Case of the Day: Albaniabeg Ambient v. Enel

The case of the day is Albaniabeg Ambient Sh.p.k. v. Enel S.p.A. (S.D.N.Y. 2016). BEG S.p.A., an Italian company, contracted with the government of Albania to build and operate a hydroelectric plant. BEG also had a contract with Enel S.p.A., another Italian firm, to study the feasibility of the project. Later, BEG had a similar contract with Enelpower S.p.A., an Enel subsidiary. The Enelpower contract had an agreement to arbitrate.

A dispute arose. BEG commenced an arbitration against Enelpower for breach of contract. The tribunal, seated in Rome, found that Enelpower was not liable to BEG. The Italian courts refused to vacate the award despite a claim that one of the arbitrators had a conflict of interest.

Later, Albaniabeg, a subsidiary of BEG, brought an action against Enel and Enelpower in the Albanian court. The claims were tort claims arising out of the hydroelectric project. The Albanian court entered a judgment for more than € 25 million against Enel and Enelpower, which was affirmed on appeal. The European Court of Human Rights rejected Enel and Enelpower’s challenge to the judgment.

Albaniabeg brought an action in the New York Supreme Court for recognition of the Albanian judgment. Enel and Enelpower removed the case to the District Court, and Albaniabeg moved to remand. The argument for removal was that the “subject matter of an action or proceeding pending in a State court relate[d] to an arbitration agreement or award falling under the [New York] Convention,” as required for removal under § 205 of the FAA.

There were two main questions. First, is it enough to satisfy § 205? Does that statute confer subject matter jurisdiction, or is it also necessary to have another basis for subject matter jurisdiction? The court held that § 205 was merely a removal statute, and that it is necessary both to satisfy the “related to” test of § 205 and the jurisdictional test of § 203, which requires that the action “fall under” the New York Convention.

Second, did this case fall under the Convention? No. The case did not seek to confirm an award, or to vacate an award, or to stay an action pending arbitration, or to compel arbitration. The judge asserted that no court had ever found that a case for recognition of a foreign judgment fell under the Convention merely because of a claim that the foreign judgment was inconsistent with an arbitral award.

Remands are not appealable, so this is highly likely to be the last word, at least as to this case.

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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