Nine times out of ten, one of the first questions we are initially asked by clients when we explain how international arbitration works is this: if we win the case, how can we be sure that the other side will pay, or that the award will be enforced?
Because international arbitration often involves parties from different countries resolving business disputes in a neutral country through a panel of independent “judges” (or arbitrators), people naturally believe that enforcing these decisions will be problematic, if not impossible. Not so. In fact, the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards,commonly known as the “New York Convention,” addresses this very issue.
The adoption of the New York Convention on June 10, 1958 is widely recognized as a significant milestone in international arbitration. The Convention entered into force on 7 June 1959 and currently 144 countries have signed it. Countries that are signatories to the convention effectively agree to recognize arbitration agreements in writing and to refuse to litigate disputes subject to an arbitration agreement. Signatory states must also recognize and enforce arbitral awards.
In addition to the New York Convention, specific arbitral forums may have their own means for ensuring that awards are enforced.
The recognition and enforcement of an arbitral award is actually pretty easy and oftentimes more efficient than if the decision had been handed down by the Country’s own court, at least in the United States. In the United States court system, the losing party has the opportunity to appeal the decision, a process that can last a very long time. Conversely, awards decided through arbitration are binding and cannot be challenged, except in certain, limited situations.
To read the full text of the 1958 New York Convention, visit New York Convention.