author: BREITENSTEIN, Circuit Judge.

text:
    KENNEDY ELECTRIC COMPANY, INC., Plaintiff-Appellee, v. UNITED STATES POSTAL SERVICE, Defendant-Appellant.
    No. 74-1218.
    United States Court of Appeals, Tenth Circuit.
    Argued Nov. 12, 1974.
    Decided Dec. 30, 1974.
    Rehearing Denied Jan. 30, 1975.

      Robert E. Benson, of Holland & Hart, Denver, Colo., for plaintiff-appellee.
    Thomas G. Wilson, Atty., Department of Justice (Carla A. Hills, Asst. Atty. Gen., James L. Treece, U. S. Atty., and Leonard Schaitman, Washington, D. C., on the brief), for defendant-appellant.
    Before LEWIS, Chief Judge, and BREITEN STEIN and McWILLIAMS, Circuit Judges.
   BREITENSTEIN, Circuit Judge.

This is a suit by a subcontractor on a federal postal facility construction project to recover amounts due for labor and materials. Section 409(a), 39 U.S.C., and 28 U.S.C. § 1339 confer jurisdiction. Recovery is sought out of funds both retained and disbursed. The case is unusual in that the payment and performance bonds required by the Miller Act, 40 U.S.C. § 270a, were not furnished and the prime contract was executed in violation of that statute. The district court gave judgment for the subcontractor, Kennedy Electric Co., Inc. v. United States Postal Service, D.Colo., 367 F.Supp. 828, and Postal Service appeals. We affirm.

Plaintiff-appellee, Kennedy Electric Company, a Colorado corporation, is engaged in the electrical construction business. Defendant-appellant, United States Postal Service, is an independent establishment of the United States, 39 U.S.C. § 201, with the power to sue and be sued, 39 U.S.C. § 401(1). Under the Postal Reorganization Act, 39 U.S.C. § 101 et seq., it succeeded to the interests of the former Post Office Department on July 1, 1971. The assets and liabilities of the Post Office Department were transferred to the Postal Service and constituted its initial capital. 39 U.S.C. § 2002.

The principal facts were stipulated. No party objects to the fact findings of the trial court. For clarity we will refer to the former United States Post Office Department as Department, and to the recently created United States Postal Service as Service. On December 30, 1969, Department awarded to J. C. Corri-gan Co. (Corrigan) a contract for the construction of a mail facility at Milwaukee, Wisconsin. Although payment and performance bonds were required to be filed in 10 days, none were ever filed. Corrigan was unable to obtain the bonds and neither filed them nor called the matter to the attention of Department. The failure to file the bonds was not discovered by Department until April, 1971. Department determined that Cor-rigan had wilfully failed to furnish the required bonds and on May 10, 1971, terminated the contract.

The contract price, adjusted for additional work and change orders, was $998,854.47. Corrigan subcontracted part of the work to Corrigan Construction Company. The trial court held that the two Corrigan companies “are for all practical purposes a single entity.” 367 F.Supp. at 829. All payments on the contract were made to First National Bank of Boston, the assignee of Corri-gan. The construction company subcontracted part of the work to plaintiff Kennedy which furnished labor and materials. A balance of $61,281.31 remains unpaid on the Kennedy subcontract. Corrigan is in bankruptcy and Corrigan Construction Company is insolvent. Both have failed and refused to pay Kennedy and neither has funds, or sources of funds, with which to pay Kennedy.

By March 10, 1970, Department knew that Kennedy was a subcontractor furnishing labor and materials for the project. In the months that followed Kennedy made repeated inquiries of Department as to project status. Department on many occasions called Corrigan’s attention to the lack of satisfactory progress. Despite its concern Department made no effort to comply with the regulation on project supervision, 41 C.F.R. § 1 — 30.521, and did not investigate the reasons for delay, the status of payments to subcontractors, or the financial position of Corrigan.

The contract and applicable regulations limited progress payments to 70% of costs incurred with a maximum of 70% of the contract price. As of November 27, 1970, Department had made to Corrigan’s assignee progress payments of $684,064.00. Up to this time progress payments were made on invoices containing the required information. See 41 C.F.R. § 1 — 30.519. Payments made thereafter were not on proper invoices. The progress payments exceeded the amount allowable both by the contract and the regulations.

In February, 1971, Department made a progress payment of $14,500.00 and in March a further payment of $190,747.00. These payments to the assignee were made without the required invoices. In making these two payments Department did not comply with the provisions of 41 C.F.R. § 1-30.505 providing that the head of thé procuring activity, or a duly designated official, must approve unusual progress payments, and the provisions of 41 C.F.R. § 30-521.1 requiring assurance that the unpaid balance be sufficient to cover costs of completion or that contractor have adequate resources to complete. Department did not know the intended disposition of the funds by Corrigan’s assignee.

On July 1, 1971, Department transferred to Service on account of the Milwaukee contract assets in the amount of $107,698.47 representing obligated appropriations on the books of Department. A third party completed the contract on August 15, 1971.

After a non-jury trial the district court held that there remained in Service’s hands a fund of $35,739.47 on which Kennedy had an equitable lien. It also held that Kennedy had an equitable lien on the March 24, 1971, payment of $190,-747.00 made to the assignee. Judgment was entered for Kennedy, and against Service, for $61,281.31 plus interest.

Service argues that sovereign immunity bars the suit. It seeks to avoid 39 U.S.C. § 401, which authorizes Service to sue and be sued, by asserting (1) the suit seeks monetary recovery from the Treasury of the United States and (2) the Kennedy claim was not a legal liability of Department assumed by Service under the Postal Reorganization Act.

F.H.A. v. Burr, 309 U.S. 242, 245, 60 S.Ct. 488, 490, 84 L.Ed. 724, says that absent implied exceptions and restrictions, not here present, or other showing that Congress used the phrase in a narrow sense, “it must be presumed that when Congress launched a governmental agency into the commercial world and endowed it with authority to ‘sue or be sued’, that agency is not less amenable to judicial process than a private enterprise under like circumstances would be.”

Service points out that its funds are held in the Treasury of the United States, 39 U.S.C. § 2003(a), and that a suit is against the sovereign if “the judgment sought would expend itself on the public treasury.” Land v. Dollar, 330 U.S. 731, 738, 67 S.Ct. 1009, 1012, 91 L.Ed. 1209; see also Dugan v. Rank, 372 U.S. 609, 620, 83 S.Ct. 999, 10 L.Ed.2d 15. We can discern no congressional intent to emasculate the “sue or be sued” provision of § 401 by § 2003(a). We are concerned with the right to sue and recover judgment, not with any question of execution to enforce the judgment. See F.H.A. v. Burr, 309 U.S. at 250-251, 60 S.Ct. 488.

The Postal Reorganization Act provides, 39 U.S.C. § 2002(a)(2), that upon the start of Service operations the unexpended balances of appropriations to Department and “all liabilities chargeable thereto shall become assets and liabilities, respectively, of the Postal Service.” Service says that the claim of Kennedy was not a legally enforceable liability of Department and, hence, it never became a liability of Service. The argument begs the question. Service may be sued. Determination of liability goes to the merits, not to jurisdiction. We reject the contention that sovereign immunity destroys jurisdiction and turn to the merits.

The Miller Act, 40 U.S.C.A. § 270a, was intended to provide a remedy for suppliers of labor and material to a federal project. These suppliers do not have their usual security interest because a lien cannot attach to federal property. Miller Act protection goes to those who have a contractual agreement with a prime contractor or a subcontractor. F. D. Rich Co., Inc. v. United States, 417 U.S. 116, 122, 94 S.Ct. 2157, 40 L.Ed.2d 703. Kennedy was within the protected class but, because of Department’s failure to comply with the statute, the contractor did not furnish a payment bond. There is no surety from which Kennedy may recover.

Kennedy relies on a two-pronged equitable lien. The first relates to the $35,739.47 which remained in Service’s hands from the obligated appropriation transferred to it by Department. The computation appears in the district court’s findings. See 367 F.Supp. at 832. In this regard we reject Service’s claim for liquidated damages in the sum of $45,000.00. The project has been completed. Although the contract permits recovery of both cost of completion and liquidated damages, Service’s claim for liquidated damages must be weighed against subcontractor’s claim for payment on account of the labor and materials which it furnished. The equities favor subcontractor. A court of equity may subordinate a claim because of equitable considerations. See Pepper v. Litton, 308 U.S. 295, 306, 60 S.Ct. 238, 84 L.Ed. 281. We agree with the trial court that subordination of Service’s claim is in order.

