At its annual meeting, the American Bar Association’s House of Delegates adopted Resolution 107c, which addresses reliance on the doctrine of forum non conveniens to refuse to enforce an arbitral award in the United States. The Resolution states:
RESOLVED, That the American Bar Association affirms that the U.S. common law doctrine of forum non conveniens is not an appropriate basis for refusing to confirm or enforce arbitral awards that are subject to the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the Inter-American Convention on International Commercial Arbitration and that refusal on that basis is not consistent with U.S. treaty obligations under these Conventions and U.S. implementing legislation.
The Resolution was proposed, in part, as a response to a Second Circuit case from 2011, Figueiredo Ferraz E. Engenharia De Projeto Ltda. v. Republic of Peru, 665 F.3d 384 (2d. Cir. 2011). In that case, the Second Circuit held that forum non conveniens applied to bar a consulting firm from seeking to enforce an award in the United States that had been obtained in the Republic of Peru.
Figueiredo, a consulting firm, had contracted with a Peruvian government agency to provide advice regarding the expansion of drinking water and sewer services in Peru. The consulting firm incurred significant fees and expenses beyond the lump sum price agreed-to and sought to recover those fees from the agency. It obtained an award in a Peruvian arbitral tribunal and sought to execute against a Peruvian sovereign bond offering in New York.
The government moved to dismiss the action in New York on forum non conveniens grounds. It argued that a Peruvian statute imposes a limit on the amount that a government agency may allocate to satisfy a judgment to three percent of the government agency’s budget, and therefore, by bringing an action in New York, Figueiredo was attempting to avoid application of the statute. Both parties agreed that the statute would not apply if the judgment were paid by funds obtained abroad. The District Court refused to dismiss the action, and the Second Circuit allowed an interlocutory appeal.
The Second Circuit reversed, holding that the statute was “a highly significant public factor” warranting dismissal. It did not decide whether forum non conveniens could ever be asserted in a case brought pursuant to the New York Convention, and it did not decide that the United States was an inconvenient forum. It found that Peru was an adequate forum, because some assets were located there.
Judge Lynch, in dissent, argued that forum non conveniens should never be available as a defense to an action brought under the New York Convention because it is not listed as a defense in the Convention, itself, and because it would significantly undercut the Convention’s purpose. Second, he also argued that even if it were available as a defense, it should not have operated to bar the New York action, because the action was a summary proceeding brought only to execute on assets located in New York. Indeed, he argued that dismissing the action allowed Peru to avoid its obligation to honor the award.
The case has received considerable criticism from authorities and commentators and was an area of concern noted by members of the American Bar Association’s Section of International Law, International Litigation Committee, among others. The Resolution adopted by the House of Delegates echoes the first of Judge Lynch’s points, and attempts to confirm that forum non conveniens is not available to avoid enforcement of an arbitral award in the United States.