August 22, 2017

August 22, 2017

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August 21, 2017

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Enforcement of International Arbitration Award in Non-New York Convention Country

You presented your case, and the arbitration tribunal came back with a reasoned decision and an award in your favor. You even had the award confirmed here in the United States.  You want to enforce it.  But you find that the award-debtor’s assets are all held in or have been moved to a country that is not a party to the New York Convention.  Now what?

Enforcing a U.S.-sited international arbitral award in a foreign country is ordinarily far easier than enforcing a U.S. judgment abroad due to the adoption in 1959 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly referred to as the “New York Convention”).  With 156 countries ratifying the New York Convention, this expedient mechanism for enforcement of international arbitral awards is available throughout much of the world.

World, Map

By L.tak – Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=20837858

However, dozens of nations are not parties to the New York Convention; to wit,

Angola

Belize

Cape Verde

Chad

Republic of the Congo

Equatorial Guinea

Eritrea

Ethiopia

Gambia

Grenada

Guinea-Bissau

Iraq

Kiribati

North Korea

Libya

Malawi

Maldives

Federated States of Micronesia

Namibia

Nauru

Niue

Palau

Papua New Guinea

Saint Kitts and Nevis

Saint Lucia

Samoa

Seychelles

Sierra Leone

Solomon Islands

Somalia

South Sudan

Sudan

Suriname

Swaziland

Taiwan

Timor-Leste

Togo

Tonga

Turkmenistan

Tuvalu

Vanuatu

Yemen

Nevertheless, patriating a U.S.-sited international arbitration award in those jurisdictions is often reasonably practicable, although it requires resourceful application of local law. And United States policy on enforcement of international arbitration awards provides some help in addressing a common issue in doing so.

Recognition and enforcement in Taiwan is a good example. PRC sovereignty policies have prevented Taiwan from ratifying the New York Convention.  But Taiwan is a strong economic center and home to vast assets of many sophisticated players in international commerce.  Enforcing the award of a U.S.-sited arbitral tribunal in Taiwan clearly is not as simple as doing so in a New York Convention state, but it is achievable.

Enforcement requires securing an order of recognition and enforcement from a Taiwan court. The Taiwan Arbitration Act (“TAA”) provides the means to do that, and broadly applies to any award issued outside of Taiwan or issued within Taiwan under foreign rules.  The TAA identifies several narrow grounds for refusing recognition, but most pertinent cases turn on Taiwan’s reciprocity requirement, under which the court will only recognize and enforce an arbitral award rendered under the laws of a country that recognizes and enforces international arbitral awards rendered in Taiwan.

The United States and Taiwan have a history of reciprocity, but there is some cause for care in this regard. That is, several 1990’s-vintage Taiwanese court decisions refused to enforce arbitration awards issued in New York. See e.g. High Court Decision No. 609 (1997) (refusing enforcement based on rejection of a Taiwanese award by a New York court in an unrelated case); Pro-Abit Co., B.V. v. Hong-Song International Co. Ltd., (Taipei Dist. Ct., 1999) (refusing enforcement based on telephone interview court held with New York Assistant Attorney General).  However, more recent decisions in Taiwan have been friendlier to awards rendered in the U.S., including a 2005 high court decision overruling the Pro-Abit ruling and recognizing that, as long as the issuing state does not have law clearly rejecting recognition of awards issued in Taiwan, reciprocity is appropriate. See Supreme Court Decision No. 433 (2005); see also, Mil Parts Co. v. Adtec Limited (Taipei Dist. Ct., 2011) (finding that no New York Court had ever rejected reciprocity of a Taiwanese arbitration award).

U.S. federal law arguably supports the argument for reciprocity because of a strong policy, manifested in the Federal Arbitration Act, in favor of enforcing arbitration agreements and arbitral awards generally. See Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987) (establishing “federal policy favoring arbitration” and requirement that U.S. courts “rigorously enforce agreements to arbitrate”).  That policy is also evidenced by U.S. participation in the 1975 Inter-American Convention on International Commercial Arbitration (“the Panama Convention”) and in the New York Convention.

Once the threshold reciprocity hurdle is overcome, the TAA generally tracks the terms of the New York Convention and provides six exceptions to the effective presumptive recognition and enforcement of an international arbitral award:

  • incapacity of a party under the laws governing the arbitration agreement;

  • voidness of the arbitration agreement under the governing laws;

  • lack of proper notice or other due process concern;

  • the award is irrelevant to the subject matter of the dispute;

  • the composition of the tribunal or arbitration procedure is contrary to the terms of the arbitration agreement; or

  • the award is not yet binding or has been suspended or revoked by a competent court.

Most of the these exceptions to enforcement are considered narrow.

In sum, while most U.N. member states have signed on to the New York Convention, even in non-signatory countries, resourceful utilization of local law and the tailwind provided by a strong U.S. policy in favor of recognition of international arbitration awards generally can fuel winning arguments for recognition and enforcement abroad of such awards issued in the U.S.

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About this Author

Daniel Pascucci, Mintz Levin, Jury Trial Attorney, Class Action Defense Lawyer
Member

Daniel's practice is focused on complex business litigation, international and domestic arbitration, intellectual property litigation, class action defense, unfair competition, and telecommunications. He is an experienced trial lawyer and clients often call upon him for complex and challenging cases with stakes that require a winning strategy. He has tried to verdict or award over 40 cases, including jury trials, bench trials, and arbitrations.

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