The second prong relates to Department’s March 24, 1971, payment of $190,747.00 to Corrigan’s assignee. Payment was made in violation of various pertinent regulations. See e. g. 41 C.F.R. §§ 1 30.505, 1-30.519, 1-30.521-1, and 1 30.521 2. Department then had notice of the Kennedy claim and knew that there was slight chance that the money would be used to complete the contract or to pay the subcontractor. See 367 F.Supp. at 830-831. The courts have consistently held that the government cannot escape liability to a Miller Act surety by making a wrongful payment. See Fireman’s Fund Insurance Company v. United States, 421 F.2d 706, 709, 190 Ct.Cl. 804, and cases there cited; see also Hanover Insurance Company v. United States, S.D.N.Y., 279 F.Supp. 851, 853. For our present purposes we shall treat both the funds remaining in Service’s hands and the $190,747.00 payment to the assignee as retainage.

The controlling issue is whether the subcontractor had an equitable lien on the retainage. The first pertinent decision of the Supreme Court is Prairie State Bank v. United States, 164 U.S. 227, 17 S.Ct. 142, 41 L.Ed. 412. That case related to the respective rights of a surety, which had completed a construction contract after default, and of an assignee of the contractor. The Court upheld judgment for the surety saying that the equity of the assignee, if any, was subordinate to that of the surety. 164 U.S. at 240, 17 S.Ct. 142.

In Henningsen v. United States Fidelity & Guaranty Company, 208 U.S. 404, 28 S.Ct. 389, 52 L.Ed. 547, a surety, under the then applicable Heard Act, 28 Stat. 278, on a federal construction contract was required to pay claims for labor and material. The contractor assigned the retainage to a bank. The surety sued to enjoin the disbursing officer from paying the assignee. The Court held for the surety saying that “the question turns upon the respective equities of the parties,” 208 U.S. at 409, 28 S.Ct. at 391, and that surety “paid the laborers and material-men, and thus released the contractor from his obligations to them, and to the same extent released the government from all equitable obligations to see that the laborers and supplymen were paid.” 208 U.S. at 410, 28 S.Ct. at 391.

United States v. Munsey Trust Co., 332 U.S. 234, 67 S.Ct. 1599, 91 L.Ed. 2022, was a case in which a Miller Act surety had paid those supplying labor and material to the contractor. Surety asserted a claim against the retainage. The government asserted a set-off arising from a debt owed it by the contractor under a separate and independent transaction. The Court allowed the set-off. The Court said that laborers and materialmen do not have enforeable rights against the government for their compensation, 332 U.S. at 241, 67 S.Ct. 1599, that as a substitute for their customary lien protection the Miller Act requires a payment bond, Ibid., and that “one cannot acquire by subrogation what another whose rights he claims did not have, Ibid, at 242, 67 S.Ct. at 1603. Service reads Munsey as holding that laborers and materialmen have no enforceable right against the United States for their compensation and, hence, is disposi-tive of the case at bar. Kennedy counters with the statement in the opinion, 332 U.S. 242, 67 S.Ct. 1603:

“We need not decide whether laborers and materialmen would have any claim to the retained percentages, if both contractor and surety failed to pay them.”

The basic premise of Munsey is that the laborers and materialmen are protected by the statutorily required payment bond, 332 U.S. at 243-244, 67 S.Ct. 1599. That premise is absent from the case at bar. Department, in violation of the Miller Act, made the contract without requiring the bond. Munsey says nothing about the equitable considerations discussed in Prairie State Bank and Henningsen.

Pearlman v. Reliance Insurance Company, 371 U.S. 132, 83 S.Ct. 232, 9 L.Ed.2d 190, was a dispute between the bankruptcy trustee of a government contractor and the contractor’s payment-bond surety over retainage held by the government. The district court held that pre-Munsey cases established the priority of the surety over general creditors, In re Dutcher Construction Corp., W.D.N.Y., 197 F.Supp. 441, and the Second Circuit affirmed, 298 F.2d 995. The Court granted certiorari because of the conflict with decisions of other circuits, including American Surety Company of New York v. Hinds, 10 Cir., 260 F.2d 366. The conflict was resolved in favor of the Second Circuit. The Court held that “Munsey left the rule in Prairie Bank and Henningsen undisturbed.” 371 U.S. at 141, 83 S.Ct. at 237, and said, Ibid.:

“We therefore hold in accord with the established legal principles stated above that the Government had a right to use the retained fund to pay laborers and materialmen; that the laborers and materialmen had a right to be paid out of the fund; that the contractor, had he completed his job and paid his laborers and materialmen, would have become entitled to the fund; and that the surety, having paid the laborers and materialmen, is entitled to the benefit of all these rights to the extent necessary to reimburse it.”

Service distinguishes Pearlman on the ground that it concerned only a question of priorities between a surety and the contractor’s trustee in a fund upon which the government made no claim. The priorities in Pearlman were decided on equitable principles which apply here. When it paid assignee, Department was not a claimant to the fund but a stakeholder. It chose to establish priority without resort to the judicial process.

Service stresses United States Fidelity & Guaranty Co. v. United States, Ct.Cl., 475 F.2d 1377, (USF&G) as a correct analysis and application of the Munsey and Pearlman decisions. In that case the Miller Act surety had paid its obligation in full. Certain subcontractors who had not been paid were joined as co-plaintiffs. The plaintiffs asserted rights against retainage and on account of an improper progress payment. The government claimed a tax lien on the retainage. After the tax was satisfied and deduction was made for liquidated damages, over $4,000.00 remained unex-pended from the contract funds.

The court held against the surety because it could not recover on the basis of amounts owed subcontractors but not paid by it. The court held that the unpaid subcontractors had no standing to sue the United States, 475 F.2d at 1382. The court did recommend that the government either pay the subcontractors or file an interpleader “in order to see to it that the Government does not retain possession of funds to which the subcontractors have an equitable claim.” 475 F.2d at 1383.

USF&G is a different case from that at bar. We do not have a standing question. Our suit is against an independent establishment having the power to sue and be sued. Subcontractor Kennedy has a direct interest. In USF&G a Miller Act bond was furnished and satisfied. Here we have no bond. USF&G recognizes the equities of the unpaid subcontractors and suggests procedures to prevent an inequitable result. 475 F.2d at 1383. Service does not suggest any procedure which Kennedy may take other than that followed here, and we know of none.

More importantly the effort in USF&G to reconcile Munsey and Pearl-man does not convince us. Munsey says that it does not decide whether subcontractors have any claim to retainage if both contractor and surety fail to pay, 332 U.S. at 242, 67 S.Ct. 1599. Pearlman says that Munsey held only that the government could exercise its set-off right, 371 U.S. at 140, 83 S.Ct. 232. Accordingly, there is nothing to reconcile.

Service would reject decisions upholding the rights of subrogated sureties because they relate to situations where the person for whom the surety is substituted could sue under the Tucker Act, 28 U.S.C. § 1491. They say that we are concerned with a subcontractor who may not sue. Munsey expressly left open the question of any claim of laborers and materialmen against retainage if both prime contractor and' surety failed to pay. 332 U.S. at 242, 67 S.Ct. 1599. In the case at bar the contractor failed to pay and there is no surety. Department had the benefit of the services and material furnished by the subcontractor and the asset created by that benefit was transferred to Service, which also has the retainage. Although the Supreme Court has not decided the specific point now in issue, there is no discernible difference between the equities of the sureties, which were upheld in Prairie State Bank and Henningsen, and the equities of the subcontractor now suing. In like circumstances a private enterprise could not take advantage of the misconduct of its transferor. Service is just as amenable to the judicial process as is a private enterprise. F.H.A. v. Burr, 309 U.S. 242, 245, 60 S.Ct. 488, 84 L.Ed. 724.

We are not impressed with the argument of Service that the subcontractor never made a demand on Department. There was no need for demand. Department knew of the subcontractor’s claim and led the subcontractor to believe that Department would not process progress payment billings in excess of 70%. To argue that a demand is necessary is to forget fair play and to reward misconduct.

The question remains of the funds to which the equities of the subcontractor attach. As to the $35,739.47 remaining in Service’s hands we have held that equity requires the subordination of Service’s liquidated damage claim to the claim of the subcontractor. The amount is insufficient to pay the subcontractor in full and resort must be had to the $190,747.00 paid to Corrigan’s assignee.

