The New York Convention: Recent Developments

1. The New York Convention: Recent Developments David Haigh, Q.C.

2. Outline • Canadian Developments • US Developments

3. Canadian Developments • Applicable Limitations Periods • Enforcement and the State Immunity Act • Public Policy in Alberta • Inoperative Agreements • Moot Enforcement Proceedings

4. Limitations Periods to Enforce (Yugraneft) • A claim based on "a judgement or order for the payment of money" (10 years) or a simple remedial order (2 years)? • Court finds that a two year limitation period to enforce arbitral award applies. • Is it possible there is no limitations period?

5. Enforcement Against States(Collavino) • Arbitral award in favour of Collavino against Tihama, a state agency of Yemen. Collavino seeks enforcement against Yemeni assets in Alberta. • Decision of arbitrators on proper parties to an arbitration is final and binding. Tihama, although an agent of Yemen, has a distinct identity. Collavino cannot garnish debts owed to Yemen to satisfy award against Tihama. • Tihama not entitled to state immunity because of commercial activity exemption. The contract with Collavino was clearly commercial. • In any event, agreement to arbitrate is a waiver of state immunity.

6. Public Policy Exemption(Yugraneft) • Covers Fundamental principles of law and justice. • Substantive as well as procedural protection. • The Court adopted the Ontario approach: To refuse enforcement, the Court must be satisfied that enforcement would offend the basic principles of morality of Alberta.

7. Inoperative Agreements(Reliance Insurance) • A foreign re-insurer sought to enforce the arbitration provisions in a re-insurance contract after the other party went into receivership. • Court finds that if party is bankrupt, insolvent, or under court protection, it does not have the capacity to perform a contract. The arbitration agreement is inoperative. • Court entitled to assert jurisdiction under Article 8 of Model Law, (Article II (3) of NY Convention). • Impact of this decision on enforcement under Article V(1) of NY Convention?

8. Inoperative Agreements (continued)(Resin Systems Inc.) • Defendant in arbitration proceedings frustrates them by refusing to pay institutional fees. Plaintiff brings the claim in Alberta Queens Bench. • Defendantseeks a stay and referral back to arbitration on grounds that Plaintiff could pay Defendant's fees and continue with arbitration. • Application refused. Arbitration agreement is declared inoperative and the court can assume jurisdiction. As agreement is inoperative, there is no requirement under the NY Convention or Model Law to refer to arbitration. • The Court of Appeal dismisses the appeal and describes Defendant's position as "audacious."

9. Moot Enforcement Proceedings(Karaha Bodas) • Master's summary judgement enforcing an award in Alberta appealed on grounds that proceeding by way of summary judgement not proper. Award subsequently satisfied in another jurisdiction. • Application brought to declare the appeal moot. • While substantive dispute is moot, appeal allowed to proceed because of substantive costs award by Master. If appeal successful, cost consequences of Master's decision may be reversed.

10. US Developments • The problem of jurisdiction to enforce. • Continued requirement for in personam jurisdiction to enforce in most jurisdictions. • Is quasi in rem enough? • Court-assisted discovery. • Enforcing against States.

11. The Problem of Establishing Jurisdiction • Generally not a problem when enforcing against US parties. • A significant issue if attempting to enforce in US against non-US parties. • US Courts use Article V(2)(b) of the NY Convention (the public policy exemption) to import Constitutional due process requirements into enforcement proceedings. • The court generally must find in personam or in rem jurisdiction to assist with enforcement. • But the positions of the various Federal Circuit Courts vary. Some are more to amenable to providing assistance in enforcement than others.

12. Recent In Personam Cases • Award unlikely to be enforced unless in personam jurisdiction can be established. • In personam jurisdiction requires a "presence" of the individual in the venue where enforcement is sought. • "Presence" of the loosing party is generally established by "contacts," "ties," "business relations," or "conducting activities" in the jurisdiction. • The mere presence of assets in the jurisdiction is not necessarily enough.

