On August 2, 2016, in Corporación Mexicana De Mantenimiento Integral v. Pemex‐Exploración Y Producción, the US Court of Appeals for the Second Circuit affirmed the district court's judgment confirming an arbitration award in the US, even though a Mexican court judgment nullified the award. The court held that a judgment is unenforceable as against public policy to the extent that it is repugnant to fundamental notions of what is decent and just in the state where enforcement is sought. (832 F.3d 92 (2d Cir. 2016).)

Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. (COMMISA) contracted with Pemex‐Exploración Y Producción (PEP), a Mexican state‐owned enterprise, to build oil platforms in the Gulf of Mexico. The contracts, governed by Mexican law, provided that arbitration would be the exclusive mechanism for dispute resolution. When the parties' relationship disintegrated, each side accused the other of breach. COMMISA initiated arbitration proceedings in Mexico, prevailed, and in 2009 obtained an award of approximately $300 million. In 2010, COMMISA successfully petitioned the United States District Court for the Southern District of New York to confirm the award.

In 2009, while the parties' arbitration proceedings were ongoing, the Mexican Congress enacted Section 98 of the Law of Public Works and Related Services (Section 98), which ended arbitration for claims such as the ones in this case (an argument the arbitral tribunal rejected). PEP appealed the district court's judgment (the First Appeal) and simultaneously attacked the arbitral award in the Mexican courts, invoking Section 98. The Eleventh Collegiate Court in Mexico set aside the arbitral award on the ground that PEP, as an entity deemed part of the Mexican government, could not be forced to arbitrate. Armed with that decision, PEP moved in the Second Circuit to vacate the district court's judgment and remand the First Appeal and the Second Circuit remanded the case on that basis.

After an evidentiary hearing, the district court adhered to its previous ruling and issued a new judgment confirming the arbitral award, even though the Mexican court had nullified it (see Legal Update, SDNY Confirms $400 Million Arbitration Award Set Aside by Foreign Court). PEP appealed.

The Second Circuit affirmed the district court's judgment confirming the arbitration award. The Second Circuit held that the district court properly exercised its discretion because giving effect to the Mexican court's nullification of the award violated United States' public policy and would be "repugnant to fundamental notions of what is decent and just."

The Second Circuit noted that the Panama Convention affords discretion in enforcing a foreign arbitral award that has been annulled in the awarding jurisdiction. The exercise of that discretion is appropriate under a limited public policy exception to vindicate fundamental notions of what is decent and just in the jurisdiction where enforcement is sought. The court held that the exception was satisfied because: