In an international city like Miami, our firm does a large amount of international litigation and arbitration. Increasingly, we’re seeing more and more international disputes resolved through arbitration.
New York Convention Powerful Dispute Resolution Mechanism
The primary reason parties choose to resolve international disputes through arbitration is the relative ease in which an arbitral award may be enforced. This is made possible because of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, widely considered the foundational instrument for international arbitration.
More commonly known as the New York Convention, the Convention requires courts of a nation to give effect to private agreements to arbitrate and to enforce arbitration awards made in other contracting states.” The United States, as a signatory to the Convention, enforces the Convention through the Federal Arbitration Act. Most countries have signed onto the Convention.
Not Without Its Limits
While most courts will uphold private international arbitration agreements, there are limitations. A great example of this is an opinion recently issued by Judge Cooke in the Southern District of Florida (h/t to the South Florida Lawyers blog).
In the opinion, Judge Cooke voids an arbitration clause in a Carnival Cruise line employee contract. While both parties agreed that the contract is governed by Panamanian law, the court found that Panamanian law did not provide the plaintiff a reasonable equivalent to the statutory rights conferred federal law. Because of this, Judge Cooke held that the arbitration clause was against public policy and, thus, null and void.
Typically, a district court must enforce an agreement to arbitrate under the Convention where the certain jurisdictional requirements are met. However, as this case demonstrates, an arbitration clause will not be upheld where it violates public policy and operates to preclude a party’s right to pursue statutory remedies” under federal law.
While the opinion may not be groundbreaking, it does remind us that the enforcement of an arbitration clause under the New York Convention is not without its limits.
Remember this the next time you draft an international arbitration agreement for your client.