The cases such as Fireman’s Fund, 421 F.2d 706, 190 Ct.Cl. 804, holding that the government cannot escape liability by wrongful payment, concerned Miller Act sureties. The principle is not changed by the fact that here we have an unpaid subcontractor rather than a surety. Department compounded its error in contracting without bond by wrongfully paying to an assignee after notice of the subcontractor’s claim. It arrogated to itself determination of entitlement to the fund which it held. The subcontractor had a legally enforceable right against Department. The Postal Reorganization Act transferred that liability to Service. Service may not profit by the wrongs of its predecessor. See United States v. State Bank, 6 Otto 30, 36, 96 U.S. 30, 36, 24 L.Ed. 647. The subcontractor has an equitable lien both on the fund remaining in Service’s hands and on the money wrongfully paid to the assignee.

Service contends that the award of pre-judgment interest was wrong because the claim was unliquidated. In advance of trial the parties stipulated the amount due Kennedy. For all that appears in the record, the amount was readily ascertainable. The fact that liability was disputed does not preclude pre-judgment interest. See North Drive-In Theatre Corporation v. Park-In Theatres, Inc., 10 Cir., 248 F.2d 232, 237.

Affirmed.


source: Caselaw Access Project

author: J. JOSEPH SMITH, Circuit Judge:

license: Public Domain

text:
    Bolivar IRIZARRY, Appellant, v. UNITED STATES of America, Appellee.
    No. 282, Docket 74-1866.
    United States Court of Appeals Second Circuit.
    Argued Nov. 18, 1974.
    Decided Dec. 19, 1974.
    As Amended Jan. 23, 1975.

      Stephen Gillers, New York City (Me-trick & Ostrow, Seymour Ostrow, New York City, of counsel), for appellant.
    Lee A. Adlerstein, Asst. U. S. Atty. (David G. Trager, U. S. Atty., E. D. N. Y., Raymond J. Dearie and Thomas R. Pattison, Asst. U. S. Attys., of counsel), for appellee.
    Before SMITH, HAYS and MANSFIELD, Circuit Judges.
   J. JOSEPH SMITH, Circuit Judge:

Bolivar Irizarry appeals from an order of the United States District Court for the Eastern District of New York, Mark A. Costantino, Judge, denying his motion under 28 U.S.C. § 2255 to vacate a judgment of conviction for conspiracy to possess and distribute cocaine, entered upon that court’s acceptance of Irizarry’s plea of guilty. Irizarry attacks that judgment on the ground that the district court accepted his guilty plea in violation of Rule 11, Fed.R.Crim.P., in that it failed to establish on the record at the time of the plea that the plea was entered with an understanding of the nature of the charge and that there was a factual basis for the plea. The district court rejected these contentions. We hold that at the time of the plea there was a failure sufficiently to comply with the requirement of Rule 11 that the court, by “addressing the defendant personally,” determine “that the plea is made . . . with an understanding of the nature of the charge. . . . ” We therefore reverse and remand to enable Irizarry to plead anew.

I. THE FACTS

This is not the first time that the conspiracy alleged in this case has been before this court; in United States v. Gonzalez, 488 F.2d 833 (2d Cir. 1973), we reversed the conviction of one of Irizar-ry’s co-defendants. There is no need to repeat the detailed description of the events leading up to the arrests of the alleged co-conspirators set forth in Gonzalez; the following skeletal outline will suffice.

On October 7, 1972, one Jose Valenzuela-Correa was arrested at John F. Kennedy International Airport by Customs officials who discovered approximately four pounds of cocaine strapped to his body. Correa, apparently recognizing the difficulty of concocting a plausible explanation in such circumstances, agreed to cooperate with the authorities, and a controlled delivery of the cocaine was arranged. Correa went to a preliminary meeting with Gonzalez, the purchaser of the drugs, to set up the details. Gonzalez recruited Irizarry to make the actual pickup at Correa’s motel room. Irizarry went to the motel and established his identity to Correa’s satisfaction. As he inspected the cocaine, he was arrested.

Ten days later, on October 19, 1972, Irizarry, Correa, Gonzalez and “John Doe, also known as Mario ‘C’ ” (a Chilean acquaintance of Correa’s, named by him as the seller of the cocaine) were indicted. The seven-count indictment charged conspiracies to import, possess and distribute the cocaine, and the corresponding substantive counts. Irizarry himself was named only in counts three (conspiracy to possess and distribute), six (possession with intent to distribute) and seven (distribution). On January 15, 1973, Correa entered a guilty plea to count three, conspiracy to possess and distribute. Two weeks later, on January 29, Irizarry entered a plea to the same count. Whether the colloquy that took place at that time satisfied Rule 11 is the issue on this appeal; the relevant portion of the transcript is set forth in the margin. On April 9, 1973, Irizarry was sentenced to eight years imprisonment and a special parole term of five years, and the charges against him under counts six and seven were dismissed.

On March 13, 1974, Irizarry moved the district court (a) to reduce the special parole term to three years, since at the time the plea was entered the court had stated that three years was the maximum special parole term he could have received; (b) to correct a clerical error in the judgment, which stated erroneously that Irizarry had been found guilty of conspiracy to import, rather than conspiracy to possess and distribute; and (c) to vacate the judgment entirely, on the ground that there had not been compliance with Rule 11. The court granted the motion as to (a) and (b), but denied it as to (c). It is that denial which Iri-zarry challenges on this appeal.

II. IRIZARRY’S UNDERSTANDING OF THE NATURE OF THE CHARGE

Rule 11 provides:

A defendant may plead not guilty, guilty or, with the consent of the court, nolo contendere. The court may refuse to accept a plea of guilty, and shall not accept such plea or a plea of nolo contendere without first addressing the defendant personally and determining that the plea is made voluntarily with understanding of the nature of the charge and the consequences of the plea. If a defendant refuses to plead or if the court refuses to accept a plea of guilty or if a defendant corporation fails to appear, the court shall enter a plea of not guilty. The court shall not enter a judgment upon a plea of guilty unless it is satisfied that there is a factual basis for the plea.

Irizarry claims that the district court did not make a sufficient determination of whether he understood the nature of the charge, because its questioning was directed not at the charge of conspiracy to possess and distribute, but rather at the charge of conspiracy to import. In support of this argument, he points to the erroneous judgment of conviction and the fact that, in its opinion denying his present motion, the district court referred to statements made by Correa when he entered his guilty plea. We think this claim to be farfetched. There was no indication that the district court had smuggling in mind during the questioning of Irizarry; the inquiry was focused rather on Irizarry’s role in going to Correa’s motel room to pick up the cocaine for Gonzalez. In addition, the erroneous judgment was merely a clerical error, which there is no reason to impute to the court. Finally, the charge to which Correa pled guilty was not, as Irizarry claims, conspiracy to import, but rather conspiracy to possess and distribute — the same charge to which Irizarry entered his guilty plea. Thus, to the extent the district court’s reference to Correa, in an opinion dated fifteen months after Irizarry’s plea, can have any bearing whatever on the court’s thinking at the time it accepted that plea, it supports the proposition that the court’s questions were directed at the correct charge.

That Irizarry’s principal argument carries no weight does not dispose of the appeal, however, for the very fact that such an argument could be made at all raises questions regarding compliance with Rule 11. If, at the time of the plea, the trial court addresses the defendant personally to determine his understanding of the nature of the charge, it would seem that the identity of the charge would, virtually as a matter of definition, be spelled out with sufficient precision to preclude the subsequent claim that the court had the wrong charge in mind. In fact, such a claim is not precluded in this case because the full charge — conspiracy to possess and distribute cocaine — was never even identified. The closest that the court came was to identify the charge as “conspiracy”; conspiracy to do what was never mentioned. In addition, the court’s discussion of the nature of a conspiracy' charge was limited to statements that “you can’t conspire with yourself” and “you have to have somebody else to conspire with” — hardly an adequate probing of the nature of conspiracy. Finally, at no time was Irizarry asked whether he understood the nature of the offense with which he was charged, nor did he volunteer that information, nor did he say anything from which such an understanding might be inferred. Rule 11 forbids the acceptance of a guilty plea in such circumstances.

The standards for compliance with Rule 11 were set forth in McCarthy v. United States, 394 U.S. 459, 89 S.Ct. 1166, 22 L.Ed.2d 418 (1969). That decision stressed that the defendant’s understanding of the charge must be established through personal questioning by the trial judge; to the extent that he “resorts to ‘assumptions’ not based upon recorded responses to his inquiries,” id. at 467, 89 S.Ct. at 1171, he fails to comply with the Rule:

There is no adequate substitute for demonstrating in the record at the time the plea is entered the defendant’s understanding of the nature of the charge against him.

