INTRODUCTION AND SUMMARY OF ARGUMENT
This case concerns the circumstances under which a United States court should exercise its discretion to enforce a foreign arbitral award that has been set aside by the courts of the country where the arbitration took place.2 A century ago, such discretion did not exist. The prevailing regime governing the enforcement of foreign arbitral awards rested on the so-called double exequatur requirement. See I Gary B. Born, International Commercial Arbitration 62 (2009). According to this requirement, before an arbitral award could be enforced, it first had to be confirmed in the national courts of the country where the arbitration took place (also known as the "arbitral forum"). This approach was reflected in the Geneva Convention of 1927, the dominant multilateral treaty governing the enforcement of foreign arbitral awards at that time.3 Convention on the Execution of Foreign Arbitral Awards, Sept. 26, 1927, 92 L.N.T.S. 302 [hereinafter "Geneva Convention"]. Under that Convention, enforcement of an award "shall be refused if. . . [it] has been annulled in the country in which it was made." (emphasis added). Id. at art. 2(a). Regional treaties in Latin America governing the enforcement of foreign arbitration awards, including the Montevideo Conventions of 1899 and 1940, contained similar requirements. See Horacio A. Grigera Naón, Arbitration in Latin America: Overcoming Traditional Hostility (An Update), 22 Miami Inter-Am L. Rev. 203, 253 nn.162-63 (1991).
Later treaties abandoned this double exequatur requirement. The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (known more commonly as the "New York Convention") reflected this development. The New York Convention's "basic thrust was to liberalize procedures for enforcing foreign arbitral awards." Parsons & Whittemore Overseas Co. v. Societe Generale De L'Industrie du Papier (RAKTA), 508 F.2d 969, 973 (2d Cir. 1974). Among its liberalized procedures, the New York Convention dismantled the requirement of double exequatur. See Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys "R" Us, Inc., 126 F.3d 15, 22 (2d Cir. 1997).
Instead, it permitted courts to enforce an award even when an annulment action was pending in the arbitral forum.4 Compare Convention on the Recognition and Enforcement of Foreign Arbitral Awards, art. VI, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 3 [hereinafter "New York Convention"], with Geneva Convention, art. 1(d). It also provided that "enforcement of the award may be refused. . .
where. . . [t]he award. . . has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made." New York Convention, art. V(1)(e) (emphasis added). Compare Geneva Convention, art. 2(a) ("shall be refused").5 Taken together, Article VI and Article V(1)(e) of the New York Convention "eradicat[ed] the requirement that a court in the rendering state recognize an award before it could be taken and enforced abroad."
Toys "R" Us, 126 F.3d at 22.
The Inter-American Convention on International Commercial Arbitration ("the Panama Convention") built on this model. Inter-American Convention on International Commercial Arbitration, Jan. 30, 1975, 104 Stat. 448,14 I.L.M. 336 [hereinafter "Panama Convention"]. At the time of its completion in 1975, there was a pressing need for such a regional convention: only two nations in Central and South America adhered to the New York Convention. See John P. Bowman, The Panama Convention and Its Implementation Under the Federal Arbitration Act 20 n.59 (2002). Although the Panama Convention does not track the New York Convention in all respects, their enforceability provisions are virtually identical.6 Specifically, the Panama Convention permits courts to enforce an award while an annulment action is pending in the national courts of the arbitral forum. Compare Panama Convention, art. VI, with New York Convention, art. VI.
Likewise, the Panama Convention provides that enforcement of the award "may be refused. . . if. . . the decision. . . has been annulled or suspended by a competent authority of the State in which, or according to the law of which, the decision has been made." Panama Convention, art. V(1)(e). Compare New York Convention, art. V(1)(e).
Under Article V(1)(e) of the Panama and New York Conventions, district courts have limited discretion to enforce awards annulled by the courts of the arbitral forum. While this Circuit has not previously articulated factors to guide the exercise of that discretion, they can be adapted from its decision in Europcar Italia S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, 316 (2d Cir. 1998). The factors include the pro-enforcement bias of the applicable convention, the grounds of annulment, the characteristics of the annulment proceedings, and the likelihood that the annulment order would be entitled to recognition. Application of these factors should be reviewed for abuse of discretion. See Europcar, 156 F.3d at 316-17.
In this case, the district court properly exercised its limited discretion under the Panama Convention to enforce an arbitral award vacated by Mexico's courts.7
Indeed, not just some but all of the relevant factors favor enforcement: the award was annulled on parochial grounds, upon the request of a state-owned entity litigating in its home courts, under circumstances casting doubt on whether the annulment order would be recognized. Those factors, coupled with the Panama Convention's pro-enforcement bias, supply exceptional circumstances justifying the district court's decision to enforce the award.
Peter B. Rutledge