International commercial arbitration: hurdles when confirming a foreign arbitral award in the U.S.

• Author: Gonzalez, Daniel E.
• Position: International Law

Over recent years, international commercial arbitration has gained worldwide acceptance as one of the preferred means of international dispute resolution. One of the primary reasons for the prevalence of arbitration is the expectation that the awards issued by an international arbitral tribunal will receive worldwide recognition by countries that are members of one of the international conventions on the enforcement of arbitral awards. Yet, a growing number of parties face various procedural and substantive hurdles and obstacles when attempting to enforce an arbitral award rendered in their favor. Viewed from the context of a confirmation proceeding in the U.S., this article will provide a practical approach on how to avoid and overcome the hurdles to confirming a foreign arbitral award that will apply in any jurisdiction worldwide. (1)

Statute of Limitations

In the U.S., arbitral award confirmation petitions are governed by the Federal Arbitration Act (FAA). (2) The FAA provides a three-year statute of limitations for the filing of arbitral award confirmation petitions. Specifically, the FAA provides that "[w]ithin three years after an arbitral award falling under the [c]onvention (3) is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration." (4) Therefore, a party seeking the confirmation of a foreign arbitral award in the U.S. must comply with this requirement to avoid having its enforcement petition dismissed for being time-barred.

Subject Matter Jurisdiction

Parties seeking to enforce a foreign arbitral award must also ensure that the federal court has subject matter jurisdiction over the enforcement proceedings. This, however, can be established through 28 U.S.C. [section] 1331. This is because U.S. federal district courts have original subject matter jurisdiction over arbitral award confirmation proceedings pursuant to the federal question jurisdiction statute, given that this type of proceeding is a civil action arising under the laws and treaties of the U.S., specifically 9 U.S.C. [section] 203 (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958) (the New York Convention) and 9 U.S.C. [section][section] 203, 302 (the Inter-American Convention on International Commercial Arbitration, Panama City, Panama, January 30, 1975) (the Inter-American Convention). (5)

Personal Jurisdiction

Another hurdle that a party seeking to enforce a foreign arbitral award must overcome is that of personal jurisdiction. In the U.S., the federal district court where the enforcement petition has been filed must have personal jurisdiction over the respondent. A federal court may exercise personal jurisdiction in any of two ways: specific personal jurisdiction and/or general personal jurisdiction. The exercise of specific personal jurisdiction is appropriate when the nature of the arbitrated issues arises "out of or [are] related to [respondent's] contacts with the forum." (6) General personal jurisdiction is appropriate when the respondent has contacts with the U.S., but the suit does "not aris[e] out of or is related to [respondent's] contacts with the forum." (7)

Federal courts have "widely adopted" a test for the sufficiency of minimum contacts in order to exercise personal jurisdiction over a respondent. (8) The factors identified as part of this test are the following: 1) whether the respondent transacts business in the U.S.; or 2) whether the respondent is doing an act in the U.S.; or 3) whether the respondent's actions done elsewhere have an effect in the U.S. (9)

Based on the above, when a party is seeking to enforce a foreign arbitral award in the U.S., it must confirm that the respondent has minimum contacts with the U.S. so that the federal court does not dismiss the enforcement petition for lack of personal jurisdiction over the respondent. (10)

Venue

Venue refers to the place within a jurisdiction in which a particular action is to be brought. It becomes a consideration once jurisdiction over the parties has been established. Although venue will not be discussed in detail in this article, it is also a requirement that needs to be met by the party seeking confirmation of a foreign arbitral award in the U.S. Venue in federal district court cases is controlled by the general federal venue statue. (11)

Service of Process

In line with its policy of effectuating the speedy resolution of disputes, the FAA provides that confirmation of arbitral awards are intended to be summary in nature, and should be initiated through federal motion practice. (12) The court's function in confirming an arbitral award is, therefore, limited, "since if it were otherwise, the ostensible purpose for resort to arbitration, i.e., avoidance of litigation, would be frustrated." (13)

The 11th Circuit in the Booth decision described the summary procedure for the confirmation of an arbitral award under the FAA as follows:

A party initiates judicial review of an arbitration award not by filing a complaint in the district court, but rather by filing either a petition to confirm the award or a motion to vacate or modify the award. See 9 U.S.C. [section] 9 (explaining procedure for making petition to confirm the award); [section] 12 (explaining procedure for making motion to vacate, modify, or correct an...