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Article contents
Recognition and Enforcement of State Contract Awards in the United States: A Restatement
Published online by Cambridge University Press: 27 February 2017
Extract
There is an abundant literature on the subject of state contract awards, including matters concerning recognition and enforcement, and related issues of sovereign immunity. For the most part, however, the studies that have been published tend to focus on spectacular situations involving bitter and protracted litigation in the aftermath of such well-known awards as those between the SEEE and Yugoslavia, SPP and Egypt, and LIAMCO and Libya.
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- Copyright © American Society of International Law 1997
References
1 Société Européenne d’Etudes et d’EntReprises v. People’s Federal Republic of Yugoslavia (July 2, 1956), 24 ILR 761 (1957), 86 Journal du Droit International [JDI] 1074 (1959). See also note 14 infra.
2 SPP (Middle East) Ltd. & Southern Pac. Properties Ltd. v. Arab Republic of Egypt & Egyptian Gen. Co. for Tourism & Hotels (EGOTH), ICC Case No. 3493 (Mar. 11, 1983), 22 ILM 752 (1983), 9 Y.B. Com. Arb. 111 (1984). For a history of the subsequent proceedings in domestic courts and in ICSID, see Delaume, Georges R., The Pyramids Stand—The Pharaohs Can Rest in Peace, 8 ICSID Rev.-Foreign Investment L.J. [ICSID Rev.] 231 (1993)Google Scholar.
3 Libyan Am. Oil Co. v. Libyan Arab Republic (Apr. 12, 1977), 20 ILM 1 (1981), 62 ILR 140 (1982) [hereinafter LIAMCO].
4 28 U.S.C. §§1330-1332, 1391, 1441, 1602-1611 (1994). See George, Kahale, New Legislation in the United States Facilitates Enforcement of Arbitral Agreements and Awards Against Foreign States, J. Int’l Arb., June 1989, at 57 Google Scholar; Françoise, Joly, Etats-Unis: une réforme de 1988 restreint le domaine des immunités des Etats étrangers en matière d’arbitrage, 1990 Revue de l’Arbitrage [Rev. Arb.] 607 Google Scholar.
5 June 10, 1958, 21 UST 2517, 330 UNTS 38.
6 9 U.S.C. §§1-16, 201-208, 301-307 (1994).
7 Jan. 30,1975, OAS TS No. 42, reprinted in 1 The Inter-American System: Treaties, Conventions & Other Documents 446 (Garcia-Amador, F. V. ed., 1983)Google Scholar.
8 Section 305 of the Federal Arbitration Act, supra note 6, giving effect to the Panama Convention, provides that the Convention shall apply in cases in which the majority of the parties are citizens of contracting states and that, in other cases, the New York Convention shall apply.
9 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, opened for signature Aug. 27, 1965, 17 UST 1270, 575 UNTS 159.
10 See Delaume, Georges R., Consent to ICSID Arbitration: New Developments , in International Law in the 21st Century: Essays in Memory of Professor Kenneth R. Simmonds (forthcoming 1997)Google Scholar.
The ICSID documents regarding the Additional Facility, including its conciliation/arbitration and fact-finding Rules, are published in Doc. ICSID/11 (June 1979). See also note in 17 ILM 1582 (1977). For the UNCITRAL Arbitration Rules, see 15 ILM 701 (1976). As to arbitration under the NAFTA, see further North American Free Trade Agreement, Dec. 8, 11, 14, 17, 1992, Can.-Mex.-U.S., Art. 1130, 32 ILM 605 (1993).
11 See note 4 supra.
12 As a result of either the Federal Arbitration Act or the FSIA, the federal courts have jurisdiction in cases involving the recognition and enforcement of state contract awards. The point is clearly made in the Chromalloy case, In re Chromalloy Aeroservs. and Arab Republic of Egypt, 939 F. Supp. 907, 908-09 (D.D.C. 1996), 35 ILM 1359, 1367-68 (1996). See text at notes 35, 75-76 infra. See also Gerald, Aksen & Dorman, Wendy S., Application of the New York Convention by United States Courts: A Twenty-Year Review (1970-1990), 2 Am. Rev. Int’l Arb. 65, 67 (1991)Google Scholar.
