U.S. Enforcement of International Arbitral Awards: Is Forum Non Conveniens a Viable Defense?
Are there circumstances in which forum non conveniens is a viable defense in the U.S. to a petition to confirm an arbitration award that is subject to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”)? Could or should a U.S. court having jurisdiction abstain from taking up the matter in favor of a foreign court on the grounds that the U.S. court is “inconvenient”? A federal court in the D.C. Circuit recently reaffirmed that it should not. See, Entes Indus. Plants, Constr. & Erection Contr. Co. v. Kyrgyz Republic, No. 18-2228, 2019 U.S. Dist. LEXIS 179473 (D.D.C. Oct. 17, 2019).
It appears that, while the forum non conveniens defense cannot be categorically excluded as a matter of law, the unavoidable showstopper in the doctrinal analysis that is required is a simple point: no court other than a U.S. court could afford the petitioner the sole remedy that it seeks -- i.e., a U.S. judgment with which the award could be enforced in the United States.
In the context described, and given that the New York Convention restricts the grounds for denying confirmation of a qualifying international arbitral award to a very few enumerated bases, see NY Convention Art. V, it seems reasonable to ask whether a forum non conveniens defense should simply be a non-starter as a matter of law. The Second Circuit has rejected that contention where the New York Convention applied. See, In re Arbitration between Monegasque de Reassurances S.A.M. v. NAK Naftogaz of Ukraine, 311 F.3d 488, 495-96 (2d Cir. 2002). It pointed out that Art. III of the New York Convention provides that “the rules of procedure where the award is relied upon” should be applied. Id. at 496. And since the forum non conveniens doctrine is procedural, it arguably should not be barred from consideration. Courts in the D.C. Circuit, including the Entes court, have largely acted accordingly.[1]
The Context
Entes was a Turkish corporation that obtained an arbitration award against the Kyrgyz Republic’s Ministry of Transport & Communications based on an alleged breach of a contract for the rehabilitation of a road connecting the two largest cities in Kyrgyzstan. See id. at *1, *2. The parties had a written arbitration agreement, and Entes commenced an arbitration proceeding in Bishkek (Kyrgyzstan’s capital) in January 2009. It received an award for US$16.6 million plus interest from May 13, 2006.
Entes eventually filed a petition to confirm and enforce that award in the D.C. District Court in late September 2018. See id. at *5. The Ministry and the Kyrgyz Republic, both named as respondents, sought to dismiss the petition based upon, among other things, the doctrine of forum non conveniens. See id.
The D.C. federal court had jurisdiction under 28 U.S.C. § 1330 and the Foreign Sovereign Immunity Act’s arbitration exception (28 U.S.C. § 1605(a)(6)). See id. at *6.
Forum Non Conveniens Defense
The respondents’ invocation of the doctrine of forum non conveniens required the court to consider two questions: “(1) whether an adequate alternative forum for the dispute is available and, if so, (2) whether a balancing of private and public interest factors strongly favors dismissal.” Id. at *10. These questions were to be considered with “a substantial presumption in favor of a plaintiff’s choice of forum.” Id.
Respondents’ inability to show an adequate alternative forum for the dispute was dispositive. In that regard, the D.C. District Court reiterated what the D.C. Court of Appeals had pointed out nearly 15 years before -- i.e., only a court in the United States may attach a foreign nation’s commercial property located in the U.S. (For that matter, the same is true with regard to the commercial property of any foreign entity.) Entes, 2019 U.S. Dist. LEXIS 179473 at *11-*14, citing TMR Energy Limited v. State Property Fund of Ukraine, 411 F.3d 296 (D.C. Circ. 2005). Thus, respondents plainly could not show that a court outside the United States could provide the particular remedy that Entes sought -- a U.S. judgment upon which to enforce the arbitral award in question in the United States.
While the D.C. Circuit did not say in TMR that the doctrine of forum non conveniens “could never apply in an arbitration enforcement proceeding,” id. at *15, it “laid down a practical barrier to ever obtaining dismissal of a petition to enforce an [international] arbitration award . . . based on forum non conveniens.” Id. When a foreign entity seeks to enforce an arbitral award against another foreign entity “that might -- even in the future -- hold property in the United States,” the TMR decision requires that a court in the D.C. Circuit not dismiss a petition to confirm an arbitration award on the basis of forum non conveniens, id. at *15-*16, because “[n]o other court system can provide Entes with a judgment that it can use to attach a property that is, or may someday be, held in the United States,” id. at *16.
[1] However, the Entes court noted that the D.C. Circuit had said in two unpublished opinions in 2016 that “[i]n TMR we held that the doctrine of forum non conveniens does not apply to actions in the United States to enforce arbitral awards against foreign nations.” See id. at *16n.3.