Id. at 470, 89 S.Ct. at 1173 (emphasis in original). It follows as a matter of course from McCarthy that there can be no compliance with Rule 11 where the charge is never even fully identified.

Moreover, even if the charge had been identified, the court’s discussion of conspiracy did not pass muster under Rule 11. Just how much explanation is necessary in each particular instance will vary from case to case. McCarthy, supra, 394 U.S. at 467 n. 20, 89 S.Ct. at 1171 n. 20. The determination will depend, inter alia, upon the complexity of the crime charged. Eagle Thunder v. United States, 477 F.2d 1326, 1328 (8th Cir.), cert. denied, 414 U.S. 873, 94 S.Ct. 142, 38 L.Ed.2d 92 (1973). That was a case of assault with a dangerous weapon — a relatively simple crime. It was held that Rule 11 was complied with where the court asked the defendant if he “did wilfully, knowingly and unlawfully assault Moses Anderson McBride with a dangerous weapon,” and the defendant answered affirmatively. Id. On the other hand, where the charge is more complicated, more explanation is necessary. In Majko v. United States, 457 F.2d 790 (7th Cir. 1972), the defendant was charged with a crime in violation of state law on a federal enclave, under 18 U.S.C. §§ 7, 13; the court held: “Reading the indictment and asking whether a defendant has discussed the charge with his attorney does not satisfy McCarthy.” Id. at 791. And in United States v. Cody, 438 F.2d 287 (8th Cir. 1971), where the defendant was charged with making a false and fictitious statement to a licensed - firearms dealer in order to buy a firearm, it was held that the trial court improperly accepted a guilty plea after reading the indictment to the defendant and asking if counsel had explained the charges.

In this case, the district court started out with good intentions to explain the law of conspiracy to Irizarry and elicit his understanding of such a charge. However, that inquiry was sidetracked, never to be resumed, after the following brief exchange took place:

The Court: Of course, you can’t conspire with yourself.
Defendant Irizarry: No.
The Court: In order to conspire, you have to have somebody else to conspire with. Is that true?
Defendant Irizarry: Yes.

This limited explanation of conspiracy does not meet the requirement of McCarthy that the court determine the defendant’s “understanding of the essential elements of the crime charged.” 394 U.S. at 471, 89 S.Ct. at 1173. Conspiracy is a somewhat complicated crime, and, while the court need not explore every nook and cranny of conspiracy law before accepting a guilty plea, it must at least set out the bare bones elements of the offense. At a minimum, a defendant should not be allowed to plead guilty to conspiracy under the statute here involved, 21 U.S.C. § 846, unless he understands that such a charge requires proof of an agreement between two or more persons to commit an offense under sub-chapter I of the Drug Abuse Prevention and Control Act, 21 U.S.C. § 801 et seq.; knowledge of the existence of a conspiracy; and an intent to participate in the unlawful enterprise. United States v. Falcone, 311 U.S. 205, 210, 61 S.Ct. 204, 85 L.Ed. 128 (1941); United States v. Rosner, 485 F.2d 1213, 1229 (2d Cir. 1973), cert. denied, 417 U.S. 950, 94 S.Ct. 3080, 41 L.Ed.2d 672 (1974); United States v. Agueci, 310 F.2d 817, 836 (2d (2d Cir.), cert. denied, 362 U.S. 974, 80 S.Ct. 1057, 1058, 1059, 4 L.Ed.2d 1009, 1010 (1960). Here, the district court’s explanation did not meet this standard.

We also note that at no time did Iri-zarry acknowledge that he understood the nature of the charge, nor can such understanding be inferred from any of his remarks. In United States v. Landry, 463 F.2d 253 (9th Cir. 1972), it was held that Rule 11 was not complied with where the record did not show, nor did the defendant acknowledge, that he understood the elements of the conspiracy offense to which he entered a guilty plea. It would appear to be a minimal requirement of Rule 11 that the defendant’s understanding of the nature of the charge be demonstrated on the record. Here, that requirement was not met.

In sum, the charge was never fully identified, the explanation of conspiracy was inadequate, and the record does not demonstrate that Irizarry understood the nature of the charge. Any one of these reasons would suffice as an independent basis for reversal. Taken together, they compel us to hold that the district court did not comply with Rule 11 in accepting Irizarry’s plea of guilty. Accordingly, the judgment must be reversed, the plea set aside, and the case remanded so that Irizarry may be afforded the opportunity to plead anew. McCarthy v. United States, supra.

III. FACTUAL BASIS FOR THE PLEA

Irizarry also contends that there was not a sufficient factual basis for the district court to accept the plea. At the hearing which culminated in the acceptance of the plea, the only facts established on the record which tend to provide a basis for the plea are those derived from Irizarry’s own admissions. He admitted that he was told by Gonzalez (whom he did not identify by name) to go to a hotel room and pick up from Correa a package which he knew contained cocaine. It was implicit in these admissions that Irizarry was supposed to return the cocaine to Gonzalez. On the basis of these facts, the court accepted the plea. In its opinion denying Irizar-ry’s § 2255 motion, however, the district court marshaled additional evidence in support of its conclusion that there had been a factual basis for the plea. Reference was made to statements made by Correa at the time he entered his plea of guilty to the same charge two weeks before Irizarry’s plea, as well as to admissions made by Irizarry in affidavits made in support of pre-trial and post-conviction motions. Irizarry argues that such references to materials not made a part of the record at the time of the plea are improper. The government counters that the district court was not limited to the plea colloquy in determining whether there was a factual basis, but rather that it was free to refer to any information at its disposal.

It is undeniably true that the district court, in determining whether there was a factual basis for the plea, was free to rely on any facts at its disposal — not just the admissions of the defendant. The text of Rule 11 itself mentions “addressing the defendant personally” only in conjunction with the determination “that the plea is made voluntarily with understanding of the nature of the charge and the consequences of the plea.” There is no such reference with regard to the requirement that the court satisfy itself that there is a factual basis for the plea. That this distinction was intentional is made clear by the following excerpt from the Note of the Advisory Committee on Criminal Rules to the 1966 Amendment to Rule 11:

The court should satisfy itself, by inquiry of the defendant or the attorney for the government, or by examining the presentence report, or otherwise, that the conduct which the defendant admits constitutes the offense charged

However, the fact that the court may refer to additional material does not answer Irizarry’s objection that this material was not made a part of the record of the proceedings at which the plea was entered. Any additional facts on which the court relies in determining that there is a factual basis for the plea must be put into the record at the time of the plea. See, Manley v. United States, 432 F.2d 1241 (2d Cir. 1970) (en banc). There, we had occasion to consider the effect on McCarthy, supra, of Halliday v. United States, 394 U.S. 831, 89 S.Ct. 1498, 23 L.Ed.2d 16 (1969), which held that McCarthy was not to be applied retroactively. We stated:

With respect to pleas of guilty taken prior to April 2, 1969 [the effective date of McCarthy), we construe the holdings of McCarthy and Halliday not to require any further inquiry into whether the judge in accepting the plea of guilty had satisfied himself that there was a factual basis for the plea if it is apparent in the record of the case that there was a factual basis for the plea which was known to the judge who imposed sentence.

432 F.2d at 1244. As to post-McCarthy pleas, however, we construed the rule as follows:

[The trial judge] must personally question the defendant at the time of pleading about the defendant’s knowledge of the nature of the charge and the consequences of the plea. Further, he must demonstrate on the record that he has satisfied himself that there is a factual basis for the plea.

Id. (emphasis added). If there was any doubt after Manley that the court must read into the record any facts on which it relies, it was put to rest in Santobello v. New York, 404 U.S. 257, 261, 92 S.Ct. 495, 30 L.Ed.2d 427 (1971):

Fed.Rule Crim.Proc. 11, governing pleas in federal courts, now makes clear that the sentencing judge must develop, on the record, the factual basis for the-plea, as, for example, by having the accused describe the conduct that gave rise to the charge.

(Footnote omitted; emphasis in original). Post hoc explanations, such as the one attempted in this case, are insufficient.

Thus, whether or not there was a sufficient factual basis for the plea in this case must be determined solely on the basis of Irizarry’s admissions at the time of the plea. Applying the test of United States v. Steele, 413 F.2d 967, 969 (2d Cir. 1969), it appears to us that those admissions, if only barely, sketch out a sufficient factual basis.

