The Practice of International Litigation - 2nd Edition - Looseleaf
The Practice of International Litigation - 2nd Edition - Electronic
Arbitrating with Foreign States
Lawrence W. Newman and Michael Burrows
International commercial arbitration today involves, with increasing
frequency, foreign governments or their state-owned or controlled
corporations or enterprises as parties. This chapter examines the extent to
which there may be legal problems arising out of the participation of
foreign states in arbitration.
Arbitrations involving foreign states or their enterprises, are essentially
governed in the United States by two statutes, the Foreign Sovereign
Immunities Act and the Federal Arbitration Act, and by one international
convention, the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards of June 10, 1958—sometimes also referred to as
the New York Convention.
Because of the consensual nature of arbitration, arbitration proceedings
involving foreign states do not ordinarily raise issues of sovereign
immunity. If a foreign governmental entity enters into an arbitration it is
likely to have abandoned any hopes of availing itself of the protections of
sovereign immunity. Sovereign immunity becomes an issue in the context
of arbitration in proceedings to enforce an agreement to arbitrate, to obtain provisional
remedies in aid of arbitration and to enforce an arbitral award.
Enforcement of Agreements to Arbitrate
United States courts generally take a liberal approach in construing
agreements to arbitrate, resolving doubts in favor of enforcement. The
Federal Arbitration Act is, the Supreme Court has said, “a congressional
declaration of a liberal federal policy favoring arbitration agreements.” The
courts are, however, obliged, at the request of a party, to determine, as a
preliminary matter, whether a particular dispute is within the scope of an
arbitration clause. This practice is contrary to that of most European
countries, whose courts ordinarily refer a matter to arbitration once they
determine that a written agreement to arbitrate exists.
As a practical matter, the United States courts quickly refer matters to
the arbitrators when, as is usual, there is a broad arbitration clause.
Problems have arisen, however, as to the arbitrability of certain kinds of
disputes. The courts have barred the arbitrability of certain types of
domestic disputes on public policy grounds: federal securities law
violations, antitrust claims and anti-racketeering (RICO) claims. In
international arbitrations, on the other hand, securities laws disputes arising
under “truly international agreements” have been held to be arbitrable, in
view of the strong federal policy in favor of arbitrating international
disputes, which overrode public policy concerns about taking federal
securities law determinations away from the U.S. courts.
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.