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Figueiredo Ferraz E Engenharia De Projeto Ltda v. the Republic of Peru

December 14, 2011


The opinion of the court was delivered by: Jon O. Newman, Circuit Judge.


Figueiredo Ferraz v. Republic of Peru

Heard: October 19, 2010

Last papers submitted: June 22, 2011

Before: NEWMAN, WINTER and LYNCH, Circuit Judges.

Interlocutory appeal from the September 8, 2009, order of the United States District Court for the Southern District of New York (William H. Pauley III, District Judge), denying a motion to dismiss a suit seeking confirmation of an international arbitration award.

The Appellant contends that the petition should be dismissed on the ground of forum non conveniens in favor of an action in the courts of Peru.

Reversed and remanded with directions to dismiss the petition. Judge Lynch dissents with a separate opinion.

This is an interlocutory appeal from the denial of a motion to dismiss, primarily on the ground of forum non conveniens ("FNC"), a petition seeking confirmation of an international arbitration award. A principal public interest factor to be weighed in assessing the FNC claim is a Peruvian statute that limits the amount of money that an agency of the Peruvian government may pay annually to satisfy a judgment. The limit is three percent of the agency's annual budget.*fn1 The Republic of Peru ("the Republic"), the Ministry of Housing,

Construction and Sanitation ("the Ministry"), and the Programa Agua Para Todos ("the Program") - collectively "the Appellants" - appeal from the September 8, 2009, order of the United States District Court for the Southern District of New York (William H. Pauley III, District Judge), denying their motion to dismiss an action to confirm an arbitration award in favor of Appellee Figueiredo Ferraz Consultoria E Engenharia de Projeto Ltda. ("Figueiredo"). See Figueiredo Ferraz Consultoria E Engenharia de Projeto Ltda. v. Republic of Peru, 655 F. Supp. 2d 361 (S.D.N.Y. 2009). The Appellants sought dismissal on several grounds, including lack of subject matter jurisdiction, FNC, and international comity. We conclude that the District Court erred in declining to dismiss on the FNC ground and therefore reverse and remand with directions to dismiss the petition.


This case arises from a consulting agreement entered into by the Appellee and the Program in 1997, pursuant to which the Appellee was to prepare engineering studies on water and sewage services in Peru. The agreement provides: "The parties agree to subject themselves to the competence of the Judges and Courts of the City of Lima or the Arbitration Proceedings, as applicable." After a fee dispute arose, the Appellee commenced arbitration in Peru against the Program, and in January 2005, the arbitral tribunal rendered an award (the "Award") directing the Program to pay the Appellee more than $21 million, which included approximately $5 million of principal damages plus accrued interest and cost of living adjustments as of the time of the award. The Ministry appealed to the Court of Appeals in Lima, challenging the Award and seeking its nullification on the ground that, under Peruvian law, the arbitration was an "international arbitration" involving a non-domestic party and, thus, recovery should have been limited to the amount of the contract. In October 2005, the Lima Court of Appeals denied the appeal, ruling that because the Appellee had designated itself a Peruvian domiciliary in the agreement and the arbitration, the arbitration was a "national arbitration" involving only domestic parties, and thus, the Award, rendered in equity, was permissible. In its pending amended petition*fn2 in the Southern District of New York, the Appellee alleges that it is a Brazilian corporation.

A Peruvian statute imposes, in some circumstances, a limit of three percent of the budget of a governmental entity on the amount of money the entity may pay annually to satisfy a judgment.*fn3 See Law No. 27584, Art. 42, as amended by Law No. 27684, currently set forth in Supreme Decree No. 013-2008-JUS, Art. 47.*fn4

Although the Appellee has not attempted to confirm the arbitration award in a Peruvian court or obtain and execute upon a judgment in Peru, the Program has been making payments on the Award. However, because of imposition of the statutory three percent cap, the Program's payment at the time of briefing was just over $1.4 million.

In January 2008, the Appellee filed a petition in the Southern District to confirm the Award and obtain a judgment for $21,607,003. The petition was brought pursuant to the Federal Arbitration Act, 9 U.S.C. § 1 et seq. ("FAA"), the Inter-American Convention on International Commercial Arbitration (the "Panama Convention"), enforceable pursuant to the FAA, see id. § 301, or, alternatively, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"), also enforceable pursuant to the FAA, see id. § 201. Jurisdiction was based on the FAA, 9 U.S.C. § 203, and the Foreign Sovereign Immunities Act ("FSIA"), 28 U.S.C. § 1330(b). In opposing a motion by the Appellants to dismiss, the Appellee alleged that Peru has substantial assets in New York, resulting from the sale of bonds. The Appellants acknowledge the existence of these funds. In September 2009, the District Court denied the Appellants' motion to dismiss, which had asserted various grounds, including lack of subject matter jurisdiction under the FSIA, FNC, and international comity. The District Court ruled, among other things, that the Program and the Republic are not separate entities under Peruvian Law, see Figueiredo, 655 F. Supp. 2d at 369, that Peru is therefore subject to the Award despite not having signed the consulting agreement, see id. at 367-71, that jurisdiction was proper under the FSIA, see id. at 371-72, and that dismissal was not appropriate under FNC, see id. at 374-77, the Agreement's forum selection clause, see id. at 377, or international comity, see id. at 377-78. The Court appears not to have explicitly considered whether the three percent cap statute was relevant to any of the threshold issues it decided, and had no occasion to consider what effect, if any, that statute might have on the Appellants' payment obligation because the Court did "not reach the ultimate question whether the Award should be confirmed." Id. at 378.