We reverse this judgment of conviction not without regret. Irizarry was most likely guilty of something, and he most likely knew that he was guilty of something. Had Rule 11 been sufficiently complied with, this appeal would probably never have been taken. However, reversal is necessary to comply with the admonition in McCarthy, supra, 394 U.S. at 472, 89 S.Ct. at 1174, 22 L.Ed.2d 418.

It is . . . not too much to require that, before sentencing defendants to years of imprisonment, district judges take the few minutes necessary to inform them of their rights and to determine whether they understand the action they are taking.

Reversed and remanded.

      . The Court: Now, the charge to which you are pleading guilty, under the United States Code is a charge of conspiracy.
      Now, you must tell this Court in your own words, what conspiracy you say you committed?
      Defendant Irizarry: Well, I know I was— that I was supposed to pick up at the time—
      The Court: What’s that?
      Defendant Irizarry: I knew what I was going to pick up. That it was cocaine.
      The Court: You were going to pick up cocaine?
      Defendant Irizarry: Right.
      The Court: Of course, you can’t conspire with yourself.
      Defendant Irizarry: No.
      The Court: In order to conspire, you
      have to have somebody else to conspire with. Is that true?
      Defendant Irizarry: Yes.
      The Court: Was there anyone else that you were working with in this agreement?
      Defendant Irizarry: No. I was told by someone else to pick up that package.
      The Court: You were told by someone else to pick up that package?
      Defendant Irizarry: Yes.
      The Court: And as a result of that conversation with someone else, you then did pick up the package?
      Defendant Irizarry: I went to pick it up and I was caught before I picked it up.
      The Court: What’s that?
      Defendant Irizarry: I was caught by the Federal agents.
      The Court: You were caught. But you went with the—
      Mr. Stechel: Could we first—
      The Court: From whom?
      Defendant Irizarry: This fellow named at the bar—
      Mr. Stechel: From whom did you pick up the cocaine?
      Defendant Irizarry: I went to a hotel room. The guy — Valenzuela. That’s the name.

      . In Manley v. United States, 432 F.2d 1241, 1244 (2d Cir. 1970) (en banc), this court stated that the defendant’s knowledge of the nature of the charge must be established through personal questioning by the trial judge.

      . The court in Eagle Thunder indicated that other factors to be considered would include “the defendant’s age and record and whether he was represented by counsel.” 477 F.2d at 1328. To this list we would add his intelligence, education, and ability to comprehend what was being said to him. This last factor would encompass any language barrier that might exist. In this case, the government contended at oral argument that Irizarry’s response of “No” to the court’s question, “Was there anyone else that you were working with in this agreement?” should not be construed as a denial of participation in a conspiracy because Irizarry is not completely fluent in English and probably misunderstood the question. If Irizarry does have a language problem, that would have been all the more reason for explaining the charges in greater detail.

      . In Paradiso v. United States, 482 F.2d 409 (3d Cir. 1973), it was held that reading the indictment may satisfy the requirement that the defendant’s understanding of the charge be determined. Referring to Majko and Cody, the court observed:
      Two circuits seem to say that reading the indictment is not enough to satisfy the requirement that the trial court ascertain the factual basis of the plea. [Citations omitted.] There is, however, no indication that they would extend this holding to the element of the defendant’s understanding of the nature of the charges.

        Id. at 414 n. 3. If, in the second sentence of this excerpt, the court is saying that Majko and Cody did not hold that, under the facts of those cases, reading the indictment was insufficient, we would be compelled to disagree. The court in Cody clearly indicated that the “substance of the indictment was read to the defendant,” 438 F.2d at 288, and held that this, coupled with an inquiry as to whether counsel had explained the charges, was insufficient to determine the defendant’s understanding. Majko specifically relied on Cody for this proposition. We believe, however, that it is more plausible to read Paradi-so as saying that Majko and Cody did not hold that reading the indictment can never constitute an adequate determination of the defendant’s understanding of the nature of the charge. With this interpretation we would agree. We cite Majko and Cody for the proposition that reading the indictment did not, under the particular circumstances of those cases, suffice. And we do not read Paradiso as holding that reading the indictment will always suffice. Thus, regarding the requirement that the court determine the defendant’s understanding of the nature of the charge, we perceive no inherent inconsistencies among our position, the position of Paradiso, and that of Majko and Cody. There is, however, an aspect of Paradiso's discussion of the factual basis requirement with which we do disagree. See, note 9, infra.

      . See, Berry v. United States, 435 F.2d 224 (7th Cir. 1970), holding that where a defendant was charged with unlawful importation of heroin and the court identified the charge and read a portion of the statute describing the presumptions on which the government would be able to rely at trial, the court’s failure to explain the law of constructive possession did not violate Rule 11.

      . The Falcone and Rosner cases identify as an additional element of conspiracy the commission of an overt act by one or more of the co-conspirators in furtherance of the unlawful purpose. While the government must allege and prove an overt act under the general conspiracy statute, 18 U.S.C. § 371, it has been held that there is no such requirement under the particular conspiracy statute here involved and its predecessors. Ewing v. United States, 386 F.2d 10 (9th Cir. 1967), cert. denied, 390 U.S. 991, 88 S.Ct. 1192, 19 L.Ed.2d 1299 (1968); Leyvas v. United States, 371 F.2d 714 (9th Cir. 1967); United States v. Garfoli, 324 F.2d 909 (7th Cir. 1963); United States v. DeViteri, 350 F.Supp. 550 (E.D.N.Y.1972); United States v. Gardner, 202 F.Supp. 256 (N.D.Cal.1962). Cf., United States v. Galgano, 281 F.2d 908, 911 (2d Cir. 1960), cert. denied, 366 U.S. 967, 81 S.Ct. 1929, 6 L.Ed.2d 1257 (1961).

      . In the course of its opinion denying Irizar-ry’s § 2255 motion, the district court, in discussing the claim that there had been no showing that Irizarry understood the nature of the charge, set forth the elements of conspiracy in somewhat greater detail than was done at the time of the plea, and then proceeded to show that Irizarry admitted committing acts which constituted the offense charged. The latter part of the discussion, while it bears on the question of whether there was a factual basis for the plea, is wholly irrelevant to the question of whether Irizarry understood the charge to which he was pleading guilty. And the former portion is inadequate not only because it ignores the fact that there was no discussion of what it was that Irizarry conspired to do, but also— more fundamentally — because a post hoc explanation of the charge cannot serve as a substitute for eliciting from the defendant personally his understanding of the nature of the charge before a plea of guilty is accepted.

      . The Rule refers to not entering a judgment, rather than not accepting a plea, unless there is a factual basis for the plea. On its face, this seems to imply that the determination of factual basis may be postponed until sentencing. However, to bifurcate the inquiry in this manner would be counterproductive and could lead to confusion. The Rule permits the court to review the facts at the time of sentencing, and to reject a previously accepted plea if the facts developed in the presen-tence report or elsewhere tend to cast doubt on the plea’s factual basis. “But the incorporation of this ‘escape-hatch’ in the Rule does not relieve the judge of making the inquiries required at the time the plea is taken.” 8 J. Moore, Federal Practice, fl 11.03 [4] at 11-67 (2d ed. 1974) (footnote omitted).

      . We note as particularly inappropriate the reference to an affidavit filed after judgment had entered.

      . Steele was overruled in part by United States v. Manley, supra, note 2, 432 F.2d at 1245. But Manley in no way vitiated Steele’s standard, for determining whether there is a factual basis:
      [PJarticularly where more than one defendant is charged, a sufficient statement of the acts and intent of the particular defendant, what the defendant did and intended, is necessary to an intelligent determination of whether there was a factual basis for the plea.
      413 F.2d at 969.
      We note that Steele was criticized in Para-diso v. United States, 482 F.2d 409, 415 & n. 4 (3d Cir. 1973). With respect to the requirement that the court satisfy itself that there is an adequate factual basis for the plea, the Third Circuit, citing Steele and also Majko v. United States, 457 F.2d 790 (7th Cir. 1972), and United States v. Cody, 438 F.2d 287 (8th Cir. 1971), stated:
      We decline to follow the precedents in several other courts that seem to indicate that a plea is invalid under rule 11 if the trial court does no more than read the indictment.
      With deference, we suggest that the Third Circuit has misread what we wrote in Steele. We did not rule that reading the indictment and obtaining the defendant’s admission that he committed the acts charged therein can never constitute an adequate factual basis. Nor do we think that such an absolute rule was necessary to the holdings of Majko and Cody. If in any particular case reading the indictment comports with the test laid down in Steele, then obviously Steele will be satisfied. Steele was concerned with ensuring compliance with the substance of Rule 11— not with legitimizing or outlawing any particular procedure.


text:
    PARSONS & WHITTEMORE OVERSEAS CO., INC., Plaintiff-Appellant-Appellee, v. SOCIETE GENERALE DE L'INDUSTRIE DU PAPIER (RAKTA), and Bank of America, Defendants-Appellees, Societe Generale de L'Industrie du Papier (RAKTA), Defendant-Appellee-Appellant.
    Nos. 174 and 637, Docket 74-1642 and 74-1676.
    United States Court of Appeals, Second Circuit.
    Argued Nov. 20, 1974.
    Decided Dec. 23, 1974.

