CONTROL BY U.S. COURTS OVER INTERNATIONAL ARBITRATIONS AND A FORUM-SELECTION CLAUSE IN INTERNATIONAL CONTEXTS

(Masafumi Kawamura)

I. INTRODUCTION

            This paper examines control by U.S. courts on two subjects --- (1) international arbitrations and (2) a forum-selection clause in international contexts.

            International arbitration may be subject to the control by local courts at three stages -- (1) enforcement of an agreement to arbitrate (the first stage), (2) vacation of arbitral awards (the second stage) and (3) enforcement of arbitral awards (the third stage). An agreement to arbitrate is a specialized kind of forum-selection clause, that posits not only the situs of suit but also the procedure to be used in resolving the dispute.

            This paper examine in section II the control by U.S. courts over a forum-selection clause, including an agreement to arbitrate (the first stage) and a clause choosing a judicial forum. I examine in section III and IV the control over international arbitrations at the second and the third stage respectively.

            In examining international arbitrations, this paper supposes that they fall under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention"). The New York Convention, with 98 signatories including the United States as of July 1, 1994, governs international arbitrations. The New York Convention applies to (i) arbitral awards made in the territory of a country other than the country where recognition and enforcement is sought and (ii) arbitral awards that are considered "non-domestic". (Article I(1)) The New York Convention allows its signatory "on the reciprocity" to "declare that it will apply the [New York] Convention to the recognition and enforcement of awards made only in the territory of another Contracting State." (Article I(3)) The New York Convention also allows its signatory to "declare that it will apply the [New York] Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration". (Article I(3)) The United States made both of these declarations.

II. ENFORCEMENT OF A FORUM-SELECTION CLAUSE

            In an international transaction, considerable uncertainty exists concerning the resolution of disputes arising out of the transaction and the costs for the resolution. To avoid such uncertainty, parties to an international transaction usually agree in advance on the forum in which the disputes shall be resolved. Despite the agreement, a party sometimes bring a lawsuit in a forum (usually a local court of his own country) different from the chosen forum. If such lawsuit is maintained, prediction by the party on the resolution and the costs will be undermined. The situation also produce the potential for multiple proceedings where different proceedings concurrently exist on a same dispute in different forums. The multiple proceedings result in uncertainty on enforceability of arbitral awards or judicial judgements due to the potential for inconsistent results in different forums. [FN1]

A. CLAUSE CHOOSING A JUDICIAL FORUM

            A forum-selection clause was historically not been favored by U.S. courts. Many courts, federal and state, declined to enforce such clause on the ground that they were 'contrary to public policy,' or that their effect was to 'oust the jurisdiction' of the court. [FN2]

1. The Bremen v. Zapata Off-Shore Co. [FN3]

            In 1972, the Supreme Court, in The Bremen v. Zapata Off-Shore Co., reversed the tradition and declared in international contexts that a forum-selection clause is prima facie valid.

            In Bremen, "[p]etitioner Unterweser made an agreement to tow respondent's drilling rig from Louisiana to Italy. The contract contained a forum-selection clause providing for the litigation of any dispute in the High Court of Justice in London. When the rig under tow was damaged in a storm, respondent instructed Unterweser to tow the rig to Tampa, the nearest port of refuge. There, respondent brought suit in admiralty against petitioners. Unterweser invoked the forum clause in moving for dismissal for want of jurisdiction and brought suit in the English court, which ruled that it had jurisdiction under the contractual forum provision." [FN4]

            The Supreme Court pointed out that freedom of contract should be respected in international contexts, stating: "[t]he expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws and in our courts. . . . We cannot have trade and commerce in world markets and international waters exclusively on our terms, governed by our laws, and resolved in our courts." [FN5] "There are compelling reasons why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect. . . . It cannot be doubted for a moment that the parties sought to provide for a neutral forum for the resolution of any disputes arising during the tow. Manifestly much uncertainty and possibly great inconvenience to both parties could arise if a suit could be maintained in any jurisdiction in which an accident might occur or if jurisdiction were left to any place where the Bremen or Unterweser might happen to be found. The elimination of all such uncertainties by agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting." [FN6]

