USCA4 Appeal: 23-1144 Doc: 49 Filed: 06/27/2024 Pg: 1 of 23
PUBLISHED
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 23-1144
ESTATE OF KE ZHENGGUANG,
Plaintiff/Petitioner - Appellee,
v.
YU NAIFEN STEPHANY, a/k/a Stephany Yu, a/k/a Stephany Naifen Yu, a/k/a Stephany N. Dombrowski,
Defendant/Respondent - Appellant.
Appeal from the United States District Court for the District of Maryland, at Greenbelt. Paula Xinis, U.S. District Judge (8:18-cv-03546-PX; 8:20-cv-02260-PX)
Argued: March 19, 2024 Decided: June 27, 2024
Before NIEMEYER, GREGORY, and AGEE, Circuit Judges.
Affirmed by published opinion. Judge Niemeyer wrote the opinion, in which Judge Gregory and Judge Agee joined.
ARGUED: Charles Michael, STEPTOE LLP, New York, New York, for Appellant. Amiad Moshe Kushner, SEIDEN LAW LLP, New York, New York, for Appellee. ON BRIEF: Jennifer Blecher, Xintong Zhang, SEIDEN LAW LLP, New York, New York, for Appellee. USCA4 Appeal: 23-1144 Doc: 49 Filed: 06/27/2024 Pg: 2 of 23
NIEMEYER, Circuit Judge:
The Estate of Ke Zhengguang commenced this action against Stephany Yu to
enforce an arbitral award entered in its favor against Yu on February 28, 2018, by an
arbitration panel in Hong Kong. The award was entered following a lengthy arbitration
proceeding commenced in Hong Kong to resolve business disputes among several parties
involving real property in China. As part of its award, the Hong Kong panel ordered Yu
and her two sisters, jointly and severally, to pay the Estate and Xu Hongbiao 10,346,211
Renminbi (“RMB,” China’s official currency), which was roughly equivalent to $1.63
million, for the losses they sustained. The panel subsequently issued supplemental awards
adding attorneys fees, arbitration fees, and interest.
After Yu had paid Xu his one-half share of the damages awarded, the Estate brought
this action against Yu, who is a U.S. citizen residing in Maryland, to collect the other half.
The district court confirmed the award under the New York Convention, a treaty to
which the United States and Hong Kong are signatories, which provides for the recognition
and enforcement of foreign arbitral awards, and it entered judgment in favor of the Estate
against Yu in a total amount of $3.6 million, which included attorneys fees, costs, and pre-
award interest. The damages component of the award in U.S. dollars was based on the
currency exchange rate as of February 28, 2018 — the date of the original arbitration
award.
On appeal, Yu contends that the district court erred in failing to grant her motion to
dismiss the enforcement proceeding, arguing (1) that the district court in Maryland was a
forum non conveniens; (2) that the Estate failed to join necessary, indeed indispensable,
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parties to the arbitration proceeding, as required by Federal Rule of Civil Procedure 19;
and (3) that the enforcement of the award would violate Chinese currency control laws and
thereby violate the United States’ policy favoring international comity, which is a specified
defense in the New York Convention. She also contends that the district court should have
entered judgment in RMB, as provided in the arbitral award, not in U.S. dollars.
For the reasons that follow, we find none of Yu’s arguments regarding the damages
she owes persuasive and accordingly affirm.
I
In the early 2000s, Stephany Yu and her two sisters entered into a business
partnership with Xu Hongbiao and Ke Zhengguang with the purpose of buying and
developing real estate in China. Together, the five partners formed Oasis Investment
Group Limited, a company incorporated in the British Virgin Islands. Xu and Ke held non-
controlling interests in Oasis, each holding 16.6% of its shares, while Yu and her two sisters
collectively held a controlling interest, holding respectively 49%, 16.6%, and 1% of its
shares.
In 2010, the five Oasis partners decided to restructure their arrangement, executing
an agreement detailing how they would divide their interests with payments of cash,
transfers of stock, and transfers of property. The agreement included an arbitration clause,
providing that any disputes arising out of the agreement would be resolved by arbitration
in the Hong Kong International Arbitration Center under Hong Kong law.