Although the Federal Arbitration Act does not apply to the enforcement of ICSID awards, see 22 U.S.C. §1650a(a), exclusive jurisdiction is also vested in the U.S. courts, see 22 U.S.C. §1650a(b).
13 Delaume, Georges R., Enforcement of State Contract Awards: Jurisdictional Pitfalls and Remedies, 8 ICSID Rev. 29 (1993)CrossRefGoogle Scholar. Note that after the publication of this article, the Italian law, summarized in id. at 37-38, changed as a result of decision No. 329 rendered by the Constitutional Court on July 15, 1992, Condor & Filvem v. Minister of Justice, 33 ILM 593 (1994), 101 ILR 394 (1995), which held that Law No. 1263 of 1926 was unconstitutional. Consequently, the Executive was stripped of its earlier prerogatives and the courts were reinvested with the power to determine whether immunity should be granted or denied in individual cases.
14 See, e.g., in the Netherlands, Société Européenne d’Etudes et d’Entreprises/Socialist Federal Republic of Yugoslavia, HR Oct. 26, 1973, NJ 361, translated in 5 Neth. Y.B. Int’l L. 290 (1974), and Giorgio, Gaja, New York Convention, pt. V, No. 18, at 2 (loose-leaf, 1978-)Google Scholar; and in France, CA Rouen, Nov. 13, 1984, Société Européenne d’Etudes et d’Entreprises v. République Fédérale de Yougoslavie, 112 JDI 473 (1985), translated in 24 ILM 345 (1985), aff’d, Cass, le civ., Nov. 18, 1986, 26 ILM 377 (1987). For a history of the SEEE. litigation, which lasted some three decades, see Delaume, Georges R., SEEE v. Yugoslavia: Epitaph or Interlude? J. Int’l Arb., Sept. 1987, at 25 Google Scholar.
15 La Société Nationale pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures v. Shaheen Natural Resources Co., 585 F. Supp. 57 (S.D.N.Y. 1983), aff’d, 733 F.2d 260 (2d Cir.), cert, denied, 469 U.S. 883 (1984) [hereinafter Sonatrach].
16 See cases cited in note 14 supra.
17 Sonatrach, 585 F.Supp. 57 (S.D.N.Y. 1983), aff’d, 733 F.2d 260 (2d Cir.), cert, denied, 469 U.S. 883 (1984).
18 T.G.I. Paris, Mar. 5, 1979, Procureur de la République v. Société LIAMCO, 106 JDI 857 (1979).
19 CA Svea, June 18, 1980, Libyan American Oil Co. v. Socialist People’s Arab Republic of Libya, translated in 20 ILM 893 (1981), 7 Y.B. Com. Arb. 359 (1982).
20 Libyan American Oil Co. v. Socialist People’s Libyan Arab Jamahiriya, 482 F. Supp. 1175 (D.D.C. 1980), vacated after settlement, 684 F.2d 1032 (D.C. Cir. 1981). See also the U.S. Government’s brief and memorandum, 20 ILM 161, 169-70 (1981).
21 887 F.2d 1357 (9th Cir. 1989), cert, denied, 494 U.S. 1016 (1990).
22 See 5 Neth. Y.B. Int’l L. 290 (1974). The case is cited in full in note 14 supra.
23 887 F.2d at 1365. The court acknowledged, however, that recognition of a non-national award might imply that the losing party could not avail itself of some of the defenses provided for in Article V (specifically Art. V(a) and (e)) of the New York Convention, but held that this did not deprive that party of adequate safeguards, and especially those regarding due process (Art. V(l)(b)) and public policy (Art. V(2)(b)). Id.
This last point was made clear in another decision of the same court, which denied recognition to an award of the Iran-U.S. Tribunal on the basis of Article V(l)(b) because the court found that, as a result of an unexpected turn of events, the defendant (who was the plaintiff in the proceedings before the Tribunal) had been unable to present his case. See Iran Aircraft Indus, v. Avco Corp., 980 F.2d 141 (2d Cir. 1992).
