The opinion
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 12, 2007 Decided May 25, 2007
No. 06-7058
TERMORIO S.A. E.S.P. AND
LEASECO GROUP, LLC,
APPELLANTS
V.
ELECTRANTA S.P., ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 03cv02587)
Thomas R. Johnson, Jr. argued the cause for appellants.
With him on the briefs were Stephanie K. Hines, Kevin M. Sali,
and Benjamin Sharp.
Paul J. Kiernan argued the cause for appellees. With him
on the brief was Stephen A. Bogorad.
Before: TATEL and GARLAND, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
2
EDWARDS, Senior Circuit Judge: Appellant TermoRio S.A.
E.S.P. (“TermoRio”) and appellee Electrificadora del Atlantico
S.A. E.S.P. (“Electranta”), a state-owned public utility, entered
into a Power Purchase Agreement (“Agreement”) pursuant to
which TermoRio agreed to generate energy and Electranta
agreed to buy it. When appellee allegedly failed to meet its
obligations under the Agreement, the parties submitted their
dispute to an arbitration Tribunal in Colombia in accordance
with their Agreement. The Tribunal issued an award in excess
of $60 million dollars in favor of TermoRio. Shortly after the
Tribunal issued its award, Electranta filed an “extraordinary
writ” in a Colombia court seeking to overturn the award. In due
course, the Consejo de Estado (“Council of State”), Colombia’s
highest administrative court, nullified the arbitration award on
the ground that the arbitration clause contained in the parties’
Agreement violated Colombian law.
Following the judgment by the Consejo de Estado,
TermoRio and co-appellant LeaseCo Group, LLC (“LeaseCo”),
an investor in TermoRio, filed suit in the District Court against
Electranta and the Republic of Colombia seeking enforcement
of the Tribunal’s arbitration award. Appellants contended that
enforcement of the award is required under the Federal
Arbitration Act, 9 U.S.C. § 201 (“FAA”), which implements the
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, opened for signature June 10, 1958, 21 U.S.T.
2517, reprinted in 9 U.S.C. § 201 (historical and statutory notes)
(“New York Convention”). The District Court dismissed
LeaseCo as a party for want of standing, dismissed appellants’
enforcement action for failure to state a claim upon which relief
could be granted, and, in the alternative, dismissed appellants’
action on the ground of forum non conveniens. TermoRio S.A.
E.S.P. v. Electrificadora del Atlantico S.A. E.S.P., 421 F. Supp.
2d 87 (D.D.C. 2006).
3
We affirm the judgment of the District Court. The
arbitration award was made in Colombia and the Consejo de
Estado was a competent authority in that country to set aside the
award as contrary to the law of Colombia. See New York
Convention art. V(1)(e) (“Recognition and enforcement of the
award may be refused, at the request of the party against whom
it is invoked . . . if that party furnishes . . . proof that: . . . [t]he
award . . . has been set aside . . . by a competent authority of the
country in which, or under the law of which, that award was
made.”). Because there is nothing in the record here indicating
that the proceedings before the Consejo de Estado were tainted
or that the judgment of that court is other than authentic, the
District Court was, as it held, obliged to respect it. See Baker
Marine (Nig.) Ltd. v. Chevron (Nig.) Ltd., 191 F.3d 194 (2d Cir.
1999). Accordingly, we hold that, because the arbitration award
was lawfully nullified by the country in which the award was
made, appellants have no cause of action in the United States to
seek enforcement of the award under the FAA or the New York
Convention.
I. BACKGROUND
The facts in this case are carefully set forth in the District
Court’s published Memorandum opinion. See TermoRio, 421
F. Supp. 2d at 89-91. Because the facts relevant to this appeal
are undisputed, we have incorporated significant portions of the
District Court’s statement as a part of our Background section.
Defendant Republic of Colombia is a foreign state.
Defendant [Electranta], incorporated in 1957 to provide
electricity services in and around Barranquilla, Colombia,
was 87% owned and controlled by Colombia.
Consequently, it is an agency or instrumentality of
Colombia within the meaning of the Foreign Sovereign
Immunities Act (28 U.S.C. § 1603(b)).
4
In the mid-1990s, Colombia’s Atlantic coast
experienced significant electricity shortages. In 1995
LeaseCo entered into discussions with Electranta to
modernize Electranta’s operations and build a new power
plant in Colombia. A year later, LeaseCo and Electranta
formed two Colombian entities seriatim: first, Coenergia,
and then TermoRio. Coenergia owned 99.9% of all shares
of TermoRio. Initially, LeaseCo and Electranta owned
roughly equal shares of Coenergia, so that they accordingly
owned roughly equal shares of TermoRio. However, at the
time of Electranta’s complaint (in June 2004), LeaseCo and
Electranta were transferring sole ownership of the 99.9% of
the shares of TermoRio to LeaseCo.
