Opinion ID: 787187
Heading Depth: 3
Heading Rank: 3

Heading: Effect of Consorcio's Participation in the Arbitral Proceeding

Text: 36 Consorcio argued below that, pursuant to Article (V)(1)(a), the award should not be confirmed. Article V(1)(a) states that a court may refuse to confirm an award if, inter alia, the [arbitration] agreement is not valid under the law to which the parties have subjected it. Convention, art. V(1)(a). Consorcio argued that a Venezuelan court has determined that the arbitration agreement is not valid under Venezuelan law, the substantive law that the parties agreed would apply in any arbitration. The district judge rejected this argument on the grounds that Consorcio had participated in the arbitral proceeding and had therefore waived its right subsequently to challenge the panel's decisions. Consorcio argues on appeal that a party's participation in an arbitral proceeding does not constitute a waiver by that party of its right to challenge the proceeding in federal court. 37 We agree with Consorcio that it is not precluded from challenging the panel's decision merely because it participated in the arbitral proceeding. If we adopted the district court's position, a party facing arbitration would be in an untenable position. On the one hand, it could refuse to participate in the arbitral proceeding altogether to preserve its ability to challenge any adverse ruling in court; by doing so, however, the party would effectively forfeit any ability to present the merits of its case to the arbitrators. On the other hand, if the party were to participate in the proceeding, it would lose any ability to challenge the arbitrator's ruling. Nothing in the Convention suggests that parties must make such a choice, and we can find no case that supports this preclusive rule. 5 38 For this reason, we remand this case to the district court so that it may consider for the first time the merits of Consorcio's argument that the Venezuelan court's ruling favors non-confirmation of the award. We note that, even if the court finds that Article V(1)(a) applies, the court must exercise its discretion to determine whether confirmation nevertheless is appropriate. 6 The court should balance the Convention's policy favoring confirmation of arbitral awards against the principle of international comity embraced by the Convention. Europcar Italia, S.p.A. v. Maiellano Tours, 156 F.3d 310, 317-18 (2d Cir.1998) (identifying non-exclusive factors that a court should consider). 7 39