In a recent case decided on 22 March 2022 by the U.S. District Court of the Southern District of New York (case no. 21-cv-4150 - JGK), the State of Lybia was requesting the dismissal of a petition submitted by Olin Holdings Limited to have a final arbitral award – which had been issued by an arbitration panel of the International Chamber of Commerce in Paris, France - confirmed in U.S.A..
The facts of the case are as follows: Olin was a limited liability company from Cyprus. In 2005, Olin selected a site to build a factory in an industrial area in Tripoli and received from the Libyan Government a building permit to begin its construction, and an investment license. However, in 2006 the Libyan Government issued an Expropriation Order, expropriating some land including Olin's factory site.
After some attempts to obtain Court protection in Libya, Olin started arbitration proceedings in Paris, at the end of which, it obtained an arbitral award holding the Libyan Government liable to compensate the damages caused by the expropriation of Olin’s factory.
Olin then filed a petition with the U.S. District Court in New York to obtain recognition and confirmation of said arbitration award in U.S.A..
Libya opposed Olin's petition pursuant to Article V(l) (c) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (the New York Convention) and, in the alternative, sought dismissal of Olin’s petition on forum non conveniens grounds.
U.S. federal courts have discretion to dismiss a case on the ground of forum non conveniens when an alternative forum has jurisdiction to hear a case, and when trial in the chosen forum would establish oppressiveness and vexation to a respondent out of all proportion to the petitioner's convenience, or when the chosen forum is inappropriate because of considerations affecting the court's own administrative and legal problems.
Dismissal for forum non conveniens reflects a court's assessment of a range of considerations, most notably the convenience to the parties and the practical difficulties that can attend the adjudication of a dispute in a certain locality. The party seeking dismissal based on forum non conveniens, carries the burden of establishing that it duly applies.
U.S courts’ precedents have a three-step framework for resolving a motion to dismiss based on forum non conveniens, which are: (1) to determine the degree of deference to be afforded to the petitioner's choice of forum; (2) to examine whether an adequate alternative forum exists; and (3) to balance the private and public factors enumerated in certain leading court cases (“Gulf Oil Corp. v. Gilbert”, 1947; “Iragorri v. United Techs. Corp.”, 2001).
In Olin, the New York Judge evaluated first whether the test of deference was met, reasoning that, while parties who file suit in the district in which they reside are entitled to great deference, less deference is owed to foreign parties suing in U.S.A.: the greater the petitioner's bona fide connection to U.S.A. and to the forum of choice and the more it appears that considerations of convenience favor the conduct of the lawsuit in U.S.A., the greater deference which will be given. If, on the contrary, the choice of a U.S. forum was motivated only by forum-shopping reasons, less deference should receive such choice.
Since Olin is a Cypriot company with no ties to U.S.A., the bilateral investment agreement between Cyprus and Libya was not drafted in U.S.A., the arbitration was conducted in Paris, France, and all events giving rise to the arbitration took place in Libya, outside of U.S.A., at first it seemed that there was a lack of connection between Olin and U.S.A., reducing the deference due to the New York court choice of forum.
However, the New York Judge has found that the compensation of the damages owed to Olin under the arbitral award is in U.S. dollars, such award was written in English, and the bilateral investment agreement and the award itself are governed by the New York Convention, thus entitling Olin to some deference.
Libya's arguments to the contrary have been held to be unavailing by the Judge, in particular that that Olin had failed to identify any bona fide reason for seeking enforcement in U.S.A., but such burden of proof should have been borne by Libya, which has failed to identify even one private or public interest factor that may weighs in favor of its argument: consequently, the New York Court has not exercised its discretion to dismiss the case in favor of an alternative forum, making reference to the Iragorri precedent, pursuant to which: "The action should be dismissed only if the forum is shown to be genuinely inconvenient and the selected forum significantly preferable.". Libya's motion to dismiss the Olin’s petition has been accordingly denied.
This recent New York Judge’s Order rejecting the Libya’s motion - based on the exception of forum non conveniens – aimed at dismissing Olin’s petition to confirm the foreign arbitral award in U.S.A., is particularly important if we consider that most contracts between the Russian Federation (now subject to sanctions) and foreign companies usually provide in case of any dispute for arbitration in a “neutral” forum, usually being Sweden or Switzerland: since most contracts provide for payments or penalties to be paid in U.S. dollars, it is very likely that an arbitral award issued in such neutral jurisdictions, may end to be confirmed and enforced in U.S.A., where the doctrine of forum non conveniens does not seem to apply in such cases because of the link created by the currency of payment being the U.S. dollar.
Click here to see the original decision of U.S. District Court of the Southern District of New York (case no. 21-cv-4150 - JGK)
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Prof. Avv. Salvatore Vitale
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