the District Court for the Eastern District of Michigan held, on August 9, 1976, that the section of the contract stating that the arbitral decision shall be decided "finally and binding upon the parties" indicated the consent of the parties to entry of judgment by a court.

In 1968 petitioner and respondent entered into an agreement involving the sale and importation of foreign automobiles into the United States. In 1972 a dispute arose and petitioner called for arbitration. The arbitration panel, meeting in Zurich, entered an award in favor of the petitioner.

When petitioner commenced action in the District Court of Michigan for confirmation of the award, the respondent moved to dismiss, arguing (1) that the Court lacked jurisdiction because the arbitration lacks an express "section 9 recitation" (9 U.S.C. 9); (2) that the Convention on the Recognition of Foreign Arbitral Awards (TIAS 6997; 21 UST 2517) cannot supersede that statutory requirement, for to do so would result in a constitutionally impermissible retroactive application of a statute (i.e., forbidden under the Contracts Clause); and (3) that the petitioner failed to exhaust his remedies under the existing Friendship, Commerce, and Navigation Treaty with Germany (TIAS 3593; 7 UST 1839).

The District Court denied the motion to dismiss. The opinion stated, in part:

In the present case the Court concludes that Section 1 of the Contract, which states that the arbitral decision "shall be decided finally and binding upon the parties," does indicate consent of the parties to entry of judgment by a court...

Indeed such a conclusion seems inescapable if the "final and binding" language of the Contract is to be given effect. Nor does the Court find merit in the respondent's contention that the following phrase "disbarring legal actions" found in the arbitration clause must be accorded an all-encompassing interpretation which bars even judgments on the award. Such an interpretation is neither reasonable nor consistent with the "final and binding" language.

As the Court concludes that the arbitration clause in question does manifest consent to the judgment on the arbitral award by the parties, it need not reach the issues of (1) whether the provisions of the Convention, as codified in 9 U.S.C. 201 et seq. do away with the § 9 consent to judgment requirement, and (2) whether such statutory modifications result in an impermissible retroactive effect as applied here. The Court finds the respondent's exhaustion of F.C.N. Treaty remedies argument to be without merit.

84

Bankruptcy Proceedings

In Israel-British Bank (London), Ltd. v. Federal Deposit Insurance Corporation, 536 F.2d 509 (1976), the U.S. Court of Appeals for the Second Circuit reversed the order of the U.S. District Court for the

Southern District of New York in Matter of Israel-British Bank (London), Ltd., 401 F. Supp. 1159 (1975), dismissing a voluntary bankruptcy petition filed by a foreign banking corporation. See the 1975 Digest, pp. 899-900.

The Court of Appeals held, on May 25, 1976, that the "banking corporation" exception in section 4 of the Bankruptcy Act, 11 U.S.C. 22, governing voluntary petitions is based on considerations of federalism and that the British banking corporation, which borrowed Eurodollars and U.S. dollars from American banks and maintained deposits in U.S. banks but which did not do business as a bank in the United States and which was not licensed in any State to do such business, qualified for benefit of the Bankruptcy Act as a voluntary bankrupt and was not a "banking corporation" within the meaning of the exception. The opinion of the Court of Appeals stated, in part:

If we acknowledge, as did the District Court, that Congress failed to consider foreign banking corporations when creating the exceptions to eligibility for bankruptcy, are we, nevertheless, required to recognize within the exception what was never in its consideration? There is no plain meaning in "banking corporation" to compel such a result.

When the words [of the statute] create a general inclusionary category there is greater reason, perhaps, to accept a literal meaning in the absence of any particular purpose which contradicts it. When the statute is couched in terms of an exception, however, the task is somewhat different, for in the case of an exception we can hardly assume that excluding a particular category from a general class was utterly without purpose. If we find that there was a legislative purpose for the general exception which does not fit the narrower exception at issue, a court may justifiably conclude that the exception at issue is without the statute. Thus, the normal rule of construction is that where words of exception are used, they are to be strictly construed to limit the exception

We start with the recognition that a foreign corporation which has assets in the United States is generally amenable to bankruptcy here. IBB is such a body under section 2 of the Act. To find that it is excluded from the general class of entities amenable to bankruptcy one would have to find a reason which illuminates the exception. We can find no convincing reason why a foreign banking corporation, not licensed to do business in the United States, conducting no semblance of a banking business here, and not under the regulatory supervision of any State or Federal

agency, should not qualify for the benefits of the Act as a voluntary bankrupt. [pp. 512-513.]

*

In finding IBB not to be a "banking corporation" within the meaning of the exception, the Court noted that it was avoiding an inequitable result to its creditors, including the other American banks "who have lost the race of diligence."

INDEX

(797)