24 National Oil Corp. v. Libyan Sun Oil Co., 733 F. Supp. 800 (D. Del. 1990), 29 ILM 716 (1990). The awards rendered in that case are Reproduced in 29 ILM 565 & 601 (1990). See Bernard Audit, L’Affaire NOC c/ Libyan Sun Oil Company, 1991 Rev. Arb. 263.
25 Parsons & Whittemore Overseas Co. v. Société Generale de l’Industrie du Papier (RAKTA), 508 F.2d 969 (2d Cir. 1974).
26 The court said:
[T]he Convention’s public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state’s most basic notions of morality and justice. . . . .
. . . Enforcement of an award predicated on the feasibility of [Parsons’s] returning to work in defiance of these expressions of national policy would . . . allegedly contravene United States public policy. In equating “national” policy with United States “public” policy, the appellant quite plainly misses the mark. To read the public policy defense as a parochial device protective of national political interests would seriously undermine the Convention’s utility. . . . [A] circumscribed public policy doctrine was contemplated by the Convention’s framers and every indication is that the United States, in acceding to the Convention, meant to subscribe to this supranational emphasis. . . .
To deny enforcement of this award largely because of the United States’ falling out with Egypt in recent years would mean converting a defense intended to be of narrow scope into a major loophole in the Convention’s mechanism for enforcement. We have little hesitation, therefore, in disallowing [Parsons’s] proposed public policy defense.
Id. at 974.
27 Sun Oil, 733 F. Supp. at 820.
28 See Sonatrach, 585 F. Supp. 57, 62-63 (S.D.N.Y. 1983).
29 American Constr. Mach. & Equipment Corp. v. Mechanized Constr. of Pakistan, Ltd. [wholly owned by the Pakistani Government], 659 F. Supp. 426, 429 (S.D.N.Y), aff’d, 828 F.2d 117 (2d Cir. 1987), cert, denied, 484 U.S. 1064 (1988).
30 535 F.2d 334 (5th Cir. 1976).
31 Id. at 337.
32 Fertilizer Corp. of India v. IDI Management, Inc., 517 F. Supp. 948 (S.D. Ohio 1981).
33 The American party against which recognition was sought argued that it should be denied because, although India, like the United States, was a party to the New York Convention, the manner in which its courts construed the notion of “commerciality” was much more restrictive than that obtaining in die United States, and that, in the converse situation in India, recognition of the award would be denied. Under the circumstances, the “reciprocity” reservation was not satisfied.
The court did not accept this argument. It made it clear that all that was required to satisfy the reciprocity requirement was to show that India-was a signatory of the Convention and that to attempt to control the way Indian courts applied the Convention would be adding to the reciprocity test. Id. at 962.
34 This information is given by Michael Tupman, W., Staying Enforcement of Arbitral Awards under the New York Convention, 3 Arb. Int’l 209, 216 (1987)Google Scholar. Tupman also indicates, id. at 216 n.39, that the defense of public policy raised by IDI under Article V(2) (b) failed. See Fertilizer Corp. of India v. IDI Management, Inc., 530 F. Supp. 542 (S.D. Ohio 1982).
35 In re Chromalloy Aeroservs. and Arab Republic of Egypt, 939 F. Supp. 907 (D.D.C. 1996), 35 ILM 1359 (1996).
36 Id. at 909, 35 ILM at 1369.
37 See, e.g., Pierre-Yyes, Tschanz, International Arbitration in the United States: The Need for a New Act, 3 Arb. Int’l 309, 319 (1987)Google Scholar; Carte Blanche (Singapore) v. Carte Blanche (Inc.), 888 F.2d 260 (2d Cir. 1989); Al-Harbi v. Citibank, N.A., 85 F.3d 680 (D.C. Cir. 1996).
38 The court noted that the majority decision regarding the determination whether “civil” or “administrative” substantive rules applied constituted at worst a mistake of law and, as such, was not subject to judicial review. 939 F. Supp. at 911, 35 ILM at 1372.
39 ICC, Rules of Arbitration, Jan. 1, 1988, Arts. 1075, 1076, reprinted in The 1989 Guide to International Arbitration and Arbitrators 63 (1989). See also the decision of the president of the Rechtbank of Amsterdam, Apr. 24, 1991, 17 Y.B. Com. Arb. 572 (1992).