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Over the next few years, despite the partners’ efforts, the partners were unable to
agree on how to implement their 2010 agreement. Accordingly, in February 2013, Xu and
Ke filed a notice of arbitration against Oasis, Yu, and her two sisters in Hong Kong. During
the course of the arbitration proceedings, Ke died, and the arbitration panel substituted as
a claimant the Estate of Ke (administered by Ke’s wife and daughter). Years later, on
February 28, 2018, the arbitration panel issued a final arbitral award, ordering the transfers
of properties, the transfers of stock, and the payment of money. Specifically, the award
contained nine orders. Orders 1 and 2 provided for transfers of real property; Orders 3 and
4 provided for the settlement of intra-company debts and compliance with audit
requirements; Orders 5, 6, and 7 provided for transfers of stock; Order 8 required the four
arbitral respondents to make specified payments to Xu and the Estate of Ke; and Order 9
ordered Yu and her two sisters, jointly and severally, to pay Xu and the Estate RMB
10,346,211, “as compensation for their losses,” one-half to each.
Thereafter, Yu paid Xu his portion of the damages awarded in Order 9 by having an
Oasis subsidiary wire money to an account that Xu held in a bank in China. While Yu was
also willing to pay the Estate its share with a check drawn on a bank in China, the Estate
refused payment in that form because the money would become subject to Chinese
currency laws if the Estate attempted to move it to Hong Kong or elsewhere. It took the
position that Yu must provide the Estate payment that could be deposited into its Hong
Kong bank account, where the arbitration award was issued.
To enforce the award against Yu, the Estate commenced this action under the New
York Convention in the federal district court in Maryland, where Yu resides and has resided
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since 2016. The Estate requested judgment confirming Order 9 of the arbitration award
and enforcing it in U.S. dollars equivalent to RMB 5,173,105.50, representing one-half of
the payment due under Order 9 of the arbitration award, plus interest and attorneys fees.
Shortly after the Estate filed this action, the Hong Kong arbitration panel issued a
clarification making a procedural change to Order 2 and a name change to Order 7. The
Estate thereafter filed an amended petition in the district court seeking not only the payment
required by Order 9, but also confirmation of the obligations delineated in Orders 1 through
8. And with respect to Order 9, the Estate included a request for both pre-judgment and
post-judgment interest. In its amended petition, the Estate alleged that it was “unable to
negotiate any RMB-denominated payments that are drawn on a [People’s Republic of
China] bank,” because such a bank could not, under China’s currency laws, freely send
money to the Estate’s bank in Hong Kong. It alleged, however, that it was willing to accept
payment in RMB by check so long as the check could be deposited in a bank in Hong
Kong. Yu refused to provide payment in that form.
Yu filed a motion to dismiss the petition, as amended, contending (1) that the district
court was a forum non conveniens; (2) that the Estate failed to join necessary parties, as
required by Federal Rule of Civil Procedure 19; and (3) that the district court should decline
to enforce the award under the Convention’s public policy exception, as Yu’s offshore
payment of the judgment would run contrary to China’s currency control laws and therefore
violate the United States’ public policy of international comity. She also urged that, if a
money judgment requiring payment for Order 9 were to be entered, the court should enter
it in RMB rather than U.S. dollars, with instructions that the payment be made in China.
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By a memorandum opinion dated February 24, 2020, the district court denied Yu’s
motion to dismiss on all grounds and granted the Estate’s amended petition for recognition
and enforcement, providing that the entry of judgment be in U.S. dollars. The court noted
that the New York Convention “lists seven exclusive defenses to enforcement, and neither
forum non conveniens nor failure to join necessary parties under Rule 19 is one of them.”
And denying Yu’s public policy defense, the court explained:
Stephany Yu simply asserts, without citing any authority, that she might be placed at legal risk for potentially violating China’s currency control laws if the Court were to require her to pay the Final Award from China to a bank account outside of China. This Court is not being asked to enforce a judgment in China, but rather, in the United States, so any decision in this case would not undermine the interests of China in enforcing its own currency control laws.
Finally, the court determined that its judgment would be in U.S. dollars, as requested by
the Estate, recognizing that “[r]ecent cases have endorsed judgment in a foreign currency
if the petitioner requests payment in that currency.” (Quoting Leidos, Inc. v. Hellenic
Republic, 881 F.3d 213, 218 (D.C. Cir. 2018)).
The only order of the Hong Kong award that the district court addressed in its
memorandum opinion was Order 9, an order for which Yu — the only arbitral respondent
who is a party in this enforcement action — was jointly and severally liable. The Estate
did not in its briefing pursue any specific performance orders regarding the obligations of
the other parties to the arbitration, and the district court did not address such relief against
Yu or any other party to the arbitration.
