that “[e]ven if GOB has no attachable property in the United States at this time, . . . ‘it may own property here in the future, and [BSDL’s] having a judgment in hand will expedite the process of attachment.’” Id. at 34, quoting TMR Energy, 411 F.3d at 303.
The D.C. Circuit affirmed the district court rejecting the FNC argument for the reasons articulated by the district court. 794 F.3d 99, 105 (D.C. Cir. 2015).
In Figueiredo Ferraz Consultoria E Engenharia de Projeto Ltda. v. Republic of Peru, 655 F. Supp. 2d 361 (S.D.N.Y. 2009), Figueiredo sought to confirm a $22-million arbitral award against the Republic of Peru. Peru moved to dismiss the petition on several grounds, including FNC. Relying on the D.C. Circuit’s decision in TMR Energy, the district court denied the motion finding, among other things, that there was no adequate alternative forum where Figuereido could bring its enforcement action because Figueiredo could not reach the Republic’s assets in the United States unless it brought an action in U.S. courts. Figueiredo, 655 F. Supp. 2d at 376.
On appeal, the Second Circuit reversed the district court and, in doing so, rejected TMR Energy. Figueiredo Ferraz e Engenharia de Projeto Ltda. Republic of Peru, 665 F.3d 384 (2d Cir. 2011).
In considering the factor of the adequacy of an alternative forum, the District Court concluded that although Peruvian law permits execution of arbitral awards, “only a United States court ‘may attach the commercial property of a foreign nation located in the United States,’ ” id. at 375–76 (quoting TMR Energy Ltd. v. State Property Fund of Ukraine, 411 F.3d 296, 303 (D.C.Cir.2005)). In deeming a Peruvian forum inadequate for the stated reason, we think the District Court erred. 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. Figueiredo, 665 F.3d at 390.
. . .
Where adequacy of an alternative forum is assessed in the context of a suit to obtain a judgment and ultimately execution on a defendant’s assets, the adequacy of the alternate forum depends on whether there are some assets of the defendant in the alternate forum, not whether the precise asset located here can be executed upon there. See Norex Petroleum Ltd. v. Access Industries, Inc., 416 F.3d 146, 158 (2d Cir.2005) (adequacy of alternate foreign forum does not depend on “identical remedies”). And the fact that a plaintiff might recover less in an alternate forum does not render that forum inadequate. See Alcoa Steamship Co. v. M/V Nordic Regent, 654 F.2d 147, 159 (2d Cir.1980) (alternate forum not inadequate although plaintiff might recover only $570,000 there, rather than $8 million in the United States). Figueiredo, 665 F. 3d at 390-391.
The Second Circuit held that “[t]o the extent that the District of Columbia Circuit in TMR Energy considered a foreign forum inadequate because the foreign defendant’s precise asset in this country can be attached only here, we respectfully disagree.” Figueiredo, 665 F. 3d at 391.
Circuit splits are eventually resolved by the Supreme Court and that may happen here. The GOB has petitioned the Supreme Court for review. In an order dated March 28, 2016, the Supreme Court invited the Solicitor General to file a brief expressing the views of the United States on the subject. That brief has not been filed as of this writing. Justice Ginsburg wrote the opinion in TMR Energy when she was on the D.C. Circuit. That fact may add an extra measure of interest in the resolution of the circuit split should the Court accept the petition.