The international scope of energy transactions commonly leads parties to incorporate arbitration as their method of dispute resolution. When the arbitration concludes, the award does not always lead to final resolution. The successful party may need to pursue confirmation of the award, which often leads to an attempt to confirm it in U.S. courts. A party seeking confirmation of a foreign arbitration award, however, may encounter obstacles and delays, notwithstanding public policy favoring enforcement of arbitration awards.

Lawyers may have clients who want a court to confirm either a foreign award, which is an award made in accordance with foreign law, or a nondomestic award, meaning one involving parties domiciled or principally located outside the enforcement jurisdiction. Attorneys can seek to enforce such awards through the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) or, in certain circumstances, the Inter-American Convention on Commercial Arbitration (the Panama Convention).

The two treaties provide similar rights and are implemented in chapters two and three of the Federal Arbitration Act (FAA). When deciding which to use, lawyers should consider whether the country where an arbitrator rendered the award is a signatory to one or the other. There are a number of other issues to consider, including scope of review, jurisdiction over persons and property, and the Foreign Sovereign Immunities Act and related enforcement issues.

1. Scope of review: The conventions mandate two different regimes for review of foreign arbitral and nondomestic awards.

Courts generally have greater latitude under the conventions to review nondomestic awards. A district court may set aside or modify an award under the FAA and case law if the award was procured by fraud, the arbitrators refused to hear key evidence, or the arbitrators committed other misconduct.

In contrast, a court asked to enforce a foreign arbitral award may only consider the substantive defenses contained in Article V of the New York and Panama Conventions. In summary, those are: lack of capacity or invalidity; improper notice of the proceeding or the arbitrator’s appointment; matters not submitted or beyond the scope of arbitration; lack of agreement to arbitral authority; a nonbinding award; differences not susceptible to arbitration; and public policy contrary to enforcement.

2. Jurisdiction over the person or property: Such jurisdiction poses another procedural obstacle that a party opposing enforcement of a foreign arbitral award can raise. While several chapters of the FAA confer subject matter jurisdiction on federal courts to enforce foreign arbitral awards, the party seeking enforcement must demonstrate either that the court has jurisdiction over the respondent’s person or property or that the Due Process Clause is inapplicable because the respondent is a sovereign or its agent.

When seeking to enforce a foreign arbitral award, the attorney for the petitioning party must demonstrate that a statutory basis exists for the court to exercise personal jurisdiction over the respondent or its property and that the exercise of jurisdiction comports with constitutional due process. This is the familiar analysis of whether the court has acquired specific or general jurisdiction over the respondent’s person or has acquired quasi in rem jurisdiction over the respondent’s property.

3. Foreign Sovereign Immunities Act (FSIA) and enforcement: In the context of a foreign state, the party petitioning for enforcement of a foreign arbitral award does not need to establish personal jurisdiction consistent with constitutional due process. Rather, FSIA and 28 U.S.C. §1330 authorize a court to exercise personal jurisdiction over a foreign state if there has been proper service of process under FSIA and the court has jurisdiction under an exception to immunity, which generally includes actions to confirm arbitral awards.

FSIA will not necessarily relieve a petitioning party of the burden to demonstrate that the court has jurisdiction over a foreign, state-owned corporation. While FSIA’s definition of a foreign state is broad enough to often include a state-owned corporation as an agency or instrumentality of the foreign state, courts do not construe FSIA to necessarily confer personal jurisdiction over state-owned corporations.

The reasoning is based on the presumption that state-owned corporations are juridical entities, which are distinct and separate from the foreign state. If a state-owned corporation is separate from the foreign state, FSIA provides a statutory basis for the court to exercise personal jurisdiction. The petitioning party must, nonetheless, demonstrate that the court has jurisdiction over the person or property consistent with constitutional due process.

A party seeking to enforce a foreign arbitral award against a state-owned corporation may avoid the burden of demonstrating that the court has acquired personal jurisdiction consistent with due process if it can present sufficient evidence to overcome the presumption that the state and the state-owned entity are separate. The presumption of separateness can be overcome if the state so extensively controls the instrumentality that a relationship of principal and agent is created or if adhering blindly to the corporate form would cause an injustice.

While the United States’ judicial system can provide an efficient and predicable forum to enforce foreign and nondomestic arbitral awards, a party petitioning for enforcement can face significant hurdles. These hurdles — including potential challenges to the award itself, in the case of nondomestic arbitral awards, and objections to personal jurisdiction in actions under the New York or Panama Convention — can be managed through an arbitration agreement. Notably, the parties can add predictability to a future enforcement action by consenting to the jurisdiction of U.S. courts and conducting the arbitration hearing in the United States.