Fourth Circuit remands attempt to enforce an arbitral award from Bermuda. Not clear that one of the parties is a foreign corporation because it may have its principal place of business in Florida. New York Convention applies only if one of the parties is not a U.S. citizen, so the District Court will have to determine the location of the defendant’s principal place of business.
Case of the day: Molecular Dynamics v. Spectrum Dynamics
The case of the day is Molecular Dynamics, Ltd. v. Spectrum Dynamics Medical Ltd.(2d Cir. 2025). Molecular Dynamics was a joint venture formed by SDBM Ltd. and Chancey Capital Corp. on the one hand and Biosensors International Group Ltd. on the other. The idea was to share intellectual property in order to develop “parallel but non-competing” medical imaging technologies. Molecular Dynamics was supposed to develop technologies for use in oncology only, and Biosensors was supposed to develop technology only outside of oncology. But Biosensors accused Molecular Dynamics of developing a cardiology camera, and it stopped making loans to Molecular Dynamics, as the agreement required. That led to Molecular Dynamics’s failure. Biosensors’s successor in interest, Spectrum Dymanics, also terminated the agreement and demanded repayment of the loans Biosensors had made. For its part, Molecular Dynamics accused Biosensors of breaching the agreement by failing to make required loans.
The parties arbitrated their dispute in Geneva; the contracts provided for arbitration “under the Swiss Rules of International Arbitration of the Swiss Chambers’ Arbitration Institution.” The contracts also had a New York choice of law clause, and one of them, a license agreement, had an odd choice of forum clause:
On matters of injunctive relief, the parties agree that the courts of New York, New York shall have non-exclusive jurisdiction and are competent courts for the purposes thereof, and on matters of concerning the Chosen Arbitration, the courts of New York, New York will have exclusive jurisdiction thereupon.
The parties arbitrated their dispute in Switzerland. After the hearing, Molecular Dynamics accused the presiding arbitrator of bias, and he withdrew. A new presiding arbitrator was appointed, and she promised not to review or rely on a draft award that had been circulating among the arbitrators. The tribunal then issued an award, without holding new evidentiary hearings first. The award found that Molecular Dynamics had breached the license agreement by developing the cardiology technology, which discharged Biosensors’ obligations under the license agreement. It found that Spectrum was entitled to repayment of the loans Biosensors had made, which totaled $7.5 million plus interest, and to $6.9 million in costs and fees.
Molecular Dynamics sought to vacate the award in New York. This is odd. The award was made in Switzerland, and so one would think that only the Swiss courts, the courts with primary jurisdiction, could set the award aside. But Molecular Dynamics pointed to the language in the license agreement I quoted above, arguing that Spectrum and its co-parties had “consented to [the district court’s] jurisdiction over them by agreeing to a forum selection clause vesting exclusive jurisdiction over ‘matters’ ‘concerning’ the Arbitration ‘in the courts of New York, New York.'”
The district court held that it lacked subject matter jurisdiction, because under the New York Convention, only the courts at the seat of the arbitration can vacate an award, and because the parties cannot circumvent that limitation by contract. Molecular Dynamics appealed.
The Second Circuit affirmed, though on slightly different grounds. The court pointed out that whether or not an American court has “jurisdiction” under the New York Convention to set aside an award made in Switzerland is not the same as the question whether an American court has “jurisdiction” under US law to hear an application to set aside an award in those circumstances. This kind of issue arises a lot in arbitration cases. I’m reminded of the difficulty courts have in deciding what’s a jurisdictional question and what’s a merits question when someone tries to confirm an arbitral award against a foreign sovereign (have a look at my post on Chiejina v. Nigeria, where I discussed this issue). I also note a similar issue in friend of Letters Blogatory Maggie Gardner’s excellent series of ongoing posts on the Fuld case at the Transnational Litigation Blog. I’ll be writing about those later this week. In her first post, Maggie explains how the confusion between jurisdiction to prescribe and jurisdiction to adjudicate leads to muddles. In short, as the Second Circuit (quoting the Supreme Court) says, “jurisdiction is a word of many, too many meanings.”
