Arbitration. Enforcement of Award. Personal Jurisdiction. Forum Non Conveniens. District court grants petition for confirmation of a foreign arbitral award in connection with a dispute between two foreign entities, ruling that (1) the U.S.-based activities of Defendant's affiliates can be attributable to Defendant for purposes of finding personal jurisdiction; and (2) the nationalities of the parties does not have much relevance in the particular context of a proceeding to confirm an arbitral award.
Petitioner Sonera Holding B.V. ("Sonera") was organized under the laws of the Netherlands. Respondent Cukurova Holding A.S. ("Cukurova") was a joint stock corporation organized under the laws of the Republic of Turkey. The dispute arose out of a Letter Agreement and a draft share purchase agreement purporting to require Cukurova to deliver to Sonera shares in Turkcell Holding AS, which owned the largest mobile telephone service in Turkey. The Letter Agreement contained an arbitration clause, which provided that all disputes arising from the Agreement were subject to the rules of the International Chamber of Commerce and designated Geneva, Switzerland as the place of arbitration. Sonera claimed a breach by Cukurova, and an arbitral tribunal in Switzerland awarded Sonera $932 million in damages.
Sonera sought confirmation of the award in the United States District Court for the Southern District of New York pursuant to the provisions of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") as implemented by the Federal Arbitration Act ("FAA"), 9 U.S.C. § 201, et seq. Cukurova objected to confirmation, citing the absence of personal jurisdiction, forum non conveniens, and irregularities in the Swiss arbitration. For the following reasons, the court granted the petition for confirmation.
The court first evaluated whether personal jurisdiction existed over Cukurova, which was necessary under the New York Convention to confirm a foreign arbitral award. The court evaluated the evidence Sonera presented and concluded that Cukurova and its affiliates were engaged in business activity in New York that was sufficiently continuous and systematic as to give rise to general jurisdiction under the state's long-arm statute and the Due Process Clause. The commercial contacts on which the court relied included Cukurova's negotiations with two New York-based private equity funds regarding the sale of a portion of a television channel; Cukurova's SEC-registered secondary offering of approximately 64 million American Depository Shares in Turkcell on the New York Stock Exchange; Cukurova's sale of 90 million Turkcell shares to an underwriter for resale to foreign investors, including U.S. investors; U.S. activities of its subsidiary Turkcell; and the Manhattan location of two Cukurova affiliates, one of which facilitated trade between U.S. companies and Cukurova and described itself as Cukurova's "gateway to the Americas."
In resisting personal jurisdiction, Cukurova argued mainly that the U.S.-based activities of its affiliates cannot be attributed to it, because these entities did not have the power to bind Cukurova and did not have an agency relationship with Cukurova. The court explained that "an agency relationship need not be formalized in order to give rise to personal jurisdiction." Rather, continued the court, "it is enough that the New York-based affiliate renders services on behalf of the foreign corporation that go beyond mere solicitation and are sufficiently important to the foreign entity that the corporation itself would perform equivalent services if no agent were available."
Next, the court addressed Cukurova's argument that there were irregularities in the Swiss arbitration. Cukurova argued that the award was unenforceable because the arbitrators exceeded the powers granted by the Letter Agreement by awarding damages to Sonera for Cukurova's non-delivery of Turkcell shares (an obligation that fell under the draft share purchase agreement and not the Letter Agreement). The court responded that this was really a thinly-veiled attempt at claiming the dispute was not arbitrable. The court promptly rejected the argument, explaining that "it does not sanction second-guessing the arbitrator's construction of the parties' agreement." Cukurova also argued that it was "denied an opportunity to present its case" because the arbitrators refused to hear live testimony of Cukurova's only witness to the parties' negotiations. The court rebuffed this argument noting that Cukurova was permitted to present the testimony of its witness in written form and the arbitrators had accepted it as truthful.
Finally, the court addressed Cukurova's forum non conveniens argument. The court observed that, within the Second Circuit, the doctrine "does apply to proceedings to confirm an arbitration and enforce its award." However, the court was not persuaded that it should exercise its discretion to dismiss the petition for confirmation on forum non conveniens grounds. In particular, the court noted that the nationalities of the parties, i.e., both non-U.S. entities, did not have much relevance in the particular context of a proceeding to confirm an arbitral award. The court stated that "the New York Convention and the FAA were both intended to encourage international commerce and to make an American forum as hospitable to enforcement of foreign arbitral awards as we hope foreign venues will be to enforcement proceedings begun by American businesses." In addition, in response to Cukurova's reliance on Turkey's significant interest in the dispute, the court stated as follows: "Cukurova having executed an agreement that provided for foreign arbitration and foreign enforcement of any arbitral award, it is difficult to find that Turkey's interest in its telecommunications industry should trump any of the other public policy interests that support foreign enforcement of foreign arbitral awards."