On January 18, 2017, the United States Court of Appeals for the Second Circuit (Second Circuit) issued its decision in CBF Indústría de Gusa S/A v. AMCI Holdings, Inc., a case considering important questions on the application of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the doctrine of issue preclusion in the context of an action to enforce an arbitral award against non-signatories to the underlying arbitration agreement.

The Second Circuit reversed the decision of the United States District Court for the Southern District of New York, which had held that (i) the New York Convention and its implementing legislation in the Federal Arbitration Act (“FAA”), require award creditors to seek confirmation of a foreign arbitral award before the award may be enforced by a district court, and (ii) the award creditor’s causes of action for fraud against nonsignatories as alter-egos of the award debtor should be dismissed prior to discovery on the ground of issue preclusion due to the arbitral tribunal’s having found that no fraud had occurred. The Second Circuit’s decision clarified that “recognition and enforcement” under the New York Convention and the FAA occur in a single proceeding, that an award creditor may seek to bind a non-signatory to a foreign arbitral award through an enforcement proceeding brought under the Convention, and that the equitable doctrine of issue preclusion does not mandate dismissal of fraud allegations where there is a plausible showing of the other party’s “unclean hands.”