The U.S. is a very hospitable place for international arbitration. The country’s legal framework embodies a strong policy in favor of international arbitration and the courts’ readiness to enforce arbitration agreements and awards, as well as their reluctance to intervene in the arbitration process, make it a sound choice for arbitrating international disputes. Indeed, several U.S. seats have emerged as leaders for the conduct of international arbitration, with New York remaining the most commonly selected arbitration seat in the U.S.

A strong national policy favoring arbitration (particularly international arbitration) is a significant incentive for commercial parties to arbitrate in the U.S. The U.S. also offers a multicultural setting, which facilitates the selection of arbitrators and counsel with diverse legal and cultural backgrounds. Furthermore, since the U.S. is the world’s leading economy, international arbitration award creditors seeking to collect on their awards often find themselves in search of assets located within the U.S. Seating a commercial arbitration in the U.S. can therefore facilitate such post-award enforcement efforts.

The federal structure of the U.S. has resulted in two coexisting judicial systems: the federal courts and the state courts of each of the fifty states and the District of Columbia. Therefore, the legal framework for an international arbitration seated in the U.S. does consist of partly overlapping federal and state law (the latter usually playing a gap-filling role for ancillary matters). It is important for commercial parties to understand this legal interplay before selecting a U.S. seat for their international arbitration. Separately, if parties to an international arbitration find themselves with a seat outside of the principal seats, such as New York or Washington, D.C., there is sometimes a risk that more domestic arbitration practices can inform the conduct of arbitration. This can often resemble more litigation practice than what international arbitration practitioners might ordinarily be used to.

Due to the well-developed litigation tradition in the U.S., competent court reporters, certified translators, litigation support organizations and state of the art facilities will be readily available when selecting a major U.S. city such as New York, Miami, and Houston (among others) as the venue for an international arbitration. 

The Federal Arbitration Act (FAA) is the key legislation that governs international commercial arbitration in the U.S. The FAA applies to all arbitrations that involve interstate or foreign commerce. Each state has its own arbitration laws that govern domestic arbitrations involving commerce based solely within that state. The FAA contains three chapters: 

• the first chapter governs both domestic arbitration agreements and awards, and applies to international arbitration to the extent it does not conflict with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention);
• the second chapter implements the New York Convention; and
• the third chapter implements the Inter-American Convention on International Commercial Arbitration (Panama Convention).

Section 202 of the FAA provides that “[a]n agreement or award arising out of [a commercial] relationship which is entirely between citizens of the United States shall be deemed not to fall under the [New York Convention] unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states.” For the most part, U.S. federal courts have found that what qualifies as an international arbitration encompasses a wide range of arbitration proceedings that have some “reasonable relation with one or more foreign states.” Various criteria will be considered to reach a conclusion in this regard, such as “[t]he location of property, or designation of performance or enforcement … in a foreign jurisdiction.” (See Restatement (Third) U.S. Law of Int'l Comm. Arb. § 1.4 (2019) (Proposed Final Draft)).

The International Centre for Dispute Resolution (ICDR) is the international division of the American Arbitration Association (AAA), the largest arbitral institution in the U.S. The International Chamber of Commerce (ICC) has an office in New York City with counsel and support staff that administer ICC arbitrations in North America. Other organizations such as the International Institute for Conflict Prevention & Resolution (CPR) and JAMS (formerly known as Judicial Arbitration and Mediation Services, Inc.) also administer international arbitrations in the U.S.

International arbitration agreements are governed by §2 of the FAA, which only requires such an agreement to be “in writing” to be valid. They are not required to be signed by the parties, can take any form (e.g., an exchange of emails), and can even be incorporated by reference to another document. On top of the writing requirement, the New York and the Panama Conventions require the agreement to arbitrate also to be “signed by the parties” or contained in an “exchange of letters” or “telegrams.” Nonetheless, such provisions “d[o] not restrict contracting states from applying domestic law to refer parties to arbitration in other circumstances.” GE Energy v. Outokumpu, 140 S. Ct. 1637, 1645 (2020). Thus, international arbitration agreements not complying with these additional requirements may still potentially be valid and enforceable under the FAA.

As the FAA places these international arbitration agreements on the same footing as other contracts, their validity and enforcement are also governed by general contract state laws. Volt Info. v. Bd. of Trustees, 489 U.S. 468, 474 (1989). However, state law requirements “specifically and solely” governing international arbitration agreements are displaced by the FAA. Doctor’s Assocs., Inc. v. Casarotto, 517 U.S. 681, 683 (1996). 

