The Case of the Day, Zeevi Holdings Ltd. v. Republic of Bulgaria (S.D.N.Y. 2011), is an unusual case involving the intersection between the New York Convention and exclusive choice of forum agreements. Zeevi, an Israeli firm, had a contract with an agency of the Bulgarian government (but not with Bulgaria itself) to purchase shares in Bulgaria’s national airline. The contract had an arbitration clause calling for arbitration of any disputes in Paris under the UNCITRAL Rules. The agreement was to be “governed by and construed in accordance with” Bulgarian law, and “[t]he execution of an award against the Seller may be conducted only in Bulgaria in accordance with the provisions of Bulgarian law.” Zeevi commenced an arbitration against Bulgaria, asserting various misrepresentations, and the tribunal entered a $10 million award in Zeevi’s favor. Bulgaria refused to pay. Zeevi sought recognition and enforcement of the award in the Jerusalem district court, which ruled in its favor and held, as a matter of Israeli law, that the contract did not limit confirmation proceedings to Bulgaria. (As the New York court noted, it was unclear why the Israeli court decided the issue under Israeli law, when the contract itself called for application of Bulgarian law. For this reason, the New York court rejected out of hand the argument that the Israeli decision was preclusive). Zeevi then sought recognition and enforcement in the New York Supreme Court, and Bulgaria removed the case to the federal court.

On the one hand, the grounds for refusal of recognition in Article V of the New York Convention are exclusive, and § 207 of the FAA makes that point expressly. But because the court conceived of the forum selection clause as procedural rather than substantive, it held that a line of precedent allowing refusal of recognition on procedural grounds not specified in Article V compelled the conclusion that the case should be dismissed if the forum selection clause was binding. This was the key holding of the case (for Letters Blogatory purposes—Marc J. Goldstein has a helpful post on the other holdings). The court went on to consider arguments about whether the forum selection clause applied to the dispute before it in light of the parties’ unusual use of the word “execution” in the forum selection clause, and whether Bulgaria provided an adequate forum for seeking recognition and enforcement in the circumstances of the case. On both issues, the court rejected Zeevi’s arguments. It therefore dismissed the case.

Zeevi is somewhat unusual because it seems likely that the whole point of an arbitration clause was to provide a neutral forum for resolution of the disputes. Zeevi likely did not trust the Bulgarian courts to adjudicate disputes between the Bulgarian government and Zeevi. But why, then, did Zeevi agree that enforcement proceedings could be taken only in Bulgaria? On the other hand, perhaps this is not so strange, since as we have seen in the case of China, some countries with developing judiciaries nevertheless have very good records of enforcing international arbitral awards.