Nov 2019

Confirming & Collecting International Arbitration Awards in the U.S. Federal Court System

For many companies engaged in global business, international arbitration is the preferred method of resolving international commercial disputes.  Businesses engaged in international commerce prefer to avoid litigation in the countries where they do business.  They are conducting business to profit, not to be subject to local courts.  Instead, these businesses prefer that commercial disputes be resolved by an arbitral process.  Arbitration agreements usually define the location where the arbitration is to be conducted and how it is to proceed.  For example, the parties may agree to proceed under the United Nations Commission on International Trade Law (“UNCITRAL”) Arbitration Rules.

In the event of an arbitration award, the losing party can voluntarily pay the winning party.  However, where the losing party does not pay the award voluntarily, the winning party must enforce the award.  The first step in enforcing an arbitration award is to confirm it in a court with jurisdiction over the losing party or its assets.

International arbitration awards can be confirmed in the United States pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention.  It was adopted by the United Nations diplomatic conference on June 10, 1958 and became effective on June 7, 1958.  The United States is a participant in the New York Convention and enacted its provisions into law on July 31, 1970 by amending the Federal Arbitration Act (“FAA”), 9 U.S.C. § 201 et seq.

An action or proceeding falling under the New York Convention is deemed to arise under the laws and treaties of the Unites States, thereby granting original jurisdiction to the United States District Courts.  The appropriate venue for the action is the District Court identified in the arbitration agreement or the district court where the matter could have been brought as a lawsuit, but for the arbitration agreement.

The matter is initiated in the U.S. District Court as a Petition to Confirm a Foreign Arbitral Award.  Confirmation proceedings are summary in nature and the court should confirm the award unless it suffers from a defect identified by the New York Convention.  Those potential defects include: 1) incapacity of a party or the arbitration agreement is not valid under the law to which the parties subjected it or under the law of the country where the award was made, 2) the party against whom the award is made was not given proper notice of the appointment of the arbitrator or of the arbitration proceeding, 3) the award deals with a difference that does not fall within the scope of the arbitration agreement, 4) the composition of the arbitral authority or the arbitral procedure was not in accordance with the arbitration agreement, 5) the arbitration award is not yet binding, has been suspended or set aside, 6) the court where confirmation is sought views the issue as not being arbitrable under the laws of that country or 7) confirmation of the award is against public policy.

“The burden establishing the requisite factual predicate to deny confirmation of an arbitral award rests with the party resisting confirmation,” and “the showing required to avoid summary confirmation is high.” Int’l Trading and Indus. Inc. Co. v. DynCorp Aerospace Technology, 763 F.Supp.2d 12, 20 (D.D.C. 2011) (quoting Imperial Ethiopian Gov’t v. Baruch-Foster Corp., 535 F.2d 334, 336 (5th Cir. 1976); Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987).  Confirmation of the award is a summary proceeding and not re-litigation of the underlying dispute.

The winning party can pursue collection of the award once it is confirmed and reduced to a judgment.  Federal Rule 69 provides two mechanisms for collection: 1) a federal Writ of Execution or 2) in accord with the procedures of the state where the court is located.  The incorporation of state procedures allows for the full scope of collection methods.  Additionally, Rule 69(a)(2) permits the full scope of discovery techniques under the court rules in aid of collection.  This allows for issuance of subpoenas, notices of deposition and interrogatories.

The US federal court system is a viable and effective venue to confirm and collect international arbitration awards and Earp Cohn P.C. is strategically located in the Eastern District of Pennsylvania and the District of New Jersey.  Both districts are home to a significant number of the Fortune 500.  Our team of seasoned litigators are positioned to handle the confirmation and collection of international arbitral awards.