The Appellants filed an interlocutory appeal, No. 09-3925, from the denial of their motion to dismiss, predicating appellate jurisdiction on the collateral order doctrine, which is applicable to an order denying a motion to dismiss that had sought FSIA immunity, see Kensington International Ltd. v. Itoua, 505 F.3d 147, 153 (2d Cir. 2007).*fn5 Thereafter, pursuant to 28 U.S.C. § 1292(b), the Appellants moved for leave to appeal the Court's determinations concerning FNC, the forum selection clause, and comity. The Court granted the motion and certified for interlocutory appeal those portions of its ruling concerning these issues. This Court then granted the Appellants' section 1292(b) petition for an interlocutory appeal,*fn6 No. 10-478-cv, and consolidated Nos. 09-3925-cv and 10-478-cv. See Figueiredo v. Republic of Peru, No. 10-478 (2d Cir. Apr. 29, 2010) (order granting interlocutory appeal). After oral argument, we invited the views of the United States on "aspects of the appeal that might have implications for the conduct of the foreign relations of the United States."*fn7 See Letter from Catherine O'Hagan Wolfe, Clerk of Court, to Neal Katyal, Acting Solicitor General (Oct. 29, 2010).

The amicus curiae brief submitted for the United States primarily urges a remand so that the District Court can give further consideration to the issue of subject matter jurisdiction over the Republic and the Ministry. See Brief for the United States at 6-20. The brief contended that the District Court did not err in declining to dismiss on grounds of either FNC, see id. at 21-27, or international comity, see id. at 27- 29. The parties have also submitted briefs commenting on the views of the United States and letters responding to this Court's inquiry as to whether the three percent cap applies to funds of the Republic in the United States. The Appellee contends that the cap statute does not apply, see Letter from Atty. Thomas J. Hall to Catherine O'Hagan Wolfe, Clerk (June 16, 2011), a contention that the Appellants do not dispute, see Letter from Atty. Juan C. Basombrio to Catherine O'Hagan Wolfe, Clerk (June 15, 2011).


Although courts are normally obliged to consider issues of subject matter jurisdiction prior to other issues, the Supreme Court has approved the practice of this Court, see In re Arbitration Between Monegasque de Reassurances S.A.M. v. NAK Naftogaz of Ukraine, 311 F.3d 488, 497-98 (2d Cir. 2002); In re Minister Papandreou, 139 F.3d 247, 255-56 (D.C. Cir. 1998), of exercising discretion to consider an FNC dismissal without first adjudicating issues of subject matter jurisdiction. See Sinochem International Co. v. Malaysia International Shipping Corp., 549 U.S. 422, 429-34 (2007). We have concluded that it is appropriate to do so in this case.

We review a district court's rejection of an FNC claim for abuse of discretion, but may reverse if we conclude that the court has made an error of law. Moneagasque, 311 F.3d at 498.

The FNC standards concern both private and public interests. See American Dredging Co. v. Miller, 510 U.S. 443, 448 (1994); Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 509-09 (1947); PT United Can Co. v. Crown Cork & Seal Co., 138 F.3d 65, 74 (2d Cir. 1998). Among the public interests are "a local interest in having localized controversies decided at home," Gilbert, 330 U.S. at 509, and the interest in having foreign law interpreted by a foreign court, see PT United Can, 138 F.3d at 74.

In the pending case, the District Court recognized that although the Panama Convention establishes jurisdiction in the United States, "'there remains the authority to reject that jurisdiction for reasons of convenience, judicial economy and justice.'" Figueiredo, 655 F. Supp. 2d at 374-75 (quoting Monegasque, 311 F.3d at 497). The Court then appropriately gave somewhat reduced deference to the foreign plaintiff's choice of forum, id. at 375 (citing Monegasque, 311 F.3d at 498), and considered several private and public interest factors, see id. at 376-77.

In considering the factor of the adequacy of an alternative forum, the District Court concluded that although Peruvian law permits execution of arbitral awards, "only a United States court 'may attach the commercial property of a foreign nation located in the United States,'" id. at 375-76 (quoting TMR Energy Ltd. v. State Property Fund of Ukraine, 411 F.3d 296, 303 (D.C. Cir. 2005)). In deeming a Peruvian forum inadequate for the stated reason, we think the District Court erred. It is no doubt true that only a United States court may attach a defendant's particular assets located here, but that circumstance cannot render a foreign forum inadequate. If it could, every suit having the ultimate objective of executing upon assets located in this country could never be dismissed because of FNC. Yet in Monegasque, to cite a recent example, we upheld an FNC dismissal in favor of suit abroad even though the plaintiff had obviously sought a judgment in the United States in order to execute upon a foreign government's assets here.*fn8

"An alternate forum is adequate if the defendants are amenable to service of process there, and if it permits litigation of the subject matter of the dispute." Pollux Molding Ltd. v. Chase Manhattan Bank, 329 F.3d 64, 75 (2d Cir. 2003) (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254 n.11 (1981)). Where adequacy of an alternative forum is assessed in the context of a suit to obtain a judgment and ultimately execution on a defendant's assets, the adequacy of the alternate forum depends on whether there are some assets of the defendant in the alternate forum, not whether the precise asset located here can be executed upon there. See Norex Petroleum Ltd. v. Access Industries, Inc., 416 F.3d 146, 158 (2d Cir. 2005) (adequacy of alternate foreign forum does not depend on "identical remedies"). And the fact that a plaintiff might recover less in an alternate forum does not render that forum inadequate. See Alcoa Steamship Co. v. M/V Nordic Regent, 654 F.2d 147, 159 (2d Cir. 1980) (alternate forum not inadequate although plaintiff might recover only $570,000 ...

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