At the heart of this lawsuit is [the Agreement] between
TermoRio and Electranta [executed] in June 1997. Under
this Agreement, TermoRio agreed to generate energy and
Electranta agreed to buy it. In reliance on this Agreement,
TermoRio invested more than $7 million to construct a
power plant. The Agreement also provided that any dispute
between the parties would be resolved by binding
arbitration in Colombia.
However, in March 1998, Colombia announced a plan
to sell the assets of all its Atlantic Coast utilities, including
Electranta, to private owners and other Colombian utilities.
On April 16, 1998, Colombia began to privatize by creating
a new company, Electrocaribe, to receive and hold
Electranta’s assets and liabilities. However, at the behest of
Colombia, Electranta did not transfer its duties under the
Agreement to buy power from TermoRio. Electranta was
left with obligations under the Agreement to buy power, but
no resources to do so. As a result, Electranta failed to buy
power from TermoRio and breached the Agreement. This
breach of the Agreement, plaintiffs allege, had a direct
effect in the United States affecting the extensive marketing
5
of [Electrocaribe’s] assets in the United States, by affecting
the price of these assets, by causing United States
purchasers to acquire a substantial interest in these assets,
and by eliminating any obligation for Electrocaribe . . . to
fulfill the [Agreement].
....
The Agreement’s arbitration clause provides (as
translated):
Any dispute or controversy arising between the Parties
in connection to the execution, interpretation,
performance or liquidation of the Contract shall be
settled through mechanisms of conciliation, amiable
composition or settlement, within a term no longer than
three weeks. If no agreement is reached, either party
may have recourse to an arbitral tribunal that shall be
governed in accordance with the Rules of Conciliation
and Arbitration of the International Chamber of
Commerce. The tribunal shall be made up of three (3)
members appointed by the Chamber, and shall be
seated in the city of Barranquilla[, Colombia]. The
award, which shall be binding on the parties, must be
rendered within a maximum term of three months.
Pursuant to this provision, after defendants failed to
meet their obligations under the Agreement, the parties
entered into a long arbitration process. On December 21,
2000, a Tribunal of three arbitrators, applying ICC
procedural rules, determined that Electranta breached the
Agreement at the direction of Colombia. The Tribunal
ordered Electranta to pay TermoRio an award of $60.3
million USD.
....
6
Neither the Republic of Colombia nor Electranta has
complied with the $60 million arbitral award, and both have
refused to pay any portion of it. Plaintiffs allege that
Colombia and Electranta have also sought to undermine the
award in several other respects.
. . . [O]n December 23, 2000 (right after the Tribunal
issued the award), Electranta filed an “extraordinary writ”
with a court in Barranquilla, seeking to overturn the award.
In response the Council of State vacated it. The Council of
State reasoned that the arbitration had to be conducted in
accordance with Colombian law, and Colombian law in
effect as of the date of the Agreement did not expressly
permit the use of ICC procedural rules in arbitration.
In . . . another action, plaintiff TermoRio filed two
lawsuits in Colombian courts to rescind the transfer of
Electranta’s assets and to hold Colombia liable for breach
of the Agreement. A Colombian court dismissed the first
action on procedural grounds. The second count [was] still
pending in the Colombian court system [as of March 17,
2006].
Id. at 89-90 (internal footnotes, quotation marks, and citations
omitted).
In the District Court, appellants TermoRio and LeaseCo
filed an Amended Complaint and Application for Confirmation
and Enforcement of Arbitral Award and for Other Relief. The
appellants initially alleged four causes of action: fraudulent
conveyance, expropriation, an action to enforce the arbitration
award, and breach of contract. By stipulation, however, the first
two claims were dropped, leaving only the action to enforce the
arbitration award and the breach of contract claim before the
District Court. Appellees filed a motion to dismiss in which
they raised numerous defenses, including, inter alia, that the
award was properly vacated by a Colombian court; that the
7
District Court lacked subject matter jurisdiction by operation of
the Foreign Sovereign Immunities Act and because the statute
of limitations barred the suit; that the complaint should be
dismissed under the doctrine of forum non conveniens; and that
LeaseCo, an American corporation not party to the Agreement,
lacked standing to enforce the arbitral award.