N/A

Neither the FAA, nor the New York and Panama Conventions, provide the applicable law to an international arbitration agreement. Thus, unless the parties have specified the applicable law, an arbitral tribunal will have the authority to determine it. 

If the underlying agreement includes a choice-of-law clause, New York federal courts, and most U.S. federal courts, will not construe it as an implied choice of the state arbitration law displacing the FAA. Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 62-64 (1995)). Additionally, parties providing for the arbitration seat “creat[e] a presumption that the procedural law of that place applies to the arbitration.” Karaha v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 291 (5th Cir. 2004).

In international arbitration, “arbitrability” is understood as the capability of a dispute to be settled by arbitration. However, it should be noted that in the U.S., “arbitrability” has a broader meaning as it also includes issues regarding the jurisdiction of the arbitral tribunal (e.g., the existence, validity, and scope of the arbitral agreement, or the fulfillment of pre-arbitration requirements).

The FAA contains no express restriction on the capability of disputes to be arbitrated. Further, a dispute will be arbitrable unless “congressional intention [is] expressed in some other statute” identifying a claim as not being capable of settlement by arbitration. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473, U.S. 614, 626 (1985). However, if such limitations come from state statutes, “under the Supremacy Clause [they] must give way,” and cannot exempt claims from arbitration under the FAA. Perry v. Thomas, 482 U.S. 483, 491, (1987).

This rule has led to antitrust and securities claims, as well as claims under the Racketeer Influenced and Corrupt Organizations Act (RICO), among others, to be found to be arbitrable by the Supreme Court.

United States courts have consistently recognized a public policy in favor of the enforcement of arbitration agreements. To this end, courts are empowered to take measures to protect the efficacy of such agreements.

The FAA provides that, where judicial proceedings have been commenced concerning a matter that is referrable to arbitration under a written agreement between the parties, any party to the proceeding may apply for a stay to permit the matter to be arbitrated. If the court concludes that the issue is referrable to arbitration, it must grant the application. 9 U.S.C. § 3.

United States courts have discretion to issue anti-suit injunctions to restrain a party from commencing or continuing legal proceedings abroad in breach of an arbitration agreement. The standard for exercising this discretion varies between courts in different regions of the United States, with some adopting a more liberal approach to issuance of anti-suit injunctions and others a more restrictive approach. Care must be taken to ascertain the standard applicable in the particular court in which the request for an anti-suit injunction is made. 

United States law does not impose extensive rules for constitution of an arbitral tribunal, or challenge and removal of arbitrators, generally leaving this to the agreement of the parties and the applicable rules. Courts generally intervene in the constitution of the tribunal only to appoint an arbitrator when necessary.

The law of the United States does not impose any restrictions on the parties’ freedom to choose arbitrators. Deference will be given to the terms of the parties’ arbitration agreement.

The law of the United States requires that arbitrators be independent and impartial only indirectly, by providing that an award may be set aside where there was “evident partiality” in any of the arbitrators. 9 U.S.C. § 10(a)(2). 

United States federal law does not impose any mandatory rules applicable to the appointment process.

Under the FAA, a court must follow the method for appointing arbitrators set out in the parties’ agreement unless: 

• no such method is provided; 
• any of the parties to the agreement fail to avail themselves of such method; or 
• for any other reason there is a lapse in the naming of an arbitrator or arbitrators. 

In such circumstances, the court is empowered to appoint an arbitrator itself, which will be a single arbitrator unless provided otherwise in the parties’ agreement to arbitrate. 9 U.S.C. § 5.

United States federal law does not impose any mandatory rules applicable to the replacement process.

United States federal law does not impose any mandatory rules applicable to the replacement process.

United States federal law does not establish particular grounds for challenging the appointment of an arbitrator during the pendency of the arbitration. Moreover, courts will generally not entertain challenges to an arbitrator prior to the conclusion of the arbitration, but rather only after the arbitration is concluded, in the form of a motion to set aside the arbitrator’s award on one of the grounds permitted under the FAA. See, e.g., Aviall, Inc. v. Ryder Sys., Inc., 110 F.3d 892, 895 (2d Cir. 1997). A challenge to the arbitrator during the pendency of the arbitration must instead be made in the arbitral proceedings themselves, e.g., according to the procedure set out in the applicable rules. 

The FAA does not impose any express rules governing the challenge of arbitrators. However, courts have held that a party who proceeds with an arbitration having actual or constructive knowledge of the basis for a challenge, and does not raise the challenge promptly, may be deemed to have waived its right to challenge on that basis. See Dealer Computer Services, Inc. v. Michael Motor Co., 485 Fed. App’x 724, 727 (5th Cir. 2012).

