Enforcing an international arbitration award in the U.S.: can a debtor’s assets be preemptively preserved?
An earlier article in this series described the steps required to enforce an international arbitration award in the U.S. But what can an award-creditor do when it fears the award-debtor will transfer assets before recognition and enforcement proceedings can reach them? Below we provide a basic overview of pre-recognition provisional remedies.
Pre-recognition provisional remedies
Prior to recognition, it is sometimes possible for a petitioner to attempt to preserve the debtor’s assets through pre-judgment attachment and garnishment procedures. Those procedures are designed to prevent the debtor from transferring property subject to post-recognition seizure. They may also prevent third parties from transferring assets belonging to the debtor.
Pre-judgment attachment and garnishment procedures are governed by the law of the state where the federal court is located. Such proceedings may be ex parte. Eventually, however, the award-debtor is to receive notice and may mount an opposition. As procedures are tethered to state law, they can vary widely and can often contain complicated requirements.
In New York, for example, an award-creditor may be entitled to pre-judgment attachment if it shows, among other things, that (i) its petition is likely to succeed; and (ii) that the award-debtor, with intent to frustrate enforcement, has or is about to transfer assets. The petitioner must also post bond. And it will be subject to paying the debtor’s damages and attorneys’ fees if the petition for recognition is denied or attachment is found to have been improper.
Because attachment and garnishment procedures are so state-specific, it is wise for a party to consult counsel familiar with the process where it intends to take action.
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