Defendant also moved to vacate a maritime attachment dated March 12, 1976, attaching $40,000 at the Marine Midland Bank held for defendant in the name of All Seas Shipping Agency, Inc. The motion was made on the ground that defendant was “jurisdictionally present" in the district. The Court denied the motion to vacate the maritime attachment. Using the dual rule applicable to foreign corporations, the Court said there was insufficient evidence to conclude (1) that the defendant, a Panamanian corporation, was doing business within the district so as to subject it to the Court's jurisdiction, or (2) that All Seas, as its "general agent" in New York, had adequate authority and discretion to act for the defendant so as to accept service of process.

Fuller Company v. Compagnie des Bauxites de Guinee, 421 F. Supp. 938 (1976), decided on October 19, 1976, by the U.S. District Court for the Western District of Pennsylvania, involved an interpretation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (TIAS 6997; 21 UST 2517) as it applies to contracts between citizens of the United States. The Court decided that in this case the contract involved a sufficient connection with a foreign country to sustain jurisdiction in the Federal court.

Fuller Company, a Pennsylvania corporation which manufactures and sells equipment, filed a petition for declaratory judgment in the Court of Common Pleas of Allegheny County seeking determination of the effect of an alleged settlement between it and the defendant, a Delaware corporation (hereinafter CBG), which had purchased equipment from Fuller. CBG removed the case to the U.S. District Court, invoking its jurisdiction pursuant to the terms of the Foreign Arbitral Awards Convention.

The District Court turned for guidance to the legislative history of the Act of July 31, 1970 (9 U.S.C. 201-208), which implements the Convention. It quoted the following testimony by Ambassador Richard D. Kearney, Chairman of the Secretary of State's Advisory Committee on Private International Law, before the Senate Committee on Foreign Relations on February 13, 1970:

We have included in section 202 a requirement that any case concerning an agreement or award solely between U.S. citizens is excluded unless there is some important foreign element involved, such as property located abroad, the performance of a contract in a foreign county, or a similar reasonable relation with one or more foreign states. The reasonable relationship criterion is taken from the general provisions of the Uniform Commercial Code. Section 1-105(1) of the code permits the parties to a transaction that bears a reasonable relationship to any other state or nation to specify that the law of that state or nation will govern their rights and duties.

In this connection of course, it should be recalled that what we are dealing with under the Convention is solely a situation in which the parties have voluntarily agreed to arbitration. The Convention and implementing legislation will apply to a transaction only because the parties to that transaction have agreed to settle disputes by arbitration. The provision on choice of law in the Uniform Commercial Code is also based on the same kind of voluntary action by the parties to a transaction. Since the Commercial Code is basic law on commercial transactions in the United States it seemed appropriate to incorporate its test of reasonable relationship into the implementing legislation on foreign arbitral awards. Appendix to S. Rep. No. 702, 91st Cong. 2d Sess. at 6 (1970).

In addition, the Court noted the comments to section 1-105 concerning what constitutes a legal relationship (12A-PS1-105) and the Pennsylvania Bar Association's notes to 12A-PS1-105, on choice of

law.

It concluded that the contract between Fuller and CGB bore a sufficient connection with the Republic of Guinea to sustain jurisdiction under the Convention, specifically that it met the requirements under 9 U.S.C. 202 of envisaging performance abroad. The Court accordingly denied plaintiff's motion to remand. Further, since of the four possible inferences arising from the conduct of the parties at the alleged settlement meeting, only one was that there was a settlement agreement terminating the life of a broad arbitration clause, the Court ordered that arbitration be convened and trial stayed pending issuance of a final award in the arbitration.

Foreign Arbitral Awards

In Imperial Ethiopian Government v. Baruch-Foster Corp, 535 F.2d 334 (1976), the U.S. Court of Appeals for the Fifth Circuit, on July 19, 1976, affirmed confirmation of a foreign arbitral award in favor of the Ethiopian Government. It held that the burden of proof is on the party defending against enforcement under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (TIAS 6997; 21 UST 2517).

Baruch-Foster Corporation (BFC) had invoked arbitration to settle a dispute under a petroleum development agreement with Ethiopia. Ethiopia had repudiated its obligations under the agreement, following BFC's delayed performance of an obligation to drill a test oil well. Pursuant to the agreement, an arbitral board was set up. It entered a unanimous award, rejecting BFC's defense to its contractual breach and awarding Ethiopia's counterclaim for damages. BFC neither made payment nor challenged the award, and Ethiopia petitioned in Federal district court for confirmation of the award under the Foreign Arbitral Awards Convention, im

plemented by 9 U.S.C. 201-208. The U.S. District Court for the Northern District of Texas confirmed the award and the corporation appealed.

The dispositive issue on appeal was whether the District Court erroneously entered judgment without compelling Ethiopia to honor BFC's far-reaching requests for discovery. BFC had called for Ethiopia to produce documents spanning a 21-year period and relating to an assertion by BFC that the president of the arbitration panel had a disqualifying connection with the Ethiopian government. In confirming the award, the District Court held that BFC had waived any objection to the composition of the board and was estopped from contesting it.