United States federal law does not establish grounds for removal of arbitrators. As noted above, courts will only consider challenges to an arbitrator once the arbitration is concluded. 

United States federal law broadly recognizes that arbitrators and arbitral institutions have immunity from civil liability for acts within the scope of the arbitral process. See, e.g., Austern v. Chicago Board Options Exchange, Inc., 989 F.2d 882, 886 (2d Cir. 1990); Sacks v. Dietrich, 663 F.3d 1065, 1069 (9th Cir. 2011).

Generally, proceedings associated with international arbitrations will be governed by either the New York Convention or the FAA. As both instruments are types of federal law, the proper forum in which to seek assistance will typically be federal court. While neither the FAA nor the New York Convention grants courts direct authority to issue interim relief, many federal courts have found that the power to issue such relief stems from the arbitrators’ broad authority and the arbitration agreement itself, among other considerations. Additionally, as law develops differently in each federal circuit, different jurisdictions may have different approaches to some of the interim relief measures discussed below. 

Assistance may also be sought in state courts, but the type of assistance available to parties will vary more broadly in state court than in federal court. 

In the U.S., a party seeking assistance from any court must demonstrate that the court has both subject matter jurisdiction over the dispute and personal jurisdiction over the parties. Thus, the determination of the most appropriate venue in which to seek assistance will depend on the type of assistance being sought and the relationship of the parties to that particular forum. 

Overview of interim measures

While U.S. courts have traditionally only enforced final awards, interim measures are increasingly considered a type of final enforceable award that is separate from the merits controversy. See e.g., Pacific Reins. Mgt. Corp. v. Ohio Reins. Corp., 935 F.2d 1019, 1022-23 (9th Cir. 1991); Compania Chilena de Navegacion Interoceanica, S.A. v. Norton, Lilly & Co., 652 F. Supp. 1512, 1515 (S.D.N.Y. 1987).

In most jurisdictions, federal courts may grant interim measures and provisional relief in international arbitrations. However, such interim relief is typically only awarded when it is sought in furtherance of arbitration. Interim relief sought to circumvent an agreement to arbitrate is typically not granted. See Borden, Inc. v. Meiji Milk Prods. Co., 919 F.2d 822, 826 (2d Cir. 1990).

As mentioned above, interim relief may also be sought in some state courts, but as international arbitrations are typically governed by the New York Convention and the FAA, federal courts will often be the proper forum for any application for interim measures. 

Relevance of availability of emergency arbitrator mechanism

As long as emergency arbitration procedures are not prohibited by an arbitration agreement itself, U.S. courts may authorize interim measures issued by an emergency arbitrator. See generally, Yahoo! Inc. v. Microsoft Corp., 983 F. Supp. 2d 310, (S.D.N.Y. 2013).

Traditionally, federal courts have been unwilling to interfere with the discovery process in international arbitrations. In rare cases, extraordinary circumstances have justified orders to preserve or produce evidence, but such situations are uncommon. Further, the Supreme Court’s recent decision in ZF Auto. US, Inc. v. Luxshare, Ltd., 142 S. Ct. 2078 (2022), to limit the application of 28 U.S.C.S § 1782(a) – a statute previously employed to provide discovery relief in arbitrations – to only courts with governmental authority, has severely limited recourse to federal courts for discovery in arbitrations. The ZF Auto decision is discussed in greater detail below in Section 15. Trends and recent developments.

State law varies, but parties may seek discovery relief in state court in certain jurisdictions. 

In exceptional circumstances, such as where the selection of arbitrators does not conform with the parties’ arbitration agreement, a party may seek removal of an arbitrator in court. See Fleming Companies, Inc. v. FS Kids, L.L.C., No. 02-CV-0059E(F), 2003 WL 21382895, at *6 (W.D.N.Y. May 14, 2003) (listing circumstances where removal of an arbitrator may be appropriate). 

A party may seek an attachment to obtain a security interest to satisfy a final award. However, even when a party attempts to seek an attachment in federal court, the attachment will be governed by the law of the state in which the federal court is located. See Fed. R. Civ. P. 64. Thus, the process for seeking attachment will vary by state. 

No right to a physical hearing exists under U.S. law and therefore parties may hold hearings in-person or virtually. There is also “no brightline rule requiring arbitrators to conduct oral hearings. Rather, ‘[a]s long as an arbitrator’s choice to render a decision based solely on documentary evidence is reasonable, and does not render the proceeding ‘fundamentally unfair,’ the arbitrator is acting within the liberal sphere of permissible discretion.’ The key issue is whether the arbitral panel ‘allow[ed] each party an adequate opportunity to present its evidence and argument.’” ST Shipping & Transp. PTE, Ltd. v. Agathonissos Special Mar. Enter., 2016 WL 5475987, at *4 (S.D.N.Y. June 6, 2016) (internal citations omitted) (denying motion to vacate award where tribunal decided the case on the papers).

