Source: http://arbitrationblog.kluwerarbitration.com/2016/08/17/perspectives-new-york-convention-laws-united-states-forum-non-conveniens-stopper-enforcement/
Timestamp: 2019-04-21 23:09:40+00:00

Document:
The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) is the engine that makes international arbitration an effective mechanism to resolve disputes. The purpose of the New York Convention is to encourage and simplify the recognition and enforcement of foreign arbitral awards. In the case of Figueiredo Ferraz e Engenharia de Projeto Ltda. v. Republic of Peru (“Figueiredo case”), the court stated that since arbitrators have no power to enforce their awards, an arbitral award must first be recognized, that is, reduced to a court judgment, which can be enforced against the debtor’s assets (Figueiredo Ferraz e Engenharia de Projeto Ltda. v. Republic of Peru, 665 F.3d 384, 395 (2d Cir. 2011)).
Under the New York Convention, recognition and enforcement of foreign arbitral awards may be refused only upon proof of one of seven specified grounds. The forum non conveniens doctrine is not one of them.
A principal public interest factor to be weighed in assessing the [forum non conveniens] claim is a Peruvian statute that limits the amount of money that an agency of the Peruvian government may pay annually to satisfy a judgment. […] We agree with the Appellants that the cap statute is a highly significant public factor warranting FNC dismissal (Id. at 386 and 392.).
The forum non conveniens doctrine allows courts to decline to hear a case that would be more convenient to try in another forum, notwithstanding that the court has jurisdiction over the parties and the subject matter of the dispute. It is founded on the court’s inherent authority to manage its own affairs in order to promote the orderly and efficient disposition of cases (Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507 (1947); Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981)).
In the Figueiredo case, the Second Circuit held that Peru was an adequate alternate forum and the fact that Figueiredo might recover less in Peru than it would in the United States did not alter the conclusion that Peru was an adequate alternate forum. A plaintiff’s choice is entitled to greater deference when the plaintiff has chosen its home forum (Koster v. Lumbermens Mut Cas. Co., 330 U.S. at 524). The assumption is less reasonable, however, when the plaintiff is foreign. (Piper Aircraft Co., 454 U.S. at 255-56). Because Figueiredo was a foreign plaintiff, its choice of a U.S. forum received reduced deference. The court must then consider private and public interests that affect the convenience of the parties and the court, and the expenses of holding the trial in the chosen forum ( Norex Petroleum Limited v. Access Industries, Inc., et al., 416 F.3d at 153).
Private interest factors are those aspects of a case that affect the convenience of the litigants. In the Figueiredo case, the court noted that the underlying claim arose from a contract executed in Peru, by a company that claimed to be Peruvian, against an entity alleged to be an organ of the Peruvian government, for work done in Peru. Consequently, the appellate court held that the private interest factors favored dismissal.
Finally, the Second Circuit held that the Peruvian cap statute was a public interest factor to be weighed in its forum non conveniens analysis.
[T]here is nonetheless 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.” (Figueiredo, at 392).
And with that, the Second Circuit held that Peru was an adequate alternate forum.
An application of the forum non conveniens doctrine as an additional ground for refusing to recognize or enforce arbitral awards is contrary to the United States’ treaty obligations. The Second Circuit’s reasoning that the forum non conveniens doctrine is authorized by Article III of the New York Convention is unfortunate.
The purpose of the forum non conveniens doctrine is to make trials “easy, expeditious and inexpensive” (Gulf Oil Corp., 330 U.S. at 508.). Typically, actions to recognize and enforce arbitral awards are summary proceedings and are unlikely to impose a significant burden on a courts’ ability to manage the docket, and thus the application of this doctrine to such a proceeding appears to be misguided.
The court applied the forum non conveniens doctrine broadly, as if it were dealing with the trial of a dispute on the underlying merits. The purpose of a recognition and enforcement action is to reduce the arbitral award to a court judgment that the plaintiff can enforce against the defendant’s assets. There is nothing to suggest that Figueiredo’s choice of a U.S. forum was motivated by reasons of forum-shopping or to harass or cause inconvenience to the defendants. It filed its enforcement action in a forum where the defendants held substantial and identifiable assets.
The Second Circuit misapplied the forum non conveniens doctrine by considering the Peruvian statute in its analysis. It compounded its mistake by making this statute a dispositive factor warranting dismissal.
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. Courts outside of the Second Circuit are not bound by the Figueiredo decision, of course. One day, a circuit split may place the issue before the Supreme Court for resolution if the Second Circuit itself does not first 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.
Surely, by any logical analysis, this is absurd. The question of forum non conveniens applies to Courts seized of the dispute if the dispute is before them. The arbitral tribunal has heard and settled the matter. any issue of Peruvian Law could have been argued before the Arbitrators.
In this case, the Second Circuit has intermeddled with the substance of the Award. It is to be hoped that there are funds somewhere else where there is better respect for the NYC 1958.
Unfortunately this is not the first case in which courts applied forum non conveniens, see for example Monegasque de Reassurances v. Nak Naftogaz of Ukraine and State of Ukraine (311 F.3d 488). What is interesting the draft of the Restatement of the Law Third – international arbitration excludes application of doctrine of forum non conveniens to the awards which are going to be enforced under the NY Convention. Also the International Commercial Disputes Committee of the Association of the Bar of the City of New York (ICDC), does not consider doctrine of forum non conveniens as “a ground for dismissing an action to confirm or enforce an arbitral award governed by the NY Convention”. It seems that courts do not follow these recommendations.
Or is it just a bias against Brazilian parties, as it was very recently shown in the Rio OG by US athletes ?
Herein lies the problem. American courts routinely rely on Article III to invoke grounds for non-enforcement that are not present in Article V–such as statutes of limitations, counterclaims/set-offs, and now forum non conveniens. The fundamental problem is that there is a conflict of laws within the New York Convention: it authorizes enforcement actions to be governed by two sets of laws (1) the provisions of the Convention itself; and (2) the rules of procedure of the state parties. These two sets of laws may conflict: a “procedural rule” may call for an enforcement action to be dismissed, while Article V may call for an enforcement action to be affirmed.
I thought that FNC, like defective service or lack of jurisdiction was a ground for preliminary dismissal of a civil proceeding. How the hell can you apply that principle to an enforcement action of any kind?
Well, I suppose if the core issue in the enforcement dispute arises from the Peruvian cap statute it is more convenient to litigate that issue in Peru. So will the enforcement proceeding in the US simply be stayed pending the resolution of that question? That’s a practical option.

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