By Matthew H. Adler
A recent decision by the United States Court of Appeals for the Second Circuit represents a dramatic step backward for the enforcement in the United States of international arbitration awards. In Figueiredo Ferraz e Engenharia de Projeto Ltda. v. Republic of Peru, the Second Circuit held that enforcement of international arbitration awards pursuant to a multilateral treaty is subject to the U.S. common law doctrine of forum non conveniens (FNC). Given that FNC relates to the convenience of holding a trial on the underlying merits, rather than the “convenience” of locating and executing upon assets post-judgment, FNC should have little if any relevance to enforcement actions. The Second Circuit’s reasoning is particularly weak because it did not proceed on commonly understood convenience factors at all. Instead, the Second Circuit expressed concern that enforcement in the United States would demonstrate improper respect for a Peruvian statute that would restrict payment of the arbitration award. Therefore, the court deemed it inconvenient for any Peruvian entity that would be entitled to the protective armor of this statute in Peru to be subject to enforcement proceedings in the United States.
The Second Circuit managed to mangle several doctrines at once, creating a number of problems. First, FNC should be a narrowly restricted doctrine that relates to the trial of underlying facts and not to the enforcement of a resulting award or judgment. Once an award is rendered, assets should be deemed convenient to attach wherever they are located, a point that is the essence of enforcement. Second, public policy concerns have nothing to do with FNC; rather, the public policy exception of the New York Convention is a wholly separate section of that treaty. Third, it is not the blanket “public policy” of the United States to defer automatically to the laws of other countries, especially where those laws interfere directly with the multilateral commitment made by both the United States and Peru to enforce international arbitration awards. By cloaking its public policy holding in FNC garb, the Second Circuit misapplied one doctrine, misstated another, and left enforcement of future international arbitration awards—at least in the critical commercial center that is New York—potentially in considerable disarray.