By: DOLAN MEDIA NEWSWIRES//December 22, 2014//
By Ryan Billings
As the global economy becomes increasingly interconnected, clients’ interests frequently extend beyond state and national borders.
A thorough understanding of the New York Convention can help those clients reduce risk and save substantial time and money in disputes with business partners around the globe. The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, often called the New York Convention, creates a process for compelling arbitration and enforcing arbitration awards involving foreign parties or when rendered in foreign countries.
It is a model of simplicity, comprising only four pages of text.
Each of the 149 countries that have adopted the convention agreed to recognize written agreements to arbitrate disputes and to compel arbitration at the request of either party, unless the contract is unenforceable or the matter is not capable of arbitration.
The international tool is useful to Wisconsin practitioners in two contexts. First, attorneys familiar with the convention can provide helpful advice to Wisconsin businesses when drafting arbitration agreements in contracts with foreign business partners. But those provisions often are boilerplate and negotiated last, which is a mistake.
Second, when collectible assets relevant to an international arbitration award are in Wisconsin, attorneys skilled in the ways of the convention can assist clients in converting an international arbitral award to a local judgment or in resisting conversion.
To seek recognition of an arbitration award under the convention, a party must submit an arbitral decision and a copy of the arbitration agreement to a court in any of the 149 countries. Once recognized, the award has the force and effect of a domestic judgment.
That lets the prevailing party use any domestic methods for enforcement and collection. Further, the convention forbids countries from charging higher fees or creating procedural hurdles more onerous than are required for enforcement of domestic arbitration agreements.
The spirit of the convention is to encourage arbitration and to keep it as simple as possible for companies to resolve disputes.
While the basic mechanics of recognition are relatively straightforward, there are several key elements to keep in mind when advising a client about appropriate language for an international arbitration agreement. The following points always should be considered:
Once an award has been rendered, there are only a few reasons under the convention for a court to refuse to recognize an arbitration award. Those include invalidity of the arbitration agreement, failure to obey the arbitration procedure specified in the agreement, immaturity of the award if it is not yet binding and the court determining enforcement would be contrary to the enforcing country’s public policy.
Those exceptions are invoked sparingly. In its previous term, the U.S. Supreme Court affirmed in BG Group PLC v. Republic of Argentina the bedrock principles of the convention and the deference courts should grant arbitrator decisions. The court held that arbitrators, not courts, should decide if the procedural prerequisites to arbitration have been satisfied.
When attempting to convert a foreign arbitral award into a local judgment in Wisconsin, or when attempting to resist such a conversion, there are several points to consider.
It is very difficult to vacate an arbitration award under the convention when the proper procedures have been followed and when there are no extraordinary circumstances such as blatant corruption. Clients should be aware of that when going into any litigation over recognizing or resisting recognition of an award.
Wisconsin practitioners can use the New York Convention as a powerful tool for controlling legal risk in international business disputes. However, like any tool, effective use of the convention requires a skilled and knowledgeable hand.
Ryan Billings is an attorney with Kohner, Mann & Kailas SC, Milwaukee.