The case of the day is Molecular Dynamics, Ltd. v. Spectrum Dynamics Medical Ltd.(2d Cir. 2025). Molecular Dynamics was a joint venture formed by SDBM Ltd. and Chancey Capital Corp. on the one hand and Biosensors International Group Ltd. on the other. The idea was to share intellectual property in order to develop “parallel but non-competing” medical imaging technologies. Molecular Dynamics was supposed to develop technologies for use in oncology only, and Biosensors was supposed to develop technology only outside of oncology. But Biosensors accused Molecular Dynamics of developing a cardiology camera, and it stopped making loans to Molecular Dynamics, as the agreement required. That led to Molecular Dynamics’s failure. Biosensors’s successor in interest, Spectrum Dymanics, also terminated the agreement and demanded repayment of the loans Biosensors had made. For its part, Molecular Dynamics accused Biosensors of breaching the agreement by failing to make required loans.

The parties arbitrated their dispute in Geneva; the contracts provided for arbitration “under the Swiss Rules of International Arbitration of the Swiss Chambers’ Arbitration Institution.” The contracts also had a New York choice of law clause, and one of them, a license agreement, had an odd choice of forum clause:

On matters of injunctive relief, the parties agree that the courts of New York, New York shall have non-exclusive jurisdiction and are competent courts for the purposes thereof, and on matters of concerning the Chosen Arbitration, the courts of New York, New York will have exclusive jurisdiction thereupon.

The parties arbitrated their dispute in Switzerland. After the hearing, Molecular Dynamics accused the presiding arbitrator of bias, and he withdrew. A new presiding arbitrator was appointed, and she promised not to review or rely on a draft award that had been circulating among the arbitrators. The tribunal then issued an award, without holding new evidentiary hearings first. The award found that Molecular Dynamics had breached the license agreement by developing the cardiology technology, which discharged Biosensors’ obligations under the license agreement. It found that Spectrum was entitled to repayment of the loans Biosensors had made, which totaled $7.5 million plus interest, and to $6.9 million in costs and fees.

Molecular Dynamics sought to vacate the award in New York. This is odd. The award was made in Switzerland, and so one would think that only the Swiss courts, the courts with primary jurisdiction, could set the award aside. But Molecular Dynamics pointed to the language in the license agreement I quoted above, arguing that Spectrum and its co-parties had “consented to [the district court’s] jurisdiction over them by agreeing to a forum selection clause vesting exclusive jurisdiction over ‘matters’ ‘concerning’ the Arbitration ‘in the courts of New York, New York.’”

The district court held that it lacked subject matter jurisdiction, because under the New York Convention, only the courts at the seat of the arbitration can vacate an award, and because the parties cannot circumvent that limitation by contract. Molecular Dynamics appealed.

The Second Circuit affirmed, though on slightly different grounds. The court pointed out that whether or not an American court has “jurisdiction” under the New York Convention to set aside an award made in Switzerland is not the same as the question whether an American court has “jurisdiction” under US law to hear an application to set aside an award in those circumstances. This kind of issue arises a lot in arbitration cases. I’m reminded of the difficulty courts have in deciding what’s a jurisdictional question and what’s a merits question when someone tries to confirm an arbitral award against a foreign sovereign (have a look at my post on Chiejina v. Nigeria, where I discussed this issue). I also note a similar issue in friend of Letters Blogatory Maggie Gardner’s excellent series of ongoing posts on the Fuld case at the Transnational Litigation Blog. I’ll be writing about those later this week. In her first post, Maggie explains how the confusion between jurisdiction to prescribe and jurisdiction to adjudicate leads to muddles. In short, as the Second Circuit (quoting the Supreme Court) says, “jurisdiction is a word of many, too many meanings.”

The only basis for subject matter jurisdiction asserted in the case was 9 U.S.C. § 203, which vests the courts with jurisdiction in “an action or proceeding falling under the Convention.” Does a petition to set aside the award fall under the Convention? The Second Circuit’s answer is “no.” The Convention itself defines its scope of application in Article I: it applies “to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought” and “to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.” That is, the scope of the Convention is limited to cases where someone seeks recognition and enforcement of an award and excludes cases where someone seeks to set an award aside.

You might ask why this matters, if the outcome is the same. The reason is that if the courts have subject-matter jurisdiction, then they can reach and decide the question that Molecular Dynamics posed and that the district court decided: can the parties, by contract, vary the Convention’s rules about which courts have the power to set awards aside? But if the courts don’t have subject-matter jurisdiction, then they can’t reach that question. The district court confused the issues a bit by characterizing its decision on that merits question as a decision about its subject-matter jurisdiction.

Aside from the helpful clarification the decision provides about how to think about the protean term “jurisdiction,” the case is also helpful because it sticks with one of the main practical rules that keeps the system of international arbitration working: you challenge awards in the place where the awards are made.