            While the Supreme Court admitted that "[a] contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision"[FN7], "in the light of present-day commercial realities and expanding international trade [the Court concluded] that the forum clause should control absent a strong showing that it should be set aside." [FN8] The Supreme Court also concluded that serious inconvenience of the chosen forum is not enough to deny enforcement of the forum-selection clause, stating: "[w]hatever 'inconvenience' Zapata would suffer by being forced to litigate in the contractual forum as it agreed to do was clearly foreseeable at the time of contracting. In such circumstances it should be incumbent on the party seeking to escape his contract to show that trial in the contractual forum will be so gravely difficult and inconvenient that he will for all practical purposes be deprived of his day in court."[FN9]

2. Carnival Cruise Lines, Inc. v. Shute. [FN10]

            In 1991, the Supreme Court, in a domestic case, Carnival Cruise Lines Inc. v. Shute, broadened the applicability of The Bremen by narrowing the circumstances in which a forum selection clause will be held unreasonable [FN11].

            In Carnival Cruise, "[a]fter the respondents Shute, a Washington State couple, purchased passage on a ship owned by petitioner, a Florida-based cruise line, petitioner sent them tickets containing a clause designating courts in Florida as the agreed-upon fora for the resolution of disputes. The Shutes boarded the ship in Los Angeles, and, while in international waters off the Mexican coast, Mrs. Shute suffered injuries when she slipped on a deck mat. The Shutes filed suit in a Washington Federal District Court, which granted summary judgment for petitioner. The Court of Appeals reversed, holding, inter alia, that the forum-selection clause should not be enforced under The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 because it was not 'freely bargained for,' and because its enforcement would operate to deprive the Shutes of their day in court in light of evidence indicating that they were physically and financially incapable of pursuing the litigation in Florida." [FN12]

            The Supreme Court denied the Court of Appeals' decision that a nonnegotiated forum-selection clause in a form ticket contract is never enforceable simply because it was not the subject of bargaining, stating: "by ignoring the crucial differences in the business contexts in which the respective contracts were executed, the Court of Appeals' analysis seems to us to have distorted somewhat this Court's holding in The Bremen. . . .Including a reasonable forum clause in a form contract of this kind well may be permissible for several reasons: First, a cruise line has a special interest in limiting the fora in which it potentially could be subject to suit. Because a cruise ship typically carries passengers from many locales, it is not unlikely that a mishap on a cruise could subject the cruise line to litigation in several different fora. . . Additionally, a clause establishing ex ante the forum for dispute resolution has the salutary effect of dispelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judicial resources that otherwise would be devoted to deciding those motions. . . Finally, it stands to reason that passengers who purchase tickets containing a forum clause like that at issue in this case benefit in the form of reduced fares reflecting the savings that the cruise line enjoys by limiting the fora in which it may be sued." [FN13]

            The Supreme Court also denied the Court of Appeals' decision relying on The Bremen that the clause here at issue should not be enforced because the Shutes were incapable of pursuing this litigation in Florida, stating: "[f]urthermore, the Court of Appeals did not place in proper context this Court's statement in The Bremen that 'the serious inconvenience of the contractual forum to one or both of the parties might carry greater weight in determining the reasonableness of the forum clause.' . . the Court made this statement in evaluating a hypothetical 'agreement between two Americans to resolve their essentially local disputes in a remote alien forum.' In the present case, Florida is not a 'remote alien forum,' nor--given the fact that Mrs. Shute's accident occurred off the coast of Mexico--is this dispute an essentially local one inherently more suited to resolution in the State of Washington than in Florida.' [FN14]

B. AGREEMENT TO ARBITRATE -- THE FIRST STAGE

            Under the New York Convention, a court of its signatory, "when seized of an action in a matter in respect of which the parties have made an agreement [to arbitrate] within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed." (Article II(3)) Parties to an agreement to arbitrate are, therefore, bound by the agreement unless they prove that the agreement is "null and void, inoperative or incapable of being performed."