40 BGH, Feb. 26, 1991, 17 Y.B. Com. Arb. 513 (1992). The award creditor had sought recognition of an award rendered in the Netherlands on the basis of German law relied on under Article VII of the Convention.
41 Cass, le civ., Oct. 9, 1984, 1984 Bull. Civ. I, 211, Société Pabalk Ticaret Ltd. Sirketi v. Société Norsolor, 111 p i 680 (1984), 24 ILM 360 (1985); Cass, le civ., Mar. 10, 1993, Société Polish Ocean Line v. Société Jolasry, 120 JDI 360 (1993), 19 Y.B. Com. Arb. 662 (1994).
42 Cass, le civ., Mar. 23, 1994, Société Hilmarton v. Société OTV, 123 JDI 701 (1994), 20 Y.B. Com. Arb. 663 (1995).
43 CA Paris, Feb. 24, 1994, Ministère Tunisien de l’Equipement v. Société Bee Frères, 1995 Rev. Arb. 275.
44 See Professor Gaudemet’s comment on the Bee case, 1995 Rev. Arb. at 284-89.
45 See Leurent, & Meyer, Fabre, La Reconnaissance en France des sentences rendues à l’etranger, l’exemple francosuisse, Swiss Arb. Bull. 118 (1995)Google Scholar. See also Delaume, Georges R., Book Review, 11 ICSID Rev. 259 (1996)Google Scholar.
46 Note that the situation arising from differences between Article V of the Convention and domestic rules cannot arise in Switzerland or Italy since the provisions of Article V either are incorporated by reference (Art. 194 of the Swiss law on private international law of 1989) or are substantially Reproduced (Art. 840 of the Italian arbitration law of January 5, 1994) in domestic statutes and are thus part and parcel of the lex fori. See Pierre, Lalive, Jean-François, Poudret & Claude, Reymond, Le Droit De L’arbitrage Interne et International en Suisse 458-59 (1989)Google Scholar; Piero, Bernardini, L’Arbitrage en Italic après la récente réforme, 1994 Rev. Arb. 479, 498 Google Scholar.
47 Seetransport Wiking Trader Schiffahrtsgesellschaft MBH & Co. v. Navimpex Centrala Navala, 29 F.3d 79 (2d Cir. 1994), 20 Y.B. Com. Arb. 988 (1995). For the earlier decisions in the case, see 793 F. Supp. 444 (S.D.N.Y. 1992), 18 Y.B. Com. Arb. 524 (1993), and 989 F.2d 572 (2d Cir. 1993), 19 Y.B. Com. Arb. 812 (1994).
An older case, Island Territory of Curacao v. Solitron Devices, Inc., 489 F.2d 1313 (2d Cir. 1973), concerned the recognition of an award rendered in favor of the Island Territory of Curaçao and the Central Government of the Netherlands Antilles. When recognition was sought in the United States against the award debtor, an American manufacturer, the district court granted recognition, holding that the award satisfied the requirements of both the New York Convention and Article 53 of the New York Civil Practice Law and Rules (C.P.L.R). Island Territory of Curaçao v. Solitron Devices, Inc., 356 F. Supp. 1 (S.D.N.Y. 1973). On appeal, the judgment was upheld, but the court of appeals based its decision solely on the C.P.L.R., considering it unnecessary to determine whether the award was independently enforceable under the New York Convention.
48 In this respect, Seetransport relied on Article 53 of the New York C.P.L.R., which permits enforcement of a “foreign country judgment which is final, conclusive and enforceable where rendered.”
49 The court noted in its first decision that this interpretation was consistent with Article 22 of the ICC Rules, according to which an award is deemed to be made when it is signed by the arbitrators. 989 F.2d 572, 581 (2d Cir. 1993).
Under French law, international—like domestic—awards are res judicata as soon as they are rendered. See, e.g., Delaume, Georges R., Transnational Contracts, ch. 13, at 94 (May 1990)Google Scholar; Philippe, Fouchard, Emmanuel, Gaillard & Berthold, Goldman, Traité de l’Arbitrage Commercial International 791 (1996)Google Scholar.
50 29 F.3d at 81.
