Second Circuit Confirms That an Arbitral Award That Has Been Nullified at the Seat of the Arbitration Should Rarely Be Enforced

July 27, 2017

On July 20, 2017, in Thai-Lao Lignite (Thailand) Co., Ltd. v. Gov’t of the Lao People’s Democratic Republic, the Second Circuit upheld a district court decision vacating its prior enforcement of a $57 million arbitral award against Laos after the award was annulled by a court at the seat of the arbitration.

In its most recent notable decision on the subject, Corporación Mexicana de Mantenimiento Integral, S. de R.L. de C.V. v. Pemex-Exploración y Producción, the Second Circuit had confirmed that U.S. courts asked to enforce nullified arbitral awards should defer to the decisions of courts in the primary jurisdiction absent a violation of “‘fundamental notions of what is decent and just’ in the United States,” but the Court had applied this standard in a way that many found controversial. Thai-Lao Lignite returns the Court to a more deferential application of the standard, which promotes the pro-arbitration and international comity principles embodied in the New York Convention. The decision further ensures that these principles will be vindicated even when an arbitral award has already been recognized and enforced in the United States, but later annulled at the seat of the arbitration.