In affirming the order of the District Court, the Court of Appeals said its rationale was somewhat different. The opinion stated, in part:

** *

"The goal of the Convention, and the principal purpose underlying American adoption and implementation of it, was 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. AlbertoCulver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974). To advance those objectives the implementing legislation prescribed a summary procedure in the nature of Federal motion practice to expedite petitions for confirmations of foreign arbitral awards. In addition, 9 U.S.C. 207 mandates that "the court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention." The burden of proof is on the party defending against enforcement. See Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1066 (1961), and Parsons & Whittemore Overseas Co., Inc. v. Societe Generale de L'Industrie du Papier (RAKTA), 508 F.2d 969, 973 (C.A.2, 1974), where the Second Circuit reviewed the legislative backdrop of the Convention and concluded that it "clearly shifted the burden of proof to the party defending against enforcement."

The Court went on to state that BFC had brought forward nothing to show that its claim of a disqualifying connection had any semblance of substance or that it was even asserted in good faith. On the other hand, it found that there were statements by the arbitrator and others indicating that there was no such connection and that the arbitrator was respected and a man of integrity.

An exporter of automobiles petitioned for confirmation of a foreign arbitration award in Audi Nsu A. U. Aktiengesellschaft v. Overseas Motors, 418 F. Supp. 982 (1976). On the importer's motion to dismiss,

the District Court for the Eastern District of Michigan held, on August 9, 1976, that the section of the contract stating that the arbitral decision shall be decided "finally and binding upon the parties" indicated the consent of the parties to entry of judgment by a court.

In 1968 petitioner and respondent entered into an agreement involving the sale and importation of foreign automobiles into the United States. In 1972 a dispute arose and petitioner called for arbitration. The arbitration panel, meeting in Zurich, entered an award in favor of the petitioner.

When petitioner commenced action in the District Court of Michigan for confirmation of the award, the respondent moved to dismiss, arguing (1) that the Court lacked jurisdiction because the arbitration lacks an express "section 9 recitation" (9 U.S.C. 9); (2) that the Convention on the Recognition of Foreign Arbitral Awards (TIAS 6997; 21 UST 2517) cannot supersede that statutory requirement, for to do so would result in a constitutionally impermissible retroactive application of a statute (i.e., forbidden under the Contracts Clause); and (3) that the petitioner failed to exhaust his remedies under the existing Friendship, Commerce, and Navigation Treaty with Germany (TIAS 3593; 7 UST 1839).

The District Court denied the motion to dismiss. The opinion stated, in part:

In the present case the Court concludes that Section 1 of the Contract, which states that the arbitral decision "shall be decided finally and binding upon the parties," does indicate consent of the parties to entry of judgment by a court.

Indeed such a conclusion seems inescapable if the "final and binding" language of the Contract is to be given effect. Nor does the Court find merit in the respondent's contention that the following phrase "disbarring legal actions" found in the arbitration clause must be accorded an all-encompassing interpretation which bars even judgments on the award. Such an interpretation is neither reasonable nor consistent with the "final and binding" language.

As the Court concludes that the arbitration clause in question does manifest consent to the judgment on the arbitral award by the parties, it need not reach the issues of (1) whether the provisions of the Convention, as codified in 9 U.S.C. 201 et seq. do away with the § 9 consent to judgment requirement, and (2) whether such statutory modifications result in an impermissible retroactive effect as applied here. The Court finds the respondent's exhaustion of F.C.N. Treaty remedies argument to be without merit.

84

Bankruptcy Proceedings

In Israel-British Bank (London), Ltd. v. Federal Deposit Insurance Corporation, 536 F.2d 509 (1976), the U.S. Court of Appeals for the Second Circuit reversed the order of the U.S. District Court for the

Southern District of New York in Matter of Israel-British Bank (London), Ltd., 401 F. Supp. 1159 (1975), dismissing a voluntary bankruptcy petition filed by a foreign banking corporation. See the 1975 Digest, pp. 899-900.

The Court of Appeals held, on May 25, 1976, that the "banking corporation" exception in section 4 of the Bankruptcy Act, 11 U.S.C. 22, governing voluntary petitions is based on considerations of federalism and that the British banking corporation, which borrowed Eurodollars and U.S. dollars from American banks and maintained deposits in U.S. banks but which did not do business as a bank in the United States and which was not licensed in any State to do such business, qualified for benefit of the Bankruptcy Act as a voluntary bankrupt and was not a “banking corporation" within the meaning of the exception. The opinion of the Court of Appeals stated, in part:

If we acknowledge, as did the District Court, that Congress failed to consider foreign banking corporations when creating the exceptions to eligibility for bankruptcy, are we, nevertheless, required to recognize within the exception what was never in its consideration? There is no plain meaning in "banking corporation" to compel such a result.

When the words [of the statute] create a general inclusionary category there is greater reason, perhaps, to accept a literal meaning in the absence of any particular purpose which contradicts it. When the statute is couched in terms of an exception, however, the task is somewhat different, for in the case of an exception we can hardly assume that excluding a particular category from a general class was utterly without purpose. If we find that there was a legislative purpose for the general exception which does not fit the narrower exception at issue, a court may justifiably conclude that the exception at issue is without the statute. Thus, the normal rule of construction is that where words of exception are used, they are to be strictly construed to limit the exception

We start with the recognition that a foreign corporation which has assets in the United States is generally amenable to bankruptcy here. IBB is such a body under section 2 of the Act. To find that it is excluded from the general class of entities amenable to bankruptcy one would have to find a reason which illuminates the exception. We can find no convincing reason why a foreign banking corporation, not licensed to do business in the United States, conducting no semblance of a banking business here, and not under the regulatory supervision of any State or Federal