We return today to Zeevi Holdings Ltd. v. Republic of Bulgaria, which we first considered on April 15, 2011, when the case was still in the District Court. Here was my summary of the facts:

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.

As we saw, the US District Court for the Southern District of New York held that the forum selection clause allowed confirmation proceedings only in Bulgaria. Zeevi appealed to the Second Circuit. In today’s decision, the court summarily affirmed. The decision made three basic points.

First, a motion to dismiss on forum selection clause grounds is procedural not substantive, and thus permissible under the New York Convention even though not explicitly mentioned in the Convention.

Second, the petition for confirmation was within the scope of the forum selection clause. The clause read:

The execution of an award against the Seller may be conducted only in Bulgaria in accordance with the provisions of Bulgarian law.

On the one hand, “confirmation” seems distinct from “execution,” just as “recognition” is distinct from “enforcement.” But on the other hand, everyone agreed that under Bulgarian law, an award cannot be “executed upon” in a Bulgarian court unless a Bulgarian court has first confirmed it. Thus the necessary implication of the parties’ agreement, in the court’s view, was that the parties intended for confirmation proceedings should also occur in Bulgaria.

Third, the court rejected the notion that the judge should have deferred, as a matter of comity, to the Israeli judge’s decision that the forum selection clause did not require confirmation proceedings to be brought in Bulgaria. This is the most interesting, and also the most contestable, aspect of the decision. The court’s review was de novo. The court began by noting that issue preclusion as between a US court and a foreign court is a matter of comity, i.e., not mandatory. But even in the domestic context, issue preclusion arises only when the issues considered by the two courts are identical. But “issues are not identical when the legal standards governing their resolution are significantly different.” According to the court, the Israeli court relied on a provision of Israeli law that forum selection clauses are to be construed narrowly, but the parties in the US agreed that Bulgarian law applied to the interpretation of the clause and that there was no similar rule of construction in Bulgarian law.

I’m not completely sure of this, but it appears to me that Zeevi did not seek recognition of the Israeli judgment, as perhaps it might have done. I wonder whether the court’s point about comity would have applied if it had.