The District Court, after hearing arguments on the motion
and reviewing the submissions of the parties – which included
supporting memoranda, affidavits, sworn declarations, and the
decisions of the Colombian courts – granted appellees’ motion
to dismiss. The trial court ruled as follows:
[A]n accompanying Order dismisses LeaseCo for lack of
standing. The court lacks subject matter jurisdiction over
plaintiffs’ breach of contract claim both under the Foreign
Sovereign Immunities Act and by operation of the
applicable statute of limitations. Although the court has
subject matter jurisdiction over the remaining arbitral award
enforcement claim, it is dismissed for failure to state a
claim; the Colombian courts have vacated the award. In the
alternative, the order dismisses the complaint on the ground
of forum non conveniens. In this light, defendants’
remaining arguments regarding abstention, dismissal of
Colombia as a party, and service of process on defendants
need not be addressed.
Id. at 92. On appeal, appellants have abandoned their breach of
contract claim.
Because it is clear and undisputed that TermoRio has
standing to bring this lawsuit, we need not address the standing
of LeaseCo. Military Toxics Project v. EPA, 146 F.3d 948, 954
(D.C. Cir. 1998) (“If one party has standing in an action, a court
need not reach the issue of standing of other parties when it
makes no difference to the merits of the case.” (quoting Ry.
Labor Executives’ Ass’n v. United States, 987 F.2d 806, 810
8
(D.C. Cir. 1993))). In addition, because we hold that the District
Court properly dismissed appellants’ enforcement action under
Article V(1)(e) of the New York Convention, we find it
unnecessary to determine whether the case might have been
dismissed on the ground of forum non conveniens, the
alternative basis announced by the District Court. Likewise, we
find it unnecessary to address any presumptive veil-piercing
claim asserted by appellants to allow suit against the Republic
of Colombia or whether such a claim is barred by the relevant
statute of limitations. The only issue of consequence before this
court is whether the District Court erred in dismissing
appellants’ claim to enforce the disputed arbitration award.
II. ANALYSIS
A. Standard of Review
This court reviews de novo the District Court’s dismissal for
failure to state a claim, Stewart v. Nat’l Educ. Ass’n, 471 F.3d
169, 173 (D.C. Cir. 2006). As to the alternative basis for
dismissal announced by the District Court, “[w]e may reverse a
forum non conveniens determination . . . only for a ‘clear abuse
of discretion.’” TMR Energy Ltd. v. State Prop. Fund of
Ukraine, 411 F.3d 296, 303 (D.C. Cir. 2005) (quoting Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 257 (1981)); see also Piper
Aircraft, 454 U.S. at 257 (“The forum non conveniens
determination is committed to the sound discretion of the trial
court. It may be reversed only when there has been a clear
abuse of discretion . . . .”).
B. The Applicable International Agreement
As the District Court noted,
[t]he United States has ratified and codified two
Conventions that allow courts in one country to enforce
arbitral awards rendered in other signatory countries. See
Inter-American Convention on International Commercial
9
Arbitration[, opened for signature Jan. 30, 1975, O.A.S.T.S.
No. 42, 1438 U.N.T.S. 245,] (the “Panama Convention”)
(reprinted after 9 U.S.C. § 301), and The Convention on the
Recognition and Enforcement of Arbitral Awards (the
“New York Convention”) (reprinted after 9 U.S.C. § 201).
Colombia is a signatory to both of these Conventions. The
New York Convention provides that signatory nations are
to recognize and enforce arbitral awards rendered in other
nations. See New York Convention Art. III. However,
enforcement of awards “may be refused” if, inter alia, they
were set aside by a competent authority in the country in
which the award was made. See New York Convention Art.
V(1)(e).
....
FN4. [Appellants] maintain that the Panama
Convention applies to this dispute because a majority
of the parties to the arbitration agreement are citizens
of states that have ratified the Panama Convention. See
9 U.S.C. § 305(1). However, codification of the
Panama Convention incorporates by reference the
relevant provisions of the New York Convention (see
9 U.S.C. § 302), making discussion of the Panama
Convention unnecessary.
TermoRio, 421 F. Supp. 2d at 91 & n.4. We need not decide
whether 9 U.S.C. § 302 incorporates the New York Convention,
as opposed to other provisions of law related to the New York
Convention, because the relevant provisions of the Panama
Convention and the New York Convention are substantively
identical for purposes of this case and neither party challenges
the District Court’s analysis. We therefore resolve this matter
with reference to and using the language of the New York
Convention.
