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Defences to enforcement of an arbitral award in the USA under the New
York Convention
Produced in partnership with Vinson & Elkins LLP--Houston office
Practice Note: Enforcing a New York Convention award in the USA, discussed enforcement of an arbitral
award in the US including considering the requirements of the Federal Arbitration Act (FAA) and 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). This Practice Note
focuses on defences to enforcement under the New York Convention.
Chapter Two of the Federal Arbitration Act (FAA) (9 U.S.C. § 207) provides that:
'the court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition of enforcement
of the award.'
Defences specifically enumerated in the New York Convention
The award debtor may challenge enforcement of an arbitral award made under the New York Convention on
the very limited grounds specifically set out in the Convention. The award debtor bears the burden of proof to
show that the award should not be enforced.
References: New York Convention
The FAA recognises all five grounds for non-enforcement under art V(1) of the New York Convention:
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under applicable law, the parties to the agreement were under some incapacity or the agreement to arbitrate was not valid
the party against whom the award is invoked was not given proper notice of the appointment of
the arbitrator or of the arbitration proceedings or was otherwise unable to present his case
the award deals with a difference not contemplated by the submission to arbitration or it contains decisions on matters beyond the scope of the submission to arbitration; (there is a powerful presumption that the arbitral body acted within its powers, see Parsons & Whittemore
Overseas Co Inc v Societe Generale De L'Industrie Du Papier (RAKTA), 508 F.2d 969, 976 (2d
Cir. 1974) (not available in Lexis®Library)
the composition of the arbitral authority or the arbitral procedure was not in accordance with the
agreement of the parties or in accordance with law
the award has not yet become binding on the parties or has been set aside or suspended by a
competent authority of the country in which, or under the law of which, that award was made.
(Courts will likely look to both the arbitral rules (eg ICC, ICDR, LCIA, etc.) and the laws of the
country in which the award was rendered when considering whether the arbitral award is final;
see Fertilizer Corp of India v IDI Mgmt Inc, 517 F. Supp. 948, 956 (S.D. Ohio 1981) (not available in Lexis®Library) (both the Rules of Conciliation and Arbitration of the ICC and the Indian
Arbitration Act provided that arbitral awards were final and binding))
Recognition and enforcement of an arbitral award may also be refused under art V(2) where:
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the subject matter of the difference is not capable of settlement by arbitration under the law of
that country, or
the recognition or enforcement of the award would be contrary to the public policy of that country
Parties should consult US counsel regarding the most recent interpretation of these provisions in US courts.
However, general guidance is available:
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the United States has a clear public policy favouring of international arbitration, see Scherk v
Alberto-Culver Co, 417 U.S. 506 (1974) (not available in Lexis®Library). The public policy defence in art V(2)(b), therefore, is narrowly construed. It applies only where enforcement 'would
violate the forum state's most basic notions of morality and justice'
courts will not set aside arbitral awards even if the arbitrators explain their conclusions 'in terms
that offer even a barely colorable justification for the outcome reached'
No defence available under Ch One of the FAA unless the award is 'non-domestic'
The award creditor must determine whether the award is 'foreign', 'non-domestic', or 'domestic'. This determination is critical as to whether the arbitral debtor can avail itself of additional defences as grounds to vacate an arbitral award under 9 U.S.C. § 10 (see Practice Note: Enforcing a New York Convention award in
the USA -- Steps to enforce a New York Convention award in the USA.).
A few courts have analogised between art V of the New York Convention and the grounds for vacatur under
9 U.S.C. § 10, but none explicitly apply 9 U.S.C. § 10 to vacate a purely foreign arbitral award under the New
York Convention. See Matter of Arbitration Between Chromalloy Aeroservices, a Div. of Chromalloy Gas
Turbine Corp. & Arab Republic of Egypt, 939 F. Supp. 907, 910 (D.D.C. 1996) (not available in Lexis®Library). This is significant as award debtors often will invoke a perhaps undead defence that the tribunal
acted in 'manifest disregard of the law.'
