The opinion of the court was delivered by: Conboy, District Judge:
In this action, the parties seek, on the one side, to vacate
a foreign arbitration award, and, on the other, to enforce that
award pursuant to an international convention. This case, then,
requires us to evaluate and apply the relevant standards for
vacatur and enforcement of an award made under the aegis of the
International Chamber of Commerce Court of Arbitration in
Petitioner, International Standard Electric Corporation
("ISEC"), is a wholly owned subsidiary of the International
Telephone and Telegraph Company ("ITT"). Respondent Bridas
Sociedad Anonima Petrolera, Industrial Y Comercial. ("Bridas")
is a corporation organized and doing business in Argentina. At
issue in this case is the interpretation of certain provisions
of the United Nations Convention on Recognition and Enforcement
of Foreign Arbitral Awards (the "New York Convention" or the
"Convention"), signed in New York City on June 10, 1958, 3
U.S.T. 2517, T.I.A.S. No. 6997, 330 U.N.T.S. 38, and
implemented after United States ratification in 1970 at 9
U.S.C.A. §§ 201 et seq. (West Supp. 1990).
A brief preliminary account of events leading to this lawsuit
is, at this point, essential, which account is primarily
distilled from the arbitral record of this case. By the late
1970's, the American corporation ITT had established itself as
a global pace setter in the telecommunications industry. It
conducted its international business through ISEC, which was
its wholly owned subsidiary. ISEC in turn controlled more than
50%, of the Argentine telecommunications
market through its wholly owned subsidiary, Compania Standard
Electric Argentina S.A. ("CSEA"). In 1978, ISEC offered, and
Bridas accepted 25% participation in CSEA for $7.5 million. The
parties entered into a Shareholders Agreement (the "Agreement")
(Ex. G, Bridas' Notice of Motion, dated March 21, 1990,
hereinafter "Bridas Notice") on May 7, 1979 to control the
terms of their arrangement. Chapter 11 of the Agreement
provides that "[a]ll disputes connected to this Agreement . .
. shall be settled or finally decided by one or more
arbitrators appointed by the International Chamber of Commerce
in accordance with the Rules of Conciliation and Arbitration."
Chapter 8 of the Agreement provides that the Agreement would be
"governed by and construed under and in accordance with the
laws of the State of New York."
On April 17, 1985 Bridas filed with the International Chamber
of Commerce ("ICC") in Paris a Request for Arbitration and
Summary of Complaint, and nominated as a member of the Arbitral
Panel Dr. Eduardo Jimenez de Ariechaga of Uruguay, former
President of the International Court of Justice at the Hague.
ISEC sought to block the arbitration by applying for injunctive
relief in the New York State Supreme Court, which relief was
denied on June 11, 1985. See Bridas S.A.P.I.C. v. International
Standard Electric Corp., 128 Misc.2d 669, 490 N.Y.S.2d 711
(Sup.Ct.N.Y.Cty. 1985). In July of 1985, ISEC nominated as a
member of the Arbitral Panel Edward Hidalgo, Esq. of the United
States, a practicing attorney and former Secretary of the Navy
in the Administration of President Carter. On September 25,
1985, the ICC International Court of Arbitration designated as
the third and presiding member of the Arbitral Panel Lic.
Manuel Lizardi Albarran of Mexico. Mexico City was designated
as the place of the arbitration, and pursuant to Article 9(2)
of the ICC Rules, each party was directed to pay one half of
the ICC advance on costs of $190,000.
On February 27, 1986, the Appellate Division of the New York
State Supreme Court unanimously affirmed the denial of ISEC's
attempt to enjoin the arbitration. 117 A.D.2d 1027, 499
N YS.2d 566 (1st Dep't 1986). On July 24, 1986, ISEC filed
"Objections to Jurisdiction" with the Arbitral Panel, asserting
lack of jurisdiction over three of the four claims set forth in
Bridas' complaint. On August 19 and 20, 1986, the Arbitral
Panel conducted a hearing in Mexico City, heard argument on the
jurisdictional question, and in conjunction with the parties
drafted the Terms of Reference, which were then signed by the
parties. These terms defined the issues to be decided. The
Panel also established a schedule for the submission of briefs
on the jurisdictional question.
Shortly after both parties had submitted their briefs on that
matter, the ICC International Court of Arbitration, on November
7, 1986, suspended the arbitral proceedings because of ISEC's
refusal to pay its half of the ICC advance on costs. On
February 17, 1987, Bridas filed suit against ISEC in New York
State Supreme Court to compel ISEC to comply with its costs
obligations under the Rules. Four months later, Bridas posted
a letter of credit with the ICC guaranteeing payment of ISEC's
share of the costs, and the suspension on the proceedings was
On September 1, 1987, the Panel held a hearing and heard oral
argument on the jurisdictional issues, and shortly thereafter,
on October 22, 1987 issued a "Preliminary Award on
Jurisdiction," concluding that the relevant clause is
"sufficiently broad to comprehend the particular dispute now
before it and to permit it to proceed to a full consideration
of the merits of such dispute. . . ." Bridas Notice, Exhibit F,
¶ 8. On December 18, 1987, ISEC filed its Answer to the
Complaint, and on March 15, 1988, the Panel issued a schedule
for submissions of evidence, expert opinions and memoranda of
law. On nine separate dates from June 6, 1988 through November
28, 1988 the parties filed a daunting volume of material with
the Panel, including affidavits from no less than seven
On January 16, 1989, at the request of the Panel, each party
filed the full text of all authorities, including cases,
statutes, rules and all other sources, upon which it relied.
