Parties to international arbitrations may seek to enforce awards in New Zealand. This process differs in several aspects from the procedure to enforce awards arising from domestic arbitrations, which we discussed in our previous article. In this article, we discuss the process to enforce awards which arise from foreign arbitrations (foreign awards) and highlight some points to consider.

Foreign awards

Foreign arbitrations are defined in Article 1 of schedule 1 of the Arbitration Act (Act) as arbitrations in which: 

• the parties to the arbitration agreement have their places of business in different states; or 
• the place of arbitration under the arbitration agreement, the place where the parties’ commercial obligations were to be performed, or the place with which the subject matter of the dispute is most closely connected is outside the state in which the parties have their places of business; or
• the parties have expressly agreed that the subject matter of the arbitration relates to more than one country. 

This captures a wide range of possible scenarios, including where two companies are resident in New Zealand but the disputed obligations were to be performed overseas, or the subject matter of the dispute is most closely connected to a place overseas. One example is where a New Zealand-based entity is undertaking a construction project in Australia, and contracts with another New Zealand-based entity to install some part of the project. Here, the parties’ commercial obligation (the installation of part of the project) is to be performed in Australia, or – alternatively – the subject matter of the dispute (the installation of the part) is most closely related to Australia. As such, any arbitration arising out of this type of scenario will be considered an international arbitration, despite both businesses being based in New Zealand.

The enforcement process

As discussed in our previous article, in order to enforce an arbitral award the successful party must apply to the court to enter the award as a judgment. Once this has been done, the award is enforceable just like any judgment issued by the courts. Then, the successful party can take practical steps to enforce the award by requiring the unsuccessful party to make payment. 

Differences between enforcement of domestic and international arbitral awards

While enforcement mechanisms are largely the same for both domestic and foreign awards, there are some key points to keep in mind. 

The role of the court

When a New Zealand court is asked to set aside or refuse enforcement of a domestic arbitral award, it exercises a general power of supervision. This ensures that arbitrations conducted in New Zealand comply with minimum standards of procedural fairness. 

When dealing with foreign arbitral awards, the courts apply a general presumption in favour of enforcement. This is because of various public policy principles: the court needs to demonstrate both comity towards other foreign courts and respect for international tribunals’ ability to hand down awards. Further, there is a public policy imperative to prevent “forum shopping”, whereby parties seek to enforce an award in a friendly jurisdiction (that is, a jurisdiction which provides one or more benefits to the enforcing party), instead of in another jurisdiction which is more clearly connected with the parties, contract or subject matter, but which does not provide these benefits. Finally, it is important to ensure predictability in the resolution of international commercial disputes, so as to limit the risk that a domestic court might refuse to enforce an award properly handed down in accordance with international arbitral rules. This presumption is supported by the objectives of the New York Convention, which are given effect in articles 35 and 36 of schedule 1 to the Arbitration Act. 

Accordingly, the courts have the jurisdiction to make a ruling on a defendant’s application to set aside or refuse enforcement of an arbitral award. However, the courts are also able to refuse enforcement or set aside an award where the subject matter of the dispute is not capable of settlement by arbitration under New Zealand law or the recognition or enforcement of the award would be contrary to New Zealand public policy. 

Grounds to refuse enforcement of an award

As discussed in our previous article on enforcement of domestic awards, there are a narrow set of grounds on which the courts may refuse enforcement of an award. Even though the courts do not exercise their general power of supervision when dealing with foreign arbitral awards, they retain their jurisdiction to set aside or refuse enforcement of awards. An award may be refused enforcement if it is not made in accordance with natural justice or due process, if the arbitral tribunal did not have jurisdiction to make the award, or if the award contravenes the public policy of New Zealand (including where the award was induced or affected by fraud or corruption). 

Articles 34 and 36 of schedule 1 to the Act sets out various grounds on which a court may refuse enforcement of an award. In brief, an award may be refused enforcement if it was not made in accordance with natural justice or due process, if the arbitral tribunal did not have jurisdiction to make the award, or if the award contravenes the public policy of New Zealand (including where it was induced or affected by fraud or corruption). 

The court can also refuse to enforce an award which is so defective that it is incapable of enforcement. In these cases, a court will not fix awards which are defective or remit them back to the arbitral tribunal to be fixed. Instead, the court will decline to enforce the award, or will suspend the application to set aside for a period of time under article 34(4) of schedule 1 to the Act, to enable the arbitral tribunal to eliminate the issue that gave rise to the application. A party then needs to request the arbitral tribunal to correct the award under article 33 of schedule 1 to the Act. Once corrected, the party can then apply to the court for enforcement as usual.

Schedule 2 of the Arbitration Act applies to international arbitrations only if the parties have so agreed (section 6 of the Act). If they have so agreed, a party may in some cases appeal to the High Court on a question of law arising out of the award. The High Court may confirm, amend or set aside the award, or send it back to the arbitral tribunal for consideration in light of the High Court’s opinion on the question of law. 

Timeframes

The timeframes to enforce a foreign arbitral award are the same as those for enforcing domestic awards, as discussed in our previous article.

Next steps once the award is entered as a judgment

Once the award is entered as a judgment, it can be enforced just like any other judgment. If the defendant is a New Zealand-registered company, the plaintiff can issue a statutory demand requiring the defendant to pay the amount of the award as a debt due and owing within 15 working days. 

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