The enforcement of annulled awards: further reflections in light of Thai Lao-Lignite

The fate of awards annulled at the seat has been the subject of well-known case-law from different countries and has spurred considerable scholarly debate. The traditional position was that awards annulled at the seat ceased to have legal existence and could therefore not be enforced in other countries. Over time some courts and many commentators have begun to consider that the annulment of an award at the seat is not necessarily preclusive of the possibility of enforcement in other countries. As I have tried to argue in earlier pieces, legal as well as policy reasons strongly militate in favor of the more open view. Specifically, the possibility of enforcing awards annulled at the seat is one of the tools to insulate arbitral awards from undue, or unpalatable, interferences by state courts with arbitration and to deleverage the role of the state of the seat. The other tool is the recourse to international courts and tribunals, particularly those constituted under bilateral investment agreements, to sanction interferences with arbitration potentially amounting to violations of international law. A significant contribution to the debate on the possibility of enforcing annulled awards was given by the decision rendered by the District Court for the Southern District Court in August of last year in Corporación Mexicana de Mantenimiento Integral (“COMMISA”) v. Pemex-Exploración y Producción (“PEP”) (“Pemex”). By granting enforcement in the United States to an award vacated by the courts of the seat for the first time since Chromalloy, in Pemex the District Court took what I described as “an important step in the right direction” . Barely four months later, in February 2014, in Thai-Lao Lignite (Thailand) Co Ltd & Hongsa Lignite (Lao Pdr) Co., Ltd v Government of the Lao People’s Democratic Republic, the same court might seem to have gone in the opposite direction by deferring to the annulment decision of the courts of the seat in Malaysia. The purpose of this note is to analyze the Thai-Lao Lignite decision and show that the different outcome in the two cases is explained by the substantial differences in the facts. The more recent decision does not indicate a backtracking by the New York court from the welcome, albeit extremely cautious, stance on the enforcement of annulled awards it took in Pemex. The final paragraph will focus on the legal and policy shortcomings of the deferential approach to foreign annulments, including that of US courts.