The US Court of Appeals for the District of Columbia Circuit affirms the District Court’s judgment enforcing an arbitral award against Belize

On 13 May 2016, the US Court of Appeals for the District of Columbia Circuit affirmed the judgment of the US District Court for the District of Columbia enforcing an arbitral award against the Government of Belize (Newco Limited v. Government of Belize, No. 15-7077 (D.C. Cir. May 13, 2016)).

Factual Background

In 2002, Newco Limited entered into an agreement with the Government of Belize to operate and develop the country’s international airport. When Belize repudiated the agreement, Newco Limited invoked the agreement’s arbitration provisions, and an arbitral tribunal in Miami issued an award in Newco Limited’s favor for approximately USD 4.3 million.

Belize agreed to pay the award subject to two conditions: (i) that Belize pays the award in Belize dollars rather than in US dollars; and (ii) Belize would not pay without first subtracting any unpaid taxes owed by Newco Limited.

Newco Limited brought suit to enforce the award in the US District Court for the District of Columbia. Thereafter, Belize brought its own suit in the Belize Supreme Court. Belize obtained an anti-suit injunction against Newco Limited from the Belize court. Newco Limited’s suit in the District Court was stayed as Newco Limited litigated in Belize. The Belize Supreme Court eventually agreed with Belize that the country could subtract unpaid taxes and pay the remainder of the award in Belize dollars. Newco Limited refused to agree to those conditions and again sought to enforce the arbitral award in the District Court. Belize moved to dismiss the suit on several grounds, including international comity, public policy, and forum non conveniens. The District Court rejected Belize’s arguments and enforced the award (Newco Ltd. v. Belize, No. 08-2010, 2015 WL 9810457 (D.D.C. Aug. 7, 2015)). Belize appealed to the US Court of Appeals for the District of Columbia Circuit.

US Court of Appeals' Judgment

Having carefully considered all of Belize’s arguments, the US Court of Appeals for the District of Columbia Circuit affirmed the judgment of the District Court.

According to the US Court of Appeals, under the Federal Arbitration Act, US courts must enforce foreign arbitral awards unless they find “one of the grounds for refusal or deferral of recognition or enforcement of the award specified in” the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (“New York Convention”). In this case, Belize asked the US Court of Appeals to deny enforcement on the basis of international comity. Belize argued that the New York Convention instructs courts to enforce arbitral awards “in accordance with the rules of procedure of the territory” where the enforcement action is brought (Article III of the New York Convention). According to the US Court of Appeals, Belize has failed to provide support for its assertion that the doctrine of international comity is a “rule of procedure” of the United States.

Belize also claimed that the District Court should have refused to enforce the arbitral award based on an alleged public policy interest in international comity. The US Court of Appeals noted that under the New York Convention, courts may decline to enforce an arbitral award if “enforcement of the award would be contrary to the public policy of that country” (Article V(2)(b) of the New York Convention). But, according to the US Court of Appeals, courts should rely on the public policy only “in clear-cut cases” where “enforcement would violate the forum state’s most basic notions of morality and justice” (Termorio S.A. E.S.P. v. Electranta S.P., 487 F.3d 928, 938 (D.C. Cir. 2007)). In this case, Belize has not shown that enforcement would violate the most basic US notions of morality and justice. By design, the New York Convention allows investors to choose to resolve dispute with states through neutral tribunals in neutral countries. Any public policy interest in “international comity”, therefore, does not here override “the emphatic federal policy in favor of arbitral dispute resolution” (Belize Social Development Ltd. v. Belize, 668 F.3d 724, 727 (D.C. Cir. 2012)).

Belize further contended that the District Court should have dismissed the enforcement action on forum non conveniens grounds. The US Court of Appeals found that this argument is squarely foreclosed by the US Court of Appeals for the Circuit of District of Columbia’s precedent. In TMR Energy Ltd. v. State Property Fund of Ukraine, 41 F. 3d 296 (D.C. Cir. 2005), the US Court of Appeals for the District of Columbia Circuit held that the doctrine of forum non conveniens does not apply to actions in the United States to enforce arbitral awards against foreign nations.

Accordingly, the US Court of Appeals affirmed the District Court’ judgment.

A more detailed summary and an excerpt of this decision, indexed and searchable according to the list of topics published in http://www.newyorkconvention.org/court+decisions/description will be published in the 2016 volume of the Yearbook Commercial Arbitration, published by the International Council of Commercial Arbitration (ICCA).

Source: Original Opinion available at http://www.pacer.gov