10
C. The Validity of a Foreign Judgment Vacating an
Arbitration Award
The Supreme Court has recognized an “emphatic federal
policy in favor of arbitral dispute resolution.” Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614,
631 (1985); see also Dean Witter Reynolds Inc. v. Byrd, 470
U.S. 213, 217 (1985) (noting that where parties have seen fit to
adopt arbitration clauses in their agreements, there is a “strong
federal policy in favor of enforcing [them]”). “And at least
since this Nation’s accession in 1970 to the [New York]
Convention, and the implementation of the Convention in the
same year by amendment of the Federal Arbitration Act, [9
U.S.C. §§ 201-208], that federal policy applies with special
force in the field of international commerce.” Mitsubishi, 473
U.S. at 631 (internal citation omitted). “As international trade
has expanded in recent decades, so too has the use of
international arbitration to resolve disputes arising in the course
of that trade.” Id. at 638. The Convention’s purpose was to
“encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the
standards by which agreements to arbitrate are observed and
arbitral awards are enforced in the signatory countries.” Scherk
v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974). And, as
the Court has noted, “[t]he utility of the [New York] Convention
in promoting the process of international commercial arbitration
depends upon the willingness of national courts to let go of
matters they normally would think of as their own.” Mitsubishi,
473 U.S. at 639 n.21.
The basic understanding of the New York Convention is
that “[e]ach Contracting State shall recognize arbitral awards as
binding and enforce them in accordance with the rules of
procedure of the territory where the award is relied upon, under
the conditions laid down in the . . . articles [of the Convention].”
New York Convention, art. III. Under the Convention, “the
11
critical element is the place of the award: if that place is in the
territory of a party to the Convention, all other Convention states
are required to recognize and enforce the award, regardless of
the citizenship or domicile of the parties to the arbitration.”
Creighton Ltd. v. Gov’t of the State of Qatar, 181 F.3d 118, 121
(D.C. Cir. 1999) (quoting RESTATEMENT (THIRD) OF FOREIGN
RELATIONS LAW § 487 cmt. b (1987)).
Although its purpose is to encourage the recognition and
enforcement of commercial arbitration agreements in
international contracts, the New York Convention enumerates
specific grounds upon which a court may refuse recognition and
enforcement of an arbitration award. On this point, Article V
provides:
1. Recognition and enforcement of the award may be
refused, at the request of the party against whom it is
invoked, only if that party furnishes to the competent
authority where the recognition and enforcement is sought,
proof that:
(a) The parties to the agreement . . . were, under the
law applicable to them, under some incapacity, or the
said agreement is not valid under the law to which the
parties have subjected it or, failing any indication
thereon, under the law of the country where the award
was made; or
(b) The party against whom the award is invoked was
not given proper notice of the appointment of the
arbitrator or of the arbitration proceedings or was
otherwise unable to present his case; or
(c) The award deals with a difference not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration, provided that, if the decisions on matters
12
submitted to arbitration can be separated from those
not so submitted, that part of the award which contains
decisions on matters submitted to arbitration may be
recognized and enforced; or
(d) The composition of the arbitral authority or the
arbitral procedure was not in accordance with the
agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country
where the arbitration took place; or
(e) The award has not yet become binding on the
parties, or has been set aside or suspended by a
competent authority of the country in which, or under
the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may
also be refused if the competent authority in the country
where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable
of settlement by arbitration under the law of that
country; or
(b) The recognition or enforcement of the award
would be contrary to the public policy of that country.
New York Convention art. V(1)-(2). These provisions of the
Convention have been implemented by the FAA. See 9 U.S.C.
§ 207 (“The court shall confirm the award unless it finds one of
the grounds for refusal or deferral of recognition or enforcement
of the award specified in the said Convention.”).
The Convention provides a carefully crafted framework for
the enforcement of international arbitral awards. Under the
Convention, “[o]nly a court in a country with primary
jurisdiction over an arbitral award may annul that award.”
Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan
13
Gas Bumi Negara, 364 F.3d 274, 287 (5th Cir. 2004) (“Karaha
Bodas II”). As the Second Circuit has noted:
the Convention mandates very different regimes for the
review of arbitral awards (1) in the state in which, or under
the law of which, the award was made, and (2) in other
states where recognition and enforcement are sought. The
Convention specifically contemplates that the state in
which, or under the law of which, the award is made, will
be free to set aside or modify an award in accordance with
its domestic arbitral law and its full panoply of express and
implied grounds for relief. See Convention art. V(1)(e).
However, the Convention is equally clear that when an
action for enforcement is brought in a foreign state, the
state may refuse to enforce the award only on the grounds
explicitly set forth in Article V of the Convention.
Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, Inc., 126 F.3d
15, 23 (2d Cir. 1997).
In this case, appellees point out that, because the arbitration
award was made by a Colombian Tribunal convened in that
country, pursuant to an agreement between Colombian
companies to buy and sell electrical power in that country,
Colombia is the nation with primary jurisdiction over this
dispute. Appellees argue further that, under the clear terms of
the Convention, appellants’ action to enforce the arbitration
award fails to state a cause of action. On this latter point,
appellees point to Article V(1)(e) of the Convention, which
provides that
[r]ecognition and enforcement of [an] award may be
refused, at the request of the party against whom it is
invoked, . . . if that party furnishes . . . proof that: . . . [t]he
award . . . has been set aside . . . by a competent authority
of the country in which, or under the law of which, that
award was made.
