were arbitrable. See Rodriguez, 490 U.S. at 480-484.
Finally, plaintiffs argue broadly that any foreign arbitration award would be unenforceable as contrary to American public policy, and that therefore the arbitration clauses should not be enforced. In support, they cite only Justice Douglas' dissent in Scherk, which vehemently objected that "nothing justifies the conclusion that only a diluted version of [federal securities] laws protects American investors." 417 U.S. at 530-31. However, the conclusion Justice Douglas was criticizing, was in fact the holding of the case, a result that remains the law and binds the plaintiffs.
C. Exercise of Judicial Discretion Against Enforcing Arbitration and Forum Selection Clauses
Finally, plaintiffs argue that "as a matter of judicial discretion," the forum selection and arbitration agreements should not be enforced because their enforcement would deprive plaintiffs of the protections of securities laws, and would exculpate defendants from asserted securities fraud and RICO violations. Again, however, these precise arguments have been considered and rejected by the Tenth Circuit Court of Appeals in Riley, and are not supported by the weight of previous case law.
"The fact that an international transaction may be subject to laws and remedies different or less favorable than those of the United States is not a valid basis to deny enforcement, provided that the law of the chosen forum is not inherently unfair." Riley, slip op. at 10-11. In Mitsubishi, supra, the Supreme Court enforced a clause requiring arbitration of an antitrust claim in Japan "even assuming that a contrary result would be forthcoming in a domestic context," and rejected arguments that public policy demanded that American courts refuse to dilute American antitrust law by enforcing the agreements. See Mitsubishi, 473 U.S. at 629. Similarly, in AVC Nederland B.V. v. Atrium Investment Partnership, 740 F.2d 148, 158 (2d Cir. 1984) (Friendly, J.), the Court of Appeals for this Circuit enforced a forum selection clause specifying Dutch jurisdiction although it was unlikely that a Dutch court would enforce American securities laws, which were the basis for the complaint. And in Scherk, the Supreme Court enforced an arbitration clause governing a securities fraud complaint where, as here, "in the absence of the arbitration provision considerable uncertainty existed . . . concerning the law applicable to the resolution" of the dispute, 417 U.S. at 516, and where, again as here, a motion to dismiss the complaint for failure to state a securities fraud claim was pending while the arbitration clause question was being decided. Id. at 516 n. 9.
Plaintiffs object that under the English causes of action available to them, they must show affirmative misrepresentations by defendants (as opposed to fraudulent omissions) and must make a more difficult showing of fraudulent intent. They also object that rather than the full panoply of American statutory provisions whose violation they have asserted, they will be relegated to mere common law claims and essentially identical statutory claims. They further question the availability of claims against various defendants.
Accepting only for purposes of discussion plaintiffs' description of English remedies that would be available to them, enforcement of the present arbitration and forum selection clauses nevertheless is far from "unreasonable or unjust," and is consistent with the standards governing enforcement of arbitration and forum selection agreements.
The sophistication and fairness of English courts cannot seriously be disputed, and has repeatedly been recognized by American courts, see, e.g., The Bremen, 407 U.S. at 12, while the arbitration proceeding has not been shown to be biased or incompetent, but has merely been objected to as unlikely to apply American securities laws.
Although English law does not afford the treble damage provisions of RICO or the less rigorous elements of proof of the American securities laws, it does at a minimum offer a full panoply of common law remedies for the alleged behavior underlying all plaintiffs' claims. These remedies include equitable claims for rescission of fraudulently induced agreements and damages claims for negligent or fraudulent misrepresentation, or "deceit." Plaintiffs have conceded that these remedies are available as to the Managing and Members' Agents, who more directly interacted with plaintiffs than did other defendants, and, upon a stronger showing of scienter, as to Lloyd's. In addition, English securities regulations may be enforced against Lloyd's upon application by the government on behalf of a defrauded or misled purchaser of securities. Such remedies afford plaintiffs protection under the law; the English law which they earlier accepted merely is less advantageous than the American law that they now prefer. Under the circumstances, plaintiffs are not entitled to more.
It is undeniable that there exists a considerable American interest in affording investors the protections of our securities laws. However, that interest does not outweigh the strong American and transnational interest in maintaining the predictability and regularity of international commerce that is provided by agreements like those in question here, nor can it overcome plaintiffs' earlier agreement to be bound by English law and English dispute resolution.
* * * *
The overwhelmingly English nature of this dispute likely also would warrant dismissal of the action on forum non conveniens grounds. In view of the dismissal pursuant to the arbitration and forum selection agreements, however, that question need not be reached.
Defendants' motions are granted. The complaint is dismissed.
It is so ordered.
DATED: New York, New York
August 18, 1992
Morris E. Lasker