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How to Defend Against Enforcement of Foreign Arbitration Awards

In July 2017’s newsletter, we discussed how you can enforce an international arbitration award in the United States. Although, there are people who may want to enforce a foreign arbitration award, there are others who seek to defend themselves against it.

In general, the domestic courts can decide not to enforce a foreign arbitration award for a number of reasons. For example, these reasons can include: (i) if the arbitrator exceeds his/her power or authority; (ii) if the arbitrator was not neutral; (iii) if there were any instances of fraud; or (iv) if the arbitrator is found to be guilty of misconduct.

The New York Convention has outlined the other reasons for avoiding the enforcement of foreign arbitration awards. Additionally, some types of arbitration awards cannot be enforced under the New York Convention. For example, if someone tried to enforce a custody agreement, then they would be unable. The United States has stated that it only applies to matters that are considered commercial transactions under the federal law. This means that certain awards are excluded from being enforced in the United States, including, but not limited to, labor disputes, custody disputes, matrimonial disputes, succession of property disputes, or boundary disputes.

There are other reasons why a domestic court will decide not to enforce a foreign arbitration award.  Our domestic courts will also not enforce an arbitration award if the arbitration award goes beyond the scope of what was in the original arbitration agreement. This means that the arbitrator was deciding things that were not subject to arbitration. The only exception is if the court finds that the improper awards can be separated from the proper awards. Another reason why a court might refuse to recognize an arbitration award is when the party who the arbitration award was given against was not given proper notification of the proceedings or if that party was not given the opportunity to present his or her case. This is also known as the due process defense.

An arbitration award can also be denied when the award violates fundamental public policy principles. The courts explain this as “only where enforcement would violate the forum state’s most basic notions of morality and justice.”  The courts have narrowly construed this, which means that it only applies in limited circumstances.

A party who is trying to challenge the recognition and enforcement of any foreign arbitration award has the burden of showing the reasons why the foreign arbitration award should not be recognized and enforced. The party must show its reasons pursuant to the New York Convention. The domestic courts have the ability to raise a motion on the grounds for non-recognition when they believe the foreign arbitration award has issues either with public policy or they do not yield jurisdiction.  If these exceptions apply, then you may be able to prevent the foreign arbitration award from being enforced in the United States.

At our law firm, we assist clients with legal issues related to foreign arbitration awards. Please contact us to set up an initial consultation.