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International corporations are no strangers to dispute resolution processes, including arbitration, mediation, and litigation. However, once a dispute is resolved, the parties must enforce the decision. That can be a challenge when dealing with foreign countries. For this reason, international corporations need to understand the fundamental differences between enforcing an international arbitration award and enforcing a judgment in a foreign country. This blog post explores the differences between Arbitrational Award vs. Judgment. In addition, it offers insights to help international corporations navigate these complex and often frustrating issues.
Arbitrational Award vs. Judgment: Which one is better?
Enforcing a judgment in a foreign country involves various procedures, depending on the country’s legal system. It is often a time-consuming and costly process. In particular, it requires complying with local laws and regulations. It may also involve translating legal documents, appointing local legal representatives, and obtaining local court orders. Moreover, enforcing a judgment in a foreign country does not necessarily guarantee recovery of the amount owing. Indeed, the process may be subject to numerous delays and local rules. On the other hand, enforcing an international arbitration award is relatively straightforward. That is because the award is enforceable under the New York Convention (1958).
Arbitrational Award vs. Judgment: The Legal Basis
One of the main differences between enforcing a foreign judgment and enforcing an international arbitration award is their legal basis. Enforcement of judgments in foreign countries relies on private international law. By contrast, enforcing a foreign arbitral award rests on the New York Convention and the national laws implementing it. In the U.S., that law is Chapter 2 of the Federal Arbitration Act (9 U.S.C. §§ 201–208). Furthermore, parties can choose a neutral venue for arbitration. This makes the arbitration process more predictable and uniform. In contrast, the legal system of each country is unique. As a result, enforcing a judgment across borders is complicated and unpredictable.
Judicial Intervention is an issue.
Another fundamental difference between the two is judicial intervention. When a party enforces a judgment in a foreign country, there is often greater judicial involvement than with an arbitration award. Judges have more discretion when enforcing judgments than when enforcing an arbitration award. In contrast, when a party enforces an international arbitration award, the scope of judicial review is limited. This is because the parties have agreed to arbitration. They have also agreed to the appointed arbitrators as impartial experts.
International Arbitration is faster than litigation.
When it comes to enforcement, international customers prefer arbitration over litigation. The arbitration process is quick and predictable, and it offers a neutral forum for resolving disputes. Moreover, international corporations may be concerned about the confidentiality of their matters. Arbitration protects confidentiality more effectively than litigation does. The arbitration proceedings remain private, while court proceedings are subject to public scrutiny. These practical factors also shape the Arbitrational Award vs. Judgment comparison.
New York Convention (1958)
One of the most significant benefits of an international arbitration award is that it can be enforced across multiple jurisdictions. This is because the New York Convention (1958) provides for the recognition and enforcement of foreign arbitral awards in its more than 170 Contracting States. Thus, an arbitration award can reach across many foreign countries. That makes arbitration a desirable choice for international corporations who do business across multiple borders. For more information on the signatories visit Contacting states » New York Convention
Grounds for Refusing Enforcement of an Arbitral Award
Under Article V of the New York Convention, a court may refuse to recognize or enforce a foreign arbitral award only on limited grounds. The party resisting enforcement must prove one of them. For example, it may show that a party to the arbitration agreement lacked capacity, or that the agreement is invalid under the law that governs it. It may also show that it did not receive proper notice of the appointment of the arbitrator or of the proceedings. Likewise, it may show that it was otherwise unable to present its case.
In addition, a court may refuse enforcement if the award deals with matters beyond the scope of the submission to arbitration. The same applies if the composition of the tribunal or the procedure did not follow the parties’ agreement or, failing such agreement, the law of the seat. Finally, the resisting party may show that the award is not yet binding, or that a court at the seat has set it aside or suspended it.
Grounds a Court May Raise on Its Own
Article V(2) adds two grounds that a court may raise on its own. First, the subject matter may not be capable of settlement by arbitration under the law of the enforcing country. Second, recognition or enforcement may be contrary to that country’s public policy. In practice, courts in many Contracting States read these grounds narrowly. In the United States, Chapter 2 of the Federal Arbitration Act (9 U.S.C. §§ 201–208) implements the Convention. Under 9 U.S.C. § 207, a party may apply to confirm a Convention award within three years after the award is made. For this reason, the limited grounds for refusal are a central part of the Arbitrational Award vs. Judgment comparison.
Conclusion: Arbitrational Award vs. Judgment
Overall, international corporations that intend to enforce arbitration awards and judgments in foreign countries should understand the fundamental differences between the two processes. Enforcing a judgment in a foreign country is complex and time-consuming. By comparison, enforcing an international arbitration award is relatively straightforward. Arbitration also provides international corporations with enforceable awards across a variety of jurisdictions in a private and more predictable setting. By understanding these differences, international corporations can make informed decisions. Those decisions help keep their dispute resolution process efficient and cost-effective. Our office is well experienced in enforcing judgments in the United States. Please Contact Our Office – Transnational Matters
If you are weighing arbitration against litigation, or deciding how to enforce an award or a court judgment abroad, our team can help you compare the options. Contact our team to discuss which route fits your dispute.
