How do I enforce my international arbitration award in the U.S.?
Surveys show that the losing party in an international arbitration voluntarily pays over 75% of the time. In cases where an award-debtor refuses to comply, and has assets in the U.S., the U.S. courts provide a path to collection.
Recognition vs. enforcement
The proceedings in a U.S. court have two steps: “recognition” followed by “enforcement.” Recognition (sometimes referred to as “confirmation”) is the process to convert the arbitral award into a U.S. judgment, granting the award-creditor the same judgment-enforcement tools as any plaintiff who wins a money judgment. The second step, enforcement, is the process under which the award-creditor collects assets of the award-debtor to satisfy the award.
Recognition
The recognition of most foreign arbitral awards is governed by an international treaty called the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the “New York Convention.” More than 160 countries are party to the New York Convention. The U.S. is also party to the Inter-American Convention on International Commercial Arbitration, more commonly known as the “Panama Convention.” Nineteen countries throughout the Americas are party to the Panama Convention. The Panama and New York Conventions are similar regarding the issues discussed in this article.
There is no specialized court in the U.S. with jurisdiction over recognition and enforcement matters. Rather, an award-creditor may file its petition for recognition of its foreign arbitral award in the federal district court where the award-debtor’s assets are located.
Generally, an award-creditor must seek recognition of an award within three years of its issuance. However, some courts in the U.S. have permitted award-creditors to convert their arbitral award into a judgment in a foreign country, which may have a statute of limitations longer than the U.S. Award-creditors can then seek to enforce that foreign-court judgment in the U.S. under applicable law governing recognition of foreign-country judgments.
A U.S. court normally cannot hear any matter – including the recognition of a New York Convention award – unless it has jurisdiction over the parties or, in some cases, the property at issue. The action should be filed in a jurisdiction where the award-creditor is based, incorporated, or where the assets are located.
An award-creditor files a “petition” rather than a “complaint,” the typical initial filing in U.S. courts. The petition must attach an authenticated copy of the arbitral award, the arbitration agreement underlying the award, and, if documents are not in English, certified translations. The petitioner must then serve the petition on the award-debtor pursuant to the Federal Rules of Civil Procedure. Award recognition actions are summary proceedings that often are resolved on the papers without an in-person hearing.
Grounds for resisting enforcement
If the award-creditor establishes personal jurisdiction and provides the required documentation, the court must recognize the award unless one of seven relatively narrow grounds for non-enforcement applies.
The merits of the substantive claims underlying the arbitration are largely irrelevant. Instead, the seven grounds for non-recognition deal essentially with three issues: due process, jurisdiction, and public policy. We provide more detail about grounds for non-recognition here.
Execution
Once a federal court confirms a party’s arbitral award, it can enter a money judgment for the award’s amount. The winner can then enforce the award as it were any federal court money judgment.
A party may enforce a federal money judgment through the procedures permitted under the law of the state where the federal court is located. Each state has its own procedures. Generally, states permit a judgment creditor to execute against most property capable of being assigned or transferred. That includes, for example, cash, securities, and debts owed by third parties to the debtor.
The judgment is automatically stayed for 30 days. During that period, the award-debtor may appeal the court’s recognition decision. The award-debtor may also obtain a stay of enforcement pending appeal by posting a bond or by court order. After recognition of an award, the award-creditor may also obtain discovery in aid of execution under the Federal Rules of Civil Procedure or the procedural rules of the state where the court is located. Discovery is not limited to the award-debtor. Discovery may be obtained from third parties. The procedures are relatively permissive and may include document requests, interrogatories, and depositions regarding assets that could be recovered.
How long does the process take?
The length of proceedings can vary substantially depending on complexity of the case or practices of the presiding judge. There is no statutory time limit. Parties can expect recognition proceedings to take approximately 6-8 months. But it is possible that a court could take less or more time.
If an award-debtor appeals, parties can expect to wait another year or more, depending on the court and the judges hearing the appeal.
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