Originally from Dispute Resolution Journal

INTERNATIONAL

Dismissal and Forum Non Conveniens

The 2nd Circuit held that a federal district court must consider whether foreign law is a principal “public interest” factor in assessing whether to dismiss a petition to enforce an international award for forum non conveniens (FNC). At the same time, it ruled that the court cannot dismiss on the ground that assets of a foreign defendant in the U.S. can only be attached here.

Plaintiff Figueiredo Ferraz Engenharia de Projeto contracted to prepare engineering studies on water and sewage services in Peru. In their contract “[t]he parties agree[d] to subject themselves to the competence of the Judges and Courts of the City of Lima or the Arbitration Proceedings, as applicable.” Figueiredo commenced arbitration in Peru over a fee dispute. The tribunal awarded Figueir edo over $21 million, including $5 million in damages, interest, and cost of living adjustments. Peru challenged the award in the Court of Appeals in Lima, but it did not prevail.

Figueiredo petitioned a federal district court in New York to enforce the award under the Inter-American Convention on International Commercial Arbitration (the Panama Convention). Peru moved to dismiss on three grounds: lack of subject matter jurisdiction, FNC, and international comity. Peru pointed out that it had a law that capped judgments against a state agency to 3% of the agency’s annual budget.

The district court granted the motion to confirm the award. Peru filed an interlocutory ap peal. After certifying the appeal, a divided panel of the 2nd Circuit reversed and remanded with directions to dismiss the petition.

The 2nd Circuit rejected the district court’s rationale for deciding that Peru was an inadequate alternative forum, which was that “only a U.S. court may attach the commercial property of a foreign nation located in the United States.” Although the District of Columbia Cir cuit had applied the same reasoning in the TMR Energy case, the 2nd Circuit said it disagreed with that approach, explaining that this “circumstance cannot render a foreign forum inadequate. If it could, every suit having the ultimate ob jective of executing upon assets located in this country could never be dismissed because of FNC.”

The appeals court then established the approach district courts in the 2nd Circuit should take to determine the adequacy of an alternate forum. It said that this determination depends on whether there are “some assets of the defendant in the alternate forum,” not whether the precise asset located here can be executed upon there.

The 2nd Circuit went on to find that a sovereign nation’s statute capping the rate of judgments against its agencies was “a highly significant public factor” warranting dismissal based on FNC. It also found that the Peruvian courts are “the only tribunal[s] empowered to speak authoritatively” on the meaning and operation of the Peruvian statute.