## Facts

- Baxter invented sevoflurane and obtained process patents, but did not pursue FDA approval for U.S. sales.
- Baxter granted Maruishi an exclusive worldwide license to use Baxter’s sevoflurane process patents; Maruishi later sublicensed U.S. rights to Abbott.
- Abbott spent substantial sums to obtain FDA approval and began selling sevoflurane in the United States; Maruishi manufactured using Baxter’s processes, Abbott resold, and Maruishi paid Baxter royalties.
- A competitor (Ohmeda) obtained a patent for an alternative sevoflurane manufacturing process; Baxter acquired Ohmeda and planned to compete against Abbott in the U.S. using that process.
- Abbott commenced arbitration under the parties’ licensing arrangements, asserting that Baxter’s planned competition violated contractual exclusivity during the life of Baxter’s patents.
- Baxter argued (1) the contract barred only additional licensing, not Baxter’s own competition using a different process, and (2) any interpretation barring competition would violate U.S. antitrust law.
- The arbitral tribunal considered and rejected Baxter’s antitrust defense and issued an award effectively requiring Baxter not to compete with Abbott in sevoflurane during the patents’ term.
- The district court confirmed the award; Baxter appealed, seeking non-enforcement on public policy/antitrust grounds under the New York Convention.

## Issues

1. Whether, in an enforcement action governed by the New York Convention, a court may refuse to enforce an international arbitral award based on an alleged error of U.S. antitrust law.
2. Whether the Convention’s public policy exception permits merits review of arbitrators’ antitrust analysis when the tribunal considered and rejected the antitrust defense.

## Decision

- The Seventh Circuit affirmed confirmation and enforcement of the arbitral award.
- The court held that alleged legal error, including alleged misapplication of the Sherman Act, is not a ground to deny enforcement under the New York Convention.
- The court construed the Convention’s public policy defense narrowly and found it inapplicable to Baxter’s attempt to relitigate the merits of its antitrust defense.
- The court noted that antitrust enforcement remains available to non-parties (e.g., government, competitors, consumers) and that the award did not immunize conduct from antitrust scrutiny outside the parties’ dispute.

## Legal Principles

- Judicial review of international arbitral awards under the New York Convention is limited; courts generally may not refuse enforcement because they believe the arbitrators made a legal mistake.
- Antitrust claims are arbitrable, and submission of antitrust defenses to arbitration does not expand post-award judicial review under the Convention.
- The Convention’s public policy exception is narrowly applied and does not authorize reconsideration of the correctness of the tribunal’s legal reasoning absent an extraordinary conflict with fundamental forum public policy.
- An arbitral award binds the parties to the arbitration but does not preclude antitrust challenges by non-parties.

## Conclusion

The Seventh Circuit enforced an international arbitral award that restricted Baxter’s competition during the life of its patents, holding that the New York Convention does not permit non-enforcement based on alleged antitrust legal error and that the public policy exception does not allow courts to revisit the merits of an antitrust defense rejected in arbitration.


Baxter Int'l, Inc. v. Abbott Labs., 315 F.3d 829 (7th Cir. 2003)