The court directed the parties to submit a proposed judgment implementing the
rulings of its memorandum opinion.
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Before the district court entered final judgment, however, the arbitration panel in
Hong Kong issued two supplemental awards addressing fees, costs, and interest. In
response, the Estate filed a second action in the district court to enforce those supplemental
awards. The parties thereafter stipulated to the consolidation of the two cases and agreed
that they would each submit to the court a proposed form for a consolidated judgment to
cover both actions. While Yu requested that the court’s judgment make clear that it was
only enforcing the award insofar as it imposes obligations on Yu, the Estate countered that
there was no need for the court to add such language, considering the clear rule that a final
judgment only binds parties to the action. (Citing Richards v. Jefferson Cnty., 517 U.S.
793, 798 (1996)).
On January 9, 2023, the district court entered a consolidated judgment in favor of
the Estate in the amount of $3,614,772.78, which included the amount Yu owed under
Order 9 of the final arbitration award and the attorneys fees, costs, and pre-award interest
as ordered in the 2020 supplemental awards. The judgment in dollars reflected the currency
exchange rate as of February 28, 2018, for conversion of the RMB in Order 9, and it
reflected other currency exchange rates for the fees and interest awards, as addressed in the
2020 supplemental awards. Finally, the judgment directed the Clerk to close the case.
From the final judgment, Yu filed this appeal, challenging only the portions of the
consolidated final judgment that implemented the 2018 final arbitration award. She also
deposited roughly $3.8 million with the Clerk of the district court as security for the
payment of the judgment.
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II
The Estate commenced this action to confirm and enforce an arbitration award
issued by an arbitral panel in Hong Kong pursuant to the New York Convention —
formally, the Convention on the Recognition and Enforcement of Foreign Arbitration
Awards, June 10, 1958, 21 U.S.T. § 2517 — to which both Hong Kong and the United
States are signatories. The United States implemented the treaty in Chapter 2 of the Federal
Arbitration Act, 9 U.S.C. § 201 et seq.
The Convention treats foreign arbitration awards much like the judgment of a court
and provides for their enforcement in a similarly simplified proceeding. While it
recognizes that any arbitration award may be reviewed and modified as provided by the
law and procedure of the country in which the award was issued, when the award is taken
to another country for confirmation and enforcement, the issues in dispute and the relief
granted are treated as fully resolved. See, e.g., Compañía de Inversiones Mercantiles S.A.
v. Grupo Cementos de Chihuahua S.A.B. de C.V., 58 F.4th 429, 445 (10th Cir. 2023)
(observing that “[a] secondary jurisdiction . . . must generally confirm an arbitral award”).
Thus, when seeking confirmation and enforcement in another country, the party who
obtained the award need only file (1) a certified copy of the arbitration agreement and (2)
a certified copy of the award. See Convention, art. IV. And in response, the party against
whom the foreign award was entered may argue for a refusal of confirmation and
enforcement, but “only if that party furnishes . . . proof” of one or more of five specified
defenses or if the court finds that either of two additional defenses applies. Convention,
art. V (emphasis added).
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The defenses authorized by Article V are that (1) the award is not valid; (2) the
respondent was not given proper notice; (3) the award exceeds the scope of the submission
to arbitration; (4) the arbitral tribunal was not properly composed; (5) the award is not yet
binding; (6) the subject matter in dispute is “not capable of settlement by arbitration” under
the law of the issuing country; or (7) “[t]he recognition or enforcement of the award would
be contrary to the public policy of that country.” Convention, art. V. And under U.S.
implementing law, a court will confirm the award “unless it finds one of the grounds for
refusal or deferral of recognition or enforcement of the award specified in the said
Convention.” 9 U.S.C. § 207.
In light of the Convention’s provisions, the procedure for recognizing and enforcing
a foreign arbitration award is essentially a stripped-down summary judgment proceeding
designed “to encourage the recognition and enforcement of commercial arbitration
agreements.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1974); see also Reddy
v. Buttar, 38 F.4th 393, 398 (4th Cir. 2022), cert. denied, 143 S. Ct. 364 (2022). It is “akin
to a motion for summary judgment.” D.H. Blair & Co. v. Gottdiener, 462 F.3d 95, 109 (2d
Cir. 2006). And it is modeled after the procedure for the confirmation and enforcement of
domestic arbitration awards under the Federal Arbitration Act. See 9 U.S.C. § 208
(providing that Chapter 1 of the Federal Arbitration Act “applies to actions brought under
[Chapter 2, which implements the Convention,] to the extent that [that] chapter is not in
conflict with this chapter or the Convention”); Corporación AIC, SA v. Hidroeléctrica
Santa Rita S.A., 66 F.4th 876, 882 (11th Cir. 2023) (observing that “[c]onfirmation under
the [Federal Arbitration Act] is essentially the same as recognition and enforcement under
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the New York Convention”). In this posture, “[m]any of the ordinary procedural rules
governing civil litigation are inapplicable.” Jiangsu Beier Decoration Materials Co. v.