The material submitted by ISEC contained no reference to the
aforementioned court expert selection procedure. Nor was any
reference made to it by ISEC either in the final hearing before
the Panel in Mexico City on March 30-31, 1989 or in the final
Reply Memorandum and Exhibits filed by ISEC with the Panel on
April 25, 1990.
On December 20, 1989, the Panel, in accordance with the rules
which require the advance review and approval by the ICC
International Court of Arbitration, signed the final Award,
which was released and issued to the parties on January 16,
The Arbitral Award ("Award") (Bridas Notice, Ex. A.), found
unanimously by the Panel, concluded that Bridas had not
established that ISEC had made misrepresentations or committed
fraud in connection with the sale of certain stock to Bridas in
1979 (Award at 17); that Bridas had not established that ISEC
had unlawfully mismanaged CSEA (Award at 18); that Bridas had
established that in July of 1984 ISEC breached its fiduciary
obligations to Bridas in connection with a 1984
recapitalization of CSEA (Award at 19-20); and that Bridas had
established that in March of 1985 ISEC breached its contractual
and fiduciary obligations to Bridas by selling, over Bridas'
objection, its 97% interest in CSEA to Siemens, the German
multinational corporation and a major competitor of Bridas in
Argentina. The Panel also concluded that ISEC had failed to
"comply with the norms of good faith demanded of a fiduciary"
by not giving Bridas adequate notice of the proposed sale and
its terms (Award at 21-24). Though describing these findings
against ISEC as erroneous, ISEC concedes that they are beyond
this Court's review. Memorandum of Law in Support of ISEC's
Petition to Vacate and in Opposition to Bridas' Cross-Petition
to Enforce Arbitration Award, dated April 27, 1990 ("ISEC
Mem."), at 5, 7. The Panel awarded Bridas damages of $6,793,000
with interest at 12%, compounded annually, from March 14, 1985.
Bridas was also granted $1 million in legal fees and expenses
plus $400,000 for the costs of the arbitration.
On February 2, 1990, ISEC filed a petition in this Court to
vacate and refuse recognition and enforcement of the Award.
Respondent Bridas has cross-petitioned to dismiss ISEC's
petition to vacate on the grounds that this Court lacks subject
matter jurisdiction to grant such relief under the Convention,
and for failure to state a claim pursuant to Fed.R.Civ.P.
12(b)(1) and (6). Bridas further cross-petitions to enforce the
Award pursuant to Article III of the Convention.
We will first address the question of whether, under the
binding terms of the New York Convention, we lack subject
matter jurisdiction to vacate a foreign arbitral award. The
situs of the Award in this case was Mexico City, a location
chosen by the ICC Court of Arbitration pursuant to rules of
procedure explicitly agreed to by the parties. Since the
parties here are an American Company and an Argentine Company,
it is not difficult to understand why the Mexican capital was
selected as the place to conduct the arbitration.
Under Article V(1)(e) of the Convention, "an application for
the setting aside or suspension of the award" can be made only
to the courts or the "competent authority of the country in
which, or under the law of which, that award was made."
(Emphasis added). ISEC argues that "the competent authority of
the country . . . under the law of which [the] award was made,"
refers to the country the substantive law of which, as opposed
to the procedural law of which, was applied by the arbitrators.
Hence, ISEC insists that since the arbitrators applied
substantive New York law, we have jurisdiction to vacate the
ISEC cites only one case to support this expansive reading of
the Convention, Laminoirs-Trefileries-Cableries de Lens v.
Southwire Co., 484 F. Supp. 1063 (N.D.Ga. 1980). That case,
however, did not involve a foreign award under the Convention,
and did not implicate the jurisdictional question here raised,
since there the parties' substantive and procedural choice of
law, and the situs of the arbitration were both New York. It
seems plain that the Convention does not address, contemplate
or encompass a challenge to an award in the courts of the state
where the award was rendered, since the relation of the courts
to the arbitral proceedings is not an international, but a
wholly domestic one, at least insofar as the Convention is
concerned. Whether such an arbitration would be considered
international because of the parties' nationalities under the
Federal Arbitration Act, is irrelevant. See A. Van den Berg,
The New York Arbitration Convention of 1958 19-20, 349-50
Bridas has cited a case decided by our colleague Judge
Keenan, American Construction Machinery & Equipment Corp. v.
Mechanised Construction of Pakistan Ltd., 659 F. Supp. 426
(S.D.N.Y.), aff'd, 828 F.2d 117 (2d Cir. 1987), cert. denied,
484 U.S. 1064, 108 S.Ct. 1024, 98 L.Ed.2d 988 (1988), as
authority against the ISEC position. This case involved a
dispute between a Cayman Islands Company and a Pakistani
company, arguably controlled by Pakistani substantive law and
arbitrated in Geneva. Judge Keenan was asked to decline
enforcement of the award on the ground that a challenge to it
was pending in the courts of Pakistan. He ruled that "[t]he law
under which this award was made was Swiss law because the award
was rendered in ...