51 See Article 54(1) of the Convention, supra note 9.
52 The ICSID Secretariat keeps a list of these designations. See Doc. ICSID/8 (1996).
53 Delaume, note 13 supra. See also, in connection with Article VII of the New York Convention, text and corresponding notes 39-46 supra.
54 Liberian Eastern Timber Corp. (LETCO) v. Republic of Liberia (Mar. 31, 1986), 26 ILM 647 (1987), 13 Y.B. Com. Arb. 35 (1988). SeeLiberian E. Timber Corp. v. Republic of Liberia, 650 F. Supp. 73 (S.D.N.Y. 1986), 26 ILM 695 (1987), 2 ICSID Rev. 188 (1987), aff’d mem., No. 86-9047 (2d Cir. May 19, 1987).
55 See text at note 66 infra.
56 See cases cited in notes 15, 21, 23, 24, 30 supra.
57 See cases cited in notes 20, 29, 35, 47, 54 supra, and 78 infra.
58 ICSID Convention, Art. 53.
59 Id., Art. 55.
60 H.R. Rep. No. 94-1487 (1976), reprinted in 1976 U.S.C.C.A.N. 6604, 6617, 15 ILM 102, 106 (1976).
61 Brief for the United States as Amicus Curiae, 20 ILM 161 (1981), Libyan Am. Oil Co. v. Socialist People’s Libyan Arab Jamahiriya, 482 F. Supp. 1175 (D.D.C. 1980), vacated after settlement, 684F.2d 1032 (D.C. Cir. 1981) (Nos. 80-1207, 80-1252).
62 Declaration of the Government of the Democratic and Popular Republic of Algeria Concerning the Settlement of Claims by the Government of the United States of America and the Government of the Islamic Republic of Iran, Jan. 19, 1981, Art. IV(3), 20 ILM 230, 232 (1981).
63 See Ministry of Defense of Iran v. Gould, 887 F.2d 1357 (9th Cir. 1989), cert, denied, 494 U.S. 1016 (1990); Iran Aircraft Indus, v. Avco Corp., 980 F.2d 141 (2d Cir. 1992).
The suggestion has been made that considerations of immunity might fall within the public policy exception set forth in Article V(2) (b) of the New York Convention. See Toope, Stephen J., Mixed International Arbitration 140 (1990)Google Scholar. This suggestion is off the mark, since the Convention is concerned exclusively with recognition and does not deal with immunity. See Delaume, note 13 supra, at 49-50.
64 507 F.Supp. 311 (D.D.C. 1980).
65 Id. at 312.
66 Liberian Eastern Timber Corp. v. Republic of Liberia, 2 ICSID Rev. 187 (1987).
67 Liberian E. Timber Corp. v. Republic of Liberia, 650 F. Supp. 73 (S.D.N.Y. 1986), 26 ILM 695 (1987), 2 ICSID Rev. 188 (1987), aff’d mem., No. 86-9047 (2d Cir. May 19, 1987). Other assets related to fees and taxes collected by agents of Liberia on shipowners located in the United States. It was ruled that these assets were used for governmental, and not commercial, activities and were therefore not subject to execution.
68 Apr. 18, 1961, 23 UST 3227, 500 UNTS 95.
69 See, e.g., in Germany, BVerfGE 46, 342 (399), 65 ILR 146 (1984) (case of the Philippine Embassy Bank Account); in the United Kingdom, Alcorn Ltd v. Republic of Colombia, [1984] 2 All E.R. 6, [1984] 2 W.L.R. 750 (H.L.); in Austria, Sup. Ct, Apr. 3, 1986, Republic of “A” Embassy Bank Account case, 77 ILR 489 (1988); and in Italy, Cass, (en banc), May 4, 1989, Banamar Capizzi v. Ambasciata delta Repubblica democratica popolare di Algeria, 72 Rivista di Diritto Internazionale 416 (1989), summarized in 84 AJIL 573 (1990).
70 507 F. Supp. 311 (D.D.C. 1980).
71 Note that §1605(a) (6) also confers jurisdiction on U.S. courts when (C) the underlying claim could have been brought in U.S. courts, or (D) the state has waived its immunity. These rules, which have been characterized as “technical amendments,” see Kahale, note 4 supra, at 62, are self-explanatory and require no particular comments.
