Originally from American Review of International Arbitration - ARIA

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After five years of intensely fought International Chamber of Commerce (“ICC”) arbitration, in which we1 represented Bridas Sociedad Anonima Petrola, Industrial y Comercial (“Bridas”), the Argentine claimant, it could be anticipated that the respondent, International Standard Electric Corporation (“ISEC”), a wholly-owned subsidiary of International Telephone and Telegraph Co., would challenge an adverse award.2 When the award was finally released, the question was how and where the challenge would be made. Mexico City was the place of arbitration, and the parties had agreed that the arbitral proceedings would be conducted subject to the mandatory rules of Mexican procedural law. ISEC and ITT are multinational corporations based in New York, and the substantive law of New York was applied to resolve the dispute. Mexico, the United States, and Argentina (among about eight other countries) have ratified the New York Convention,3 and ISEC and ITT had assets in many of those countries.
In my view, the award presented ISEC with the following dilemma: it could either move in Mexico to “annul” or “vacate” the award on whatever grounds might have been available under Mexican procedural law; or it could resist enforcement of the award in every jurisdiction in which Bridas sought to enforce it. ISEC did neither. Instead, it petitioned the U.S. district court in New York to vacate the Mexican award. This might have been a mistake, but it also might have been a tactical move: While Bridas could still seek enforcement of the award in any jurisdiction other than the United States, ISEC was providing itself with zprima facie admissible defense under article VI of the New York Convention — a pending action to vacate the award. The resulting scenario, an entangled international litigation in which more money would have to be spent than was commensurate with the amounts to be recovered, was not appealing.
I decided to move that the U.S. district court dismiss the petition to vacate the award for lack of subject matter jurisdiction and order enforcement of the award. If the challenge to jurisdiction was successful, ISEC’s attack on the award would be limited to the specific grounds permitted by the New York Convention to resist enforcement of foreign arbitral awards. Judge Conboy’s opinion in International Standard Electric Corporation v. Bridas Sociedad Anonima Petrolera, Industrial y Comercial4 fully addressed the jurisdictional issues and other matters of interest regarding enforcement of foreign arbitral awards. ISEC did not appeal the ruling, choosing instead to settle the case.
I. SUBJECT MATTER JURISDICTION TO VACATE FOREIGN ARBITRAL AWARDS

I find it difficult to say what led me in those days to take for granted that only the courts of Mexico had jurisdiction to annul or vacate the award; probably it was that old readings of Kelsen, Hart, and Ross make me think of arbitral awards, judicial orders, statutes, and similar material as “norms” or “directives” created within a national legal system that can only be annulled or destroyed within that national legal system pursuant to its procedural law. The courts of other countries may or may not recognize what is claimed to be a “norm” belonging to a foreign national system; if they recognize it, they can choose not to cooperate in its enforcement. There, however, they would have to stop.5
The first thing I did after receiving ISEC’s petition to vacate the award was, of course, to look again at the New York Convention, where I found two references to the setting aside of arbitral awards. Both leave that decision to the competent authority “of the country in which, or under the law of which, the award was made.”6
When I turned to the records of the working sessions of 1958,7 I noted the conflicting views with respect to the definition of foreign arbitral awards. The United States had strongly advocated the so-called “territoriality principle,” holding that only awards made in the territory of another country would be regarded as foreign for the purposes of the Convention, and that the country in which the arbitration took place pursuant to the wishes of the parties for the exercise of judicial supervision over arbitral proceedings would be the proper place.8