13. In personam jurisdiction required(Base Metal - 3rd and 4th Cir.) • Two related cases in the 3rd and 4th Circuits. • Base Metal attempts to enforce award of Commercial Arbitration Court of the Moscow Chamber of Commerce, and obtains orders for attachment of shipments. • Court of Appeals for 4th Circuit holds that mere presence of property that is not related to the cause of action is not enough to support jurisdiction. 3rd Circuit in same matter came to a similar decision.

14. In personam jurisdiction required(Glencore Grain – 9th Cir.) • Dutch Company receives arbitration award issued out of London as a result of a contract dispute with an Indian company. • Seeks to enforce the award in the 9th Circuit on grounds that the Indian company shipped product through the port of San Francisco and had a sales agent in California. • Held: Facts established that Indian company did business with California, but not in California. Engaging in commerce in the forum is not the same as physical presence in the forum.

15. In personam may not be required (Dardana – 2nd Cir.) • The Court questions whether in personam jurisdiction is required to enforce under NY Convention. • As District Court did not address the issue in its decision, Court of Appeal referred the matter back to the District Court. • Unfortunately, the parties settled and the question of whether in personam is required in the 2nd Cir. remains unanswered.

16. Quasi in rem jurisdiction may be sufficient (CME – 2nd Cir.) • When Defendant given adequate notice of hearing, will not offend due process for court to assume jurisdiction over assets. • It can assert quasi in rem jurisdiction to attach assets in its jurisdiction provided that attachment is based on the decision of a forum that had personal jurisdiction over the Defendant. • The assets do not have to be related to the claim (as in the case of in rem jurisdiction), but the Plaintiff does have to satify the Court that there are assets in its jurisdiction.

17. But the Court will not assist party to determine if it can assert a quasi in rem claim • In cases where the Claimant was not able to point to specific property, it has asked for court assistance to determine presence of property in the jurisdiction through limited Discovery. • Courts have rejected this. Absent in personam jurisdiction, can only exercise jurisdiction over known assets of the Defendant in its jurisdiction. • See Frontier Resources and Cargnani.

18. An exception for States • In most US jurisdictions once subject matter jurisdiction is established in a claim against a State (I.e. the Foreign Sovereign Immunity Act does not apply), there is no need to show in personam jurisdiction to enforce an award (per Price). • The exception is the 2nd Circuit, which still requires in personam jurisdiction before it will enforce.

19. Canadian cases cited Canada (Attorney General) v. Reliance Insurance Co. (2007), 87 O.R. (3d) 42 (Sup. Ct.). Collavino Inc. v. Yemen (Tihama Development Authority), [2007] A.J. No. 531 (Q.B.). Kahara Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, [2007] A.J. No. 1153 (Q.B.). Resin Systems Inv. v. Industrial Service and Machine Inc., [2008] A.J. No. 238 (C.A.). Yugraneft Corp. v. Rexx Management Corp., [2007] A.J. No. 749 (Q.B.).

20. US cases cited Base Metal Trading Ltd. v. OJSC "Novokuznetsky Aluminum Factory," 47 Fed. Appx. 73 (3rd Cir. 2002). Base Metal Trading Ltd. v. OJSC "Novokuznetsky Aluminum Factory," 283 F.3d 208 (4th Cir. 2002). Cargnani v. Pewag Austria G.m.b.H., 2007 U.S. Dist. LEXIS 8210 (Eastern District California). CME Media Enterprises B.V. v. Dr. Vladimir Zelezny, 01 Civ. 1733 (DC), 2001 U.S. Dist. LEXIS 13888 (S.D.N.Y., 2001). Dardana Ltd. v. Yuganskneftegaz, 317 F.3d 202 (C.A.2 (N.Y.), 2003). Frontera Resources Azerbaijan Corp. v. State Oil Co. of Azerbaijan Republic, 479 F.Supp.2d 376 (S.D.N.Y., 2007). Glencore Grain Rotterdam B.V. v. Shivnath Rai Harnarian Co., 284 F.3d 1114 (9th Cir. 2002).

21. Questions? David R. Haigh, Q.C. Burnet, Duckworth & Palmer L.L.P 1400, 350-7th Avenue S.W. Calgary, AB T2P 3N9 Phone: (403) 260-0135 DRH@bdplaw.com