On December 12, 2013, we reported on a United States District Court’s confirmation of a roughly $400 million Mexican arbitration award entered against an oil company affiliated with the Mexican government, notwithstanding that a Mexican court had subsequently nullified the award based on a subsequent change in Mexican law governing arbitration. The U.S. court had held that the Mexican judgment “violated basic notions of justice in that it applied a law that was not in existence at the time the parties contract was formed and left [the party in arbitration] without an apparent ability to litigate its claims.” The case was then appealed to the Second Circuit.
The Second Circuit has determined that the trial court did not violate the Panama Convention on enforcement of foreign judgments when the trial court refused to afford comity to the Mexican judgment. The Mexican judgment, the Second Circuit explained, amounted to a taking of property by the government without compensation and for the sole benefit of the government; i.e., if the action were to be enforced in the United States, it would be an unconstitutional taking. The Second Circuit, for these and other reasons, thus upheld the original confirmation of the arbitration award that pre-dated the change in Mexican law. The court concluded that “in the rare circumstances of this case,” the trial court “did not abuse its discretion by confirming the arbitral award at issue because to do otherwise would undermine public confidence in laws and diminish rights of personal liberty and property.” Corporación Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex‐Exploración Y Producción, Case No. 13-4022 (2d Cir. Aug. 2, 2016).
This post written by Joshua S. Wirth.
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