Appeal from the United States District Court for the Northern District of California Jeremy D. Fogel, District Judge, Presiding D.C. No. 5:05-cv-01887-JF.
The opinion of the court was delivered by: Wallace, Senior Circuit Judge
Argued and Submitted January 15, 2010 -- San Francisco, California.
Before: J. Clifford Wallace, Procter Hug, Jr. and Richard R. Clifton, Circuit Judges.
Opinion by Judge Wallace; Dissent by Judge Clifton.
Appellants Polimaster Ltd. and Na&Se Trading Company, Ltd. (Na&Se) (collectively, Polimaster) appeal from the district court's confirmation of an arbitration award against them and in favor of appellee RAE Systems, Inc. (RAE). They also appeal from the district court's subsequent order granting preand post-judgment interest on the arbitration award. We have jurisdiction pursuant to 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(1)(D), and we reverse and remand.
Appellant Polimaster Ltd. is a limited liability company based in Belarus, engaged in the design and manufacture of radiation monitoring instruments. Appellant Na&Se is a corporation based in Cyprus, engaged in intellectual property licensing. In January 2003, Polimaster Ltd. and Na&Se entered into a contractual relationship with RAE, a Delaware corporation with its principal place of business in California. The parties signed two agreements, the "Nonexclusive License for Proprietary Information Usage" (License Agreement) and the "Product and Component Buy/Sell Agreement" (Buy/Sell Agreement), which provided for RAE's manufacture and distribution of Polimaster-developed radiation detection devices.
The License Agreement refers to Na&Se as the "Licensor," RAE as the "Licensee," Na&Se and RAE as the "Parties," and Polimaster Ltd. as the "Manufacturer." The License Agreement contains a dispute resolution provision that states:
9.1 In case of the dispute between the Licensor and the Licensee on the issues provided for by the present Agreement the Parties shall take every effort for their settlement by negotiations.
9.2 In case of failure to settle the mentioned disputes by means of negotiations they should be settled by means of arbitration at the defendant's side.
The parties agree that "defendant's side" means "defendant's site," that is, the geographical location of the defendant's principal place of business. The Buy/Sell Agreement also contains an arbitration clause, which states, "7.1 The Parties shall exert the best efforts to settle up any disputes by means of negotiations, and in case of failure to reach an agreement the disputes shall be settled by arbitration at the defendant's site."
Disputes arose in the course of performing the agreements. In May 2005, Polimaster filed an action against RAE in the United States District Court for the Northern District of California. After the district court denied Polimaster's request for a preliminary injunction, the parties negotiated to submit Polimaster's claims to arbitration in California (that is, defendant RAE's "site," as directed in the agreements). In May 2006, Polimaster and RAE commenced arbitration by a joint letter to "JAMS," an arbitration provider organization (since renamed "JAMS, The Resolution Experts"). Although the parties jointly submitted to arbitration, Polimaster made the following reservation:
It is Polimaster's position that no counterclaims will be filed in this matter based on the requirement in the agreement that all such claims be filed in the location of the party against whom such claims are brought. Because Polimaster is located in Belarus, Polimaster asserts that all such claims against it shall be brought in that location.
In July 2006, Polimaster submitted its demand for arbitration, setting forth claims against RAE for breach of contract under both the License Agreement and the Buy/Sell Agreement, misappropriation of trade secrets, and unfair competition. In August 2006, RAE submitted its answer to Polimaster's demand for arbitration, in which RAE set forth not only its affirmative defenses and responses to Polimaster's allegations, but also RAE's own claims against Polimaster, which it called "counterclaims." RAE asserted several claims sounding in contract and tort, including interference with prospective economic advantage, fraud and negligent misrepresentation.
Polimaster asked the arbitrator to dismiss RAE's "counter-claims," arguing that any claims by RAE against Polimaster could not be arbitrated at RAE's site in California, because the arbitration agreement required that they be brought at the "defendant's [site]," that is, at Polimaster's site. The arbitrator refused to dismiss RAE's counterclaims, reasoning that the contract did not specify where counterclaims should be brought. To fill the perceived gap, he applied procedural rules regarding compulsory counterclaims, as defined in Federal Rules of Civil Procedure, California Rules of Civil Procedure, and JAMS rules. The arbitrator decided it would be contrary to "notions of fairness, judicial economy and efficiency" to "[p]rosecut[e] a claim with affirmative defenses in one venue while simultaneously prosecuting counterclaims almost identical to the affirmative defenses in another [venue]." Instead, he reasoned, RAE's "counterclaims" should be "heard in the same venue as the properly situated original arbitration claims [by Polimaster against RAE]."
