GSS Group v. National Port Authority (NPA), Civil Action No. 09-1322 (PLF) (D.D.C. Mar. 2011), presents another example of how the corporate lawyer or draftsman might have avoided a conundrum that prevented a non-U.S. arbitral award from getting the significant benefits of the New York Convention’s provisions permitting enforcement in the U.S. of international arbitral awards rendered outside the United States.
GSS is a corporation formed under the laws of the British Virgin Islands. NPA is a corporation wholly owned by Liberia. The contract for the construction and operation of a container park in Liberia provided for arbitration of disputes in London in accordance with the laws of England and Wales.
NPA refused to participate in the arbitration, and GSS was awarded damages of $44,347,260. The current law suit was an effort to enforce the award in the U.S. under the New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 U.S.T. 2517 — a copy of the Convention can be reviewed in the significant documents link of this blog). NPA claimed that the Court lacked personal jurisdiction over it. The District Court agreed on the basis of reasoning that could have broad applicability.
The significant international practice rulings of the case included:
First, the Court acknowledged that the Foreign Sovereign Immunities Act (FSIA) authorizes personal jurisdiction over a “foreign state” “so long as the court has subject matter jurisdiction over the subject matter of plaintiff’s claims and service has been effected in accordance with the relevant provisions of the FSIA”. The Court found that NPA “is encompassed by the relevant statutory definition of ‘foreign state'”. The FSIA contains a waiver of sovereign immunity over non-U.S. states, “including their agencies and instrumentalities, with respect to, among other claims, petitions for the confirmation of arbitral awards pursuant to the New York Convention”.
Second, and however, the Court ruled that the FSIA waiver did not answer the question of whether the Court could exercise personal jurisdiction over NPA. That in turn depended on whether the non-U.S. instrumentality of a non-U.S. sovereign was entitled to the protections of the U.S. Constitution’s Due Process Clause and the minimum contacts that apply to, for example, U.S. persons and companies.
Third, the Court acknowledged that “foreign sovereign nations ar not among the ‘persons’ afforded rights by the Fifth Amendment and receive no due process protections”. Nonetheless, private non-U.S. entities do receive such protection, and so the question presented was what to do with NPA, which “would seem to fall somewhere in between those two categories of defendants”. The Court found that NPA was “a legal entity distinct from the national government, able to sue and be sued in its own name”. It’s primary purpose was “commercial in nature and it operated as a standalone economic enterprise”. The Court found that as a result the non-U.S. corporation wholly owned by an entity with not Fifth Amendment protections was nonetheless entitled to them.
Fourth, and however, the Court also acknowledged that “it is established in other contexts that nonresident aliens without connection to the United States typically do not have rights under the United States Constitution”. Still, when it came to minimum contacts, the “notion is enshrined in law, including, as noted, Supreme Court precedent”. The Court attempted to explain that “[f]oreign states occupy a unique position in relation to the United States”, finding that “[r]elations between nations in the international community are seldom governed by the domestic law of one state or another. And legal disputes between the United States and foreign governments are not mediated through the Constitution”.
The Court did not address the application of the New York Convention’s rules, or the public policy favoring granting a forum for the enforcement of non-U.S. arbitral awards. It dismissed the petition for want of personal jurisdiction over the non-U.S. sovereign’s instrumentality.