United States: A Primer For Enforcement In The U.S. Of Foreign-Issued Arbitration Awards (Courtesy Of The Second Circuit)

In CBF Industria de Gusa S/A v. AMCI Holdings, Inc., 2017 U.S. App. LEXIS 3815 (2d Cir. Mar. 2, 2017), the U.S. Court of Appeals for the Second Circuit provides something of a primer regarding enforcement in the United States of a foreign-issued arbitral award, which is subject to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("New York Convention") and Chapter 2 of the Federal Arbitration Act ("FAA"). In an effort to clear up confusion, the court (i) defined several pertinent terms and explained their significance, (ii) urged practitioners and judges to use consistent terminology, (iii) examined when a district court sits in primary jurisdiction versus in secondary jurisdiction, (iv) explained the differences between a non-domestic arbitral award and a foreign arbitral award, and (v) described the treatment of each when brought to a U.S. district court for enforcement.

The court's principal teaching was that in order to enforce an award that was issued (or "made") outside the U.S. — i.e., a foreign arbitral award — in a U.S. court, the award-creditor need not commence a proceeding to confirm the award. Indeed, the word "confirm," as used in FAA § 207, is a misnomer when referring to a foreign arbitral award: "Section 207 uses the term 'confirm' to describe the process by which a district court acts under its secondary jurisdiction to recognize and enforce a foreign arbitral award," but "the proper term for the single-step process in which a federal district court engages when it sits in secondary jurisdiction over a foreign arbitral award is 'Enforcement,'. . . ."

Recognizing an inconsistent use of terminology in the pertinent case law, the court advised:

we encourage litigants and district courts alike to take care to specify explicitly the type of arbitral award the district court is evaluating (domestic, nondomestic, or foreign), whether the district court is sitting in primary or secondary jurisdiction, and, accordingly, whether the action seeks confirmation of a domestic or nondomestic arbitral award under the district court's primary jurisdiction or enforcement of a foreign arbitral award under its secondary jurisdiction.

Under the New York Convention an arbitration award is to be "confirmed," if at all, in the jurisdiction in which it was issued. Elsewhere, the award may be enforced, but an award creditor is not required to seek confirmation of the award. Thus, as a practical matter, an award debtor bears a burden to seek vacatur of an award in the jurisdiction in which it was issued, or the award may be enforced — subject only to very narrow defenses — in any country where the New York Convention is in force. (Indeed, certain recent decisions have shown that even vacatur of an award where it was issued may not preclude enforcement elsewhere. See, e.g., Corporación Mexicana de Mantenimiento Integral v. Pemex-Exploracion y Produccion, No. 13-4022 (2d Cir. Aug. 2, 2016) (applying Panama Convention Art. v(1)(e)).)

The chart below provides a simple guide.

Type of Arbitral Award Description Jurisdiction Type Procedural Terminology
Domestic Issued in U.S. in arbitral proceeding with no non-U.S. aspects among U.S. domiciled parties. Primary Action for confirmation under 9 U.S.C. §9
Non-domestic 1. Issued in U.S. – the agreed place of arbitration.

2. Subject to FAA ch. 2 because (1) it was "made within the legal framework of another country, e.g., pronounced in accordance with foreign law[,]"; or (2) if decided under the laws of the U.S., it [a] involves entities that are not U.S. citizens; [b] involves "property located abroad; [c] envisages performance or enforcement abroad; or [d] has some other reasonable relation with one or more foreign states"
Primary Action for confirmation under 9 U.S.C. §207.

"The process by which a nondomestic arbitral award is reduced to a judgment of the court by a federal court under its primary jurisdiction is called "confirmation."

"Under its primary jurisdiction in a confirmation proceeding, the district court is, as this court has recognized, 'free to set aside or modify an award in accordance with its domestic arbitral law and its full panoply of express and implied grounds for relief.'"
Foreign Issued outside the U.S. Secondary Action for Enforcement under 9 U.S.C. §207.

Though Section 207 uses the word "confirm" (and its variants), the Second Circuit emphasized that the procedure is called "enforcement":

"the proper term for the single-step process in which a federal district court engages when it sits in secondary jurisdiction over a foreign arbitral award is 'Enforcement,'"

"Section 207 uses the term 'confirm' to describe the process by which a district court acts under its secondary jurisdiction to recognize and enforce a foreign arbitral award."

No requirement to commence an action to "confirm" the award.

The Second Circuit also clarified the nature of the procedure for enforcing a foreign arbitral award against a party who was not a subject of the award and who did not participate in the arbitration (i.e., a "third party"). In CBF Industria, the appellants ("CBF") first obtained an arbitral award in Paris against a bankrupt respondent ("SBT") and then commenced an action in a U.S. district court to enforce that foreign award against alleged alter egos of the award-debtor. The alleged alter egos were not parties to, nor participants in, the arbitration. The Second Circuit held that award creditor CBF "properly sought to have the district court enforce a foreign arbitral award under its secondary jurisdiction."

Generally, award-enforcement proceedings are governed by the law applicable to the enforcement of judgments in the jurisdiction. Accordingly, the court of appeals stated:

the question of whether a third party not named in an arbitral award may have that award enforced against it under a theory of alter-ego liability, or any other legal principle concerning the enforcement of awards or judgments, is one left to the law of the enforcing jurisdiction, here the Southern District of New York . . . .

Thus, the court of appeals remanded the case, instructing the district court to adjudicate the enforcement action — particularly CBF's effort to reach the alleged alter egos of SBT — "under the standards set out in the New York Convention, Chapter 2 of the FAA, and applicable law in the Southern District of New York."

But the court's phrase "the law of the enforcing jurisdiction" does not definitively identify the substantive law that will govern the analysis of whether an alter ego relationship exists for purposes of enforcing the award against a third party. Should the district court apply New York State law? Federal common law? Both? Including their conflict of law principles? Would any of those options require the district court to look to the laws of Switzerland, where the award-debtor SBT was formed, existed, and filed for bankruptcy?

In the end, the court of appeals vacated the district court's dismissal of the award creditor's action to enforce the award, and remanded the case for further proceedings consistent with the opinion of the court of appeals. Therefore, issues concerning the precise governing law were left to be adjudicated by the district court in subsequent proceedings.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions