## Facts

- Iran Aircraft Industries and Iran Helicopter Support and Renewal Company, agencies/instrumentalities of Iran, contracted with Avco Corporation beginning in 1976 for repair and replacement services involving helicopter engines and related parts.
- After the 1978–79 Iranian Revolution, disputes arose concerning Avco’s performance and the Iranian entities’ payments.
- The parties submitted the disputes to the Iran–United States Claims Tribunal for binding arbitration pursuant to the Algiers Accords, which granted the Tribunal exclusive jurisdiction over covered claims and counterclaims.
- Avco’s presentation of its claimed amounts depended on extensive invoices; at a prehearing conference, Avco proposed using audited accounting summaries in lieu of producing volumes of invoices.
- The presiding third-country judge indicated the summary approach was acceptable, and Avco prepared its evidentiary submission in reliance on that direction.
- Before the merits hearing, the presiding judge was replaced; at the hearing, the new presiding judge questioned the absence of original invoices.
- The Tribunal later rejected Avco’s claims to the extent they were supported only by the audited summaries rather than underlying invoices, yielding a net award requiring Avco to pay approximately $3.5 million to the Iranian entities.
- The Iranian entities sought to enforce the award in federal district court; Avco opposed enforcement under the New York Convention, arguing it was “unable to present [its] case.”

## Issues

1. Whether awards of the Iran–U.S. Claims Tribunal are directly enforceable in U.S. courts without applying defenses available under the New York Convention.
2. Whether enforcement could be refused under New York Convention Article V(1)(b) because Avco was “unable to present [its] case” after relying on tribunal-approved summary evidence that was later rejected.

## Decision

- The Second Circuit held that Iran–U.S. Claims Tribunal awards are not automatically enforceable in U.S. courts; enforcement proceeds through ordinary mechanisms for foreign arbitral awards, including the New York Convention and its defenses.
- The court affirmed summary judgment for Avco and affirmed the refusal to enforce the award under Article V(1)(b).
- The court concluded Avco was “unable to present its case” because the tribunal’s handling of evidentiary requirements misled Avco and effectively deprived it of a fair opportunity to prove its claims.

## Legal Principles

- A tribunal award described as “final and binding” internationally is not, without a domestic enforcement mechanism, self-executing in U.S. courts; U.S. courts apply the New York Convention framework to enforcement.
- Under New York Convention Article V(1)(b), enforcement may be refused where the arbitral process denies a meaningful opportunity to be heard, including when tribunal conduct misleads a party about required proof and the party is then penalized for relying on that direction.
- Article V(1)(b) can apply even if formal notice was provided, when procedural fairness is compromised in a way that prevents effective presentation of claims or defenses.

## Conclusion

The Second Circuit required enforcement of the award, if at all, through the New York Convention and held that enforcement could be denied where tribunal actions regarding proof requirements misled Avco and resulted in Avco being unable to present its case within the meaning of Article V(1)(b).


Iran Aircraft Indus. v. Avco Corp., 980 F.2d 141 (2d Cir. 1992)