Two to Tango: Domestic Grounds for Vacatur Under the New York Convention - Chapter 08 - International Arbitration and the Courts

Author(s):

Harout Jack Samra

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32 pages

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Published:

September, 2015

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Originally from International Arbitration and the Courts

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I. INTRODUCTION

Over the last decade, international arbitration has provided ample

fodder for mystifying Supreme Court rulings and rampant divisions among

the circuit courts. These divisions, some seemingly irreconcilable, are

deeply troublesome as they lead to the sort of venue or choice-of-law

gamesmanship that plagues litigation. From the viability of the doctrine of

manifest disregard of the law in light of the Supreme Court’s command in

Hall Street v. Mattel,1 to the more fundamental question of whether the

grounds for vacatur enumerated in the Federal Arbitration Act2 (the “FAA”

or the “Act”) are available at all, selecting the locus of an arbitration has

acquired even greater, more far-reaching significance than it previously

possessed, as that selection may bear directly on which defenses against an

adverse award are available. These factors are particularly true in the

context of international arbitration, which is also directed by the United

Nations Convention on the Recognition and Enforcement of Foreign

Arbitral Awards (the “New York Convention”).3 This article will address

this last concern in particular.

In international arbitration, several circuit courts have diverged

rather drastically as to what bases are available for vacating arbitration

awards. This confusion, largely rooted in the challenge of reconciling

the New York Convention and the FAA, strikes at the core of the

essential balance that must be maintained in order for arbitration to

remain a viable tool for dispute resolution: the balance between the

finality of the award and the procedural safeguards provided to parties

who, quite literally, get less than what they bargained for.4 Several

courts have wrestled with this question and reached, at least on the

surface, differing conclusions. Nevertheless, upon close analysis, a

compelling argument can be made that these two schemes are not in

any way inconsistent, but rather complementary. In Yusuf Ahmed

Alghanim & Sons v. Toys “R” Us, 5 the Second Circuit Court of

Appeals engaged in such analysis and reached that very conclusion.

The state of the law in the other circuits is in a greater degree of flux.

While based on a broad reading, one might conclude that the Eleventh

Circuit, in Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte,6

addressed this issue and reached the opposite conclusion from the

Second Circuit. As we shall discuss, infra, the Eleventh Circuit’s

rationale is glaringly incomplete, as it fails to address Article V(1)(e)

of the New York Convention, through which the Second Circuit

incorporated domestic grounds.

As the title of this article suggests, “it takes two to tango” insofar as

consideration of motions to vacate an international arbitration award

rendered in several specific circumstances must be made by employing

the FAA and the New York Convention in tandem, each supporting the

other. To this end, I will first address each of the schemes in turn,

followed by a discussion of the manner in which they have been applied