The arbitrator in California ultimately adjudicated both Polimaster's claims and RAE's "counterclaims." The arbitrator issued an Interim Award in July 2007, which rejected all of Polimaster's claims and awarded damages to RAE on its successful counterclaim, in the amount of $2,412,432. By a Final Arbitral Award dated September 20, 2007, the arbitrator confirmed the findings and conclusions of the Interim Award and further awarded costs to RAE, as the prevailing party, in the amount of $46,213.15.
Thereafter, RAE sought confirmation of the arbitration award in the United States District Court for the Northern District of California. Polimaster moved to vacate the award, arguing that the arbitral procedure was not in accordance with the parties' agreement and that the arbitrator exceeded his powers by allowing RAE to assert "counterclaims" at RAE's own site in California rather than at the "defendant's [site]" as required by the agreement. The district court confirmed the award to RAE, and this appeal followed.
 The parties agree that the arbitration agreement and award are governed by the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), June 10, 1958, 21 U.S.T. 2517. We must confirm an arbitration award falling under the New York Convention unless we determine that "one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the [sic] said Convention." 9 U.S.C. § 207; see also Mgmt. & Technical Consultants S.A. v. Parsons-Jurden Int'l Corp., 820 F.2d 1531 (9th Cir. 1987) (Parsons-Jurden).
 The New York Convention enumerates seven defenses to the recognition or enforcement of an arbitral award. These grounds include, among others, that the award "deals with a difference not contemplated by or not falling within the terms of the submission to arbitration," that the parties were under some incapacity or their agreement is not valid under the law of the country where the award is made, or that the party against whom the award is invoked was not able to present its case. 21 U.S.T. 2517, Art. V, §§ 1(a)-(c). In this appeal, Poli-master invokes the defense set forth in Article V, § 1(d), of the New York Convention:
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place.
21 U.S.T. 2517, Art. V, § 1(d). Polimaster asserts that the arbitration procedure was contrary to the parties' agreement because the arbitrator allowed RAE to bring its claims, calling them "counterclaims," against Polimaster in an arbitration proceeding in California, thereby permitting RAE to bring a claim at its own site.
We review de novo whether a party established a defense to enforcement of an arbitration award under the New York Convention. China Nat'l Metal Prods. Import/Export Co. v. Apex Digital, Inc., 379 F.3d 796, 799 (9th Cir. 2004). As the party seeking to avoid enforcement of the award, Polimaster has the burden of showing the existence of a New York Convention defense. Ministry of Def. of the Islamic Republic of Iran v. Gould, Inc., 969 F.2d 764, 770 (9th Cir. 1992). Polimaster's burden is substantial because the public policy in favor of international arbitration is strong, id., and the New York Convention defenses are interpreted narrowly. See China Minmetals Materials Imp. & Exp. Co., Ltd. v. Chi Mei Corp., 334 F.3d 274, 282-83 (3d Cir. 2003); Gould, 969 F.2d at 770 (adopting narrow interpretation of defense based on arbitrator exceeding authority); Parsons & Whittemore Overseas Co. v. Societe Generale de L'Industrie Du Papier (RAKTA), 508 F.2d 969, 976 (2d Cir. 1974) (adopting narrow interpretation of public policy defense).
 The grounds for refusing confirmation of an award under the Federal Arbitration Act (FAA), 9 U.S.C. § 10, generally track those under the New York Convention, although they are not coextensive. See Parsons-Jurden, 820 F.2d at 1534. When interpreting the defenses to confirmation of an arbitration award under the New York Convention, we may look to authority under the FAA. Parsons & Whittemore, 508 F.2d at 974.
We may decline enforcement of an arbitral award on the basis that "the arbitral procedure was not in accordance with the agreement of the parties." 21 U.S.T. 2517, Art. V, § (1)(d). To determine whether the procedure used was contrary to the parties' agreed arbitral procedures, we must begin with the language of the parties' arbitration agreement. See Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc., 403 F.3d 85, 91 (2d Cir. 2005); Coast Trading Co. v. Pac. Molasses Co., 681 F.2d 1195, 1198 (9th Cir. 1982); cf. generally Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002) (holding that, in the context of an arbitrability determination, the court reviews the contract de novo); Simula, Inc. v. ...