            As the reason that the agreement is "null and void, inoperative or incapable of being performed", parties flequently contend that the dispute is not capable of arbitration even though it is within the scope of the agreement. U.S. courts considered in the past that many areas of business-related law were not capable of arbitration. These areas include antitrust, the Securities Act, patents, ERISA (Employee Retirement Income Security Act) claims, bankruptcy matters, the Commodities Exchanges Act, the Civil Rights Act, state franchise statutes and punitive damages. The concern of U.S. courts was that society would be injured by arbitration of public law claims. Courts expressed a fear that public law issues were too complicated for arbitrators, that arbitration proceedings were too informal, or that arbitrators were like foxes guarding the chicken coop, with a pro-business bias that will lead to under-enforcement of laws designed to protect the public. [FN15]

            The U.S. Supreme Court, however, has increasingly narrowed these areas of law which was not capable of arbitration. In 1987, the Supreme Court, in Shearson/American Express, Inc. v. McMahon [FN16], held that both the securities claims and the RICO claims are capable of arbitration under the Federal Arbitration Act (the "FAA"). In 1989, the Supreme Court, in Rodriguez de Quijas v. Shearson/American Express, Inc. [FN17], specifically overruled Wilko [FN18] which had held in 1953 that securities claims were not capable of arbitration. In 1984, the Supreme Court, in Southland Corp. v. Keating [FN19], held that the FAA preempted state law and applied to state claims, concluding that claims arising under the California franchise law were capable of arbitration. In 1995, the Supreme Court, in Mastrobuono v. Shearson Lehman hutton, Inc.[FN20], held that the presence of New York choice-of-law provision in standard brokerage-customer agreement did not preclude arbitrators from awarding punitive damages, notwithstanding New York's common law ruled against arbitral awards of punitive damages.

            In international contexts, the Supreme Court has allowed a broader scope of subject capable of arbitration than in domestic contexts. The Supreme Court, in Scherk [FN21] and Mitsubishi [FN22], held that securities law and antitrust claims were capable of arbitration in international disputes at a time when they were not capable in domestic disputes.

1. Scherk v. Alberto-Culver Co.

            In Scherk, the Supreme Court held that an agreement to arbitrate was enforceable even though there was alleged violation of the Securities Exchange Act of 1934 with relying on The Bremen.

            The Supreme Court distinguished its holding in Wilko which had held in domestic contexts that securities law was not capable of arbitration. (As mentioned above Wilko was later overruled.) The Supreme Court distinguished international disputes from domestic disputes and emphasized the necessity to enforce an agreement to arbitrate in the former context, stating: "the respondent's reliance on Wilko in this case ignores the significant and, we find, crucial differences between the agreement involved in Wilko and the one signed by the parties here." [FN23] "[By contrast to Wilko, a genuinely domestic case, in Scherk an international case], in the absence of the arbitration provision considerable uncertainty existed at the time of the agreement, and still exists, concerning the law applicable to the resolution of disputes arising out of the contract. . . Such uncertainty will almost inevitably exist with respect to any contract touching two or more countries, each with its own substantive laws and conflict-of-laws rules. A contractual provision specifying in advance the forum in which disputes shall be litigated and the law to be applied is, therefore, an almost indispensable precondition to achievement of the orderliness and predictability essential to any international business transaction. Furthermore, such a provision obviates the danger that a dispute under the agreement might be submitted to a forum hostile to the interests of one of the parties or unfamiliar with the problem area involved. . . A parochial refusal by the courts of one country to enforce an international arbitration agreement would not only frustrate these purposes, but would invite unseemly and mutually destructive jockeying by the parties to secure tactical litigation advantages." [FN24]

2. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.

            In Mitsubishi, the Supreme Court held that antitrust claims were capable of arbitration in international contexts.

            The Supreme Court, as in The Bremen and Scherk, pointed out that an international context highly required to enforce the parties' agreement, stating: "concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties' agreement, even assuming that a contrary result would be forthcoming in a domestic context". [FN25] The Supreme Court also pointed out the federal policy in favor of arbitral dispute resolution, stating: "The Bremen and Scherk establish a strong presumption in favor of enforcement of freely negotiated contractual choice-of-forum provisions. Here, as in Scherk, that presumption is reinforced by the emphatic federal policy in favor of arbitral dispute resolution. And at least since this Nation's accession in 1970 to the [New York] Convention, . . . ., and the implementation of the [New York] Convention in the same year by amendment of the Federal Arbitration Act, . . . that federal policy applies with special force in the field of international commerce". [FN26]

