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UC Law Journal

Abstract

This Article addresses an undertheorized but important topic: the laundering of foreign arbitral awards. Prevailing parties in foreign arbitrations often obtain judgments confirming their awards at the place of arbitration. Fifty years ago, the Second Circuit established the so-called “parallel entitlements” doctrine, pursuant to which prevailing parties can seek enforcement of the foreign award under federal law, or enforcement of the foreign confirmation judgment under state law, or both.

If an award faces obstacles to enforcement under the New York Convention or the Federal Arbitration Act, the prevailing party can still obtain enforcement of the confirmation judgment under the legal standards that apply to the enforcement of foreign judgments under state law. Although a modest but persuasive body of commentary has criticized this laundering of foreign arbitral awards, observers have treated it as a logical consequence of the parallel entitlements doctrine that will continue until legislatures or courts change the direction of the law.

However, when recently serving as an expert witness in a high-end dispute, the author discovered a line of cases in which U.S. courts have effectively limited the scope of the parallel entitlements doctrine. Specifically, those cases have construed state law as sufficiently broad to permit consideration of certain fundamental lapses in the underlying arbitration when deciding whether to enforce foreign confirmation judgments. Such lapses include arguments that (1) the parties never had a valid arbitration agreement; (2) the arbitrators exceeded the scope of the submission to arbitration; (3) the respondent did not receive adequate notice of the arbitration proceedings; and (4) the tribunal lacked independence or impartiality. This line of cases provides new and meaningful limits on the laundering of foreign arbitral awards.

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