US courts have long grappled with the issue of whether the doctrine of forum non conveniens applies in proceedings to confirm a foreign arbitration award.
The argument goes that forum non conveniens is not an enumerated defence to enforcement in the New York Convention. In Entes Industrial Plants, Construction and Erection Contracting Co. Inc. v Ministry of Transport and Communications of the Kyrgyz Republic and the Kyrgyz Republic, the US District Court for the District of Columbia adopted a somewhat different approach to reject the forum non conveniens defence, albeit by following a DC Circuit decision. While, in law, forum non conveniens does apply to recognition proceedings, it would be extremely difficult for a petition to be dismissed on forum non conveniens grounds in practice.
Background
In 1999, Entes Industrial Plants, Construction and Erection Contracting Co. Inc. entered into a contract with the Ministry of Transport and Communications of the Kyrgyz Republic to rehabilitate 620 kilometres of mountainous road connecting the two largest cities in the Kyrgyz Republic. The contract included a written agreement to arbitrate.
A dispute arose over additional costs that Entes incurred due to construction delays. Entes initiated UNCITRAL arbitration proceedings in Bishkek in January 2009. The respondent in the proceedings was the Ministry; the Republic itself was not a party. In September 2015, the arbitral tribunal issued an award, finding for Entes and ordering the Ministry to pay roughly US $16.6 million.
Issue
In September 2018, Entes petitioned the US District Court for the District of Columbia to confirm the award. The court was asked to decide, among other things, whether the doctrine of forum non conveniens was applicable.
Entes argued that the doctrine did not apply because:
- It is not among the limited enumerated grounds for denying confirmation of an award set forth in the New York Convention.
- The DC Circuit allegedly rejected the doctrine as a defence to enforcement in TMR Energy Limited v State Property Fund of Ukraine.
The respondents argued that TMR did not rule out forum non conveniens in enforcement proceedings, and that the Kyrgyz Republic was the more suitable forum.
Ruling
The court dismissed the respondents’ arguments on forum non conveniens. It began by noting that, to apply the doctrine, a court would consider two questions:
- Whether an adequate alternative forum for the dispute is available.
- If so, whether a balancing of private and public interests factors strongly favors dismissal.
However, Entes, the court pointed out, was challenging the very applicability of the doctrine itself.
The court then turned to consider TMR. In that case, a Cypriot corporation sought confirmation of an arbitration award that it had obtained against the State Property Fund (SPF) of Ukraine as a result of an arbitration held in Sweden. SPF sought dismissal of the case on grounds of forum non conveniens. On appeal, the DC Circuit found that SPF had failed to make out the first limb of the doctrine, that is, that there was an alternative adequate forum. Courts outside the United States (in Sweden or Ukraine for instance) could not, unlike a US court, attach the commercial property of a foreign nation located in the United States. Even if SPF had no attachable property in the US at the time of enforcement, it may own property in the US in the future. In other words, there was no alternative adequate forum because TMR could not obtain a judgment allowing it to attach SPF’s property in the US from anywhere other than the courts of the United States.
The court summed up the holding of TMR as follows. TMR did not go so far as to say that the doctrine of forum non conveniens could never apply in arbitration enforcement proceedings. However, it did lay down a “practical barrier” to ever obtaining dismissal of a petition to enforce an arbitration award based on forum non conveniens: in effect, a court cannot dismiss a petition on that ground if the respondent might, even in the future, hold property in the United States.
Applying the controlling precedent of TMR, the court concluded that forum non conveniens was no basis for dismissal because “no other court system [could] provide Entes with a judgment that it [could] use to attach property that is, or may someday be, held in the United States.” As the respondents had not made out the first limb of the doctrine of forum non conveniens, the court dismissed their objection.
Comment
In some ways, the court’s decision in Entes is unremarkable, a straightforward application of the doctrine of precedent. In following TMR, the Entes decision confirms that award creditors wishing to defeat a forum non conveniens defence are best served by taking their award to the DC Circuit rather than the Second Circuit, which routinely applies the first and second limbs of the doctrine of forum non conveniens (see, for example, Figueiredo Ferraz E Engenharia de Projeto Ltda v Republic of Peru).
In other ways, the Entes decision is notable for its acknowledgment of the unsettled status of the case law. Despite its skillful characterisation of TMR as a “practical barrier” (though not a legal one) to the application of forum non conveniens, the court in a footnote accepted that two, more recent, “unpublished” DC Circuit opinions said that TMR proscribed the application of forum non conveniens to actions to confirm arbitration awards. Similarly, although the court stated in passing that Entes was “not entirely correct” to say that forum non conveniens was not among the limited enumerated grounds for denying confirmation identified in the New York Convention, it did not elaborate further.
Ultimately, the Entes decision is unsatisfactory for two reasons. First, although the court discussed the Second Circuit’s view, it is still unclear whether the DC Circuit thinks that the New York Convention forecloses the application of forum non conveniens because the court dodged a discussion on that issue. Second, whatever is said and done, the court applied the doctrine of forum non conveniens, which it should not have done. The doctrine seeks to make trials “easy, expeditious and inexpensive” (Gulf Oil Corp. v Gilbert). It has no place in proceedings to enforce an arbitration award, which are not substantive trials but merely seek to reduce an award to a court decision.
