Winning an arbitration is only part of the process. The real value of an arbitration award lies in being able to enforce it.
In many cases, the losing party complies voluntarily with the award and arranges payment without further action. However, that does not always happen. An award debtor may miss payment deadlines, dispute enforcement, or simply refuse to pay.
When voluntary compliance is not forthcoming, the successful party must take steps to enforce the award. One of international arbitration's greatest strengths is that, unlike court judgments, arbitral awards benefit from a well-established international enforcement framework.
The global framework for enforcement: The New York Convention
The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, more commonly known as the New York Convention is ratified by over 170 countries.
The Convention provides a straightforward mechanism for recognising and enforcing arbitral awards across national borders. In practical terms, an award made in one Convention state can generally be recognised and enforced in another without the need to re-litigate the underlying dispute.
This international framework is one of the principal reasons why arbitration remains the preferred method of resolving cross-border commercial disputes.
The UK’s regime: The Arbitration Act 1996
In the UK, the New York Convention is implemented through sections 101, 102, and 103 of the Arbitration Act 1996.
Under these sections, a New York Convention award may be enforced in the same manner as a judgment or order of the court of England and Wales.
When applying for the recognition or enforcement of an award, the applicant must produce the original award, the arbitration agreement, and a translation of the award if it is in a foreign language.
The English courts are generally supportive of arbitration and adopt a pro-enforcement approach. While section 103 of the Arbitration Act allows a party to resist enforcement, the available grounds are deliberately narrow and are interpreted restrictively.
Examples include:
- the arbitration agreement was invalid;
- a party was not given proper notice of the arbitration or was unable to present its case;
- the tribunal exceeded its jurisdiction;
- the award has been set aside or suspended by the courts at the seat of the arbitration; or
- enforcement would be contrary to public policy.
Successfully resisting enforcement is relatively uncommon, reflecting the courts' strong commitment to upholding valid arbitral awards.
The process for seeking enforcement in the UK
Enforcement usually begins with an application to the High Court.
The court will consider whether the award should be recognised and, if satisfied, will grant permission for the award to be enforced as though it were a High Court judgment.
Once permission has been granted, the full range of enforcement procedures available under the Civil Procedure Rules becomes available to the award creditor.
The award debtor has a limited period in which to apply to set aside the enforcement order. If no successful challenge is made, enforcement can proceed in the same way as any other English judgment debt.
Statutory demand or winding up petition
For corporate debtors, one of the most effective enforcement options is often insolvency proceedings.
Where an arbitration award has been recognised by the English court and remains unpaid, the creditor may be able to serve a statutory demand. Failure to satisfy a debt can constitute evidence that a company is unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986.
If the debt is undisputed and exceeds the statutory threshold, the debtor generally has 21 days to pay the debt, secure it, or reach an acceptable settlement with the creditor.
Failure to do so may allow the creditor to present a winding-up petition.
The prospect of compulsory liquidation often creates significant commercial pressure on the debtor to resolve the outstanding award before matters progress further. Although this is a powerful enforcement tool, it should only be used where appropriate and where there is no genuine dispute over the debt.
Other enforcement tools available in the UK
Depending on the circumstances, several other enforcement methods may be available.
Writ of control
An award creditor may obtain a Writ of Control authorising a High Court Enforcement Officer to recover the debt.
After giving the required notice, the enforcement officer may attend the debtor's premises to seek payment. If payment is not made, goods belonging to the debtor may be seized and sold to satisfy the debt, together with any recoverable costs and interest.
Third party debt order
An award creditor is entitled to any money owed to the award debtor by a third party. In other words, where a third party owes money to the award debtor, the court may order that those funds be paid directly to the award creditor.
This can be an effective remedy where the creditor has identified money owed to the debtor by another party.
Charging orders
Under section 1 of Charging Orders Act 1979, an award creditor can impose a charge on any property of the award debtor to secure the payment of the money that is under the award.
These may include:
- land and property;
- shares and securities;
- investment portfolios;
- certain trust interests; and
- funds held in court.
Although a charging order does not usually result in immediate payment, it provides security for the debt and may ultimately support an application for an order for sale of the asset.
Appointing receivers
In appropriate cases, the court may appoint a receiver to collect income or realise assets on behalf of the creditor.
Receivers are commonly appointed over rental income, business income streams, dividends or other valuable assets where conventional enforcement methods are unlikely to be effective.
Although the court has powers under the Senior Courts Act 1981 and, in some circumstances, section 44 of the Arbitration Act 1996, appointing a receiver is generally regarded as a specialist remedy reserved for more complex enforcement cases.
Obtaining freezing injunctions
Where there is evidence that a debtor may attempt to move or dissipate assets before enforcement can take place, the court may grant a freezing injunction.
This prevents the debtor from dealing with specified assets while enforcement proceedings continue.
Applications for freezing injunctions are made urgently and require compelling evidence of a genuine risk that assets will be placed beyond the reach of creditors. Delay in making the application can significantly weaken the prospects of obtaining relief.
Asset disclosure orders
Effective enforcement depends on knowing what assets are available.
Where the creditor has limited information about the debtor's financial position, the court can require the debtor to disclose details of its assets.
This information may include bank accounts, real property, investments, shares, trust interests, debts owed by third parties and other valuable assets that could be used to satisfy the award.
Failure to comply with a disclosure order may amount to contempt of court, exposing the debtor to serious sanctions, including fines or, in some cases, imprisonment.
Conclusion
International arbitration offers businesses a significant advantage over traditional litigation when it comes to cross-border enforcement.
Thanks to the New York Convention, arbitral awards are recognised and enforceable in most major trading nations, giving successful parties access to a robust international enforcement framework.
England, in particular, is one of the world’s leading jurisdictions for the recognition and enforcement of international awards, and once an award has been recognised in England and Wales, creditors have access to a wide range of enforcement options.
For those involved in arbitration, obtaining an award is a significant milestone, but it should not be viewed as the end of the dispute. The true measure of success is whether the award can be converted into a meaningful recovery.
In our experience, successful enforcement rarely happens by chance. Award creditors must act promptly to identify asset early, understand where they are located, and anticipate attempts to dissipate them. The right combination of measures can make the difference between recovery or simply holding a favourable award on paper.
