LIAMCO appealed the dismissal and Libya filed a crossappeal, in which it challenged the district court's finding that Libya had waived its sovereign immunity by agreeing to arbitration of disputes.

At the initiative of the Legal Adviser of the Department of State, Roberts B. Owen, the United States Government sought, and obtained, permission to participate amicus curiae before the U.S. Court of Appeals for the District of Columbia Circuit.

The Legal Adviser considered that the district court was correct in ruling that Libya's agreement to arbitrate was an implicit waiver of immunity within the meaning of the Foreign Sovereign Immunities Act of 1976. The Legal Adviser was concerned, however, that: (1) the district court's refusal to enforce LIAMCO's award was inconsistent with United States treaty obligations under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards-and with United States policy in favor of arbitrating international investment disputes (see this Chapter, §7, ante, pp. 512-517); and (2) that the district court's reliance upon the act of state doctrine was "misplaced".

The brief amicus of the United States thus addressed the following questions:

1. Whether the domestic act of state doctrine bars the enforcement in the United States of an arbitral award entered against a foreign state in the territory of a state party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

2. Whether a foreign state which has agreed to binding arbitration of a dispute has implicitly waived its immunity from the enforcement jurisdiction of United States courts as regards an ensuing arbitral award rendered in the territory of a state party to the Convention.

Excerpts from the brief, regarding the act of state doctrine, follow: (footnote omitted)

The act of state doctrine precludes the courts of the United States from sitting in judgment on the public acts of a recognized foreign state committed within its territory. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1974). It is a self-imposed doctrine of judicial abstention, growing out of the Judiciary's concern that its rulings "may hinder rather than further this country's pursuit of goals both for itself and for the community of nations as a whole in the international sphere." Sabbatino, supra, 376 U.S. at 423. Enforcement of the arbitral award here involved solely concerns Libya's undertaking to submit disputes under freely negotiated concession contracts to final and binding arbitration outside of its territory, and to honor any ensuing awards. In enforcing arbitral

awards under such circumstances, the courts enforce a judgment to which the foreign state has consented in advance. This element of consent, coupled with the neutrality of the arbitral tribunal, removes any concern that domestic courts might venture into the political arena, or hinder the United States' pursuit of foreign policy goals.

ARGUMENT
I.

THE ACT OF STATE DOCTRINE IS NOT A PROPER GROUND FOR REFUSING TO ENFORCE AN ARBITRAL AWARD ENTERED AGAINST A FOREIGN STATE IN THE TERRITORY OF A STATE PARTY TO THE UNITED NATIONS CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS PURSUANT TO AN AGREEMENT TO SUBMIT DISPUTES TO ARBITRATION.

The United States has committed itself by treaty to recognize and enforce arbitral awards entered in the territory of states that are parties to the New York Convention, under the conditions laid down in the Convention.2 The Convention is implemented by statute, 9 U.S.C. 201-08, which confirms that enforcement of awards is mandatory unless one of the defenses specified by the Convention is established.3 The defenses are limited in number and narrowly defined, and the burden of proof rests on the party resisting enforcement.4

The act of state doctrine, invoked by the district court as the reason for refusing to enforce the award, is a judicially created doctrine that is neither constitutionally compelled nor required by international law. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 421-423, 427 (1964). It finds no support in the framework of the Convention. The courts have developed the doctrine in response to concerns that their actions could interfere with the foreign relations of the United States. Id. at 423-24, 427-28. Ironically, the application of the doctrine in this case is not only inconsistent with an explicit treaty commitment, but also in conflict with important elements of U.S. foreign policy.

A. Application of the act of state doctrine in this case is inconsistent with the Convention.

The Convention establishes only very narrow grounds for refusal to enforce an arbitral award (See supra, [ftn. 3].) The district court relied on one of these, Article V, paragraph 2(a), which provides that recognition and enforcement may be refused if the court finds that the subject matter of the difference is not capable of settlement by arbitration under the law of the forum. The district court was of the view that the "subject matter of the difference" is nationalization, which according to the court has traditionally been considered as removed from judicial scrutiny under the act of state doctrine. The court went on to hold that it could not enforce an arbitral award implicating the validity of a nationalization law where it could not have ruled on the validity of the nationalization law directly.

The district court's analysis, we submit, confuses arbitrability with justiciability. The issue under Article V, paragraph 2(a) is not whether a United States court would be precluded from deciding the dispute, but rather whether United States law permits these two parties to contract for its arbitral settlement. Under United States law, some types of disputes (such as those arising under the antitrust laws) have been held nonarbitrable because of the strong policy interest in their judicial resolution. See, e.g., Cobb v. Lewis, 488 F.2d 41 (5th Cir. 1974). Viewed in this framework, the district court's finding of nonarbitrability on the basis of a doctrine that precludes judicial resolution turns the doctrine on its head.

Furthermore, some categories of disputes considered to be nonarbitrable when they relate solely to domestic transactions may nonetheless be held arbitrable by United States courts when they arise in the international context. Compare Wilko v. Swan, 346 U.S. 427 (1953), with Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974). Thus, even if there were a doubt as to the arbitrability of a comparable investment dispute in a purely domestic context, these doubts should be resolved in favor of the arbitrability of an international dispute.

