Third-party litigation and arbitration funding is increasingly being utilized in the United States. Are the corresponding financing costs recoverable in arbitrations?
An ex parte proceeding in a U.S. court to “recognize,” “enforce,” or “confirm” an arbitration award against a foreign sovereign is improper. The U.S. Court of Appeals for the Second Circuit issued a lengthy and instructive decision to that effect in Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venez., 863 F.3d 96 (2d. Cir. 2017). Its lesson is that in the United States, the only way to enforce (or recognize or confirm) an arbitral award issued against a sovereign entity by the International Centre for Settlement of Investment Disputes (“ICSID”) (and probably otherwise as well) is in compliance with the Foreign Sovereign Immunities Act (“FSIA”).
The drive in the Second Circuit to clarify the rules regarding confirmation and enforcement of various types of arbitration awards continues. The latest addition is the decision in BSH Hausgerate GmbH v. Kamhi, 17 Civ. 5776, 2018 U.S. Dist. LEXIS 34597 (S.D.N.Y Mar. 2, 2018) (Sweet, J.). Federal district courts have occasionally decided that an arbitration award is ambiguous or incomplete or indefinite, and therefore should be remanded to the arbitrator for clarification rather than confirmed by the court. Judge Sweet seeks to bring clarity to the law concerning the judicial treatment of international arbitral awards in particular, holding that “ambiguity” is not a cognizable basis for refusing to enforce (or “confirm”) such an award.
Forum non conveniens is one of several judicial abstention doctrines, applied from time to time by U.S. courts, that permit a court to dismiss (without prejudice) a plenary action in its discretion. In a forum non conveniens case, the court’s jurisdiction is not in question, but the relative legal “inconvenience” of having the matter heard in that court, as opposed to another court of competent jurisdiction, is deemed sufficient for the U.S. court to abstain from exercising its authority. A defendant seeking abstention on forum non conveniens grounds typically is required to establish that an adequate alternative forum is available, and that a balancing of interests strongly favors dismissal by the U.S. court in favor of that other forum.
But can – or should – such a court-made doctrine properly be a defense in a non-plenary proceeding brought by an arbitration awardee seeking enforcement vis-à-vis assets in the United States? Could a court outside the U.S. grant that remedy instead? And in any case, do the applicable international conventions afford U.S. courts the latitude to enforce arbitral awards in their discretion?
For nearly thirty years, federal and state appellate courts have been split on the issue of whether the Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil and Commercial Matters, November 15, 1965 (“Hague Service Convention” or “Convention”), permits service of process by mail. In Water Splash, Inc. v. Menon, 197 L. Ed. 2d 826, 830 (2017), the Supreme Court resolved that issue, holding that the Convention does not prohibit such service.
Published in Law 360 (April 23, 2017)
We recently began a series of articles in which we ask: Is “class arbitration” viable given the essential nature of arbitration, or is it an oxymoron? (The premise here is that “class arbitration” signifies the utilization of a Federal Rule of Civil Procedure 23 class action protocol in an arbitration proceeding.) In this article, we examine possible bases for the viability of class arbitration. Spoiler alert: they do not hold up to scrutiny.
“Class arbitration” — the utilization of a class action mechanism in an arbitration proceeding — is considered by some to be the unicorn of ADR; desirable but elusive. Another view is that it is the Frankenstein’s monster of ADR – an anomalous hybrid of disparate parts that comprise a disconcerting and ultimately nonviable creation. And so let us ask, is “class arbitration” an oxymoron? Should it be viable given the essential nature of arbitration? And whither the emperor’s jurisprudential clothes?
In CBF Industria de Gusa S/A v. AMCI Holdings, Inc., 2017 U.S. App. LEXIS 3815 (2d Cir. Mar. 2, 2017), the U.S. Court of Appeals for the Second Circuit provides something of a primer regarding enforcement in the United States of a foreign-issued arbitral award, which is subject to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) and Chapter 2 of the Federal Arbitration Act (“FAA”). In an effort to clear up confusion, the court (i) defined several pertinent terms and explained their significance, (ii) urged practitioners and judges to use consistent terminology, (iii) examined when a district court sits in primary jurisdiction versus in secondary jurisdiction, (iv) explained the differences between a non-domestic arbitral award and a foreign arbitral award, and (v) described the treatment of each when brought to a U.S. district court for enforcement.
You presented your case, and the arbitration tribunal came back with a reasoned decision and an award in your favor. You even had the award confirmed here in the United States. You want to enforce it. But you find that the award-debtor’s assets are all held in or have been moved to a country that is not a party to the New York Convention. Now what?