E. US Courts Deferring to Findings and Proceedings in non-US Courts
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- The US courts are showing greater willingness to defer to non-US decisions. See the cases cited below, especially Telecom Argentina. And see the discussion of Four Seasons and Pepsi-Cola below demonstrating that US courts are willing to hear and react to clear pronouncements from non-US jurisdictions.
- In In re Bd. of Dirs. of Telecom Argentina, S.A., 528 F.3d 162 (2d Cir. 2008) the Second Circuit recognized an Argentine bankruptcy plan under the US Bankruptcy Code, even though US and Argentine bankruptcy protections differ.
(a) An Argentine court approved Debtor Telecom's proposed acuerdo preventivo extrajudicial ("APE") plan. Although the APE was approved by a majority of Telecom's creditors and accepted by the court, an American creditor, Argo, instructed its bank not to cancel any of its Telecom notes. Telecom initiated a case in the US, and the US bankruptcy court held that the APE should be recognized under ?304 of the Bankruptcy Code (the "Code").
(b) On appeal, the Second Circuit upheld the bankruptcy court's decision to extend comity to the Argentine proceedings, based on the finding that those proceedings did not violate US public policy considerations embodied in the Trust Indenture Act ("TIA"), the best interests creditor test, or the good-faith requirement in the Code. The court reasoned that enforcement of non-US insolvency proceedings that restructure TIA-protected bonds was appropriate so long as recognition of the proceedings was appropriate under the Code, and emphasized that comity did not require non-US proceedings to afford a creditor identical protections as under US law.
(c) Further, the Second Circuit held that the bankruptcy court did not err in denying Argo's objections to the APE on res judicata grounds, as Argo neglected to raise any objections in Argentina's courts.
(d) Practice Note: Whether the Court of Appeals actually means res judicata, as opposed to a more general refusal to permit relitigation based on notions of comity, is something we intend to explore in an update to the Guide.
- In Four Seasons Hotels and Resorts, B.V. v. Consorcio Barr, S.A., 533 F.3d 1349 (11th Cir. 2008), the Eleventh Circuit upheld a US arbitration award despite parallel non-US proceedings on the grounds that there was no direct evidence that the arbitration agreement had been held invalid in the non-US proceeding.
(a) Barr appealed a decision confirming a partial arbitration award entered against him by an international arbitral panel sitting in Florida. He argued that there was an on-going parallel proceeding in Venezuela that rendered the arbitration agreement invalid.
(b) The Eleventh Circuit affirmed the district court's decision to recognize the arbitration agreement as valid and confirm the award. The Eleventh Circuit reasoned that Barr neither demonstrated on remand nor argued on appeal that the arbitration agreement was invalid by virtue of the parallel proceeding. Consequently, Barr waived his right to challenge the award on the grounds that a Venezuelan court had determined the dispute to be non-arbitrable.
(c) On this last point, the Eleventh Circuit observed that ?[i]t is unclear from the record whether there has been a final decision from any Venezuelan court that squarely holds the arbitration agreement invalid. Rather, it appears that the Venezuelan courts have allowed [the parties] to engage in parallel litigation in Venezuelan courts and before the arbitral tribunal [in the US]". Id. at 1351, n.1.
(d) In this regard, it is instructive to see a similar expression in a different case made by the Second Circuit Court of Appeals, Compania Emotelladora Del Pacifico, S.A. v. Pepsi-Cola Company, Dkt. 03-7979-cv (2d Cir. 7/17/08) (Summary Order). The Court, at page 4 n.1, could not find a clear expression of law from Peruvian courts, and stated, "[s]hould the Peruvian courts render any future decisions to the contrary, of course, our courts may address such developments as they occur." (The author and his Firm represent the defendant in this matter).
- In Belize Telecom, Ltd. v. Gov't of Belize, 528 F.3d 1298 (11th Cir. 2008), the Eleventh Circuit granted comity to a Belizean court's decision in a parallel case.
(a) A stock purchaser brought an action in the District Court of Florida against the government of Belize, a stock seller, alleging the government breached an agreement when it replaced six board directors. After parallel proceedings were initiated in Belize, the Belizean court interpreted a key provision in the agreement in a manner favorable to the stock purchaser. The district court did not recognize the Belizean decision, however, and interpreted the provision in a manner favorable to the government.
(b) On appeal, the Eleventh Circuit held that concerns of international comity, fairness, and judicial efficiency warranted deference to the Belizean decision. In explaining its reasoning, the Eleventh Circuit emphasized that the Belizean decision did not violate the public policy of the forum state (Florida), and that the Belizean interests in the litigation far outweighed the American interests.
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