The only basis for subject matter jurisdiction asserted in the case was 9 U.S.C. § 203, which vests the courts with jurisdiction in “an action or proceeding falling under the Convention.” Does a petition to set aside the award fall under the Convention? The Second Circuit’s answer is “no.” The Convention itself defines its scope of application in Article I: it applies “to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought” and “to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.” That is, the scope of the Convention is limited to cases where someone seeks recognition and enforcement of an award and excludes cases where someone seeks to set an award aside.
You might ask why this matters, if the outcome is the same. The reason is that if the courts have subject-matter jurisdiction, then they can reach and decide the question that Molecular Dynamics posed and that the district court decided: can the parties, by contract, vary the Convention’s rules about which courts have the power to set awards aside? But if the courts don’t have subject-matter jurisdiction, then they can’t reach that question. The district court confused the issues a bit by characterizing its decision on that merits question as a decision about its subject-matter jurisdiction.
Aside from the helpful clarification the decision provides about how to think about the protean term “jurisdiction,” the case is also helpful because it sticks with one of the main practical rules that keeps the system of international arbitration working: you challenge awards in the place where the awards are made.
Case of the Day: Global Voice Group v. Guinea
The case of the day is Global Voice Group S.A. v. Republic of Guinea (D.D.C. 2025). GVG had a contract to “provide and install control tools to enable Guinea to view and tax all international telecommunications traffic.” The contract identified the other party as the Postal and Telecommunications Regulatory Authority of Guinea. It had an arbitration agreement. Payment disputes arose, and GVG requested arbitration at the ICC in Paris against the PTRA and against the Republic of Guinea itself. While the PTRA had signed the contract, another Guinean governmental official outside the PTRA had also signed the contract. Guinea participated in the arbitration but objected to the tribunal’s jurisdiction. The tribunal disagreed, though, finding, under French law, that Guinea was a party to the agreement. It awarded damages to GVG. Guinea and the PTRA sought annulment in the Paris Court of Appeal. That court ruled in Global Voice’s favor, too.
GVG sought recognition and enforcement in Washington, but only against Guinea, not the PTRA. GVG sought entry of default one day after the deadline for Guinea to answer,1 and the clerk entered the default. Guinea moved to set the default aside, and GVG moved for entry of default judgment. There was a service of process issue in the motions, but the court didn’t discuss it. The main issue was Guinea’s argument that the court lacked jurisdiction because it was not a party to the agreement to arbitrate.
This issue is interesting to me because it reminds me of an issue in my case from a couple of years ago against the government of Nigeria. In that case, there was no question that the Nigerian government was a party to the agreement. But in the arbitration, the claimants were the counterparty to the contract and its owner. Nigeria did not challenge the tribunal’s jurisdiction over his claim during the arbitration, and the award issued in favor of the business and the owner. But when we sought confirmation in Washington, Nigeria argued the court lacked jurisdiction, because the owner was not a party to the agreement. The court held, correctly, that that was a merits question (is there an exception to the rule of the New York Convention requiring confirmation where the owner did not sign the agreement in his individual capacity?) with a jurisdiction question (does the FSIA’s arbitration exception to foreign sovereign immunity apply in this situation?)
But is that also the rule when it’s the foreign state, not the private party, whose status as a party to the agreement to arbitrate is in question? No, it’s not, as the court held in today’s case. The FSIA’s exception applies to cases
in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit [the dispute] to arbitration …
The court doesn’t put it this way, but the best reading of the statute, in my view, is that it does require that the foreign state be a party to the agreement but does not require that the private party be a party (or intended third-party beneficiary) of the contract. It says “a” private party, not “the” private party. If you’ll indulge me, here is how I put it in the DC Circuit brief (the case settled before oral argument):
The FSIA requires “an agreement made by the foreign state with or for the benefit of a private party.” 28 U.S.C. § 1605(a)(6). It does not require an agreement made by the foreign state with or for the benefit of the claimant, or with or for the benefit of the award creditor, or even with or for the benefit of the private party. It requires an agreement made by the foreign state with a private party.
