Case of the Day: First Investment Corp. of the Marshall Islands v. Fujian Mawei Shipbuilding

We return today to the case of the day from March 20, 2012, First Investment Corp. of the Marshall Islands v. Fujian Mawei Shipbuilding. In that decision, an action for confirmation of an English arbitral award, the judge found that he lacked personal jurisdiction over a Chinese state-owned enterprise, Fujian Mawei Shipbuilding, Ltd., and thus dismissed the action. The claimant, First Investment Corp. of the Marshall Islands, appealed to the Fifth Circuit.

In today’s case of the day, the court affirmed. The key issue was whether personal jurisdiction can, in general, be a good defense to a claim for recognition and enforcement of an arbitral award under the New York Convention. You can add the Fifth Circuit’s decision to a list of cases from other jurisdictions that say “yes.” I continue, though, to question the rationale of these decisions. Even leaving aside the fact that lack of personal jurisdiction is not one of the defenses mentioned in the Convention, it seems to me that where a judgment creditor (or a prevailing claimant in an arbitration) seeks recognition for the purpose of enforcing a money judgment or an award for money damages, the mere presence of assets of the judgment debtor in the court’s jurisdiction should be sufficient to give the court jurisdiction at least to the extent of the assets, else the judgment debtor can avoid making its assets available to pay the judgment or award, which I think is contrary to public policy. To be sure, there could be a constitutional issue here, since the requirement of due process trumps other considerations. 1 But I believe that the constitutionalization of personal jurisdiction in cases for enforcement of prior judgments is not what the Supreme Court had in mind. Here is the key language from Shaffer v. Heitner, 433 U.S. 186 (1977), to which I’d point:

The primary rationale for treating the presence of property as a sufficient basis for jurisdiction to adjudicate claims over which the State would not have jurisdiction if International Shoe applied is that a wrongdoer should not be able to avoid payment of his obligations by the expedient of removing his assets to a place where he is not subject to an in personam suit. This justification, however, does not explain why jurisdiction should be recognized without regard to whether the property is present in the State because of an effort to avoid the owner’s obligations. Nor does it support jurisdiction to adjudicate the underlying claim. At most, it suggests that a State in which property is located should have jurisdiction to attach that property, by use of proper procedures, as security for a judgment being sought in a forum where the litigation can be maintained consistently with International Shoe. Moreover, we know of nothing to justify the assumption that a debtor can avoid paying his obligations by removing his property to a State in which his creditor cannot obtain personal jurisdiction over him. The Full Faith and Credit Clause, after all, makes the valid in personam judgment of one State enforceable in all other States. (citations omitted)

But clearly the judges are not reading Letters Blogatory, as the decisions suggesting I am wrong continue to pile up.

Notes:

  1. Let’s leave aside an interesting issue in today’s decision about whether a state-owned foreign enterprise is entitled to the protection of the Due Process Clause.

About Ted Folkman

Ted Folkman is a shareholder with Murphy & King, a Boston law firm, where he has a complex business litigation practice. He is the author of International Judicial Assistance (MCLE 2d ed. 2016), a nuts-and-bolts guide to international judicial assistance issues, and of the chapter on service of process in the ABA's forthcoming treatise on International Aspects of US Litigation, and he is the publisher of Letters Blogatory, the Web's first blog devoted to international judicial assistance, which the ABA recognized as one of the best 100 legal blogs in 2012, 2014, and 2015.

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