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International Organizations Must Explicitly Waive Immunity For Judicial Enforcement, Modification or Vacatur of Arbitral Awards

The United States Appeals Court for the District of Columbia recently affirmed the dismissal of a case seeking modification or vacatur of an arbitration award in favor of the International Monetary Fund (“the IMF”) on the grounds the IMF had not explicitly waived its immunity under the Bretton Woods Agreements Acts (“Bretton Woods Act”).

The IMF retained Sacks & Associates (“Sacks”) to negotiate contractors’ claims arising from the IMF’s renovation of its headquarters in Washington D.C. The contract between Sacks and the IMF provided that any disputes between the parties would be resolved by arbitration administered by the American Arbitration Association (“AAA”). The arbitration clause’s concluding sentence stated: “It is understood and agreed that the submission of a claim or dispute to arbitration . . . shall not be considered a waiver of the immunities of the IMF.” Additionally, the contract included a clause entitled “Immunities of the International Monetary Fund: Taxes and Disputes” which recited Article IX of the IMF’s Articles of Agreement, as incorporated into U.S. law by the Bretton Woods Act, which “provides that the [IMF], its property and its assets, wherever located and by whomever held, are immune from every form of judicial process.”

A dispute arose between Sacks and the IMF as to how much the IMF owed Sacks for its legal services. Sacks filed a demand for arbitration, and the arbitral panel awarded Sacks part of the fees it sought. Sacks filed suit in the D.C. Superior Court, seeking to modify or vacate the arbitral award. The IMF removed the case to the D.C. Federal District Court and simultaneously moved to dismiss the case on the grounds it was immune from suit under the Bretton Woods Act. Sacks argued the IMF had waived its immunity by agreeing arbitrate under the AAA rules, which allow for a court’s entry of judgment on an award, and that the IMF had agreed to D.C. law in the contract, which allows for the confirmation, modification or vacatur of arbitration awards.

The D.C. District Court held, and the Appeals Court affirmed, that the IMF had not waived its immunity, as it had explicitly preserved its immunity in its contract with Sacks, regardless of the IMF agreeing to arbitrate under the AAA rules. Thus, as the IMF’s immunity as an international organization had not been explicitly waived, but in fact had been preserved, it was immune from suit.

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