Fifth Circuit Holds that Personal Jurisdiction is Required in New York Convention Recognition Proceedings

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On December 21, 2012, the U.S. Court of Appeals for the Fifth Circuit issued its decision in First Investment Corporation of the Marshall Islands v. Fujian Mawei Shipbuilding, Ltd., in which that court addressed, for the first time, whether a proper basis of personal jurisdiction is necessary in order to grant a petition to confirm a foreign arbitration award under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”) and Chapter 2 of the Federal Arbitration Act. It held in the affirmative, reasoning that the requirement of personal jurisdiction is rooted in the United States Constitution and must be satisfied regardless of whether the New York Convention or its implementing legislation explicitly included such a requirement.

Summary -

First Investment Corporation of the Marshall Islands (“First Investment”) obtained an arbitration award against Fujian Shipbuilding Industry Group Corp. (FSIGC) and Fujian Mawei Shipbuilding Ltd. (“Mawei”) (together, the “Fujian Entities”). FSIGC is 100%-owned by the People’s Republic of China (PRC), and Mawei is a private corporation of which FSIGC is a majority shareholder. The arbitration took place in London and was conducted by a tribunal of three arbitrators. First Investment sought to confirm the award pursuant to the New York Convention in the Chinese courts, but encountered several difficulties along the way. As an example, First Investment claimed that the Chinese embassies in London and Athens initially refused to authenticate documents that were necessary for First Investment to commence a confirmation proceeding in China; however, upon the intervention of the Greek government, the Chinese embassy in Athens eventually acquiesced to provide the necessary authentication. First Investment also claimed that it was deprived, without explanation, the assistance of its Chinese counsel and its translator during a hearing before the Chinese court; instead the court provided First Investment with a student translator with a limited legal vocabulary. The Chinese court ultimately denied enforcement of the award on grounds that the arbitral tribunal was not constituted in accordance with the parties’ agreement.

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