When an international arbitration award is set aside or nullified in the state where the arbitration was held (the primary jurisdiction), the prevailing party may attempt to enforce the award in another jurisdiction (the secondary jurisdiction). This presents unique challenges for the secondary jurisdiction, whose courts must balance the rights of the parties under the award with respect for the judgment of the court that nullified the award. According to Albert Jan van den Berg, the “generally accepted rule … is that if an award has been annulled … in the country of origin (usually the place of arbitration), it cannot be enforced in other countries.” This rule gives substantial deference to the judgment of the court where the award is issued.
Not all jurisdictions have followed this rule, including the earliest U.S. case to address the issue. An increasing consensus has nonetheless developed that annulled awards should generally not be enforced in the United States. The latest U.S. Court of Appeals case on this issue, which we discuss below, advances the trend, holding that the rule should apply except when the judgment of the primary jurisdiction’s court is “repugnant to fundamental notions of what is decent and just in the State where enforcement is sought.”
This chapter reviews the development of U.S. jurisprudence on the treatment of awards annulled in the primary jurisdiction. We begin with an overview of the applicable treaty and U.S. law provisions. We then examine the controversial early decision in Matter of Chromalloy Aeroservices, which did not honor a foreign annulment decision. Finally, we discuss the more recent cases rejecting the Chromalloy approach, particularly the D.C. Circuit’s 2007 decision in TermoRio S.A. E.S.P. v. Electranta S.P., which has effectively narrowed the application of Chromalloy to the most exceptional of circumstances.