Chicago International Dispute Resolution Association

Undisputed Facts

Newsletter of The Chicago International Dispute Resolution Association
Winter 2003

The Ninth Circuit Introduces a "Due Process" Defense to the Recognition and Enforcement of Foreign Arbitral Awards

by Mahir Jalili 1

The New York Convention provides in Article V for seven defenses to the recognition and enforcement of foreign arbitral awards. These defenses are:

  1. The parties were under some incapacity or the arbitration agreement was invalid.

  2. The respondent in the arbitration was not given proper notice or was otherwise unable to present his case.

  3. 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.

  4. The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or with the law of the seat of arbitration.

  5. The award has not yet become binding on the parties or has been set aside or suspended by a competent authority.

  6. The subject matter of the difference is not capable of settlement by arbitration in the country where recognition and enforcement is sought.

  7. The recognition and enforcement of the award would be contrary to public policy in the country where recognition and enforcement is sought.

In a recent case 2, the Ninth Circuit appears to introduce a "new" defense, namely that the court in the country where recognition and enforcement is sought must have jurisdiction over the party against whom enforcement is sought or his property.

The facts are summarized as follows: A Dutch company, Glencore, entered into a contract with an Indian company, Shivnath, for the purchase of Indian rice FOB Port of Kandla, India. The contract was governed by English law and provided for arbitration under the rules of the London Rice Brokers' Association ("LRBA"). A dispute arose between the parties, which was referred to arbitration in London.

In 1997, the LRBA arbitral tribunal awarded about $7 million to Glencore. Shivnath neither paid up nor challenged the award in England. Glencore filed suit in New Delhi, India, to enforce the award, but that action is still pending. In 2000, Glencore filed an application in the U.S. District Court in California seeking confirmation of the award under the New York Convention. Glencore provided evidence that Shivnath had shipped rice to California on several occasions and also had a U.S. sales agent based in California.

The District Court dismissed the application on the grounds that the court had no jurisdiction over Shivnath. The Ninth Circuit affirmed the decision. It stated that Shivnath's contacts with California made it, at most, a visitor to the forum, and that the "physical presence" required for assertion of jurisdiction required more.

1 Mr. Jalili practices from Chicago and London. He is qualified as an English barrister and an American attorney. His practice is concentrated on international arbitration.
2 Glencore Grain Rotterdam BV v. Shivnath Rai Harnarain Co., decided March 26, 2002.

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