South-Western Legal Studies in Business

Dispute Between Russian and Ukrainian Companies Not the Business of U.S. Courts
Description Appeals court affirmed that a dispute between a Russian company and a Ukrainian company could not be litigated in U.S. courts. The forum was improper given that the matter could be litigated, should arbitration be inadequate or need to be enforced, in the home courts of the two companies. There is no logical relationship of the U.S. to the matter.
Topic International Law
Key Words Arbitration; Enforcement; Forum non Conveniens
C A S E   S U M M A R Y
Facts Gazprom, a Russian company, contracted with Ukragazprom, a Ukrainian gas company, to pipe natural gas across the Ukraine to various destinations. As payment, Ukragazprom was allowed to withdraw 235 million cubic meters of gas. Gazprom asserted that the Ukrainian company took more gas than it was entitled to and sued for reimbursement with the International Commercial Court of Arbitration in Moscow, as the contract provided. The arbitrators awarded $88 million in payment for the gas. Ukragazprom appealed, but the award was affirmed by the Moscow City Court and by the Supreme Court of the Russian Federation. Prior to those rulings, Gazprom filed a petition in federal court in the U.S. to confirm the arbitration award. The district court dismissed the action on the grounds of forum non conveniens. Gazprom appealed.
Decision

Affirmed. The doctrine of forum non conveniens applies to arbitration proceedings that occur under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. There is little rationale for this litigation to be in U.S. courts. The only link of the U.S. to this matter is that it is a party to the Convention. Litigating the matter in the U.S. would impose a significant burden on the other party. The contention of Gazprom that the courts in the Ukraine are corrupt is not adequate. Since Gazprom contracted with a Ukrainian company, it "must have anticipated the possibility of litigation in Ukraine" so cannot now claim that is an inadequate forum.

Citation In the Matter of the Arbitration between Monegasque de Reassurances, 311 F.3d 488 (2nd Cir., 2002)

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