The US Bankruptcy Courts' Failure to Interpret the New York Convention as a Treaty Obligation

Abstract

FOR OVER 200 years the US has evidenced its international agreements in treaties which are ratified after the Senate has given its advice and consent. During that time, the federal courts have interpreted those treaties according to established tenets of construction which are aimed, in part, at avoiding federal court intervention in US foreign policy making. It may come as a surprise, therefore, to discover that, for the past 19 years, federal courts have apparently forgotten their constitutionally limited role when called upon to decide questions concerning conflicts between the Bankruptcy Code and the New York Convention on the Recognition and Enforcement of Arbitral Awards. In that context, the courts have given themselves a wide discretion in deciding whether or not to enforce agreements for foreign arbitration. Much of the fault may lie with the parties' counsel, who have often failed to address the issue properly. The practical result has been the elevation of the Bankruptcy Code over that of the Law of Nations.1 The New York Convention was ratified by the US in 1970 in order to encourage the recognition and enforcement of international arbitration awards. In 1978, Congress enacted the Bankruptcy Code, which does not refer to the New York Convention in its text or legislative history. As a matter of statutory construction, a Treaty will not be deemed to have been abrogated or modified by a later federal statute unless such a purpose has been clearly and unequivocally expressed.2 Prior to the enactment of the Bankruptcy Code, federal courts had given cognizance to the New York Convention in a bankruptcy context. In the Second Circuit Court of Appeals decision In re Fotochrome Inc. ,3 decided under the former Bankruptcy …