Challenging and Enforcing Arbitration Awards

Global trade adjudication is based on the premise that if parties to a dispute prefer to resolve their differences outside of national court adjudication, they can submit the case to arbitration – provided that the clause is included in the contract between the parties. However, arbitral tribunals, including private arbitration courts, do not possess enforcement powers: they cannot seize assets, freeze bank accounts, or otherwise compel compliance. To enforce an arbitral award, the prevailing party must obtain recognition and a writ of execution from a competent national court. The decisions that come through these methods are supposed to be final and unreviewed, except in the case of showing serious flaws.

Two Avenues After a Decision Is Made

Upon delivery of the ex-parte decision, the parties concerned have available two fundamentally vital options to secure it. One of them consists in lodging a direct challenge against that decision in the very country in which it was rendered—that is, to have it legally unenforceable. The alternative road surfaces when a party seeks enforcement of the award in another country, which is invariably where the losing party’s assets are located. In such a case, the losing party may apply to that court to have the decision denied on the grounds of any legal or procedural imperfections.

Though they are distinct processes, both routes rely on the same legal standards. This close connection underscores how the enforcement and challenging of arbitration award are often two sides of the same coin.

Legal Reasons for Overturning or Blocking a Decision

Only a narrow set of justifications exist to set aside or prevent the outcome of such a process from taking effect. These safeguards exist to strike a balance between legal finality and protection from serious injustice.

Problem with the Original Agreement or Party Eligibility

If the agreement pursuant to which the disputes were to be submitted for resolution appeared to be vulnerably unenforceable—for example, in the case of a party not competent in law or the agreement being void—then the award again would not bear any effect. Courts will scrutinize the agreement to submit to arbitration and consider the respective capabilities of both parties in order to do so. 

Failure to Properly Notify or Allow Participation

A decision may be vulnerable if one side was not properly informed about the process or was prevented from making their case. This could be due to missed notifications or procedural barriers that left a party out of the process.

Going Beyond What Was Submitted

A panel is only authorized to deal with specific issues. If it steps beyond those boundaries—by deciding on matters not included in the original scope—then that part of the outcome may be invalid.

Irregular Panel Formation or Breach of Agreed Process

The panel must be created according to what the parties agreed, or as required by the national rules in that country. If the procedure used was seriously flawed or the composition of the panel was improper, the result may be open to challenge.

Decision Not Final or Already Nullified Elsewhere

Multinational awards must have legal force in order to be recognized and enforced in other countries. However, if the award has been set aside or declared invalid in the country where it was made, this fact may be grounds for refusing recognition and enforcement of such an award in other states.

Conflict with the Country’s Basic Legal Values

If applying the result would be offensive to a country’s fundamental legal or ethical values, the courts there may refuse to give it any effect. This exception is rarely used but acts as a final safeguard against unjust outcomes.

Strict Time Rules and Procedural Discipline

Different legal systems require quick and careful action to either apply or challenge a decision made through private resolution. Most countries allow only a few months for a party to request that the outcome be set aside. This deadline is strictly enforced, and courts generally do not grant extensions without exceptional reasons.

More so, any allegations must be made during the proceedings—that is, not after the case has ended. The silence of the disputant may be construed as an affirmation of what is being put forth. A heavy obligation is thus placed on the parties to act with due diligence and foresight—more so where parties are likely to challenge the outcome.

It is important to respect procedural rules. Missing a deadline only means weakening the position of a party should their objections be overlooked.

Scope and Authority: Who Gets to Decide?

Decisions are overturned or resisted for a principal reason: the panel lacked legal authority from the very beginning to decide the issue. If the decision-making entity makes a ruling on issues never put to it, then the decision may be void.

When a similar disagreement is considered in tribunal, it usually disregards the conclusions made by the commission itself if they are not supported by sufficient evidence or do not comply with the rules of law. Instead, the court starts from scratch with respect to the issue being canvassed and asks whether the panel ever had the legal right to decide.

To raise this effectively, a party must act at an early stage—often before making any argument on the facts pertaining to the dispute. Delay in raising this argument may prove fatal.

The Role of Fundamental Legal Values

When all other legal checks are passed, a court may still decline to give effect to a decision if it violates the core moral or legal fabric of the country. This includes instances of corruption, denial of a fair process, or serious legal defects.

However, this exception is used very sparingly. Courts are cautious not to let local preferences override global uniformity. Minor legal errors or unfavorable results are not enough. The conflict must be severe and obvious to rise to this level.

Setting Aside a Decision Doesn’t Always Stop It Elsewhere

One of the more surprising aspects of the guide to challenging and enforcing arbitration awards is that having a decision overturned in one country doesn’t guarantee that it will be rejected everywhere. Some courts may still give it effect, especially if the setting-aside process is believed to be politically influenced or legally flawed.

This means that the success of a challenge is sometimes limited to one country. Other courts may evaluate the decision independently and decide to proceed with giving it legal effect. Thus, a strategy that relies solely on one country’s court system may not be enough to block the result in full.

Planning and Strategy for Parties

For businesses and individuals involved in this kind of dispute resolution, a strong plan is essential. Legal reasoning must be combined with practical considerations to create a workable approach.

Choose the Right Country

There is a vast difference in the way different nation states may welcome or conversely be very cynical about decisions coming from extraterritorial tribunals. This will highly affect the speed and outcome of a case. 

Know Where the Assets Are

It makes little sense to secure a decision’s legal effect in a country where the other party holds no assets. Parties should aim to act in countries where the result will have real, practical consequences.

Build a Strong Case File

To successfully argue that a result should be blocked or upheld, detailed evidence is crucial. Courts expect a clear narrative showing what went wrong—or why the process was fair and complete.

Act Quickly

Waiting too long can mean the end of the challenge. Most legal systems have strict timeframes for both applying and objecting. Delays are often treated as acceptance.

Weigh the Costs

Contestation of such decisions in international fora is often costly, and before chasing any such legal end, parties need to evaluate if the potential return is worth the investment.