In any dispute resolution process, the war does not necessarily end upon receipt of an award or judgment. Where the losing party refuses to satisfy the award, the winning party will need to go through the legal process of recognition and enforcement of the award in all jurisdictions where the losing party has assets. In doing so, the award creditor can incur not-insignificant costs. An important question for parties seeking enforcement is whether a court will grant an award creditor their attorney’s fees, interest on the award and costs of court. In the U.S., the answer may well be “yes” on all three counts as illustrated by a recent win for a Norton Rose Fulbright client in Gulf Haulage Heavy Lift Co. v. Swanberg International. In this article we cover how an award creditor can pull off this trifecta and obtain everything it is due.
Legal framework in the U.S.
In the U.S., confirmation of an arbitral award that was issued in another country is nearly always governed by either the New York Convention or its close cousin, the Panama Convention. These international conventions generally obligate a signatory country to enforce foreign arbitral awards issued within the territory of another signatory country, unless the party opposing confirmation proves any of the exceptions to enforcement specified in the relevant convention.
The New York and Panama Conventions do not address specifically whether an enforcing court should grant to a prevailing award creditor anything else, such as its costs in seeking confirmation or interest on the award. However, the conventions do not exclude the possibility. In fact, the New York Convention provides at Article III that signatory countries must generally enforce a foreign arbitral award “in accordance with the rules of procedure of the territory where the award is relied upon[.]” Similarly, the Panama Convention provides at Article 4 that execution on an award “may be ordered in the same manner as that of decisions handed down by national or foreign ordinary courts, in accordance with the procedural laws of the country where it is to be executed[.]” The conventions leave questions of ancillary compensation, such as costs and interest, up to the laws of the country where enforcement is sought.
In the U.S., the New York and Panama Conventions are implemented as federal law through the Federal Arbitrations Act. The Act does not expressly address whether and when courts confirming foreign arbitral awards can grant ancillary compensation. Given this legislative silence, it has fallen on the courts to decide these questions. As shown below, a growing judicial consensus recognizes that ancillary compensation for prevailing award creditors is often available.
U.S. courts usually decline requests for attorney’s fees in confirmation actions, even when the award creditor successfully obtains confirmation of the foreign arbitral award. In doing so, courts frequently note the “American rule” whereby even prevailing parties must bear their own attorney’s fees, absent express authority in a contract or statute.
That said, a growing body of U.S. case law holds that courts have the discretion to award attorney’s fees to the prevailing award creditor, at least when the award debtor has opposed confirmation in bad faith, vexatiously, wantonly, or for oppressive reasons. For example, a federal district court in New York ordered an award debtor to pay attorney’s fees after it failed to provide any briefing or evidence in support of its opposition. A district court in San Diego did the same, granting attorney’s fees against a private company whose opposition it characterized as “weak” and “dilatory.” Sovereign states are not immune to adverse fee awards, either. A court in the District of Columbia awarded attorney’s fees against a sovereign state respondent that had, in the court’s words, “refused to participate” in the court proceeding in a display of “inaction [that] is inherently unjustified and in bad faith.”
To this line of cases, one can now add Gulf Haulage Heavy Lift Co. v. Swanberg International, Ltd., 4:18-CV-04392 (S.D. Tex. Nov. 12, 2020). The authors hereto acted in that case and argued on behalf of our client that the award creditor was entitled to its attorney’s fees in seeking confirmation of a Saudi arbitral award. We construed the award debtor’s case against confirmation as being not only in bad faith, but also largely irrelevant to the recognized exceptions to confirmation under the New York Convention. The court agreed. Thus, in an apparent first for a federal court sitting in Texas, the court granted attorney’s fees to an award creditor that successfully obtained confirmation of its foreign award pursuant to the New York Convention.
What is the takeaway? Although somewhat rare, an award of attorney’s fees is possible in a U.S. confirmation action, particularly if the court concludes that the award debtor’s opposition to confirmation is legally groundless or in bad faith.
Interest on the award
An award creditor may also wish to recover interest on the unpaid arbitral award. Such a recovery may not always be possible (for example, if the question of post-award interest was specifically considered but denied by the arbitral tribunal). But if post-award interest was not decided in the award, then a U.S. court may well have the power to decide the issue.
Assuming the court has the requisite power, there are two types of post-award interest that a U.S. court can award, with different rules for determining the available interest rate to be applied.
Post-award, pre-judgment interest—that is, interest accruing between the date of the arbitral award and the date of the court judgment confirming the award—is considered an equitable remedy. Federal courts sometimes determine the equitable rate of interest by reference to the pre-judgment rate that would ordinarily apply under the laws of the particular U.S. state where the court sits. This is not a hard and fast rule, however, and the court may determine that a higher or lower rate of interest—or even no interest at all—should be awarded in a given case.
In contrast, the availability and amount of post-judgment interest are determined in accordance with a federal statute that governs money judgments (i.e., 28 U.S.C. § 1961). This statute essentially mandates the award of post-judgment interest, with the interest rate to be determined based on the going rate for the U.S. one-year treasury bond.
Although both types of post-award interest are usually available, a surprising number of award creditors fail to request either when seeking confirmation of an arbitral award.
In the Gulf Haulage example, we invited the court to award both types of post-award interest. The court agreed, granting in the final judgment nearly one million U.S. dollars in additional compensation to our client.
Costs of court
While often overlooked, an award creditor should also not forget the possibility of recovering costs of court. In many cases, these costs can be comparatively minor, possibly no more than a few hundred dollars for the case filing fee. In confirming a foreign arbitral award, however, the costs of court may well be higher. For instance, interpreters may be needed, and the costs of engaging them may be recoverable costs. Copying and printing costs can also be voluminous and, if properly documented, they too may be recoverable.
Whether such costs are large or small, the client is out of pocket. Therefore, when preparing a bill of costs, it can be well worth the small effort to consult the list of potentially recoverable costs found in 28 U.S.C. § 1920.
Obtaining an award is often not the end of the process. The end game – getting the client paid – is always top of mind for experienced arbitration counsel. As in any legal process, there are tactics to achieving the best enforcement outcome for a client and part of that is the costs position. In seeking enforcement of a foreign arbitral award in the U.S. (and elsewhere), award creditors should consider seeking ancillary compensation beyond that granted on the face of the award to cover the costs of enforcement and the time lost in receiving payment on the award.
In law, as in life, it really pays to ask.