14
New York Convention art. V(1)(e). Pursuant to this provision
of the Convention, a secondary Contracting State normally may
not enforce an arbitration award that has been lawfully set aside
by a “competent authority” in the primary Contracting State.
Because the Consejo de Estado is undisputedly a “competent
authority” in Colombia (the primary State), and because there is
nothing in the record here indicating that the proceedings before
the Consejo de Estado were tainted or that the judgment of that
court is other than authentic, appellees contend that appellants
have no cause of action under the FAA or the New York
Convention to enforce the award in a Contracting State outside
of Colombia. On the record at hand, we agree.
In reaching this conclusion, we generally subscribe to the
reasoning of the Second Circuit in Baker Marine, 191 F.3d 194.
In that case, Baker Marine, a barge company, executed a
services contract with Danos, a shipping concern. The contract
contained a clause requiring the parties to arbitrate disputes or
controversies arising under their agreement. Following such a
dispute, the parties “submitted to arbitration before panels of
arbitrators in Lagos, Nigeria.” Id. at 195. The panels awarded
Baker Marine nearly $3 million in damages, but the award was
subsequently set aside by a Nigerian court. Baker Marine then
sought enforcement of the award in the United States District
Court for the Northern District of New York. The trial court
refused to recognize the award, citing Article V(1)(e) of the
New York Convention, as well as principles of comity. On
appeal, Baker Marine argued that the trial court erred in refusing
to enforce the award, because it had been set aside by the
Nigerian court on grounds that would have been invalid under
U.S. law if presented in an American court. The appellate court
rejected this argument and affirmed the trial court’s decision not
to recognize the award, noting that the parties “contracted in
Nigeria that their disputes would be arbitrated under the laws of
Nigeria.” Id. at 197. The court also remarked on the
15
undesirable consequences that would likely follow from
adoption of Baker Marine’s argument:
[A]s a practical matter, mechanical application of domestic
arbitral law to foreign awards under the Convention would
seriously undermine finality and regularly produce
conflicting judgments. If a party whose arbitration award
has been vacated at the site of the award can automatically
obtain enforcement of the awards under the domestic laws
of other nations, a losing party will have every reason to
pursue its adversary “with enforcement actions from
country to country until a court is found, if any, which
grants the enforcement.”
Id. at 197 n.2 (quoting ALBERT JAN VAN DEN BERG, THE NEW
YORK ARBITRATION CONVENTION OF 1958: TOWARDS A
UNIFORM JUDICIAL INTERPRETATION 355 (1981)). The same
principles and concerns govern here, where appellants seek to
enforce an arbitration award that has been vacated by
Colombia’s Consejo de Estado. For us to endorse what
appellants seek would seriously undermine a principal precept
of the New York Convention: an arbitration award does not
exist to be enforced in other Contracting States if it has been
lawfully “set aside” by a competent authority in the State in
which the award was made. This principle controls the
disposition of this case.
D. Considerations of “Public Policy”
Appellants argue that courts in the United States “have
discretion under the Convention to enforce an award despite
annulment in another country,” Karaha Bodas Co. v.
Perusahaan Pertambangan Minyak Dan Gas, 335 F.3d 357, 369
(5th Cir. 2003), because Article V(1)(e) merely says that
“[r]ecognition and enforcement may be refused” if the award has
been set aside by a competent authority in the primary state,
New York Convention art. V(1)(e) (emphasis added). More
16
particularly, appellants contend that “a state is not required to
give effect to foreign judicial proceedings grounded on policies
which do violence to its own fundamental interests.”
Appellants’ Br. at 22 (quoting Laker Airways Ltd. v. Sabena,
Belgian World Airlines, 731 F.2d 909, 931 (D.C. Cir. 1984)).
Appellants’ characterizations of the applicable law are
understated and thus misguided.
Appellants concede that Baker Marine is not incorrect in its
holding that “it is insufficient to enforce an award solely because
a foreign court’s grounds for nullifying the award would not be
recognized under domestic United States law.” Appellants’ Br.
at 24. Rather, appellants allege that the District Court should
have exercised its discretion to enforce the arbitration award in
this case, because, inter alia, “the Council of State’s decision
was contrary to both domestic Colombian and international law;
recognition of that decision would frustrate clearly expressed
international and United States policy; and the process leading
to the nullification decision demonstrated the Colombian
government’s determination to deny Plaintiffs fair process.” Id.