      Malcolm A. Hoffmann, New York City (Edward A. Woolley and Frank J. Kaufman, New York City, of counsel), for plaintiff-appellant-appellee.
    Jerome Doyle (Cahill, Gordon & Rein-del, New York City, Martin L. Lieberman and Edward F. Hummer, Jr., New York City, of counsel), for defendant-ap-pellee-appellant.
    Before SMITH, HAYS and MANSFIELD, Circuit Judges.
   J. JOSEPH SMITH, Circuit Judge:

Parsons & Whittemore Overseas Co., Inc., (Overseas), an American corporation, appeals from the entry of summary judgment on February 25, 1974, by Judge Lloyd F. MacMahon of the Southern District of New York on the counterclaim by Societe Genérale de L’Industrie du Papier (RAKTA), an Egyptian corporation, to confirm a foreign arbitral award holding Overseas liable to RAKTA for breach of contract. RAKTA in turn challenges the court’s concurrent order granting summary judgment on Overseas’ complaint, which sought a declaratory judgment denying RAKTA’s entitlement to recover the amount of a letter of credit issued by Bank of America in RAKTA’s favor at Overseas’ request. Jurisdiction is based on 9 U.S.C. § 203, which empowers federal district courts to hear cases to recognize and enforce foreign arbitral awards, and 9 U.S.C. § 205, which authorizes the removal of such cases from state courts, as was accomplished in this instance. We affirm the district court’s confirmation of the foreign award. Since it has been established that RAKTA can fully satisfy the award out of a supersedeas bond posted by Overseas, we need not and do not rule on RAKTA’s appeal from the adjudication of its letter of credit claim.

In November 1962, Overseas consented by written agreement with RAKTA to construct, start up and, for one year, manage and supervise a paperboard mill in Alexandria, Egypt. The Agency for International Development (AID), a branch of the United States State Department, would finance the project by supplying RAKTA with funds with which to purchase letters of credit in Overseas’ favor. Among the contract’s terms was an arbitration clause, which provided a means to settle differences arising in the course of performance, and a “force majeure” clause, which excused delay in performance due to causes beyond Overseas’ reasonable capacity to control.

Work proceeded as planned until May, 1967. Then, with the Arab-Israeli Six Day War on the horizon, recurrent expressions of Egyptian hostility to Americans — nationals of the principal ally of the Israeli enemy — caused the majority of the Overseas work crew to leave Egypt. On June 6, the Egyptian government broke diplomatic ties with the United States and ordered all Americans expelled from Egypt except those who would apply and qualify for a special visa.

Having abandoned the project for the present with the construction phase near completion, Overseas notified RAKTA that it regarded this postponement as excused by the force majeure clause. RAKTA disagreed and sought damages for breach of contract. Overseas refused to settle and RAKTA, already at work on completing the performance promised by Overseas, invoked the arbitration clause. Overseas responded by calling into play the clause’s option to bring a dispute directly to a three-man arbitral board governed by the rules of the International Chamber of Commerce. After several sessions in 1970, the tribunal issued a preliminary award, which recognized Overseas’ force majeure defense as good only during the period from May 28 to June 30, 1967. In so limiting Overseas’ defense, the arbitration court emphasized that Overseas had made no more than a perfunctory effort to secure special visas and that AID’s notification that it was withdrawing financial backing did not justify Overseas’ unilateral decision to abandon the project. After further hearings in 1972, the tribunal made its final award in March, 1973: Overseas was held liable to RAKTA for $312,507.45 in damages for breach of contract and $30,000 for RAKTA’s costs; additionally, the arbitrators’ compensation was set at $49,000, with Overseas responsible for three-fourths of the sum.

Subsequent to the final award, Overseas in the action here under review sought a declaratory judgment to prevent RAKTA from collecting the award out of a letter of credit issued in RAKTA’s favor by Bank of America at Overseas’ request. The letter was drawn to satisfy any “penalties” which an arbi-tral tribunal might assess against Overseas in the future for breach of contract. RAKTA contended that the arbitral award for damages met the letter’s requirement of “penalties” and counterclaimed to confirm and enter judgment upon the foreign arbitral award. Overseas’ defenses to this counterclaim, all rejected by the district court, form the principal issues for review on this appeal. Four of these defenses are derived from the express language of the applicable United Nations Convention on the Recognition and Enforcement of Foreign Arbi-tral Awards (Convention), 330 U.N.Treaty Ser. 38, and a fifth is arguably implicit in the Convention. These include: enforcement of the award would violate the public policy of the United States, the award represents an arbitration of matters not appropriately decided by arbitration; the tribunal denied Overseas an adequate opportunity to present its case; the award is predicated upon a resolution of issues outside the scope of the contractual agreement to submit to arbitration; and the award is in manifest disregard of law. In addition to disputing the district court’s rejection of its position on the letter of credit, RAKTA seeks on appeal modification of the court’s order to correct for an arithmetical error in the sum entered for judgment, as well as an assessment of damages and double costs against Overseas for pursuing a frivolous appeal.

I. OVERSEAS’ DEFENSES AGAINST ENFORCEMENT

In 1958 the Convention was adopted by 26 of the 45 states participating in the United Nations Conference on Commercial Arbitration held in New York. For the signatory states, the New York Convention superseded the Geneva Convention of 1927, 92 League of Nations Treaty Ser. 302. The 1958 Convention’s basic thrust was to liberalize procedures for enforcing foreign arbitral awards: While the Geneva Convention placed the burden of proof on the party seeking enforcement of a foreign arbitral award and did not circumscribe the range of available defenses to those enumerated in the convention, the 1958 Convention clearly shifted the burden of proof to the party defending against enforcement and limited his defenses to seven set forth in Article V. See Contini, International Commercial Arbitration, 8 Am.J. Comp.L. 283, 299 (1959). Not a signatory to any prior multilateral agreement on enforcement of arbitral awards, the United States declined to sign the 1958 Convention at the outset. The United States ultimately acceded to the Convention, however, in 1970, [1970] 3 U.S.T. 2517, T.I.A.S. No. 6997, and implemented its accession with 9 U.S.C. §§ 201 — 208. Under 9 U.S.C. § 208, the existing Federal Arbitration Act, 9 U.S.C. §§ 1-14, applies to the enforcement of foreign awards except to the extent to which the latter may conflict with the Convention. See generally, Comment, International Commercial Arbitration under the United Nations Convention and the Amended Federal Arbitration Statute, 47 Wash.L. Rev. 441 (1972).

A. Public Policy

Article V(2)(b) of the Convention allows the court in which enforcement of a foreign arbitral award is sought to refuse enforcement, on the defendant’s motion or sua sponte, if “enforcement of the award would be contrary to the public policy of [the forum] country.” The legislative history of the provision offers no certain guidelines to its construction. Its precursors in the Geneva Convention and the 1958 Convention’s ad hoc committee draft extended the public policy exception to, respectively, awards contrary to “principles of the law” and awards violative of “fundamental principles of the law.” In one commentator’s view, the Convention’s failure to include similar language signifies a narrowing of the defense. Contini, supra, 8 Am.J. Comp.L. 283 at 304. On the other hand, another noted authority in the field has seized upon this omission as indicative of an intention to broaden the defense. Quigley, Accession by the United States to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1070-71 (1961).

Perhaps more probative, however, are the inferences to be drawn from the history of the Convention as a whole. The general pro-enforcement bias informing the Convention and explaining its super-session of the Geneva Convention points toward a narrow reading of the public policy defense. An expansive construction of this defense would vitiate the Convention’s basic effort to remove preexisting obstacles to enforcement. • See Straus, Arbitration of Disputes between Multinational Corporations, in New Strategies for Peaceful Resolution of International Business Disputes 114 — 15 (1971); Digest of Proceedings of International Business Disputes Conference, April 14, 1971, in id. at 191 (remarks of Professor W. Reese). Additionally, considerations of reciprocity — considerations given express recognition in the Convention itself — counsel courts to invoke the public policy defense with caution lest foreign courts frequently accept it as a defense to enforcement of arbitral awards rendered in the United States.

