International Arbitration and U.S. Federal Courts

Just moments ago, the Fifth Circuit released an opinion examining Section 205 of the Federal Arbitration Act (Chapter 2), which allows for the removal of state court actions which relate to an arbitration agreement or award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly referred to as the “New York Convention“). The Fifth Circuit Opinion spends a great deal of time in this case explaining exactly how one determines whether or not a potentially improperly removed case “relates to an arbitration agreement or award falling under the Convention.”

The New York Convention is an international convention enacted in 1958 in New York City as part of a movement to encourage the use of arbitration as a means of resolving international commercial disputes. The Convention basically allows for the enforcement of foreign arbitral awards in signatory nations, assuming certain procedural hurdles have been overcome. These hurdles actually vary a little bit from country to country, but they more or less require reciprocity among arbitrating nations. In other words, if, representing a U.S. country, I get an arbitral award against a German company in a London arbitration, the Courts of Germany will enforce that award against their own citizen so long as U.S. Courts would in other cases be willing to enforce a foreign award against an American company on behalf of a German.

The Convention requires that each signatory nation enact legislation which empowers its courts to enforce the Convention. A portion of the Federal Arbitration Act (Chapter 2) serves that function in this country, and it allows for broad removal to the federal courts of state court cases relating to awards which could be enforceable under the Convention. Hence today’s case, which will be I’m sure required reading for any of you with cases involving Section 205 removal (we actually challenged a Section 205 removal once on the basis that the foreign country in question – Taiwan – was a nonsignatory to the Convention, and thus the arbitration could not possibly relate to the Convention. Our case settled before the removal question was resolved, but I still think about it sometimes during ruminative moments).

Acosta v. Master Maintenance & Construction, ___ F3d ___ (5th Cir. 2006) (Cause No. 05-30126)

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arbitration, ADR, Fifth Circuit, law, international law