Angle World LLC, 52 F.4th 554, 560 (3d Cir. 2022).
Of course, any judicial proceeding is always subject to satisfying jurisdictional
requirements and venue. And the Federal Arbitration Act, which implements the
Convention, confers jurisdiction and venue to U.S. district courts in accordance with the
requirements of “federal question” jurisdiction under 28 U.S.C. § 1331 and traditional
personal jurisdiction limitations. See 9 U.S.C. §§ 203, 204; see also Reddy, 38 F.4th at 398
(regarding subject matter jurisdiction); Base Metal Trading, Ltd. v. OJSC “Novokuznetsky
Aluminum Factory,” 283 F.3d 208, 212 (4th Cir. 2002) (regarding personal jurisdiction).
Against this structure, Yu has advanced three defenses to deny the Estate
recognition and enforcement of the Hong Kong award. Two are the procedural defenses
of forum non conveniens and failure to join necessary parties under Rule 19. And the third
is a public policy defense recognized by the Convention, which authorizes the refusal to
recognize and enforce an award when doing so “would be contrary to the public policy of
that country.” Convention, art. V(2)(b). We now turn to address these defenses.
A
Yu contends first that this proceeding is a “selective enforcement against [her]
personally for recovery of what were fundamentally corporate obligations” and therefore
that the district court should have at least considered her procedural defenses of forum non
conveniens and failure to join necessary parties. She characterizes the district court in
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Maryland as a “highly suspicious forum,” which “cannot reach the other parties” to the
arbitration. She argues that Hong Kong is the appropriate forum for litigating the issues,
where all parties are subject to the jurisdiction of the court.
In response to the district court’s conclusion that forum non conveniens — and for
that matter, Rule 19 — is not a defense available in a proceeding brought under the
Convention, Yu argues that Article III of the Convention authorizes interposing procedural
defenses by stating in relevant part, “Each Contracting State shall recognize arbitral awards
as binding and enforce them in accordance with the rules of procedure of the territory
where the award is relied upon, under the conditions laid down in the following articles.”
Convention, art. III (emphasis added). She notes that the forum non conveniens defense
has been referred to as a rule “of procedure rather than substance,” American Dredging Co.
v. Miller, 510 U.S. 443, 453 (1994), and, of course, Rule 19 is by definition a rule of
procedure.
If the Convention does indeed make the defense of forum non conveniens available,
the defense would permit federal courts, as a matter of discretion, to dismiss a recognition
and enforcement proceeding if there were an alternative forum that was (1) “available,”
(2) “adequate,” and (3) “more convenient in light of the public and private interests
involved.” Jiali Tang v. Synutra Int’l Inc., 656 F.3d 242, 248 (4th Cir. 2011) (citing Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 241 (1981)). The doctrine is designed to remedy the
challenges of trying a case in an inconvenient forum. But recognizing and enforcing an
arbitration award is not trying a case in the typical sense, and such inconveniences are
hardly ever at issue due to the limited nature of the proceeding. In confirmation
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proceedings under the New York Convention, there is no case to try, only a binding award
to recognize and enforce. See Zeiler v. Deitsch, 500 F.3d 157, 169 (2d Cir. 2007)
(“Confirmation under the Convention is a summary proceeding in nature, which is not
intended to involve complex factual determinations, other than a determination of the
limited statutory conditions for confirmation or grounds for refusal to confirm”).
For the purposes of enforcing Order 9, the district court in Maryland is surely an
appropriate forum that fully satisfies any convenience concerns for such a limited
proceeding. Yu is a U.S. citizen who resides in Maryland, and she has assets there that are
available to satisfy a judgment. Indeed, with respect to the judgment in this case, Yu
deposited the amount of judgment with the Clerk of the district court to secure payment of
the judgment upon exhaustion of her appeal. While it might well be that the defense of
forum non conveniens is not available under the Convention — as the district court
concluded, noting that the Convention lists seven defenses as the exclusive defenses to such
a proceeding — we need not decide that question in the context of this particular
proceeding, where the Maryland forum is a most suitable forum for the Estate’s
enforcement of the award against Yu.
