Sometimes, once an arbitration award is issued, the losing party accepts its lumps and pays the award, promptly and in full. At times, however, it is not so simple. The losing party may consider that the award is unfair or wrongly decided, or it may simply refuse or be unable to pay. In such cases, each party has decisions to make. For the prevailing party, the question is where and how to attempt to turn the arbitration award into money.
The Federal Arbitration Act (the “FAA”)[1] consists of three chapters. Chapter 1, “General Provisions,” applies generally except where there is a conflict with a provision of one of the other applicable chapters. Chapter 2, “Convention on the Recognition and Enforcement of Foreign Arbitral Awards,” is the implementing legislation for the international treaty of the same name (also called the “New York Convention”), to which the United States is a party. Chapter 3, “Inter-American Convention on International Commercial Arbitration,” is the implementing legislation for that convention.
Chapter 1 of the FAA expressly defines “maritime transactions” to mean “charter parties, bills of lading of water carriers, agreements relating to wharfage, supplies, furnished vessels or repairs to vessels, collisions, or any other matters in foreign commerce which, if the subject of controversy, would be embraced within admiralty jurisdiction.” Section 2 of the FAA makes it applicable with respect to all maritime transactions, and this Section has been widely construed as preempting otherwise applicable state laws relating to enforcement and challenge of arbitration awards where the dispute involves a maritime transaction.
This is not the end of the analysis, however, because an arbitral agreement or award governed by Section 2 of the FAA also “falls under the Convention,” unless it arises out of a relationship which is “entirely between citizens of the United States,” except that even then, it will nevertheless fall under the Convention if the relationship between U.S. parties “involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states.”
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