We conclude, therefore, that the Convention’s public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state’s most basic notions of morality and justice. Cf. 1 Restatement Second of the Conflict of Laws § 117, comment c, at 340 (1971); Loucks v. Standard Oil Co., 224 N.Y. 99, 111, 120 N.E. 198 (1918).

Under this view of the public policy provision in the Convention, Overseas’ public policy defense may easily be dismissed. Overseas argues that various actions by United States officials subsequent to the severance of American-Egyptian relations — most particularly, AID’s withdrawal of financial support for the Overseas-RAKTA contract — required Overseas, as a loyal American citizen, to abandon the project. Enforcement of an award predicated on the feasibility of Overseas’ returning to work in defiance of these expressions of national policy would therefore allegedly contravene United States public policy. In equating “national” policy with United States “public” policy, the appellant quite plainly misses the mark. To read the public policy defense as a parochial device protective of national political interests would seriously undermine the Convention’s utility. This provision was not meant 'to enshrine the vagaries of international politics under the rubric of “public policy.” Rather, a circumscribed public policy doctrine was contemplated by the Convention’s framers and every indication is that the United States, in acceding to the Convention, meant to subscribe to this supranational emphasis. Cf. Scherk v. Alberto-Culver Co., 417 U.S. 506, 94 S.Ct. 2449, 41 L.Ed.2d 270 (1974).

To deny enforcement of this award largely because of the United States’ falling out with Egypt in recent years would mean converting a defense intended to be of narrow scope into a major loophole in the Convention’s mechanism for enforcement. We have little hesitation, therefore, in disallowing Overseas’ proposed public policy defense.

B. Non-Arbitrability

Article V(2)(a) authorizes a court to deny enforcement, on a defendant’s or its own motion, of a foreign arbitral award when “[t]he subject matter of the difference is not capable of settlement by arbitration under the law of that [the forum] country.” Under this provision, a court sitting in the United States might, for example, be expected to decline enforcement of an award involving arbitration of an antitrust claim in view of domestic arbitration cases which have held that antitrust matters are entrusted to the exclusive competence of the judiciary. See, e. g., American Safety Equipment Corp. v. J. P. Maguire & Co., 391 F.2d 821 (2d Cir. 1968). On the other hand, it may well be that the special considerations and policies underlying a “truly international agreement,” Scherk v. Alberto-Culver Co., supra, 417 U.S. 506 at 515, 94 S.Ct. 2449, call for a narrower view of non-arbitrability in the international than the domestic context. Compare id. with Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953) (enforcement of international, but not domestic, agreement to arbitrate claim based on alleged Securities Act violations.)

Resolution of Overseas’ non-arbitrability argument, however, does not require us to reach such difficult distinctions between domestic and foreign awards. For Overseas’ argument, that “United States foreign policy issues can hardly be placed at the mercy of foreign arbitrators ‘who are charged with the execution of no public trust’ and whose loyalties are to foreign interests,” Brief for Appellant at 23, plainly fails to raise so substantial an issue of arbitrability. The mere fact that an issue of national interest may incidentally figure into the resolution of a breach of contract claim does not make the dispute not arbitrable. Rather, certain categories of claims may be non-arbitrable because of the special national interest vested in their resolution. Cf. American Safety Equipment Corp., supra, 391 F.2d 821 at 826-827. Furthermore, even were the test for non-arbitrability of an ad hoc nature, Overseas’ situation would almost certainly not meet the standard, for Overseas grossly exaggerates the magnitude of the national interest involved in the resolution of its particular claim. Simply because acts of the United States are somehow implicated in a case one cannot conclude that the United States is vitally interested in its outcome. Finally, the Supreme Court’s decision in favor of arbitrability in a case far more prominently displaying public features than the instant one, Scherk v. Alberto-Culver Co., supra, compels by analogy the conclusion that the foreign award against Overseas dealt with a subject arbitrable under United States law.

The court below was correct in denying relief to Overseas under the Convention’s non-arbitrability defense to enforcement of foreign arbitral awards. There is no special national interest in judicial, rather than arbitral, resolution of the breach of contract claim underlying the award in this case.

C. Inadequate Opportunity to Present Defense /

Under Article V(l)(b) of the Convention, enforcement of a foreign arbitral award may be denied if the defendant can prove that he was “not given proper notice ... or was otherwise unable to present his case.” This provision essentially sanctions the application of the forum state’s standards of due process. See Quigley, supra, 70 Yale L.J. 1049 at 1067 n. 81; Quigley, Convention on Foreign Arbitral Awards, 58 A.B. A.J. 821, 825 (1972); Aksen, American Arbitration Accession Arrives in the Age of Aquarius, in New Strategies, supra, at 48.

Overseas seeks relief under this provision for the arbitration court’s refusal to delay proceedings in order to accommodate the speaking schedule of one of Overseas’ witnesses, David Nes, the United States Charge d’Affairs in Egypt at the time of the Six Day War. This attempt to state a due process claim fails for several reasons. First, inability to produce one’s witnesses before an arbitral tribunal is a risk inherent in an agreement to submit to arbitration. By agreeing to submit disputes to arbitration, a party relinquishes his courtroom rights — including that to subpoena witnesses — in favor of arbitration “with all of its well known advantages and drawbacks.” Washington-Baltimore Newspaper Guild, Local 35 v. The Washington Post Co., 143 U.S.App.D.C. 210, 442 F.2d 1234, 1238 (1971). Secondly, the logistical problems of scheduling hearing dates convenient to parties, counsel and arbitrators scattered about the globe argues against deviating from an initially mutually agreeable time plan unless a scheduling change is truly unavoidable. In this instance, Overseas’ allegedly key witness was kept from attending the hearing due to a prior commitment to lecture at an American university — hardly the type of obstacle to his presence which would require the arbitral tribunal to postpone the hearing as a matter of fundamental fairness to Overseas. Finally, Overseas cannot complain that the tribunal decided the case without considering evidence critical to its defense and within only Mr. Nes’ ability to produce. In fact, the tribunal did have before it an affidavit by Mr. Nes in which he furnished, by his own account, “a good deal of the information to which I would have testified.” Appendix to Brief of Appellant at 184a. Moreover, had Mr. Nes wished to furnish all the information to which he would have testified, there is every reason to believe that the arbitration tribunal would have considered that as well.

The arbitration tribunal acted within its discretion in declining to reschedule a hearing for the convenience of an Overseas witness. Overseas’ due process rights under American law, rights entitled to full force under the Convention as a defense to enforcement, were in no way infringed by the tribunal’s decision.

D. Arbitration in Excess of Jurisdiction

Under Article V(l)(c), one defending against enforcement of an arbitral award may prevail by proving that:

The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. .

This provision tracks in more detailed form § 10(d) of the Federal Arbitration Act, 9 U.S.C. § 10(d), which authorizes vacating an award “[w]here the arbitrators exceeded their powers.” Both provisions basically allow a party to attack an award predicated upon arbitration of a subject matter not within the agreement to submit to arbitration. This defense to enforcement of a foreign award, like the others already discussed, should be construed narrowly. Once again a narrow construction would comport with the enforcement-facilitating thrust of the Convention. In addition, the case law under the similar provision of the Federal Arbitration Act strongly supports a strict reading. See, e. g., United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593, 80 S.Ct. 1358, 4 L.Ed.2d 1424 (1960); Coenen v. R. W. Pressprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S. 949, 92 S.Ct. 2045, 32 L.Ed.2d 337 (1972).

In making this defense as to three components of the award, Overseas must therefore overcome a powerful presumption that the arbitral body acted within its powers. Overseas principally directs its challenge at the $185,000 awarded for loss of production. Its jurisdictional claim focuses on the provision of the contract reciting that “[n]either party shall have any liability for loss of production.” The tribunal cannot properly be charged, however, with simply ignoring this alleged limitation on the subject matter over which its decision-making powers extended. Rather, the arbitration court interpreted the provision not to preclude jurisdiction on this matter. As in United Steelworkers of America v. Enterprise Wheel & Car Corp., supra, the court may be satisfied that the arbitrator premised the award on a construction of the contract and that it is “not apparent,” 363 U.S. 593 at 598, 80 S.Ct. 1358, that the scope of the submission to arbitration has been exceeded.