To be sure, in circumstances far different than those presented here, the Second
Circuit has held that forum non conveniens can serve as a defense under the Convention.
See In re Arbitration Between Monegasque De Reassurances S.A.M. v. Nak Naftogaz of
Ukraine, 311 F.3d 488, 496 (2d Cir. 2002); Figueiredo Ferraz e Engenharia de Projeto
Ltda. v. Republic of Peru, 665 F.3d 385 (2d Cir. 2011). In Monegasque, the court affirmed
the dismissal of a petition to enforce an arbitral award issued in Moscow against a natural
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gas transporting company owned by the Ukrainian government. 311 F.3d at 491. While
Naftogaz alone had assumed the rights and obligations of the arbitral debtor, the petitioner
sought to enforce the award in the United States against both Naftogaz and against the State
of Ukraine, which had not signed on to the arbitration agreement. Id. at 491–92. When
assessing whether forum non conveniens should be a defense to the enforcement of the
award in the United States, the court considered the administrative difficulties of enforcing
the award in the particular circumstances before it, noting that the parties had no ties with
the United States and that the more appropriate forum for enforcement was in Ukraine. Id.
at 495–97; see also id. at 499 (“[I]t is clear that the jurisdiction provided by the Convention
is the only link between the parties and the United States”).
Figueiredo likewise involved a petitioner seeking judgment against a foreign
government in the United States. A Brazilian company had contracted with a Peruvian
state agency responsible for water supply and sanitation. 665 F.3d at 387. After a fee
dispute arose, the parties arbitrated the issues in Peru, and the arbitral tribunal awarded
Figueiredo more than $21 million. Id. A Peruvian statute, however, limited the amount
the state agency could pay to satisfy the judgment to $1.4 million. Id. at 387–88.
Figueiredo brought a petition to enforce the award in a U.S. district court, pursuant to the
Panama Convention, which is similar to the New York Convention, and the district court
denied Peru’s motion to dismiss based on forum non conveniens. The Second Circuit,
however, reversed. It held that the proceeding should have been dismissed under the
doctrine of forum non conveniens, emphasizing the barrier to enforcement erected by the
Peruvian statutory cap and stating that there is “a public interest in assuring respect for a
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foreign sovereign nation’s attempt to limit the rate at which its funds are spent to satisfy
judgments.” Id. at 392.
In each of these cases, the court was presented with the challenge of enforcing an
arbitral award against a foreign sovereign in the United States, a task raising the significant
foreign policy question of whether a U.S. court can and should enter a judgment that places
a demand on a foreign government.
This case, however, raises no such issues. Indeed, this proceeding involves the
straightforward attempt to enforce a foreign arbitration award in a U.S. court against an
arbitral debtor within the U.S. court’s jurisdiction and with assets there. In such
circumstances, the D.C. Circuit has held that “forum non conveniens is not available in
proceedings to confirm a foreign arbitral award because only U.S. courts can attach foreign
commercial assets found within the United States.” LLC SPC Stileks v. Republic of
Moldova, 985 F.3d 871, 876 n.1 (D.C. Cir. 2021) (citing TMR Energy Ltd. v. State Prop.
Fund of Ukraine, 411 F.3d 296, 303–04 (D.C. Cir. 2005)). The principle underlying that
holding naturally applies here where the Estate is entitled to seek recognition and
enforcement of the Hong Kong final award by a U.S. court capable of exercising subject-
matter jurisdiction and personal jurisdiction over Yu, who has assets within the court’s
jurisdiction. In the circumstances of this case, the defense of forum non conveniens could
not apply, even if it were available under the Convention.
Yu nonetheless persists in arguing that the doctrine applies to this case, maintaining
that this is not a “typical, run-of-the-mill enforcement case.” Rather, she asserts, the award
here “involves primarily complicated and vague specific performance directives,”
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suggesting that “[s]orting out exactly who must take what steps under those vague
directives will require the Court to receive evidence in the form of documents, witness[]
testimony, and the like.” But this argument erroneously characterizes the proceeding
before us. The Hong Kong arbitration panel sorted out the liabilities among the parties and
awarded relief, resolving the various rights and obligations. That relief included a simple
order that Yu pay money to the Estate and Xu, and the district court simply entered a money
judgment on that basis, rejecting a forum non conveniens defense. The specific
performance provisions in the arbitration award were not enforced in the court’s judgment;
as related to the 2018 award, that judgment enforced only Yu’s personal obligation under
Order 9 to pay money damages to the Estate. In these circumstances, we affirm.
