On What Grounds Can an International Arbitration Award Be Vacated?

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Your U.S. company and a commercial partner from a foreign nation had the foresight to designate international arbitration as the dispute resolution mechanism in your joint venture agreement. A dispute arose and you both diligently presented your claims to the arbitral panel. The arbitral panel has issued its award. What now?

In all likelihood, the non-prevailing party will abide by the arbitral award and pay the awarded damages. However, the non-prevailing party could refuse to comply and even go so far as to seek to vacate the award. Will they succeed? Will the arbitration award be enforced?

In this scenario, because the arbitration was between a U.S. company and a foreign corporation, any confirmation or vacatur proceedings will be governed by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, better known as the New York Convention. The U.S. is a signatory to the New York Convention, as are over 160 nations around the globe. Under Article V of the New York Convention, there are only seven grounds for vacating an arbitration award:

1. The parties were in some way incapacitated, or the agreement to arbitrate was not valid under the national law selected by the parties to the agreement;

2. The non-prevailing party was not given proper notice of the arbitral proceedings or was otherwise unable to present its case;

3. The arbitrator or arbitral panel exceeded her/its authority and decided matters not within the scope of what was submitted by the parties;

4. The arbitrator or arbitral panel were not selected in accordance with the arbitral agreement of the parties or not in accordance with the law of the arbitral seat;

5. The award has not yet become binding or has already been set aside by a court in the seat of the arbitration;

6. The subject matter of the arbitration is one that cannot be resolved by arbitration under the law of the nation in which enforcement is sought;

7. The enforcement of the arbitral award would be contrary to the public policy of the nation in which enforcement is sought.

The non-prevailing party may move to vacate or set aside the arbitral award at the seat of the arbitration, or may resist enforcement of the award on the basis of these grounds in any place enforcement is sought. But unless one of these grounds is applicable in your case, the arbitral award should be enforced and the non-prevailing party should fail to vacate or set aside the award. 

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