The appellant’s attack on the $60,000 awarded for start-up expenses and $30,-000 in costs cannot withstand the most cursory scrutiny. In characterizing the $60,000 as “consequential damages” (and thus proscribed by the arbitration agreement), Overseas is again attempting to secure a reconstruction in this court of the contract — an activity wholly inconsistent with the deference due arbitral decisions on law and fact. See generally, Bernhardt v. Polygraphic Company of America, Inc., 350 U.S. 198, 203 & n. 4, 76 S.Ct. 273, 100 L.Ed. 199 (1956). The $30,000 in costs is equally unassailable, for the appellant’s contention that this portion of the award is inconsistent with guidelines set by the International Chamber of Commerce is twice removed from reality. First of all, contrary to Overseas’ representations, these guidelines (contained in the Guide to ICC Arbitration and reproduced in relevant part in Appendix to Brief of Appellant at 408a) do not require, as a pre-condition to an award of expenses, express authority for such an award in the arbitration clause. The arbitration agreement’s silence on this matter, therefore, is not determinative in the case under review. Secondly, since the parties in fact complied with the Guide’s advice to reach agreement on this matter prior to arbitration — i. e., the request by each for such an award for expenses amounts to tacit agreement on this point — any claim of fatal deviation from the Guide is disingenuous to say the least.

Although the Convention recognizes that an award may not be enforced where predicated on a subject matter outside the arbitrator’s jurisdiction, it does not sanction second-guessing the arbitrator’s construction of the parties’ agreement. The appellant’s attempt to invoke this defense, however, calls upon the court to ignore this limitation on its decision-making powers and usurp the arbitrator’s role. The district court took a proper view of its own jurisdiction in refusing to grant relief on this ground.

E. Award in “Manifest Disregard” of Law

Both the legislative history of Article V, see supra, and the statute enacted to implement the United States’ accession to the Convention are strong authority for treating as exclusive the bases set forth in the Convention for vacating an award. On the other hand, the Federal Arbitration Act, specifically 9 U.S.C. § 10, has been read to include an implied defense to enforcement where the award is in “manifest disregard” of the law. Wilko v. Swan, 346 U.S. 427, 436, 74 S.Ct. 182, 98 L.Ed. 168 (1953); Saxis Steamship Co. v. Multifacs International Traders, Inc., 375 F.2d 577, 582 (2d Cir. 1967); Amicizia Societa Navegazione v. Chilean Nitrate and Iodine Sales Corp., 274 F.2d 805, 808 (2d Cir. 1960).

This case does not require us to decide, however, whether this defense stemming from dictum in Wilko, supra, obtains in the international arbitration context. For even assuming that the “manifest disregard” defense applies under the Convention, we would have no difficulty rejecting the appellant’s contention that such “manifest disregard” is in evidence here. Overseas in effect asks this court to read this defense as a license to review the record of arbitral proceedings for errors of fact or law — a role which we have emphatically declined to assume in the past and reject once again. “[E]xtensive judicial review frustrates the basic purpose of arbitration, which is to dispose of disputes quickly and avoid the expense and delay of extended court proceedings.” Saxis Steamship Co., supra, 375 F.2d 577 at 582. See also, Amicizia Societa Navegazione, supra, 274 F.2d 805 at 808.

Insofar as this defense to enforcement of awards in “manifest disregard” of law may be cognizable under the Convention, it, like the other defenses raised by the appellant, fails to provide a sound basis for vacating the foreign arbitral award. We therefore affirm the district court’s confirmation of the award.

RAKTA does not frame its appeal from the district court’s decision disallowing collection on the letter of credit as contingent upon our reversing the district court’s confirmation of the award. Nevertheless, since RAKTA can fully satisfy the award out of a supersedeas bond posted by the appellant, we consider RAKTA’s appeal no longer to require resolution and therefore decline to rule on it.

II. TECHNICAL CORRECTION OF THE JUDGMENT, AND SUPPLEMENTARY AWARD TO PENALIZE PURSUIT OF FRIVOLOUS APPEAL

The district court entered judgment on the arbitral award for $342,507.45. RAKTA contends that the court erred in its arithmetic, the correct sum being $4,750 higher. And, indeed, RAKTA demonstrates with ease that Overseas’ indebtedness includes the difference between $36,750, the extent of its liability for the arbitrators’ compensation, and $32,000, the amount already paid by Overseas for these costs. This does not end the inquiry, however, for RAKTA has only established that Overseas owes $4,750 for arbitration costs, not that it owes this sum to RAKTA.

Overseas does not dispute, then, this $4,750 indebtedness on its part but instead argues that the amount is payable to the I.C.C. and not to RAKTA. Since the $32,000 paid at the outset of arbitration by Overseas (as well as by RAKTA, which is entitled to a partial refund) was paid to the I.C.C. and the $4;750 outstanding will go to compensate a tribunal operating under the auspices of the I.C.C., it would appear that this sum is due the I.C.C. rather than RAKTA. The district court did not discuss its reasons for excluding this $4,750 from the judgment. The court did have before it, however, an affidavit by counsel for RAKTA making the essentially identical argument as made on appeal for inclusion of the $4,750. We discount, then, the possibility of mere oversight on the district court’s part in excluding this sum from the judgment. Rather, we find that this exclusion reflects the most plausible interpretation of Overseas’ liability to RAKTA and therefore decline to amend the judgment upward by $4,750.

RAKTA also requests that this court award it damages and double costs as a penalty against Overseas for pursuing an allegedly frivolous appeal for purposes of delay. It is true that such an award has been made where an appellant presses a case of unquestionable frivolity, particularly where “the inference of an intent to delay is plausible.” South East Atlantic Shipping Ltd. v. Garnac Grain Co., 356 F.2d 189, 192-193 (2d Cir. 1966). See also, Oscar Gruss & Son v. Lumbermen’s Mutual Casualty Co., 422 F.2d. 1278, 1284 (2d Cir. 1970). But although we are not persuaded by any of the appellant’s numerous defenses to enforcement of the arbitral award, we would consider it harsh indeed to penalize by damages and double costs an effort of apparent honesty to explore the defense possibilities presented by a new and largely untested statute. We therefore reject RAKTA’s invitation to supplement its judgment with the type of award reserved for fundamentally insincere appeals.

We affirm the district court’s confirmation of the foreign arbitral award. Since the latter affirmance renders academic the validity of the court’s disposition of RAKTA’s letter of credit claim, we do not rule on RAKTA’s appeal from that part of the order below. Additionally, we find no error in the court’s computation of Overseas’ liability to RAKTA and deny RAKTA’s request to assess damages and double costs against Overseas for bringing an allegedly frivolous appeal.

Affirmed.

      . Bank of America assumes the position of an innocent stakeholder and awaits this court’s direction on the letter of credit claim.

      . Overseas initiated suit in New York Supreme Court and the case was removed to federal court on RAKTA’s petition.

      . RAKTA represented to the tribunal that it was prepared to finance the project without AID’S assistance.

      . A Contracting State shall not be entitled to avail itself of the present Convention against other Contracting States except to the extent that it is itself bound to apply the Convention.
      Article XIV. Cf. Comment, supra, 47 Wash. L.Rev. 441 at 486-87:
      [I]n a system based upon reciprocity any tendency to take an overly narrow view of foreign arbitral awards will be balanced by a desire to obtain the widest acceptance of America’s awards among the courts of other signatory states, which also have the public policy loophole available to them.

      . Moreover, the facts here fail to demonstrate that considered government policy forbids completion of the contract itself by a private party.

      . The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement specified in the said Convention.
      9 U.S.C. § 207.

      . In view of the general rule requiring strict conformity with the terms of a letter of credit, however, Venizelos, S.A. v. Chase Manhattan Bank, 425 F.2d 461, 464-465 (2d Cir. 1970); Banco Espanol de Credito v. State Street Bank & Trust Co., 385 F.2d 230, 234 (1st Cir. 1967), cert. denied, 390 U.S. 1013, 88 S.Ct. 1263, 20 L.Ed.2d 163 (1968); Marine Midland Grace Trust Company of New York v. Banco del Pais, S.A., 261 F.Supp. 884, 889 (S.D.N.Y.1966), we do register doubts about the force of RAKTA’s claim. For while the letter provides, in relevant part, that payment to RAKTA awaits presentation of “[a]n award issued by arbitrators . . . indicating the amount of the penalty due,” the award itself was written in terms of “damages” rather than “penalties.” But we refrain from passing on this admittedly complex issue and limit our affirmance to the district court’s confirmation of the foreign award.