B
Yu also contends that the district court erred in not dismissing the proceeding
because of the Estate’s failure to join necessary parties under Federal Rule of Civil
Procedure 19 — namely, Oasis, her co-obligor, and Xu, the Estate’s co-claimant.
According to Yu, they were required to be parties “because, without them, the interrelated
and sequenced specific performance provisions cannot possibly be enforced in a manner
that provides complete relief, or that provides fairness and finality.” She observes that,
when a court is asked to order specific performance on a contract, all parties that “will be
required to act to carry out a court order compelling performance have been held to be”
indispensable parties under Rule 19, quoting 7 Charles Alan Wright et al., Federal Practice
and Procedures § 1613 (3d ed. 2023).
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But again, Yu mischaracterizes the district court’s judgment, which concerns only
enforcement of the award against Yu for money she owes the Estate. The Hong Kong
arbitration award included nine orders, some of which involve specific performance. The
district court’s judgment, however, addressed only the money Yu owed to the Estate, which
could be claimed only by the Estate. The district court’s judgment did not purport to order
specific performance of other parties who were outside of the district court’s jurisdiction.
Moreover, Oasis was not a co-obligor in Order 9. And Xu, who had been paid his one-half
share of the damages awarded in Order 9, was no longer a co-claimant. Thus, the Estate
as petitioner and Yu as respondent are the only parties necessary for complete relief insofar
as Yu’s personal obligations under Order 9 are concerned.
In these circumstances, we again need not accept Yu’s invitation to consider broadly
whether the Convention categorically prohibits arbitration respondents from relying on
domestic rules of procedure to defend themselves against enforcement proceedings in the
United States because, regardless of the resolution of the question, Rule 19 is simply not
implicated here.
C
Yu next contends that the district court should have declined to enforce Order 9 of
the final arbitration award under Article V of the Convention because doing so violates the
public policy of the United States. Article V provides, as relevant:
2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: * * *
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(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
Convention, art. V(2)(b). Thus, the district court was authorized to refuse to enforce Order
9 if doing so would violate the public policy of the United States.
As Yu explains her public policy argument, she made clear to the Estate that she is
“prepared to complete the payment [under Order 9], so long as the Estate will specify a
bank account in China to receive the funds,” but “the Estate has refused.” (Emphasis
added). She continues, as the Estate is “well aware, overseas payments of RMB must be
approved by Chinese regulators before RMB may flow out of China,” and “Chinese law
prohibits making or receiving payments in foreign currency where such funds should be
collected or paid in [RMB].” (Emphasis added) (cleaned up). From those observations,
she concludes, without adequately explaining the logical jump, that “[t]he risk for Ms. Yu
is that Chinese regulators will consider a judgment payment made in the United States to
be a scheme to evade those controls altogether, and to effectively move money abroad with
no Chinese regulatory oversight.” (Emphasis added).
To bring this claimed legal risk within the ambit of the U.S. public policy, Yu
maintains further that enforcing Order 9 in the United States “would violate the
fundamental U.S. policy of international comity, which ‘refers to the spirit of cooperation
in which a domestic tribunal approaches the resolution of cases touching the laws and
interests of other sovereign states.’” (Quoting Société Nationale Industrielle Aérospatiale
v. U.S. Dist. Ct., 482 U.S. 522, 543 n.27 (1987)). She argues that the district court should
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have shown “due respect” for her exposure to the legal risk under Chinese law. (Quoting
id. at 546).
Yu’s argument relies on a misplaced reference to Chinese currency laws. To be
sure, as she points out, China controls the outflow of RMB from China as part of its
currency management. To this end, it regulates not only the movement of RMB out of
China, including the movement of RMB from Chinese banks to banks outside of China,
but it also regulates efforts within China to convert RMB transactions into transactions
involving foreign currencies, because such conversions could similarly lead effectively to
the export of the foreign currencies as a surrogate for the RMB. Thus, she asserts that
RMB transactions in China cannot be consummated with the payment of foreign currency.