72 The decision of the Swiss Federal Tribunal in the LIAMCO case illustrates the potential danger that the refusal of a party to cooperate in the selection of the seat of arbitration might represent at the time of recognition of an award. In that case, the Federal Tribunal held that the selection of Geneva as the seat of arbitration made by the arbitrator was too accidental to create a sufficient territorial nexus (Biennenbeziehung) to found jurisdiction. ATF 106 la 142, Socialist Libyan Popular Jamahiriya v. Libyan American Oil Company (LIAMCO), June 19, 1980, 1983 Rev. Arb. 113, 114 JDI 994 (1987) (extract), translated in 20 ILM 151 (1981). See the critical remarks of Pierre Lalive, Note sur la jurisprudence suisse en matière d’immunité des Etats, id. at 1000, 1004, and of Lalive, J.-F., Quelques Observations sur l’immunité des Etats et I’arbitrage international, in International Law at a Time of Perplexity 369, 377 (Yoram, Dinstein ed., 1989)Google Scholar.
73 See text at note 35 supra.
74 In its first decision in the Seetransport case, 989 F.2d 572, 577 (2d Cir. 1993), the U.S. Court of Appeals for the Second Circuit determined that, since jurisdiction could be assumed on the basis of §1605(a)(l) of the FSIA, there was no need to consider whether §1605(a)(6) applied retrospectively.
75 Perhaps an additional remark should be made, which, although it did not concern the Chromalloy situation, may be relevant to post-recognition measures of execution against the state’s property. This issue is now specifically addressed in the 1988 amendment of the FSIA. A new §1610(a)(6) provides that, when a foreign award is judicially confirmed, it can be enforced against the property of the foreign state used for a commercial activity in the United States. In this respect, the new provision is more liberal than §1610(a)(2) concerning post-judgment execution of the decisions rendered by U.S. courts. Post-judgment execution is limited to “property [which] is or was used for the commercial activity upon which the claim is based.” In contrast, post-award execution does not require a nexus between the claim on which the award is based and the commercial property of the state against which execution is sought and, thus, may confer significantly wider remedies to the award creditor.
76 In re Chromalloy Aeroservs. and Arab Republic of Egypt, 939 F. Supp. 907 (D.D.C. 1996), 35 ILM 1359 (1996).
77 In the context of the recognition of a foreign award between private parties, a court refused to assume jurisdiction on the ground that the defendant did not have sufficient contacts with the forum. The court said that the Federal Arbitration Act implementing the law did not
give the court power over all persons throughout the world who have entered into an agreement covered by the Convention. Some basis must be shown, whether arising from the respondent’s residence, his conduct, his consent, the location of his property or otherwise, to justify his being subject to the court’s power.
Transadantic Bulk Shipping v. Saudi Chartering, SA, 622 F. Supp. 25, 27 (S.D.N.Y. 1985).
78 Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981), cert, denied, 454 U.S. 1148 (1982).
79 647 F.2d at 308. Note that, in the context of a financial litigation over defaulted debt involving Argentina, the U.S. Supreme Court “assumed,” but did not “decide,” that a foreign state was a “person” for the purposes of the Due Process Clause of the United States Constitution. See Republic of Argentina v. Weltover Inc., 504 U.S. 607, 619 (1992).
In an earlier case involving the recognition of an award rendered in favor of a Canadian contractor in connection with a contract dispute with the Republic of Trinidad and Tobago, the district court held that consent to arbitrate waived both sovereign immunity and personal jurisdiction, “notwithstanding the absence of minimum contacts otherwise required.” M.B.L. Int’l Contractors Inc. v. Republic of Trinidad and Tobago, 725 F. Supp. 52, 56 (D.D.C. 1989).
80 Texas Trading, 647 F.2d at 308.
81 In an international context, such a clause would not have to refer only to the jurisdiction of U.S. courts and could (and probably should) be open-ended and provide also for submission to the jurisdiction of courts in specified countries where it is anticipated that recognition of the award may be sought or, if the parties so desire in order to maximize their options, to “any court having jurisdiction.” See Delaume, Georges R., Contractual Waivers of Immunity: Some Practical Considerations, 5 ICSID Rev. 232 (1990)CrossRefGoogle Scholar.