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Ohio Northern University Law Review

Sarah Klim

Abstract

The recognition and enforcement of foreign awards are governed almost universally by the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”). However, this recognition and enforcement necessarily invokes national judicial power. The New York Convention does not devise a harmonized set of rules for courts to follow when faced with a request to recognize and enforce an annulled award.3 This has resulted in divergent approaches by national courts, which derive “not from any perversity of judges but from good faith variants in perspectives on how to construe the treaty.” This paper seeks to answer the question: When faced with a foreign award that has been set aside in the seat of arbitration, do United States (“U.S.”) courts give primacy to the nullifying judgment or the award? National courts generally follow one of three approaches when faced with the task of recognizing and enforcing an annulled award: (1) to always defer to the nullifying judgment (the “territorial approach”); (2) to never defer to the nullifying judgment (the “delocalized approach”); or (3) to sometimes defer to the nullifying judgment, while reserving the right to recognize and enforce the award notwithstanding the annulment if justified under the circumstances (the “middle path”).6 In the 1996 case of Chromalloy Aeroservices v. Arab Republic, the U.S. District Court followed the delocalized approach and recognized and enforced an annulled award, finding that Article V(1)(e)—which grants courts the discretion to refuse recognition on the basis of an annulment—sets forth a permissive standard, whereas Article VII(1)—the New York Convention’s “most favorable right” provision—is mandatory. In the landmark 2016 case of Corporacion Mexicana de Mantenimiento Integral, S. de R.L. de C.V. v. Pemex-Exploracion y Produccion, the Second Circuit reaffirmed its willingness to recognize and enforce an annulled award, but the rationale and tone of the decision demonstrated a departure from Chromalloy. Pemex appears to adopt a “judgments framework,” standing for the proposition that the nullifying judgment is generally conclusive “as a matter of comity—except where recognition and enforcement ‘would offend the public policy of the state in which recognition is sought.’” Although critics of the “judgments framework” argue that Pemex makes no real attempt to explain the mandatory provisions of Article VII(1), proponents consider Pemex to be a welcome development because “the soundest policy lies in treating annulment decisions like other foreign money judgments.” Case law following Pemex has largely affirmed the emerging “judgments framework” in U.S. jurisprudence.

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