- 03-Nov-2025
- public international law
While arbitral awards are often seen as a more efficient and flexible means of resolving disputes compared to traditional litigation, their enforcement can be fraught with challenges. The process of enforcing an arbitral award, especially in international arbitration, involves overcoming various legal, procedural, and political hurdles. These challenges can significantly impact the effectiveness of arbitration as a dispute resolution mechanism, and parties may find it difficult to compel compliance, even after an arbitral tribunal has rendered a final award.
One of the primary challenges in enforcing arbitral awards arises from jurisdictional conflicts. An award made in one country may need to be enforced in another jurisdiction, which can involve complex legal questions about the recognition of foreign awards. Countries may have different approaches to recognizing and enforcing foreign arbitral awards, and legal systems may not always provide clear mechanisms for doing so.
Challenge: National courts may be unwilling to enforce awards if they believe the arbitration tribunal lacked jurisdiction or if they disagree with the substance of the award.
Example: A party in the United States seeks to enforce an arbitral award issued in Singapore, but the U.S. court questions whether the Singaporean tribunal had proper jurisdiction over the matter.
Under the New York Convention (1958), which governs the recognition and enforcement of foreign arbitral awards in most countries, national courts can only refuse enforcement on very limited grounds, such as:
However, courts may interpret these grounds broadly, leading to inconsistent or unpredictable outcomes.
Challenge: Even when enforcement is legally possible, courts may refuse to enforce an award if it contradicts the local laws or public policy, even if the New York Convention permits enforcement.
Example: A court in India might refuse to enforce an arbitral award made in a foreign jurisdiction on the grounds that it violates public policy related to labor laws.
Sovereign immunity is a significant challenge when enforcing arbitral awards against a state or state-owned entity. Many countries assert that their sovereign immunity protects them from being subject to foreign judgments or arbitral awards. This can make it difficult for private parties to enforce awards against governments or state-owned enterprises.
Challenge: Governments may refuse to comply with arbitral awards, invoking sovereign immunity as a defense.
Example: A foreign investor wins an arbitral award against a state-owned entity in Argentina, but the Argentine government claims sovereign immunity to avoid enforcement in its territory.
National courts may show resistance to enforcement if they feel the arbitral award conflicts with their domestic laws or public policy. This judicial resistance can occur even in jurisdictions that have ratified the New York Convention. While the Convention mandates that courts recognize and enforce arbitral awards, some courts may be reluctant to do so if they perceive the award as unjust or against the public interest.
Challenge: Courts may substitute their judgment for the arbitrator's, overturning or delaying enforcement of awards.
Example: A court in France may refuse to enforce a foreign arbitral award against a company because the award appears to conflict with French competition laws.
Enforcement of arbitral awards in cross-border disputes can be particularly complex. A party may need to seek enforcement in multiple jurisdictions if assets are spread across different countries. This can lead to delays and added costs in obtaining recognition and enforcement.
Challenge: The cost and time required to pursue enforcement in multiple jurisdictions can be significant, and there may be complications in each jurisdiction's approach to enforcement.
Example: A company in Japan wins an arbitral award against a company in Brazil, but to collect the award, they must enforce it in several jurisdictions where the debtor has assets, including in the United States, Switzerland, and the United Kingdom.
In some cases, parties may simply refuse to comply with an arbitral award, making it difficult for the winning party to obtain a remedy. This defiance can stem from a party's financial ability to ignore the award or from strategic reasons, such as a desire to delay enforcement or outlast the other party.
Challenge: Non-compliance may result in a lack of incentive for the losing party to comply, even if they have the financial means to do so.
Example: A corporation in China refuses to comply with a foreign arbitral award because the enforcement mechanisms in their jurisdiction are weak or ineffective.
While the New York Convention limits the grounds for refusal to enforce an award, one of the most common reasons for non-enforcement is a perceived violation of public policy. Each country has its own interpretation of public policy, and what is acceptable in one jurisdiction may be considered contrary to public policy in another.
Challenge: The subject matter of the award may conflict with local laws or practices, especially in areas like labor law, environmental protection, or human rights.
Example: A foreign arbitral award that orders a company to perform certain actions that violate local environmental regulations may be refused enforcement in a country that has stringent environmental laws.
Even if an arbitral award is recognized and enforcement is granted, a key challenge is whether the losing party has the financial means or assets to satisfy the award. In some cases, the losing party may be judgment-proof, making it difficult for the winning party to recover the amount awarded.
Challenge: The ability to seize assets or execute the award is limited by the availability of assets in the jurisdiction where enforcement is sought.
Example: A company wins an arbitral award against a state-owned enterprise, but the company’s assets are located in a country that is unwilling to assist in enforcement.
Imagine a construction company based in the United Kingdom wins an arbitral award against a state-owned enterprise in Nigeria for breach of contract related to a major infrastructure project. The company now faces the challenge of enforcing the award, which involves the following steps:
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