Enforcement in the USA - Chapter 11 - Enforcement of Arbitral Awards Against Sovereigns
Edward G. Kehoe, Partner, King & Spalding LLP
Originally from Enforcement of Arbitral Awards Against Sovereigns
As the world has globalized, creating a flurry of international contracts to formalize business relationships created across borders, so has the involvement of sovereign governmental entities in business activities. Commercial and investment relationships between private parties and foreign states or government-linked enterprises have existed since time immemorial. But these commercial relationships have seen a rapid growth rate in recent times, spurred on by accelerating globalization. It is common knowledge that most sovereign states engage in some kind of commercial enterprise aside from the business of government. What often is not appreciated, however, is the regularity and extent to which many sovereign entities contract with private companies or individuals. Governments often are key players in important or strategic industries, either by holding a controlling stake in a major corporation or forming quasi-governmental entities that go beyond regulation and are deliberately engaged in the business of profit-making. Like any other business relationship, those between sovereign states and private parties sometimes break down. The subsequent need for neutral dispute resolution often has led to the arena of international arbitration, and the concomitant steps by the victorious party to enforce the award in countries where the losing party maintains assets. The arbitrators who render the award, however, lack the legal authority to enforce it. This often unenviable task—of converting the arbitration award into a national court judgment that in turn serves as the basis for execution proceedings against property or assets of the losing party—falls to the victorious party of the arbitration. In the case of an arbitration involving a sovereign state or agency on the losing end, this may pose additional complications for enforcement. If the losing state party to an arbitration does not voluntarily comply with the award, enforcement must be pursued through national courts. Naturally, if the losing state party does not wish to comply with an award, it may avail itself of any legal defenses to enforcement.