FAA Does Not Preempt State Law in Enforcement of Foreign Judgments: DC Circuit | Practical Law

FAA Does Not Preempt State Law in Enforcement of Foreign Judgments: DC Circuit | Practical Law

In Commissions Import Export, S.A. v. Republic of the Congo, the US Court of Appeals for the District of Columbia Circuit held that the limitations period in the Federal Arbitration Act (FAA) governs only foreign arbitral awards, and does not preempt local state laws governing the limitations period for enforcing foreign judgments, even when the foreign judgment confirms an arbitration award.

FAA Does Not Preempt State Law in Enforcement of Foreign Judgments: DC Circuit

Practical Law Legal Update 4-575-1705 (Approx. 4 pages)

FAA Does Not Preempt State Law in Enforcement of Foreign Judgments: DC Circuit

by Practical Law Litigation
Published on 22 Jul 2014 • USA (National/Federal)
In Commissions Import Export, S.A. v. Republic of the Congo, the US Court of Appeals for the District of Columbia Circuit held that the limitations period in the Federal Arbitration Act (FAA) governs only foreign arbitral awards, and does not preempt local state laws governing the limitations period for enforcing foreign judgments, even when the foreign judgment confirms an arbitration award.
In a July 11, 2014, decision, Commissions Import Export, S.A. v. Republic of the Congo, the US Court of Appeals for the District of Columbia held that the limitations period in the Federal Arbitration Act (FAA) does not preempt local state law governing the limitations period for enforcing foreign judgments, even when the foreign judgment confirms an arbitration award (No. 12-cv-00743, , D.C. Cir. July 11, 2014).

Background

In 2000, Commissions Import Export, S.A. (the Company) won an arbitration proceeding in Paris against the Republic of the Congo. French courts subsequently confirmed the award, and in the following years the Company filed eleven judicial proceedings in France to enforce the award. In 2009, the Company initiated proceedings in London to enforce the award, pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The English court ruled that the arbitration award was enforceable in the same manner as a judgment under English law, recalculated the amount due to include additional interest and other costs, and issued a final judgment.
In 2011, the Company filed a complaint in the US District Court for the Southern District of New York to recognize and enforce the English judgment. The Southern District transferred the matter to the US District Court for the District of Columbia, where the Company amended its complaint to recognize and enforce the English judgment under the relevant DC statute. The Company then moved for summary judgment. The court denied the motion and dismissed the action, holding that the FAA's three-year period for confirmation of foreign arbitral awards preempted the local DC statute's longer enforcement period for foreign money judgments (9 U.S.C. § 207). Because the original decision had been rendered in 2000, this period had passed. The Company appealed.

Outcome

The US Court of Appeals for the District of Columbia Circuit reversed. The court examined the principles of preemption, noting that in the domestic arbitration context federal law does not preempt state law unless the state law stands as an obstacle to the "accomplishment and execution of the full purposes and objectives of Congress." The court also analyzed the relevant provisions of Chapter 2 of the FAA, which implements the New York Convention. The court found that:
  • In adopting the FAA, Congress set a three-year limit for seeking summary confirmation of an arbitral award falling under the New York Convention (9 U.S.C. § 207). The relevant provisions of the FAA do not mention foreign court judgments nor does the legislative history indicate that Congress intended Chapter 2 of the FAA to govern not only arbitral awards but the recognition of judgments as well.
  • The New York Convention does not limit the period for enforcement of arbitral awards, and includes no restriction regarding foreign judgments.
  • The Congo's argument that the purpose of Chapter 2 of the FAA would be frustrated if judgment were enforced under the DC statute lacked merit. The overriding purpose of Chapter 2 is to facilitate international commercial arbitration by ensuring that valid arbitration agreements are honored and valid arbitral awards are enforced. That policy is not undermined through recourse to parallel enforcement mechanisms that exist independently of the FAA.
  • The Second Circuit, the only other circuit to address the issue, held that both the New York Convention and Chapter 2 of the FAA govern only the enforcement of foreign arbitral awards and not the enforcement of foreign judgments confirming foreign arbitral awards.
The circuit court concluded that the limitations period in Chapter 2 of the FAA does not preempt the longer limitations period in the applicable DC statute for enforcing a foreign court judgment. It reversed and remanded with instructions for the district court to determine whether the English judgment is enforceable under DC law.

Practical Implications

Practitioners in the DC Circuit should know that federal arbitration law does govern the limitations period for confirmation of foreign arbitral awards. State laws, however, govern the limitations period for enforcing foreign court judgments in the US, even when the judgment confirms an arbitration award.
For more information on the district court's decision in this case, see Article, Enforcing Foreign Arbitral Judgments: Expert Q&A.