If you represent clients in dispute resolution matters for any substantial period of time, eventually you will encounter an adversary who refuses to appear and participate in an arbitration proceeding. Perhaps this adversary wishes to suspend the reality of an inevitable outcome. Perhaps their true motivations are simply inscrutable. But sometimes an adversary pursues a strategy of non-participation intending to attack an adverse award as unenforceable.[1] What can you, as attorney for claimant, do to maximize your chances of enforcing a favorable award when your adversary refuses to participate?

In a United States state or federal court, a plaintiff could seek a default judgment against a non-responsive adversary. Under New York law, for example, a party’s default is deemed an admission of the allegations in the pleading filed against them and a waiver of any affirmative defenses the defaulting party may have had. Under this standard, the plaintiff need merely state a valid claim and prove that the defendant was duly served with process but failed to appear and respond, an admittedly low burden. The standard for some default judgments is even lower. Under Rule 55 of the Federal Rules of Civil Procedure, a money judgment can be entered by the clerk – without review by a judge – upon an affidavit by plaintiff that the claim is for a “sum certain” and the defendant was served but “failed to plead or otherwise defend.”[2]

Arbitration is different. Despite occasional references to “default awards,” there is no procedural device available in arbitration that is truly identical to a default judgment in a court of law. Confirmation and enforcement of a favorable arbitration award requires more than merely showing that arbitration proceedings were properly commenced, an enforceable arbitration provision exists, claimant stated a valid claim, and respondent was duly served with process. Under New York law, for example, a non-participating party named in an arbitration proceeding retains a statutory right to challenge the obligation to arbitrate or failure to comply with agreed upon arbitration procedures.[3] A party that refuses to participate in an arbitration also may, under New York law, attack the merits of the award itself, on the basis that the arbitrator’s decision “violates a strong public policy” or was “wholly irrational.”[4]

Under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Chapter 2 of the Federal Arbitration Act (the “New York Convention”), awards issued in arbitrations having an international character are not enforceable when one or more parties has been denied fundamental fairness in the arbitration proceedings. Fundamental fairness may be implicated when a party is not able to attend the arbitration proceedings, service was not proper, or where, for example, an arbitrator refuses to “to hear evidence pertinent and material to the controversy.”[5]

Thus, claimants pursuing an arbitration award that is not only favorable but enforceable in court should be mindful to make a record showing that a non-participating respondent had received reasonable notice of, and a full and complete opportunity to participate or present “pertinent and material” evidence in, the proceedings. Claimants should also be sure to make an evidentiary presentation that would overcome any challenge to the merits of a decision on the underlying claims or based on public policy. The recent decision by the United States Court of Appeals by the Seventh Circuit in Bartlit Beck LLP v. Okoda is a good example. In affirming confirmation of the award the Court of Appeals specifically noted that multiple notices and opportunities to participate in the arbitration were provided to the non-participating respondent. Without a formidable record of notice and opportunities provided to the non-participating respondent, the Court of Appeals would be without solid ground to confirm the award.

Even when another party refuses to participate in an arbitration proceeding, and issuance of a favorable award is almost certain, a claimant’s right to recover is not yet final. Claimants facing a non-participating respondent in arbitration should prosecute their claims and present evidence with an eye towards the standards required to overcome a later filed motion to vacate the award.

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Abstract: Arbitration is a widespread and common procedure for resolving disputes, but there is no procedural device in arbitration that is truly identical to a default judgment in a court of law. In this article, Michael James Maloney, Esq., describes factors to be considered when arbitrating against a party who refuses to participate.

This article first appeared on the website of the North American Regional Forum of the International Bar Association, and is reproduced by kind permission of the International Bar Association, London, UK. © International Bar Association.