## Facts

- JSC Surgutneftegaz, a Russian oil company, issued shares and ADRs held by foreign investors, including the President and Fellows of Harvard College.
- Harvard held Surgut securities under documentation containing an arbitration clause referencing arbitration under the American Arbitration Association (AAA) Rules, though other language suggested possible English arbitration.
- A dispute arose over Surgut’s withholding of dividends; Russian courts upheld management’s ability to withhold dividends in related litigation to which Harvard was not a party.
- Harvard filed a demand for class arbitration with the AAA in New York, claiming wrongful deprivation of dividends owed to ADR holders.
- Surgut petitioned in New York state court to stay the AAA arbitration; Harvard removed the matter to the Southern District of New York.

## Issues

1. Whether arbitration should be stayed based on international comity, the internal-affairs doctrine, or forum non conveniens given Russian court rulings and Surgut’s status as a Russian issuer.
2. Whether the parties’ agreement required arbitration under AAA rules in New York or instead arbitration in England under English procedural rules.
3. Whether any asserted policy or treaty defenses overcame the federal policy favoring arbitration under the Federal Arbitration Act and the New York Convention.

## Decision

- The court denied Surgut’s petition to stay arbitration.
- International comity did not bar arbitration because Harvard was not a party to the Russian proceedings and the arbitration would address Harvard’s asserted contractual and related rights.
- The internal-affairs doctrine did not categorically preclude arbitration; any governing-law questions could be addressed in arbitration.
- Forum non conveniens did not justify a stay because the parties’ agreement effectively selected arbitration under AAA rules, and courts are reluctant to displace an agreed arbitral forum.
- The court construed the clause to permit AAA arbitration as demanded by Harvard; references suggesting English arbitration did not override the clause’s express AAA language.
- No applicable public-policy defense under the New York Convention justified refusing to allow the arbitration to proceed.

## Legal Principles

- Under the FAA and the New York Convention, courts generally must enforce international arbitration agreements absent narrow, established defenses.
- International comity does not require staying arbitration merely because a foreign court has ruled on related matters, particularly when the party seeking arbitration was not bound by the foreign judgment.
- The internal-affairs doctrine functions primarily as a choice-of-law concept and does not automatically invalidate an otherwise enforceable arbitration agreement.
- Forum non conveniens is disfavored as a basis to defeat a contractually chosen arbitral forum and procedural regime.
- Arbitration clause ambiguities about forum or procedure are commonly resolved in favor of enforcing arbitration, and express references to arbitral rules (e.g., AAA Rules) are given substantial weight.
- The New York Convention’s public-policy exception is construed narrowly and does not extend to generalized objections grounded in comity, internal-affairs concerns, or convenience.

## Conclusion

The court enforced the parties’ arbitration agreement and refused to stay Harvard’s AAA class arbitration, holding that comity, internal-affairs, forum non conveniens, and Convention-based objections did not justify blocking arbitration in New York under AAA rules.


JSC Surgutneftegaz v. President & Fellows of Harvard Coll., No. 04 Civ. 6069 (RMB), 2005 WL 1863676 (S.D.N.Y. Aug. 3, 2005)