Federal Court Remands Albanian Power Company’s Suit

International   |   April 29, 2016

In March, a New York federal court remanded an Albanian power company’s suit seeking enforcement of an Albanian court’s judgment. In Albaniabeg Ambient Sh.p.k. v. Enel S.P.A., the federal court reasoned that, although the award related to an arbitrated matter, subject matter jurisdiction was lacking.

In 1997, BEG obtained a contract with the Republic of Albania to construct and operate a hydroelectric power plant (the "project"). BEG entered into two agreements with Enel and its subsidiary, Enelpower (collectively "Enel defendants") to provide for studies and services related to the project. After disputes arose, BEG initiated arbitration proceedings against the Enel defendants, pursuant to their agreement. The foreign arbitration panel subsequently found the Enel defendants not liable to BEG for any damages.

Albaniabeg, a subsidiary of BEG, filed suit against the Enel defendants in Albania in 2004, asserting unfair competition and other claims related to the project. The Albanian court found for Albaniabeg and awarded damages of about $480.8 million.

In March 2014, Albaniabeg sought to enforce the Albanian court’s judgment in New York state court pursuant to Article 53 of the New York Civil Practice Law and Rules, which allows for enforcement of foreign judgments.

The Enel defendants contended that this claim was based on an arbitral award and sought to remove the claim to federal court. Disputes involving foreign arbitration awards may be heard by U.S. courts under Section 203 of the Federal Arbitration Act (FAA), which implements the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention"). Section 205 of the FAA permits removal of claims relating to arbitration agreements or awards.

The court held removal improper because the issue related not to the arbitration agreement or award, but rather to the enforcement of a foreign judgment. The court held that, while certain defenses to the award may involve claims relating to the prior arbitration, the Convention does not provide subject matter jurisdiction over actions to enforce a foreign court’s judgment, even where a party contends that the foreign court’s judgment is inconsistent with an earlier arbitration award or agreement to arbitrate.

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