            The Supreme Court rejected the proposition that "an arbitration panel [would] pose too great a danger of innate hostility to the constraints on business conduct that antitrust law imposes" [FN27], and concluded that "[t]he mere appearance of an antitrust dispute did not alone warrant invalidation of the selected forum on the undemonstrated assumption that the arbitration clause is tainted" [FN28], that "potential complexity should not suffice to ward off arbitration" [FN29] and that "[t]he importance of the private damages remedy. . . [did] not compel the conclusion that it may not be sought outside an American court." [FN30]

            The Supreme Court, however, indicated the possibility to deny enforcement of the arbitral awards if the arbitral tribunal ignores U.S. antitrust law, stating; "[t]he tribunal. . . is bound to effectuate the intentions of the parties. Where the parties have agreed that the arbitral body is to decide a defined set of claims which includes, as in these cases, those arising from the application of American antitrust law, the tribunal therefore should be bound to decide that dispute in accord with the national law giving rise to the claim." [FN31] "We . . have no occasion to speculate on this matter at this stage in the proceedings, when Mitsubishi seeks to enforce the agreement to arbitrate, not to enforce an award. Nor need we consider now the effect of an arbitral tribunal's failure to take cognizance of the statutory cause of action on the claimant's capacity to reinitiate suit in federal court. We merely note that in the event the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies for antitrust violations, we would have little hesitation in condemning the agreement as against public policy." [FN32]

III. VACATION OF ARBITRAL AWARDS (THE SECOND STAGE)

            "In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration--

(a) Where the award was procured by corruption, fraud, or undue means.

(b) Where there was evident partiality or corruption in the arbitrators, or either of them.

(c) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced.

(d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

(e) Where an award is vacated and the time within which the agreement required the award to be made has not expired the court may, in its discretion, direct a rehearing by the arbitrators." (Section 10 of the FAA) This section 10 applies to not only domestic arbitration but also international arbitration falling under the New York Convention [FN33] according to section 208 of the FAA.

            At the domestic level, arbitral awards may be vacated for manifest disregard of the law in addition to the above limited grounds. In Wilko, the Supreme Court introduced 'manifest disregard of the law' by arbitrators as a ground for vacating arbitration awards. U.S. courts after Wilko, however, have extremely limited its applicability.[FN34] In Merrill Lynch, Pierce, Fenner & Smith v. Bobker [FN35], the Second Circuit created a functional definition of "manifest disregard" with showing deference to arbitration, stating: "['manifest disregard of the law'] is not to be found in the federal arbitration law. 9 U.S.C. s 10. Although the bounds of this ground have never been defined, it clearly means more than error or misunderstanding with respect to the law. . . . The error must have been obvious and capable of being readily and instantly perceived by the average person qualified to serve as an arbitrator. Moreover, the term "disregard" implies that the arbitrator appreciates the existence of a clearly governing legal principle but decides to ignore or pay no attention to it. . . . To adopt a less strict standard of judicial review would be to undermine our well established deference to arbitration as a favored method of settling disputes when agreed to by the parties. . . . Judicial inquiry under the 'manifest disregard' standard is therefore extremely limited." [FN36]

            At the international level, the District Court S.D. New York, in Brandeis Intsel Limited v. Calabrian Chemicals Corporation, denied availability of the ground of "manifest disregard of the law" to vacate arbitral awards falling under the New York Convention, stating: "I conclude that, in any event, the 'manifest disregard' defense is not available to Calabrian. That is because 'manifest disregard' of law, whatever the phrase may mean, does not rise to the level of contravening 'public policy,' as that phrase is used in Article V of the Convention. Nor, unlike proceedings under Chapter 1 of the Federal Arbitration Act, can manifest disregard of law be urged as an independent ground for vacating an award falling within the Convention." [FN37]

            Having considered that "manifest disregard" does not rise to the level of contravening "public policy" under Article V(2)(b) of the New York Convention, that under the FAA the court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award falling under the New York Convention (Section 207 of the FAA), and that the section 10 applies to the extent that it is not in conflict with chapter 2 of the FAA or the New York Convention (Section 208 of the FAA), I think the decision in Brandeis is theoretically correct. There are courts, however, which denied, in international contexts, the ground of "manifest disregard of the law" not because of the reasoning in Brandeis but because no "manifest disregard" was found in the case. [FN38]

IV. ENFORCEMENT OF ARBITRAL AWARDS (THE THIRD STAGE)

            Parties, even if they win arbitral awards, cannot enforce the award by themselves. If the losing party does not perform its obligation voluntarily, the winning party needs to have local courts to enforce the award.