Arbitration in the U.S. is private, and not confidential, unless: 

• the underlying arbitration agreement provides for confidentiality of the proceedings; 
• the arbitration agreement calls for the application of arbitration rules that require confidentiality (see, e.g., the 2021 ICDR Rules); or
• the parties enter into a separate confidentiality agreement. 

Courts will generally enforce confidentiality obligations. However, the parties’ right to maintain the confidentiality of an arbitration proceeding or the resulting award may be lost when filing a motion to confirm or vacate the award in US courts, given the strong public policy in favor of public access to documents filed in courts. 

The FAA does not require an arbitrator to issue a reasoned award or an award that conforms to any specific format. However, when a party seeks to confirm or enforce an award, § 13 of the FAA requires the party to file their award with the court, thus implying a requirement that the award be written. While the requirements under the FAA are minimal, when two parties contract for a reasoned award, an arbitrator’s failure to issue such an award may result in a court remanding the award to allow the arbitrator to issue a reasoned award. See Smarter Tools Inc. v. Chongqing SENCI Imp. & Exp. Trade Co., 57 F.4th 372, 382 (2d Cir. 2023). Remand to the arbitrator for clarification may also be appropriate when an award is ambiguous. See Gen. Re Life Corp. v. Lincoln Nat'l Life Ins. Co., 909 F.3d 544, 549 (2d Cir. 2018).

The FAA does not impose a time limit for rendering an award.

In addition to a broad category of monetary damages, including direct damages, consequential damages, liquidated damages, punitive damages and attorneys’ fees, arbitrators may also award specific performance and injunctive relief. See Simon v. Vogel, 9 A.D.2d 63, 64 (1st Dep’t 1959) (noting that arbitrators are empowered to grant specific performance); see also Ruppert v. Egelhofer, 3 N.Y.2d 576, 581 (1958) (affirming an award granting injunctive relief where the parties’ agreements did not expressly “affirm or deny such a power. . .”).

Under § 11 of the FAA, a court may order the modification or correction of an award where there is “evident material miscalculation of figures” or an “evident material mistake” in an important part of the award. Additional grounds for modification include situations wherein an arbitrator has made an award on matters not submitted to them or the “award is imperfect in a matter of form not affecting the merits of the controversy.” FAA § 11.

The FAA creates a strong presumption in favor of the enforcement of arbitral awards. Accordingly, an award may only be challenged on four narrow grounds under § 10 of the FAA: 

“(1) where the award was procured by corruption, fraud, or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.”

While some jurisdictions recognize manifest disregard of the law as a fifth ground to vacate an arbitral award, this ground is extremely narrow and rarely applied. See Matter of Daesang Corp. v. NutraSweet Co., 2018 NY Slip Op 06331, 167 A.D.3d 1, at *18-*19 (1st Dep’t 2018) (noting that manifest disregard of the law is a high standard “requires more than a simple error in law or a failure by the arbitrators to understand or apply it”) (citations omitted). 

If a party wishes to challenge an arbitral award, it must serve a notice to modify, correct or vacate the award within three months. 

As governed by § 9 of the FAA, within one year of receiving a domestic arbitral award, a party may apply to a court (either as specified by the parties’ agreements) or in the district where the award was rendered for confirmation of the award. However, if the award was rendered in an international arbitration, the time limit for confirmation of an award under § 207 of the FAA is three years.

Further, if a party is seeking to enforce an award that has already been converted to a judgement by a foreign court, the action will be subject to the statute of limitations of the jurisdiction in which enforcement is sought. For example, the statute of limitations in New York is up to 20 years. See N.Y.C.P.L.R. 5303(d) (McKinney).

If the confirmation of an award is unopposed, the cost of enforcing that award will likely be limited to filing fees associated with the motion to confirm an arbitral award in court and attorneys’ fees spent preparing such a motion. However, if enforcement is opposed, costs can increase dramatically as the enforcement proceedings could result in extended litigation in U.S. courts which may involve discovery, briefing, and oral arguments. In such circumstances, attorneys’ fees will dramatically increase the cost of enforcement. 

The United States does not presumptively recognize the orders of emergency arbitrators, but an emerging body of caselaw suggest that such orders are often enforceable. See, e.g., Yahoo! Inc. v. Microsoft Corp., 983 F. Supp. 2d 310, (S.D.N.Y. 2013) (upholding a final award for equitable relief issued by an emergency arbitrator).

