Commercial Litigation and Arbitration

Arbitration — Order of Priority of the Federal Arbitration Act, New York Convention and Inter-American Convention (Chapters 1, 2 and 3 of Title 9)

From RZS Holdings AVV v. PDVSA Petroleos S.A., 2009 U.S. Dist. LEXIS 47126 (E.D. Va. Feb. 5, 2009):

The Court holds that the terms and provisions of the Inter-American Convention on International Commercial Arbitration ("the Inter-American Convention" or "Chapter Three") govern this arbitral award, and not Chapter One of the Federal Arbitration Act ("FAA" or "Chapter One") because this is an international arbitration, the parties are citizens of countries that are signatories of the Convention, and there is a conflict between the provisions of the Chapter One and Chapter Three and in the event of such a conflict, the terms of Chapter Three govern. International arbitral awards are governed by 9 U.S.C. §§201-208 ("the New York Convention" or "Chapter Two") and 9 U.S.C. §§301-307 ("the Inter-American Convention" or "Chapter Three"). When the requirements for the application of both Conventions are met, "[i]f a majority of the parties to the arbitration agreement are citizens of a State or States that have ratified or acceded to the Inter-American Convention, and are member States of the Organization of American States, the Inter-American Convention shall apply." 9 U.S.C. §305(1). Sections 202, 203, 204, 205 and 207 of Title IX are incorporated into the Inter-American Convention by reference. 9 U.S.C. §302. Chapter One is incorporated into Chapter Three to the extent that its provisions are not in conflict with those announced in Chapter Three. 9 U.S.C. §307.

The arbitral award presently before the Court is an international award subject to the provisions of the Inter-American Convention because it is non-domestic in nature, and because both Venezuela and the United States are signatories of the Inter-American Convention. Awards are considered non-domestic and thus governed by one of the Conventions when they are "made within the legal framework of another country, e.g., pronounced in accordance with foreign law or involving parties domiciled or having their principal place of business outside the enforcing jurisdiction." Industrial Risk Insurers v. M.A.N. Gutenhoffnungshutte, 141 F.3d 1434, 1441 (11th Cir. 1998). PDVSA's representation that the arbitration at issue here "was conducted in conformity with the Rules of the International Chamber of Commerce International Court of Arbitration located in Paris, France . . . and was governed by English law" is uncontradicted.... Furthermore PDVSA has its principal place of business in Venezuela. Therefore this arbitration, must be designated as international, not domestic, and subjected to the terms of either the New York or Inter-American Convention. As mentioned previously, when the parties to an arbitration are citizens of countries that are signatories of the Inter-American Convention, the terms of the Inter-American Convention govern. RZS was established in the Commonwealth of Virginia, and has its principal place of business therein. As previously noted, PDVSA is established under the laws of Venezuela and has its principal place of business therein. Therefore, for purposes of this analysis, the Court finds RZS to be a citizen of the United States, and PDVSA a citizen of Venezuela. Both countries are signatories of the Inter-American Convention, and therefore it provides the governing framework for this analysis.

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