Commercial Litigation and Arbitration

International Arbitration & Federal Jurisdiction — Minimum Contacts

The Cayman Islands plaintiff sought to enforce in New York a Swedish arbitral award against the State Oil Company of the Azerbaijan Republic ("SOCAR") in Frontera Resources Azerbaijan Corp. v. SOCAR, 479 F.Supp.2d 376 (S.D.N.Y. 2007). Because the defendant was an instrumentality or agency of the Azerbaijan Republic, statutory subject matter and personal jurisdiction were conferred by the Foreign Sovereign Immunities Act. 28 U.S.C. § 1605(a)(6)(B) confers subject matter jurisdiction over foreign states that have agreed to submit to arbitration their disputes with private parties, provided that "the agreement or award is ... governed by a treaty ... in force for the United States calling for the recognition and enforcement of arbitral awards" — a requirement that the New York Convention satisfies. 28 U.S.C. § 1608 conferred statutory personal jurisdiction because the plaintiff properly served the defendant in accordance with that section. That, however, was only the beginning of the analysis.

The critical issue was due process. The first question was whether the "minimum contacts" analysis applies in the context of a petition to enforce an arbitration award under the New York Convention. District Judge Richard Holwell assumed, without deciding, that the answer was affirmative, citing the almost unanimous authorities to that effect. The second and more intriguing question was whether, even indulging that assumption, a foreign state — and specifically an agency or instrumentality of a foreign state — was a "person" within the meaning of the due process clause. In light of the passage of 28 U.S.C. § 1605(a)(7) (the exception for state sponsors of terrorism), Judge Holwell indicated that he was inclined to believe that instrumentalities and foreign states are not "person" for due process purposes, as the recent cases hold. An older but still vibrant Second Circuit authority, however, held to the contrary and, following that binding precedent, the Frontera Court dismissed the action on due process grounds.

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