            Under the New York Convention arbitral awards, in principle, shall be recognized as binding and shall be enforced.(Article III) Recognition and enforcement of arbitral awards, however, may be refused according to Article V, which provides:

"1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:

(a) The parties to the agreement referred to in Article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or

(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or

(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or

(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b) The recognition or enforcement of the award would be contrary to the public policy of that country."

            Among the above grounds, the grounds of Article V(2) are subject to broad discretion of local courts of the country where the recognition and enforcement of arbitral awards are sought. As for the subject matter's capability of arbitration (Article V(2)(a)) under U.S. law, I have examined in II.B. above. As for Article V(2)(b), the leading case in the United States on the public policy defense is Parsons & Whittemore Overseas Co. Inc. v. Societe Generale de l'Industrie du Papier [FN39].

1. Parsons & Whittemore Overseas Co. Inc. v. Societe Generale de l'Industrie du Papier

            In Parsons, plaintiff, American company contracted to construct a mill for defendant, Egyptian manufacturer. The American company delayed the construction. "The American company argued that the contract's force majeure clause should be recognized in light of the U.S. government's severing of diplomatic ties with Egypt and the U.S. government's subsequent withdrawal of financial backing for the project." [FN40] The arbitral tribunal recognized the American company's force majeure defense as good only during limited period. Plaintiff appealed from an order of the district court confirming the foreign arbitral award. Plaintiff argued that the award was against U.S. public policy.

            In Parsons, the Second Circuit denied the American company's public policy defense, stating: "[t]o read the public policy defense as a parochial device protective of national political interests would seriously undermine the Convention's utility." [FN41] The Second Circuit concluded that the New York Convention's public policy defense should be construed narrowly based on the inferences to be drawn from the history of the New York Convention, stating: "Perhaps more probative, however, are the inferences to be drawn from the history of the Convention as a whole. The general pro-enforcement bias informing the Convention and explaining its supersession of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention's basic effort to remove preexisting obstacles to enforcement. . . Additionally, considerations of reciprocity -- considerations given express recognition in the Convention itself -- counsel courts to invoke the public policy defense with caution lest foreign courts frequently accept it as a defense to enforcement of arbitral awards rendered in the United States. We conclude, therefore, that the Convention's public policy defense should be construed narrowly." [FN42] The Second Circuit, eventually, held that "[e]nforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state's most basic notions of morality and justice. Cf. 1 Restatement Second of the Conflict of Laws 117, comment c, at 340 (1971)" [FN43]

            It is noteworthy that the Second Circuit here cited Restatement Second of the Conflict of Laws 117, comment c, at 340 (1971). It states: "c. Foreign nation judgements. . . . The fact that suit on the original claim could not have been maintained in a State of the United States does not mean that a judgement rendered on the claim in a foreign nation will necessarily be refused enforcement by the courts of that State. In fact, enforcement will usually be accorded the judgement except in situations where the original claim is repugnant to fundamental notions of what is descent and just in the State where enforcement is sought." Having considered the intent of the Second Circuit to cite the Restatement, I think that the Court used the phrase "the forum state's most basic notions of morality and justice" in its holding with the same meaning as the "fundamental notions of what is descent and just in the State where enforcement is sought" in the Restatement. [FN44]

2. AFTER PARSONS

            The standard of the public policy defense held by Parsons have been maintained thereafter. [FN45] In Waterside Ocean Navigation Co., Inc. v. International Navigation Ltd., for example, the Second Circuit stated: "[public policy defense in Article V(2)(b) of the New York Convention] must be construed in light of the overriding purpose of the Convention, which is 'to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and arbitral awards are enforced in the signatory countries,' Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n. 15, 94 S.Ct. 2449, 2457 n. 15, 41 L.Ed.2d 270 (1974); see Bergesen v. Joseph Muller Corp., 710 F.2d 928, 933 (2d Cir.1983); Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 516 (2d Cir.1975); Parsons & Whittemore Overseas Co. v. Societe Generale de l'Industrie du Papier, 508 F.2d 969, 973 (2d Cir.1974). Thus, this court has unequivocally stated that the public policy defense should be construed narrowly. It should apply only where enforcement would violate our "most basic notions of morality and justice." Fotochrome, Inc., supra, 517 F.2d at 516; Parsons & Whittemore, supra, 508 F.2d at 974." [FN46]

