In brief: enforcing and challenging arbitral awards in USA
Does the arbitral tribunal have the power to correct or interpret an award on its own or at the parties’ initiative? What time limits apply?
Most institutional rules grant tribunals a limited amount of time to correct or interpret minor clerical, typographical or computational errors (ICDR Rules, article 33; CPR Rules, Rule 15.6; and JAMS Rules, article 38.1). The ICDR and CPR Rules further grant arbitrators a short period in which to make an additional award on claims presented in the arbitration but not disposed of in the initial award.
FAA section 11 vests district courts with the power to modify or correct the award where it contained a material miscalculation or mistake, where it ruled upon a matter outside of the tribunal’s jurisdiction or where it ‘is imperfect in matter of form not affecting the merits of the controversy’. Nonetheless, courts may refuse to do so on the basis that the arbitrators already considered, and declined, such a request (eg, Daebo Int’l Shipping Co v Americas Bulk Transport (BVI) Ltd, 2013 WL 2149591 (SDNY 2013)).
How and on what grounds can awards be challenged and set aside?
FAA section 10 sets forth the standard and procedure for setting aside arbitral awards made in the United States. Many US courts have held that the section 10 standards for vacatur will also be applied to international or foreign awards seated in the United States. Under section 10, awards may be vacated where:
- the award was procured by corruption, fraud or undue means;
- there was evident partiality of the arbitrators;
- the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehaviour by which the rights of any party have been prejudiced; or
- the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.
Some courts have interpreted the arbitrators’ excess of powers to permit vacatur on the basis that the tribunal acted in ‘manifest disregard of the law’. In recent years, this standard has been considerably limited by many circuit courts of appeals, and it is rare for awards to be vacated on this basis (see, eg, Daesang Corporation v NutraSweet Company, 85 NYS 3d 6 (2018) (reversing the trial court’s vacatur of a foreign arbitral award on the grounds of manifest disregard of the law)).
How many levels of appeal are there? How long does it generally take until a challenge is decided at each level? Approximately what costs are incurred at each level? How are costs apportioned among the parties?
Normally, arbitral awards themselves are not subject to appeal on the merits by courts or arbitral institutions. Nevertheless, parties to AAA, CPR, or JAMS arbitrations may opt in to those institutions’ appeal procedures.
However, court orders with respect to confirmation, vacatur or recognition and enforcement of awards are subject to the normal appeal procedures of US litigation. Parties wishing to challenge a final federal district court order can appeal to the federal circuit court of appeals in which the district court sits. In general, the circuit courts of appeals have the final word on the matters before them; in rare cases, the Supreme Court may grant a request to review a circuit court decision.
What requirements exist for recognition and enforcement of domestic and foreign awards, what grounds exist for refusing recognition and enforcement, and what is the procedure?
Courts generally uphold arbitration awards in line with the United States’ strong public policy in favour of arbitration. Awards made by US-seated tribunals may be recognised and enforced (ie, confirmed) by any court agreed upon by the parties or, in the absence of such agreement, by a court sitting in the district in which the arbitration agreement was made, provided no ground for vacatur or modification exists under sections 10 or 11 of the FAA.
For foreign-seated arbitrations, the FAA incorporates the grounds for denial of recognition and enforcement of awards set forth in the New York and Panama Conventions (FAA sections 207 and 301). In limited circumstances, the United States may also permit denial of recognition or enforcement of a foreign award on the basis of certain procedural defences, such as the court’s lack of personal jurisdiction over the award debtor, or the doctrine of forum non conveniens.
Is there a limitation period for the enforcement of arbitral awards?
A petition to confirm a domestic arbitral award ‘may’ be filed within one year from the date of the award (9 USC section 9). Whether this limitation is mandatory depends on the court in which it is brought (see FIA Card Servs, NA v Gachiengu, 571 F Supp 2d 799, 803-804 (SD Tex 2008)). For foreign awards, a petition to confirm must be filed within three years (9 USC sections 207 and 302). The FAA provides a three-month limit for motions to vacate, modify or correct an award (9 USC section 12).
What is the attitude of domestic courts to the enforcement of foreign awards set aside by the courts at the place of arbitration?
Citing concerns for international comity, US courts usually do not enforce foreign awards set aside by the courts at the place of arbitration (eg, Getma Int’l v Republic of Guinea, 862 F 3d 45 (DCC 2017); and Thai-Lao Lignite (Thailand) Co v Gov’t of Lao People’s Democratic Republic, 864 F 3d 172 (Second Circuit, 2017)).
However, several courts have held that they may enforce an award despite vacatur by the courts of the seat in extraordinary circumstances. For instance, one recent decision upheld the enforcement of an award that had been vacated in Mexico on the basis of newly enacted legislation that had been applied retroactively by the Mexican courts, stating that to hold otherwise would be ‘repugnant to fundamental notions of what is decent and just in this country’ (Commisa v Pemex, 832 F 3d 92 (Second Circuit, 2016)).
Does your domestic arbitration legislation, case law or the rules of domestic arbitration institutions provide for the enforcement of orders by emergency arbitrators?
The enforceability of awards issued by emergency arbitrators is somewhat uncertain. Although courts have enforced emergency awards on a number of occasions, some courts have refused to enforce them on the basis that they are not final and therefore not reviewable under the FAA (compare Yahoo! Inc v Microsoft Corp, 983 F Supp 2d 310, 319 (SDNY 2013) (enforcing an emergency award) with Chinmax Medical Sys, Inc v Alere San Diego, Inc, 2011 WL 2135350 (SD Cal 2011) (refusing to enforce an emergency award)).
What costs are incurred in enforcing awards?
In general, each party bears its own costs and fees in connection with post-award litigation pursuant to the ‘American Rule’. US court fees are quite minimal; the bulk of a party’s costs for enforcement will be attorneys’ fees, which will generally be borne by the enforcing party absent agreement to the contrary. However, the position may be different if the parties contractually agree to fee shifting in post-award proceedings, or if a party opposes confirmation or enforcement on a ground deemed to be frivolous (in which case fees may be awarded as a sanction).