The New York Convention has been codified as part of the FAA, and it applies to the recognition and enforcement of foreign awards with a commercial focus. An award is considered foreign, among other considerations, if it has a connection to a foreign state or arises out of a relationship with a foreign party. Further, U.S. courts have interpreted “commercial” broadly to encompass a wide range of disputes, and this requirement is typically not an obstacle to application of the New York Convention. 

Additionally, the New York Convention is applied on the basis of reciprocity, which means that only those awards rendered in states that are a party to the New York Convention may be enforced under the New York Convention.

In the U.S., there is a strong presumption in favor of enforcing arbitral awards, and this presumption applies with equal force to the recognition of foreign awards under the New York Convention. A party seeking to resist enforcement of a foreign award under the New York Convention, may challenge the award on the basis of any of the seven grounds listed in Article 5 of the New York Convention. 

Additionally, in some jurisdictions, foreign awards rendered in the U.S. may also be challenged under the grounds listed in § 10 of the FAA.

Awards rendered in states that are not signatories to the New York Convention (or the Panama Convention) may be enforced pursuant to Chapter 1 of the FAA or the laws of the individual state in which enforcement is sought.

In the United States, the individual state bars are the sole regulators of the admission of attorneys to the practice of law and their ethical conduct. Attorneys admitted to practice in multiple states must adhere to the rules of professional responsibility in all the jurisdictions in which they are admitted. While each state may differ to some extent in its professional and ethical rules, most of them have based their rules on the Model Rules of Professional Responsibility of the American Bar Association (ABA), a voluntary professional organization that has no power to license attorneys or sanction attorney conduct. In the context of arbitration, most states take a non-stringent approach in cases where a lawyer is admitted to practice in one state but is not admitted in the state where the arbitration is conducted. They are less restrictive with respect to permitting lawyers from other jurisdictions to appear in locally seated international arbitrations. 

The above rules will also apply to arbitrators who are attorneys licensed in a jurisdiction in the United States. Arbitrators are generally required to observe standards of impartiality and neutrality, and particular states may impose further requirements. In addition, arbitral institutions provide non-binding guidance, such as the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes. Courts have relied on these guidelines (including the IBA Guidelines on Conflict of Interest) when deciding issues of impartiality and independence. 

Third Party Funding (TPF) in international arbitrations is generally permitted in the United States. TPF is not specifically regulated under federal law, and it remains governed only at the state level. There are some state common law doctrines (maintenance, champerty and barratry), state laws (e.g., usury laws), and professional rules that could have an impact on TPF. There also is no nationwide requirement to disclose TPF agreements, although some federal courts have required disclosures of funding arrangements in some instances. 

Notably, the ICDR, the international division of the AAA, issued revised arbitration rules that entered into force on March 1, 2021, expressly addressing TPF. These rules provide that the tribunal may require a party to disclosure the existence of TPF or existence of a non-party (i.e., not necessarily a third-party funder, but, for example, a parent company, or ultimate beneficial owner) that has an economic interest in the outcome of the arbitration. See 14(7)(a) and (b). 

TPF industry in the US remains strong and is primarily being used to pursue claimants-side or affirmative claims. There has been a growth of the market in the last years, including an increase in the number of funders entering the market, the amounts involved, the number of cases funded, and the investor interest. This growth could be attributed to larger corporations or law firms becoming familiar with TPF, and to the global pandemic and the economic changed tied to it. As claimants and firms turn more frequently to TPF, there has been also an appetite for new and innovative funding agreement structures.

The most significant recent development in U.S. arbitration law, is the Supreme Court’s consolidated decision in ZF Auto. US, Inc. v. Luxshare, Ltd., 142 S. Ct. 2078 (2022) dealing with discovery under 28 U.S.C.S. § 1782(a). Prior to ZF Auto, parties to an arbitration had utilized § 1782(a), which allows a district court to order the production of evidence for use “in a foreign or international tribunal,” to seek otherwise unobtainable discovery. However, a split emerged regarding § 1782(a), and while some jurisdictions found that an arbitral tribunal was a “foreign or international tribunal” for the purposes of § 1782(a), others found that it was not. Accordingly, the Supreme Court heard argument regarding two consolidated cases dealing with the issue, and subsequently held in ZF Auto that a “foreign or international tribunal” means a court or tribunal “imbued with governmental authority.” ZF Auto. US, Inc., 142 S. Ct. at 2082. Thus, § 1782(a) no longer extends to arbitral tribunals. This decision closes one avenue for discovery relief in U.S. district courts, but relief in some state courts may still be available. Though this ruling limits discovery, it may help to streamline arbitrations and safeguard their confidential nature.