In advancing their claims, appellants rely heavily on In re
Chromalloy Aeroservices, 939 F. Supp. 907 (D.D.C. 1996). In
that case, the District Court addressed an arbitration agreement
between the Egyptian Air Force and an American in which the
parties provided that the losing party would not seek review of
the arbitration award. While the American company’s petition
for enforcement of its award was pending before the District
Court, Egypt filed an appeal with the Egyptian Court of Appeal
to nullify the award. The District Court refused to recognize the
decision of the Egyptian court to nullify the award, finding that
to do so would violate clear United States public policy in favor
of arbitration and would reward Egypt’s breach of the express
contractual agreement not to take any appeal from the arbitration
award. We need not decide whether the holding in Chromalloy
is correct, because, as appellees point out, “the present case is
17
plainly distinguishable from Chromalloy where an express
contract provision was violated by pursuing an appeal to vacate
the award. Here, Electranta preserved its objection that the
panel was not proper or authorized by law, promptly raised it in
the Colombian courts, and received a definitive ruling by the
highest court on this question of law.” Appellees’ Br. at 13
(internal citation omitted).
Furthermore, appellants are simply mistaken in suggesting
that the Convention policy in favor of enforcement of arbitration
awards effectively swallows the command of Article V(1)(e).
A judgment whether to recognize or enforce an award that has
not been set aside in the State in which it was made is quite
different from a judgment whether to disregard the action of a
court of competent authority in another State. “The Convention
specifically contemplates that the state in which, or under the
law of which, the award is made, will be free to set aside or
modify an award in accordance with its domestic arbitral law
and its full panoply of express and implied grounds for relief.”
Yusuf Ahmed Alghanim & Sons, 126 F.3d at 23; see also Karaha
Bodas II, 364 F.3d at 287-88. This means that a primary State
necessarily may set aside an award on grounds that are not
consistent with the laws and policies of a secondary Contracting
State. The Convention does not endorse a regime in which
secondary States (in determining whether to enforce an award)
routinely second-guess the judgment of a court in a primary
State, when the court in the primary State has lawfully acted
pursuant to “competent authority” to “set aside” an arbitration
award made in its country. Appellants go much too far in
suggesting that a court in a secondary State is free as it sees fit
to ignore the judgment of a court of competent authority in a
primary State vacating an arbitration award. It takes much more
than a mere assertion that the judgment of the primary State
“offends the public policy” of the secondary State to overcome
a defense raised under Article V(1)(e).
18
The decision in Baker Marine notes that the “[r]ecognition
of the [foreign court’s] judgment in [that] case d[id] not conflict
with United States public policy,” 191 F.3d at 197 n.3, thus at
least implicitly endorsing a “public policy” gloss on Article
V(1)(e). However, the decision does not say that a court in the
United States has unfettered discretion to impose its own
considerations of public policy in reviewing the judgment of a
court in a primary State vacating an arbitration award based
upon the foreign court’s construction of the law of the primary
State. Rather, as appellees argue, Baker Marine is consistent
with the view that, “[w]hen a competent foreign court has
nullified a foreign arbitration award, United States courts should
not go behind that decision absent extraordinary circumstances
not present in this case.” Appellees’ Br. at 12.
In applying Article V(1)(e) of the New York Convention,
we must be very careful in weighing notions of “public policy”
in determining whether to credit the judgment of a court in the
primary State vacating an arbitration award. The test of public
policy cannot be simply whether the courts of a secondary State
would set aside an arbitration award if the award had been made
and enforcement had been sought within its jurisdiction. As
noted above, the Convention contemplates that different
Contracting States may have different grounds for setting aside
arbitration awards. Therefore, it is unsurprising that the courts
have carefully limited the occasions when a foreign judgment is
ignored on grounds of public policy.
A judgment is unenforceable as against public policy
to the extent that it is “repugnant to fundamental notions of
what is decent and just in the State where enforcement is
sought.” Tahan v. Hodgson, 662 F.2d 862, 864 (D.C. Cir.
1981) (quoting Rest.2d Conflict of Laws § 117, comment c
(1971)). The standard is high, and infrequently met. As
one court wrote, “[o]nly in clear-cut cases ought it to avail
defendant.” Tahan, 662 F.2d at 866 n.17 (citing von
19
Mehren & Trautman, Recognition of Foreign
Adjudications: A Survey and a Suggested Approach, 81
HARV. L. REV. 1601, 1670 (1968); Paulsen & Sovern,
“Public Policy” in the Conflict of Laws, 56 COLUM. L. REV.