There can be no question that international investment disputes of the type involved in the present case are arbitrable under U.S. law. As we show below, . . . the United States over many decades has consistently pressed for effective and enforceable mechanisms for the arbitration of disputes between host governments and private concessionaires. This is not only an Executive Branch policy, but is reflected in Congressional acts.5

Libya cannot nullify the arbitrability of a dispute by a decree that purports to supplant the arbitral remedy with a unilateral remedy. Congress has confirmed that for purposes of United States law, a foreign state may repudiate an agreement to arbitrate only in accordance with the terms of that agreement. (See the discussion of 28 U.S.C. 1605(a)(1) at . . . [pp. 514-515, ante]

A commitment between a state and an alien to arbitrate disputes is binding not only as a matter of general contract law and statutory law, but also as a matter of international law. See Restatement (Second), Foreign Relations Law of the United States §193 (1965).7 The failure of a state to live up to its agreement to arbitrate disputes is a violation of international law wholly separate from any alleged violations of other rules of international law that might have given rise to the underlying dispute. International courts and international arbitral tribunals have held without exception that a state's attempted unilateral rescission of an agreement to submit disputes for resolution by the tribunal does not affect their jurisdiction.9

We submit that the arbitral tribunal correctly ruled in the present case that LIAMCO's claim was arbitrable, notwithstanding the purported repudiation of the arbitration agreement; and it was error for the district court to reach a different conclusion.

By parity of reasoning, Libya cannot rely on the exception to the enforceability of an award found in Article V, paragraph 1(a) of the New York Convention which renders awards unenforceable where the arbitration agreement was "not valid under the law to

which the parties have subjected it." The arbitration agreement here is valid and binding under the selected law-"the principles of law of Libya common to the principles of international law and in the absence of such common principles then *** the general principles of law, including such of those principles as may have been applied by international tribunals." The act of state doctrine, a creation of U.S. federal courts, is not part of the law chosen by the parties and thus is not relevant to the invalidity defense.

Nor can Libya rely on the exception in Article V, paragraph 2(b) of the New York Convention which renders awards unenforceable if enforcement would violate local public policy.10 It is the longstanding public policy of the United States to favor the arbitration of international investment disputes generally, and of disputes between private developers of natural resources and their host governments in particular. This policy is reflected in public statements of the Executive Branch,11 actions in diplomatic channels12 and in multilateral organizations 13 and, as we noted earlier, in Congressional enactments.

In the context of the Libyan nationalizations which give rise to the present dispute, the United States has repeatedly taken the position that Libya's arbitrary and discriminatory expropriations, Libya's failure to offer just compensation, and Libya's unwillingness to honor the arbitral clauses of the concession agreements were serious and separate violations of international law. In a diplomatic note of September 14, 1973, the United States called on Libya to respond positively to the requests for arbitration as provided in the concession agreements, and noted that failure to do so would constitute a distinct breach of international law.14 These diplomatic protests proved unavailing.

Accordingly, recognizing that only limited means were available to the United States and its nationals for the effective enforcement of Libya's obligations under international law, the United States adopted a position of support for the injured companies' efforts to obtain redress through judicial processes, including judicial enforcement of arbitral agreements and awards. One element of this position, expressed as long ago as 1973 and consistently thereafter, was that the act of state doctrine should not be applied to bar suits by the injured companies. As the State Department affirmed in its Statement of Policy on "Hot" Libyan Oil issued in 1973 (13 Int'l Leg. Materials at 768):

first, foreign governments should be discouraged from nationalizing property of U.S. citizens in a manner contrary to international law, and second, the law of the offending country should not operate as a shield when the courts of the United States are called upon to consider the consequences of unlawful nationalizations. . . except when the President determines that U.S. foreign policy interests require otherwise.

The United States has supported the enforcement of the very arbitral award involved in the present case in a diplomatic note presented to France in connection with court proceedings brought there.15 The note stated:

The availability of arbitration as a means of resolving disputes, and provision for enforcement of foreign arbitral awards, have been recognized by both France and the United States as important elements in promoting durable and impartial legal arrangements under which transnational commerce and investment may take place, and in enhancing the climate for foreign investment to contribute to economic development, particularly that of developing countries.

The Government of the United States believes that private parties which have suffered a loss from uncompensated expropriation of their property, and have failed to secure satisfaction through previously-agreed dispute settlement mechanisms because of the action of the expropriating State to frustrate such procedures, are properly entitled [to pursue their legal remedies against such property, and are equally entitled] to pursue enforcement of judgments and arbitral awards, in courts of competent jurisdiction of countries where [such property, or] assets of the expropriating State or its agencies or instrumentalities, attachable for the purpose of execution on a judgment or award, may be found.

In sum, recognition and enforcement of the arbitral award is fully consonant with the public policy of the United States.

There is no treaty-based exception to recognition and enforcement applicable in the present case.16 We submit that it was error for the district court to create one. The scheme of the Convention clearly excludes the fashioning of exceptions based on municipal law doctrines not sanctioned by Article V. It is particularly inappropriate and indeed ironic-for the district court to have applied a United States domestic law doctrine not compelled by statute17 but rather created by the courts to enhance the ability of the political branches to further our foreign relations goals. For the reasons discussed below, application of the act of state doctrine in the present circumstances thwarts rather than furthers the purposes for which that doctrine was developed.

B. Extension of the act of state doctrine to bar enforcement of an arbitral award serves none of the purposes for which that doctrine was developed.

The district court's reliance on the act of state doctrine in refusing to enforce the award was, we submit, misplaced. The doctrine has been developed by the Judiciary out of a concern for the proper role of domestic courts in matters involving foreign sovereign acts.18 To our knowledge, the doctrine has never been applied to a judicial proceeding to enforce an arbitral award. The district court's unprecedented extension of the doctrine to the arbitral context is not justified by the purposes that underlie it.

The Supreme Court has justified this self-imposed doctrine of judicial abstention 19 on two grounds:

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(1) A concern that the Judiciary may not have "the competency... to make and implement particular kinds of decisions in the areas of international relations"20-in other words, that the substantive standards governing state conduct and relations may be too elusive, fluid, or controversial for effective application by national courts.