Remedies in Aid of International Arbitration - Part 5 Chapter 6 - The Practice of International Litigation - 2nd Edition
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
A decision of the Appellate Division on attachments in aid of arbitration has made it clear that in the state courts of New York the scope of such provisional remedies is limited primarily to domestic arbitrations. In Drexel Burnham Lambert Inc. v. Ruebsamen, the Appellate Division ruled that although §17502(c) of the C.P.L.R. permits attachments in aid of domestic arbitration upon a minimal showing, in cases that, because they involve foreign parties, fall under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, such relief may not be had. The decision, which refers to an interpretation of the convention by the New York Court of Appeals, highlights the need for an amendment to the convention as it has been enacted by federal legislation.
In Drexel Burnham Lambert Inc. v. Ruebsamen, petitioner Drexel Burnham Lambert Inc. (Drexel), sought an order of attachment prior to arbitration. The attachment was sought as security for a claim by Drexel against the respondents Heinz and Werner Ruebsamen in a pending arbitration proceeding. Drexel had filed its demand for arbitration to recover a liquidated debt balance of about $230,000 in a securities account maintained by the Ruebsamens with Drexel.
The Ruebsamens, citizens of West Germany, had opened an account with Drexel’s office in Brussels to engage in options transactions. On October 19, 1987, the day of the 500-plus drop in the Dow Jones Industrial Average, a Drexel representative made a margin call in the amount of $304,000. The call was not expeditiously met and Drexel liquidated the account, resulting in a debit balance of about $230,000.
Drexel procured an ex parte order attaching $250,000 of the Reubsamens’ assets in a separate and unrelated brokerage account, alleging that “there was urgent necessity to obtain security for the award that may be recovered in the arbitration proceeding.”
Seek to Vacate TRO
The Ruebsamens then cross-moved to vacate the temporary restraining order on the ground that there was an insufficient basis for attachment under C.P.L.R. 7502(c) in that Drexel could not show that any future award would be ineffectual without an attachment, that there was no likelihood of success on the merits and that the court lacked personal jurisdiction over the Ruebsamens. Drexel asserted an additional basis for the attachment—that West German law precludes enforcement of debts arising out of options and margin trading by non-registered merchants such as the Ruebsamens. Therefore, Drexel, argued, the Ruebsamens’ substantial property and assets in West Germany would not serve to protect Drexel in connection with any arbitration award the latter might obtain.
In denying the petition and dismissing the proceeding, the lower court held that the showing required for attachment in aid of arbitration pursuant to C.P.L.R. 7502(c) is the same as that described in section 6201(3) of the C.P.L.R., which mandates proof of some affirmative act threatened or performed that might render the prospective arbitral award ineffectual.