969, 980-81, 1015-16 (1956)). In the classic formulation,
a judgment that “tends clearly” to undermine the public
interest, the public confidence in the administration of the
law, or security for individual rights of personal liberty or
of private property is against public policy.
Ackermann v. Levine, 788 F.2d 830, 841 (2d Cir. 1986).
Article V(2)(b) of the Convention, unlike Article V(1)(e),
incorporates an express public policy exception. Article V(2)(b)
provides:
Recognition and enforcement of an arbitral award may also
be refused if the competent authority in the country where
recognition and enforcement is sought finds that . . . [t]he
recognition or enforcement of the award would be contrary
to the public policy of that country.
New York Convention, art. V(2)(b). It is noteworthy that in
construing this provision the courts have been very careful not
to stretch the compass of “public policy.” As one court has
noted:
Under Article V(2)(b) of the New York Convention, a
court may refuse to recognize or enforce an arbitral award
if it would be contrary to the public policy of that country.
The public policy defense is to be construed narrowly to be
applied only where enforcement would violate the forum
state’s most basic notions of morality and justice.
Karaha Bodas II, 364 F.3d at 305-06 (internal citations and
quotation marks omitted). Given that Article V(1)(e) contains
no exception for public policy, it would be strange indeed to
20
recognize such an implicit limitation in Article V(1)(e) that is
broader than the express limitation in Article V(2)(b).
Accepting that there is a narrow public policy gloss on
Article V(1)(e) of the Convention and that a foreign judgment
is unenforceable as against public policy to the extent that it is
“repugnant to fundamental notions of what is decent and just in
the United States,” Tahan, 662 F.2d at 864 (internal quotation
marks omitted), appellants’ claims still fail. Appellants have
neither alleged nor provided any evidence to suggest that the
parties’ proceedings before Colombia’s Consejo de Estado or
the judgment of that court violated any basic notions of justice
to which we subscribe.
Appellants contend that the Consejo de Estado’s ruling
conflicts with Colombia’s obligation under the New York
Convention, but that bare allegation surely provides no basis for
us to ignore Article V(1)(e) on grounds of public policy. As the
court noted in Yusuf Ahmed Alghanim & Sons:
[U]nder the Convention, the power and authority of the
local courts of the rendering state remain of paramount
importance. “What the Convention did not do . . . was
provide any international mechanism to insure the validity
of the award where rendered. This was left to the
provisions of local law. The Convention provides no
restraint whatsoever on the control functions of local courts
at the seat of arbitration.” [W. Laurence Craig, Some
Trends and Developments in the Laws and Practice of
International Commercial Arbitration, 30 TEX. INT’L L.J. 1,
11 (1995).]. Another commentator explained:
Significantly, [Article V(1)(e)] fails to specify the
grounds upon which the rendering State may set aside
or suspend the award. While it would have provided
greater reliability to the enforcement of awards under
the Convention had the available grounds been defined
21
in some way, such action would have constituted
meddling with national procedure for handling
domestic awards, a subject beyond the competence of
the Conference.
Leonard V. Quigley, Accession by the United States to the
United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 70 YALE L.J.
1049, 1070 (1961). From the plain language and history of
the Convention, it is thus apparent that a party may seek to
vacate or set aside an award in the state in which, or under
the law of which, the award is rendered. Moreover, the
language and history of the Convention make it clear that
such a motion is to be governed by domestic law of the
rendering state . . . .
126 F.3d at 22-23.
The District Court correctly observed that “[t]his matter is
a peculiarly Colombian affair,” concerning, as it does, “a dispute
involving Colombian parties over a contract to perform services
in Colombia which led to a Colombian arbitration decision and
Colombian litigation.” TermoRio, 421 F. Supp. 2d at 101, 103.
To this, we would add that the parties also agreed to be bound
by Colombian law. The Consejo de Estado, Colombia’s highest
administrative court, is the final expositor of Colombian law,
and we are in no position to pronounce the decision of that court
wrong.
E. The District Court’s Grant of Appellees’ Motion To
Dismiss
Appellants have raised one final issue that warrants our
attention. The District Court dismissed appellants’ action under
Federal Rule of Civil Procedure 12(b)(6), which provides that a
suit may be dismissed on the pleadings for “failure to state a
claim upon which relief can be granted.” FED. R. CIV. P.
12(b)(6). Normally, dismissal is appropriate under Rule
22
12(b)(6) only if it is “clear that no relief could be granted under
any set of facts that could be proved consistent with the
allegations.” Broudy v. Mather, 460 F.3d 106, 116-17 (D.C. Cir.
