Introduction

In general, there is a clear policy preference for the enforcement of arbitral awards in the United States and this pro-enforcement preference extends to awards made under the United Nations Conference on the International Commercial Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards signed 10 June 1958 (the New York Convention), where courts typically limit an award debtor’s defences to enforcement to those found in the Convention itself.

The NY Convention has two objectives:

  • The recognition and enforcement of arbitral agreements
  • The recognition and enforcement of arbitral awards

The Convention is an international treaty and thus part of public international law. Engages the responsibility of Contracting States on the international plane.

Pre-NY Convention

  • Geneva Protocol on Arbitration Clauses of 1913 and Geneva Convention on the Execution of Foreign Awards of 1927
  • Limited field of application
  • Burden of proof on party seeking enforcement
  • Requirement of “double exequatur”
  • See www.newyorkconvention.org

NY Convention

  • ICC project and 1953 Draft convention
  • 1955 ECOSOC Draft Convention
  • New York Conference of 1958
  • Dutch Proposal- Piet Sanders

 

Under US law, the enforcement of an arbitral award issued pursuant to the New York Convention is governed by the Federal Arbitration Act (9 U.S.C. § 1 et seq) (the FAA). As at January 2014, 149 countries have ratified the New York Convention. A list of all contracting states can be found here.

The New York Convention, art V applies to foreign and non-domestic awards. The art V grounds for refusal to enforce differ from grounds for vacatur under the FAA. Thus,’ foreign’ awards under the New York Convention offer fewer means of resisting enforcement of the award than ‘non-domestic’ or ‘domestic’ arbitral awards.

To clarify:

  • foreign arbitral awards are awards rendered outside of the territory of the United States. Foreign awards are not subject to vacatur, but they can be refused enforcement on the grounds in art V of the New York Convention
  • for non-domestic awards, 9 U.S.C. § 202 provides that an award arising out of a relationship entirely between citizens of the United States does not fall under the Convention unless that relationship: ◦
  • involves property located abroad
  • envisages performance or enforcement abroad, or
  • has some other reasonable relation with one or more foreign states
  • domestic awards are all other awards that do not qualify as foreign or non-domestic. Chapter One of the FAA applies to domestic awards made within the territory of the United States. Chapters Two and Three of the FAA do not apply to domestic awards.

 

NY CONVENTION  RECENT  DEVELOPMENT IS SUB DIVIDED:

 1. US  DEVELOPMENT:

US cases cited

Base Metal Trading Ltd. v. OJSC “Novokuznetsky Aluminum Factory,” 47 Fed. Appx. 73 (3rd Cir. 2002).

Base Metal Trading Ltd. v. OJSC “Novokuznetsky Aluminum Factory,” 283 F.3d 208 (4th Cir. 2002).

Cargnani v. Pewag Austria G.m.b.H., 2007 U.S. Dist. LEXIS 8210 (Eastern District California).

CME Media Enterprises B.V. v. Dr. Vladimir Zelezny, 01 Civ. 1733 (DC), 2001 U.S. Dist. LEXIS 13888 (S.D.N.Y., 2001).

Dardana Ltd. v. Yuganskneftegaz, 317 F.3d 202 (C.A.2 (N.Y.), 2003).

 

2. CANADIAN DEVELOPMENT:

Canadian cases cited

Canada (Attorney General) v. Reliance Insurance Co. (2007), 87 O.R. (3d) 42 (Sup. Ct.).

Collavino Inc. v. Yemen (Tihama Development Authority), [2007] A.J. No. 531 (Q.B.).

Kahara Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, [2007] A.J. No. 1153 (Q.B.).

Resin Systems Inv. v. Industrial Service and Machine Inc., [2008] A.J. No. 238 (C.A.).

Yugraneft Corp. v. Rexx Management Corp., [2007] A.J. No. 749 (Q.B.).

 

Proving jurisdiction

In the United States, the party filing suit must demonstrate that the court in which it is filing has jurisdiction to hear the case. This requirement applies to all actions, including an action to enforce an arbitration award. In general, a federal court must have both:

  • subject matter jurisdiction over the controversy, and
  • personal jurisdiction over the award debtor (or the property of the award debtor)

Minimum contacts

The constitutional requirement of due process provides that it is unfair for a court to assert jurisdiction over a party unless that party’s contacts with the forum are such that the party ‘could reasonably expected to be haled into court’ there (see International Shoe Co v Washington, 326 U.S. 310 (1945) (not available in Lexis®Library)).

An award debtor typically has minimum contact with a forum if it, inter alia:

  • has direct contact with the state o has a contract with a resident of the state o has placed products into the stream of commerce such that it reaches the state, or
  • if the litigation arises out of the arbitral debtor’s contacts within the forum (ie specific jurisdiction)

No jurisdiction in any state

If the defendant is not subject to the courts of general jurisdiction of any state, jurisdiction may still be proper under Federal Rule of Civil Procedure Rule 4(k)(2). Federal Rule of Civil Procedure 4(k)(2) provides that a district court may exercise jurisdiction over a defendant where:

  • the plaintiff’s claim ‘arise(s) under federal law’
  • the defendant ‘is not subject to the jurisdiction of the courts of general jurisdiction of any state’, and
  • the court’s exercise of jurisdiction ‘is consistent with the Constitution and laws of the United States’

Where to file suit

While parties seeking enforcement of arbitral awards may file proceedings in either state or federal court, enforcement actions are adjudicated typically in federal court because:

  • section 9 U.S.C. § 203 grants federal courts subject matter jurisdiction over enforcement of awards issued pursuant to the New York Convention by stating:

‘an action or proceeding falling under the Convention shall be deemed to arise under the laws and treaties of the United States. The district courts of the United States … shall have original jurisdiction over such an action or proceeding, regardless of the amount in controversy.’

  • section 9 U.S.C. § 205 provides further that any defendant may, at any time before trial, remove an action relating to an arbitration agreement or award from state court to federal district court.

When to file the suit

Within three years after an arbitral award falling under the convention is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration.

Service of process

The defendant (arbitral debtor) must be served with process (ie service of the petition and supporting documents) in accordance with the due process requirements of the United States Constitution. The requirements for service will depend on the location of the arbitral debtor. Each state and jurisdiction has varying requirements and forms to use in regards to service of process, especially as those rules apply to foreign parties.

It is therefore important to consult US counsel as to the applicability of local rules and state long-arm statutes to the enforcement of your New York Convention award.

Applicable fees

Fees for service vary by jurisdiction according to the local rules of each court, but, as specified in art III of the New York Convention, the fees will not be more than those imposed for enforcing a US domestic award

Conclusion

The New York Convention, therefore, represents an opportunity to remove uncertainties about the operation of the system of arbitral award enforcement in Commonwealth states with the added advantage of enabling those states to become parties to an updated scheme and one which is designed to avoid some of the legal shortcomings of the earlier treaties.

 

Reference links:

  1. newyorkconvention.org/
  2. https://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/New-York-Convention-Commonwealth.pdf
  3. https://www.uncitral.org/pdf/english/texts/arbitration/NY-conv/NYCDay-e.pdf
  4. http://www.euro-arbitration.org/resources/en/nyc_convention_en.pdf
  5. http://www.arbitration-icca.org/media/0/12125884227980/new_york_convention_of_1958_overview.pdf
  6. https://www.velaw.com/uploadedFiles/VEsite/Resources/EnforcingNewYorkConventionAwardUSLexisPSLPracticeNoteMarch2014.pdf