The indefinite article, “a” or “an,” is used when “referring to something not specifically identified … but [instead] treated as one of a class: one, some, any.” Citizens for Responsibility & Ethics in Wash. v. FEC, 971 F.3d 340, 354 (D.C. Cir. 2020) (citation omitted). See also Black’s Law Dictionary 77 (5th ed. 1979) (the indefinite article is “equivalent to ‘one’ or ‘any’”).
So when the statute refers to an agreement “with … a private party,” it cannot be read to refer to the agreement with a particular private party, for example the private party petitioning for confirmation. See Balkan Energy Ltd. v. Republic of Ghana, 302 F. Supp. 3d 144 (D.D.C. 2018) (holding that the court had jurisdiction over a petition brought by the assignee of an award rather than by the original award creditor). All the statute requires is that the award be made under an agreement with some private party. The definite article “the” appears earlier in the same sentence, strengthening the case. The agreement under which the award is made must be between the foreign state, that is, the foreign state against whom the petition is brought, and a private party.
This construction accords with the cases discussed above. In particular, it accords with cases such as First Investment [Corp. v. Fujian Mawei Shipbuilding, Ltd., 703 F.3d 742 (5th Cir. 2012)] and Gater [Assets Ltd. v. AO Moldovagaz, 2 F.4th 42 (2d Cir. 2021)], since in those cases the problem was that an instrumentality of the foreign state had signed an agreement to arbitrate but the foreign state itself had not. The arbitration exception applies when the award was made under a written agreement between the foreign state and a private party; questions about whether the dispute was one the foreign state had agreed to arbitrate are merits questions, not jurisdictional questions. Only if the petitioner cannot show that the award was made under a written agreement between the foreign state and some private party does the district court lack subject-matter jurisdiction.
In short, the court was right to say that when a foreign state says it is not a party to the agreement under which the award against it was rendered, its challenge is to jurisdiction and not to the merits, in light of the plain language of the FSIA.
Case to watch: Devas v. Antrix
Credit: Joe Ravi (CC BY-SA)Friend of Letters Blogatory Ingrid Brunk has a good post at the Transnational Litigation Blog about the oral argument in Devas v. Antrix, the case that asks whether it’s necessary, when seeking to confirm an arbitral award against a foreign state, to prove some connection between the foreign state and the United States. That could be so either because the foreign state is a “person” entitled to due process, or because the arbitration exception to FSIA immunity has some requirement of a connection.
There is a lot that’s of interest in the case, and several heavy hitters have filed amicus briefs. Does the “minimum contacts” test of International Shoe and its progeny apply at all in cases governed by the Fifth Amendment rather than the Fourteenth Amendment? Does the FSIA’s arbitration exception have, or imply, some sort of minimum contact or nexus requirement? My own big-picture view, which has little to do with the way the case has was argued,1I haven’t read the amicus briefs, so perhaps one of the amici is thinking along similar lines. is that it doesn’t make any sense to require minimum contacts in any case seeking recognition and enforcement of a foreign money judgment or an arbitral award for damages. The main reason judgment creditors or award creditors seek recognition and enforcement in the United States is to try to satisfy the judgment or award by looking to assets in the United States.2That’s not the only reason, and there are classes of cases for which it’s not even the main reason. We ought to dust off the unpopular notice of quasi in rem jurisdiction and say that when you’re seeking to enforce a judgment or award by looking to property in the United States, the courts have jurisdiction to the extent of the property. Otherwise the United States becomes a haven for judgment and award debtors to stash their property.
I find quasi in rem jurisdiction fascinating, and the aversion to it hard to understand. Some older posts on the issue that you might find interesting are one on AHAB v. Standard Chartered Bank (D.C. 2014), one on Harvardsky Prumyslovy Holding, A.S. v. Kozeny (N.Y. App. Div. 2018), and one on Desiano v. Envision Foods (Mass. Super. Ct. 2017).
#arbitration #FSIA #NewYorkConvention #personalJurisdiction #quasiInRem
An insured tried to use the complex interaction between the FAA, the New York Convention, and the McCarran-Ferguson Act to get out of arbitration. The Fifth Circuit was not confused by this three-dimensional chess.
#contracts #law #litigation #arbitration #NewYorkConvention #insurance
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Ted Folkman