2006) (internal quotation marks omitted) (discussing dismissal
under FED. R. CIV. P. 12(b)(6)). Appellants claim that the
District Court erred in granting the motion to dismiss under Rule
12(b)(6), because an affirmative defense only supports dismissal
if that defense is unavoidably established by the facts alleged on
the face of the complaint. Appellants argue that Colombia’s
nullification of the arbitration award is only grounds for a Rule
12(b)(6) dismissal if the nullification conclusively defeats
appellants’ claim. Application of Article V(1)(e) cannot be
conclusive, appellants say, because, in their view, the New York
Convention and United States law provide that an arbitration
award can be enforced despite having been nullified in the
country in which it was issued. Thus, according to appellants,
the District Court erred in dismissing their action under Rule
12(b)(6) solely on the basis of a foreign nullification.
The short answer to appellants’ claim is that their reference
to the requirements of Rule 12(b)(6) is misplaced. Chapter 2 of
the FAA incorporates and codifies the New York Convention.
9 U.S.C. § 201. However, the statute makes clear that “[Chapter
1 of the FAA] applies to actions and proceedings brought under
[Chapter 2] to the extent [Chapter 1] is not in conflict with
[Chapter 2] or the Convention as ratified by the United States.”
Id. § 208. Chapter 1, in turn, states that “[a]ny application to the
court hereunder shall be made and heard in the manner provided
by law for the making and hearing of motions, except as
otherwise herein expressly provided.” Id. § 6. Therefore, it
appears that motions to enforce arbitral awards should proceed
under motions practice, not notice pleading. Indeed,
[o]ne of the clearest examples of the operation of Section
208 is its making motion practice under Section 6
applicable to proceedings under the [New York
23
Convention]. Thus, an arbitration award under the
Convention may be enforced by filing a petition or
application for an order confirming the award supported by
an affidavit. The hearing on such a petition or application
will take the form of a summary procedure in the nature of
federal motion practice.
3 FED. PROC., L. ED. § 4:183 (1999).
In light of the foregoing, it is clear that the District Court
properly addressed appellants’ application for enforcement of
the arbitration award. The District Court reviewed appellants’
application and appellees’ response, reviewed the affidavits
submitted by the parties in support of their respective positions,
and, on the basis of that review, arrived at its judgment. This
satisfied the District Court’s obligation under the New York
Convention and squared with the approach that has been
endorsed by some of our sister circuits. See, e.g., Productos
Mercantiles E Industriales, S.A. v. Faberge USA, Inc., 23 F.3d
41, 46 (2d Cir. 1994) (“Since [appellee] appropriately sought
relief in the form of a motion, the court was not required to
comply with the pleading requirements of FED. R. CIV. P.
12(b).”); O.R. Sec., Inc. v. Prof’l Planning Assocs., 857 F.2d
742, 745-46 (11th Cir. 1988) (same); Imperial Ethiopian Gov’t
v. Baruch-Foster Corp., 535 F.2d 334, 335 & n.2 (5th Cir. 1976)
(same).
Furthermore, we note that, even if we were to assess the
District Court’s action by reference to the rules of notice
pleading, we would find no error. Where, as here, both parties
had sufficient opportunity to present evidence beyond the
pleadings, this court has the authority to convert a motion to
dismiss under Rule 12(b)(6) to a grant of summary judgment
under Federal Rule of Civil Procedure 56 and affirm the
judgment of the District Court. Ctr. for Auto Safety v. Nat’l
Highway Traffic Safety Admin., 452 F.3d 798, 805 (D.C. Cir.
2006). Summary judgment under Rule 56 is appropriate where
24
the pleadings and the record “show that there is no genuine issue
as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Kingman Park Civic Ass’n v.
Williams, 348 F.3d 1033, 1041 (D.C. Cir. 2003) (quoting FED.
R. CIV. P. 56(c)). Such is the case here.
Both parties had ample time to submit documents outside
of the pleadings and did, in fact, submit such evidence.
However, as noted by the District Court, appellants did not so
much as allege that the proceedings in Colombia were repugnant
to the public policy of the United States. TermoRio, 421 F.
Supp. 2d at 102. And during oral argument before this court,
appellants conceded that they were in no way foreclosed from
introducing additional evidence or materials to the District Court
to support a challenge to the validity or integrity of the
proceedings that took place in Colombia. On this record, given
the undisputed facts and the command of Article V(1)(e) of the
New York Convention, summary judgment is appropriate. We
must honor the judgment of the Colombia court vacating the
disputed arbitration award, because there is nothing in the record
here indicating that the proceedings before the Consejo de
Estado were fatally flawed or that the judgment of that court is
other than authentic.
III. CONCLUSION
For the foregoing reasons, the judgment of the District
Court dismissing appellants’ application for enforcement of the
arbitration award is affirmed.
So ordered.