V. HISTORICAL ANALYSIS AND CONCLUSION

            As surveyed above, U.S. courts have shown considerable deference both to international arbitrations and a forum-selection clause in international contexts. For the purpose of understanding the trend of the U.S. courts' decisions, I chronologically list the representative cases mentioned in this paper as follows.

A Chronological List of Representative Cases

Wilko v. Swan

(Securities law is not capable of arbitration, and "manifest disregard of the law" is a ground for vacating arbitral awards.)

The United States ratified the New York Convention in 1970.

The Bremen v. Zapata Off-Shore Co.

(A forum-selection clause is prima facie valid in international contexts.)

Scherk v. Alberto-Culver Co.

(Securities law is capable of arbitration in international contexts.)

Parsons & Whittemore Overseas Co. Inc. v. Societe Generale de l'Industrie du Papier

(The public policy defense under the New York Convention should be construed narrowly.)

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.

(Antitrust claims are capable of arbitration in international contexts.)

Merrill Lynch, Pierce, Fenner & Smith v. Bobker

("Manifest disregard of the law" is defined very restrictively.)

Shearson/American Express, Inc. v. McMahon

(Securities law and the RICO claims are capable of arbitration in domestic contexts.)

Rodriguez de Quijas v. Shearson/American Express, Inc.

(Wilko is specifically overruled.)

Carnival Cruise Lines Inc. v. Shute.

(Broadened the applicability of The Bremen in domestic contexts.)

The above list shows the trend of U.S. courts' decisions.

In 1970, ratification of the New York Convention by the United States introduced deference to international arbitration. In 1972, The Bremen introduced deference to a forum-selection clause in international contexts. The deference to international arbitration and freedom of contract in international contexts was repeated and established by a series of cases --- Scherk (1974), Parsons (1974) and Mitsubishi (1986).

U.S. courts, thereafter, stretch the deference to international arbitrations to domestic arbitrations in a series of cases including Merrill Lynch (1986), Shearson/American Express (1987) and Rodriguez (1989).

Carnival Cruise (1991) indicates that U.S. deference to forum-selection clause should also be stretched to that in domestic contexts.

In summary, deference to international arbitrations and a forum-selection clause in international contexts was established by the middle of 1980's, and thereafter such deference has been stretched to domestic arbitrations and a forum-selection clause in domestic contexts.

FOOT NOTES

FN1. In Japan, Osaka district court in Marubeni-America v. Kansai Iron Works (Dec. 22, 1977) held that it was against public policy to recognize and enforce a foreign judgement conflicting with an irrevocable Japanese judgement and denied recognition and enforcement of a judgement of Washington state court (Deutch v. West Coast Machinery Co., Marubeni-Iida, Inc. (Respondent), Kansai Iron Works, Ltd. (Petitioner), 497 P.2d 1311 (Wash.Sup.Ct.1972)) under the fact: A Japanese company sold its product, a power press machine, to a U.S. company. While operating this machine, an employee of the U.S. company suffered an accident and was injured. He brought a lawsuit against the Japanese company before a Washington state superior court to claim damages caused by the accident. Opposing this lawsuit, the Japanese company brought a lawsuit against the alleged victim before a Japanese court, seeking a judgment declaring the nonexistence of the right of indemnification that had been claimed against it. The Washington state court delivered a judgment ordering the payment of damages. Japan's court delivered a judgment to the effect that the Japanese company was under no liability. See Takao Sawaki, Recognition and Enforcement of Foreign Judgments in Japan, 23 International Lawyer 29 at 34-35 (1989).

FN2. See The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 at 9-10 and at 11 FN10 (1972).

FN3. The Bremen, the supra FN2.

FN4. Syllabus of the case by Westlaw.

FN5. The Bremen, supra FN2 at 9.

FN6. The Bremen, supra FN2 at 13-14.