Under US law, courts are divided regarding whether 'manifest disregard' continues to be a viable ground to
vacate an arbitral award under Ch One of the FAA. The Fifth, Eighth and Eleventh Circuit Courts of Appeals
have concluded that the 'manifest disregard' is not a viable ground on which to overturn an arbitral award
after the US Supreme Court holding in Hall Street Assocs v Mattel Inc, 552 U.S. 576 (2008) (not available in
Lexis®Library). See also Citigroup Global Mkts Inc v Bacon, 562 F.3d 349, 355 (5th Cir. 2009) (not available
in Lexis®Library), Medicine Shoppe Intl, Inc v Turner, 614 F.3d 485, 489 (8th Cir. 2010) (not available in
Lexis®Library), Frazier v CitiFinancial Corp, 604 F.3d 1313, 1324 (11th Cir. 2010) (not available in Lexis®Library). The Second and Ninth Circuit have held that 'manifest disregard' is still a viable standard on
which to overturn an arbitral award under 9 U.S.C. § 10(a)(4), see Comedy Club Inc v Improv W Assocs.,
553 F.3d 1277, 1290 (9th Cir. 2009) (not available in Lexis®Library) and Stolt-Nielsen SA v AnimalFeeds
Intern Corp., 548 F.3d 85, 95 (2d Cir. 2008) (not available in Lexis®Library).
Forum non conveniens and enforcement in the United States
In US law, the doctrine of forum non conveniens gives federal district courts discretion to dismiss an award
enforcement action if it finds that there is a more appropriate forum in which to seek enforcement, by weighing relevant public and private interest factors favouring enforcement or dismissal (see Piper Aircraft Co. v.
Reyno, 454 U.S. 235, 255 (1981) (not available in Lexis®Library)).
Private factors include:
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the relative ease of access to sources of proof
the availability of compulsory process for the attendance of unwilling witnesses
the cost of attendance of witnesses
the possibility of viewing the scene if appropriate to the action, and
other practical problems that make the trial easy, expeditious and inexpensive
Public factors include:
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the administrative difficulties flowing from court congestion
the local interest in having local controversies decided at home
the interest of having the trial in a forum that is at home with the law that must govern the action
the avoidance of unnecessary problems in conflict of laws or the application of foreign law, and
the unfairness of burdening citizens in an unrelated forum with jury duty
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There is a split of authority among the Circuit Courts of Appeal as to whether a court may dismiss an action
to enforce an arbitral award on forum non conveniens grounds.
The US Court of Appeals for the Second Circuit (which includes New York) has applied the doctrine to dismiss award enforcement actions. Holding that forum non conveniens is consistent with the New York Convention, art III as a 'rule of procedure,' the Second Circuit dismissed a New York Convention enforcement
proceeding. See In re Arbitration between Monegasque De Reassurances SAM v Nak Naftogaz of Ukraine,
311 F.3d 488, 496-97 (2d Cir. 2002) (not available in Lexis®Library), Figueiredo Ferraz E Engenharia de
Projeto Ltda. v Republic of Peru, 665 F.3d 384, 392 (2d Cir. 2011) (analyzing analogous provision in Inter-American Convention) (not available in Lexis®Library).
The DC Circuit however has held that dismissal of an arbitral award for forum non conveniens is improper if
no other forum may grant the relief the award debtor seeks in the forum, eg if the award creditor has property
only in the United States (or may obtain such property in the future). (TMR Energy Ltd v State Prop Fund of
Ukraine, 411 F.3d 296, 303 (D.C. Cir. 2005) (not available in Lexis®Library).)
A party seeking to enforce a New York Convention arbitral award must carefully research the case law specific to the award enforcement forum to consider this doctrine's potential application and consult US counsel
if and when forum non conveniens issues arise.
Sovereign Immunity as a defence to enforcement
If you hold a New York Convention arbitral award against an arbitral debtor that is a sovereign or agency or
instrumentality of a sovereign, the Foreign Sovereign Immunities Act (FSIA) may prevent enforcement of
your award depending on a variety of factors. The scope of FSIA immunity is beyond the scope of this Practice Note. You should consult with local counsel if a state or agency or instrumentality is the award debtor.
Originally produced for use on Lexis®PSL Arbitration