In sum, Yu concludes reasonably that China must approve payments of RMB “before RMB
may flow out of China.” But all of these observations about Chinese law are irrelevant to
the Hong Kong arbitration award and its enforcement in the United States under the New
York Convention. The Hong Kong arbitration proceedings and award is not a transaction
in China that effectively exports currency from China.
To engage the Chinese currency principles, Yu assumes that she can discharge her
obligation under the Hong Kong award with a check drawn on a Chinese bank. Yet, not
only does the money judgment entered by the Hong Kong arbitration panel not require the
Estate to accept a check in payment, it also does not require the Estate to accept a check
drawn on a Chinese bank, where currency controls would apply. Order 9 of the Hong
Kong award, made under Hong Kong law, orders Yu to pay the Estate money denominated
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in RMB, not a check drawn on a bank, and the money award can, under the Convention,
be enforced in any signatory country, including the United States.
Moreover, nothing about an award by a Hong Kong arbitration panel made in RMB
violates U.S. public policy. RMB is a widely traded international currency, which may be
converted at applicable exchange rates at any large commercial bank. Enforcing the Hong
Kong award denominated in RMB is no more violative of U.S. public policy than would
be enforcing an award entered in Hong Kong dollars or Australian dollars or Euros. Indeed,
it is U.S. public policy to provide for the confirmation of any such award in the United
States, in accordance with the terms of the Convention.
To fall within a defense provided by Article V(2)(b) of the Convention, Yu would
have to show that enforcement would be “repugnant to fundamental notions of what is
decent and just” in the United States. Ackermann v. Levine, 788 F.2d 830, 841 (2d Cir.
1986) (quoting Tahan v. Hodgson, 662 F.2d 862, 864 (D.C. Cir. 1981)). And this exception
is “construed extremely narrowly.” BCB Holdings Ltd. v. Gov’t of Belize, 232 F. Supp. 3d
28, 48 (D.D.C. 2017). Accordingly, an arbitral award debtor seeking “to avoid summary
confirmance” bears a “heavy” burden to show that the defense applies. Commodities &
Minerals Enterprise Ltd. v. CVG Ferrominera Orinoco, C.A., 49 F.4th 802, 810 (2d Cir.
2022) (quoting Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc., 403
F.3d 85, 90 (2d Cir. 2005)). Indeed, Yu would need to show that enforcement “would
violate the forum state’s most basic notions of morality and justice.” Tatneft v. Ukraine,
21 F.4th 829, 837 (D.C. Cir. 2021) (cleaned up).
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Yu has not made such a showing. Moreover, she fails to demonstrate that she can
satisfy Order 9 only by paying by check from a Chinese account, which would implicate
Chinese currency laws. In short, the Article V defense that Yu invokes provides her with
no relief.
III
Finally, Yu contends that the district court should not have entered judgment in U.S.
dollars but rather in RMB, as the arbitral panel denominated the award in Order 9. She
argues that “there should be a ‘simple, uniform’ rule of entering judgment in the currency
the parties chose to deal,” which for purposes of Order 9 is RMB. (Quoting and discussing
In re Oil Spill by Amoco Cadiz off Coast of France on March 16, 1978, 954 F.2d 1279,
1329 (7th Cir. 1992)). Issuing an award in the currency in which the parties dealt, she
argues, “accords with principles of fairness and with the goal of making injured parties
whole because it provides them with payment in the currency for which they bargained.”
(Quoting Mitsui & Co. v. Oceantrawl Corp., 906 F. Supp. 202, 204 (S.D.N.Y. 1995)). She
contends that the Estate “is playing games for a more advantageous result — namely to
skirt Chinese currency control laws and avoid Chinese withholding taxes.” (Cleaned up).
As part of her position, she also argues that the RMB should be paid in China, such that
the transaction would be subject to Chinese currency restrictions.
To start, there is no provision in Order 9 that requires that payment be made in
China. Indeed, the parties’ agreement provided for arbitration in Hong Kong under Hong
Kong law, suggesting to the contrary that payment would be made in Hong Kong. While
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the arbitral award denominated payment in Order 9 in RMB, that did not require payment
in China. RMB is an internationally traded currency that could be paid in any country.
Nonetheless, Yu’s argument that the U.S. judgment should be entered in RMB and
not U.S. dollars does remain, and it reasonably draws vitality from the arbitral award,
which was made in RMB. As an aside, it is noteworthy that the Estate has indicated that it
was willing to have Yu make payment in either RMB or U.S. dollars, although it never
requested a judgment in RMB. But following history and custom, the district court entered
judgment in U.S. dollars. We do not find this to be an abuse of discretion.
Historically, U.S. courts could only render money judgments payable in U.S.
dollars. But today, according to the Restatement of Foreign Relations Law, a judgment
can be entered in a foreign currency, but a court should do so “only when requested by the
judgment creditor, and only when it would best accomplish the objective stated in
Subsection (2).” Restatement (Third) of Foreign Relations Law § 823 cmt. b (1987). And
Subsection 2, which concerns conversion rates, states in turn, “If, in a case arising out of a
foreign currency obligation, the court gives judgment in dollars, the conversion from
foreign currency to dollars is to be made at such rate as to make the creditor whole and to
avoid rewarding a debtor who has delayed in carrying out the obligation.” Id. § 823(2).
Under these principles, district courts weigh equitable factors and exercise their discretion
to decide the proper currency in which to issue judgment, although that typically results in
the court converting a foreign currency award to U.S. dollars. See, e.g., BCB Holdings
Ltd., 232 F. Supp. 3d at 49.
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Despite the Restatement’s acknowledgement that a judgment in a foreign currency
may be appropriate when requested by the judgment creditor, conversion into dollars at
judgment remains the norm. See Yukos Capital S.A.R.L. v. Samaraneftegaz, 592 F. App’x
8, 12 (2d Cir. 2014) (“American courts rarely enter judgments in a foreign currency”); see
also BCB Holdings Ltd., 232 F. Supp. 3d at 49 (“Conversion of foreign currency into
dollars at judgment ‘is the norm, rather than the exception’” (quoting Cont’l Transfert
Technique Ltd. v. Fed. Gov’t of Nigeria, 932 F. Supp. 2d 153, 158 (D.D.C. 2013), aff’d,
603 F. App’x 1 (D.C. Cir. 2015))). Lest there be any doubt, courts have converted
monetary awards to U.S. dollars even when, as here, the underlying arbitration award
denominates payment in RMB. See, e.g., High Hope Zhongtian Corp. v. Peking Linen Inc.,
No. 22-CV-7568, 2024 WL 1911116, at *4 (S.D.N.Y. Apr. 15, 2024), report and
recommendation adopted, 2024 WL 1908436 (S.D.N.Y. May 1, 2024); Huzhou Chuangtai
Rongyuan Inv. Mgmt. P’ship v. Qin, No. 21-CV-9221, 2022 WL 4485277, at *12
(S.D.N.Y. Sept. 26, 2022), order corrected on denial of reconsideration, 2023 WL
2734433 (S.D.N.Y. Mar 31, 2023).
While Yu acknowledges that U.S. courts typically enter judgments in U.S. dollars,
she invites us to adopt a uniform rule of entering judgment in the currency the parties chose
to deal. She maintains that such a rule would enhance predictability of civil judgments and
promote the goal of making injured parties whole, providing them with neither windfall
judgments nor unforeseen diminishments.
Those good purposes, however, can still be achieved by entry of judgments in U.S.
dollars. With regard to predictability, when parties agree to resolve their contractual
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disputes in a foreign arbitral tribunal, they will anticipate that any award arising from that
tribunal will be subject to enforcement in accordance with the Convention and the laws of
the forum enforcing the award, which could result in a money judgment in a currency
different from that in which the parties initially dealt. And with regard to ensuring that the
injured party be made whole, the court will, when entering judgment, “assure that neither
party receives a windfall or is penalized as a result of currency conversion,” whether the
creditor requests judgment in a foreign currency or not. Restatement (Third) of Foreign
Relations Law § 823 cmt. c. In any event, the district court has discretion to weigh the
equities in a given case and assure that neither party be provided with a windfall or
unforeseen diminishment.
We conclude that the district court acted reasonably when it entered judgment in
dollars, calculated under the currency exchange rate for Order 9 as of the date of the award.
* * *
In sum, the Estate requested that the district court confirm and enforce a Hong Kong
arbitration award against Yu, pursuant to the New York Convention. Yu, who does not
challenge the validity of the award or that she is obligated to pay it, simply presented
procedural obstacles. The district court nonetheless confirmed the award and enforced
Yu’s personal obligation to pay the Estate by issuing a straightforward money judgment,
binding on Yu alone and requiring no involvement of absent parties. Because we conclude
that the district court appropriately disposed of the obstacles Yu placed before it, we affirm.
AFFIRMED