FN7. The Bremen, supra FN2 at 15

FN8. Id.

FN9. The Bremen, supra FN2 at 17-18.

FN10. Carnival Cruise Lines, Inc. v. Shute, 111 S.Ct. 1522 (1991)

FN11. See Melissa Leigh Lauderdale, Forum Selection Clauses and Forum Non Conveniens in International Employment Contracts, 4 Journal of International Law and Practice 117 at 121 (1995).

FN12. Syllabus of the case by Westlaw.

FN13. Carnival Cruise, supra FN10 at 593-594.

FN14. Carnival Cruise, supra FN10 at 594.

FN15. See William W. Park, National Law and Commercial Justice: Safeguarding Procedural Integrity in International Arbitration, 63 Tulane Law Review 647 at 700 (1989).

FN16. Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987).

FN17. Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989).

FN18. Wilko v. Swan, 346 U.S. 427 (1953).

FN19. Southland Corp. v. Keating, 465 U.S. 1 (1984).

FN20. Mastrobuono v. Shearson Lehman Hutton, Inc., 115 S. Ct. 1212 (1995).

FN21. Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974).

FN22. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985).

FN23. Scherk, supra FN21 at 515.

FN24. Scherk, supra FN21 at 516-517.

FN25. Mitsubishi, supra FN22 at 629.

FN26. Mitsubishi, supra FN22 at 631.

FN27. Mitsubishi, supra FN22 at 634.

FN28. Mitsubishi, supra FN22 at 632.

FN29. Mitsubishi, supra FN22 at 633.

FN30. Mitsubishi, supra FN22 at 635.

FN31. Mitsubishi, supra FN22 at 636-637.

FN32. Mitsubishi, supra FN22 at 637 FN19.

FN33. The court in Northrup Corp. v. Triad Financial Establishment, 593 F.Supp. 928 (C.D. Cal. 1984), for example, exercised the authority in vacating parts of a U.S. arbitral award falling under the New York Convention.

FN34. Wilko, supra FN18 at 436-37.

FN35. Merrill Lynch, Pierce, Fenner & Smith v. Bobker, 808 F.2d 930 (2d Cir. 1986).

FN36. Merrill Lynch, supra FN35 at 933-934.

FN37. Brandeis Intsel Limited v. Calabrian Chemicals Corporation, 656 F.Supp. 160 at 165 (1987).

FN38. See, for example, Carte Blanche (Singapore) PTE., Ltd. v. Carte Blance International, Ltd, 888 F.2d 260 (1989).

FN39. Parsons & Whittemore Overseas Co. Inc. v. Societe Generale de l'Industrie du Papier, 508 F.2d 969 (2d Cir. 1974).

FN40. Eloise Henderson Bouzari, The Public Policy Exception to Enforcement of International Arbitral Awards: Implications for Post-NAFTA Jurisprudence, 30 Texas International Law Journal 205 (1995).

FN41. Parsons, supra FN39 at 974.

FN42. Parsons, supra FN39 at 973-974.

FN43. Parsons, supra FN39 at 974.

FN44. See Joseph J. Simeone, The Recognition and Enforceability of Foreign Country Judgments, 37 Saint Louis University Law Journal 341 (1993) (stating "[t]he leading recent pronouncement on the public policy defense, Parsons & Whittemore Overseas Co. Inc. v. Societe Generale de l'Industrie du Papier (RAKTA), though given in the context of a proceeding to enforce a foreign arbitral award, applies with equal force to enforcement of judgments: Enforcement . . . may be denied on this basis [of public policy] only where enforcement would violate the forum state's most basic notions of morality and justice . . . . [The public policy defense] was not meant to enshrine the vagaries of international politics under the rubric of 'public policy.'")

FN45. See, e.g. Laminoirs-Trefileries-Cableries de Lens v. Southwire Co., 484 F. Supp. 1063, 1067 (N.D. Ga. 1980)); American Construction Machinery & Equipment v. Mechanised Construction of Pakistan 659 F. Supp. 426 (S.D.N.Y. 1987), aff'd, 828 F.2d 117 (2d Cir. 1987), cert. denied, 484 U.S. 1064 (1988).

FN46. Waterside Ocean Navigation Co., Inc. v. International Navigation Ltd., 737 F.2d 150, at 152 (1984)