The Lesser Evil: How and Why Litigation Over Arbitration Awards Should Have Preclusive Effects – Vol. 28 No. 3

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Author: Michael J. Donaldson*

Published: December 2017

United States
Interpretation of the Award
Contents of the Arbitration Agreement
Operation and Effects
Enforcement of Arbitral Awards

Description: International arbitration should generally work better than national court litigation. Even arbitration at its worst should work at least as well as going to court. And the process for enforcing arbitration awards across national borders—especially under the New York Convention—should be easy, simple, efficient, and consistent. It should not matter if an award rendered in Spain is enforced in Geneva, Riyadh, or New York—the result of any enforcement proceeding should be the same. It is only this consistency, or at least the specter of it, that will induce the loser to pay up. Alternatives to paying an award, such as attempting to
re-litigate in a different forum and asset relocation to jurisdictions that might allow such re-litigation, simply won’t work if the debtor knows that all major commercial jurisdictions will recognize and enforce a properly rendered award in the same way.

I hope these propositions are uncontroversial. If they are, I find it surprising that many experienced arbitrators and knowledgeable commentators argue that a fair and impartial decision of an enforcing court that conclusively decides the validity (or invalidity) of an Article V(1) defense under the New York Convention ought to have no preclusive effect in another forum. Such a position encourages forum shopping and asset relocation. And it encourages non-payment of awards even after the loser has had its day (or weeks, or years) in court and a fair chance to resist enforcement of the award or to annul it. If every enforcing jurisdiction allows a do-over, who wouldn’t try again elsewhere?

In this article I explain why giving preclusive effects to award judgments is better than the alternative. I propose a framework for courts to use when confronted with an Article V defense to recognition and enforcement that has already been adjudicated elsewhere. And I will explain why I don’t see any reason in principle to give different preclusive effects to judgments confirming, judgments refusing to set aside, judgments refusing to enforce, and judgments vacating an award.

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*Partner, Burnet, Duckworth & Palmer LLP, Calgary, Canada, LL.M. (Columbia), LL.B. (U.B.C.), B.A. (Queen’s). My thanks to Robert H. Smit for inspiring me to write this article, challenging and refining my thinking, and for his very helpful comments on an earlier draft. Thanks to the ARIA staff and my colleague, Paul Beke, for help with editing.