Fortior Law garnishes funds held by the LCIA: enforcing arbitral awards against funds held by arbitral institutions
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Have you won an arbitration and think you might have difficulties enforcing your arbitral award?

Most arbitral institutions ask to be paid in advance. Often, they ask for substantial amounts of money to be deposited with them to be held on account of future arbitration costs. Most institutions prefer to be safe and ask for much more money than they ultimately use.

The result is that after the final award in many arbitrations, arbitral institutions are left with extra money. Usually, their rules provide that they must return this money to the parties in the same proportions as the parties have paid them.

If the institution holds the parties’ money in England (which is the case in all LCIA arbitrations whether they are seated in England or elsewhere), you can enforce your award against that money by obtaining a third-party debt order from an English Court against the arbitral institution.

While the institution will not hold hundreds of thousands of pounds, it is generally worth enforcing against even a small amount. The procedure is simple and cheap: an application is made on the papers and ex-parte (i.e. there is no hearing and no opportunity for the defendant to respond), the Court makes an interim order restraining disposal of the funds held by the third party, and the defendant and the third party can then challenge the order within a specified time period if they so wish.

On 22 November 2019, on an application filed by Fortior Law (Vitaliy Kozachenko), the High Court in London issued a final judgment in favour of Integral Petroleum S.A. in Integral Petroleum S.A. v Petrogat FZE and San Trade GmbH. By this judgment, the Court gave Integral permission to enforce an LCIA award against Petrogat and San Trade in the same manner as a judgment in England. On the same day, the High Court issued a third-party debt order against the London Court of International Arbitration. The order restrained the LCIA from returning to Petrogat and San Trade any part of the money they had paid into the LCIA’s account as advances on arbitration costs.

The onward procedure would normally be that there would then be a further hearing where Petrogat, San Trade and/or the LCIA could contest the order. The LCIA however generally has no interest in the issue and is happy to return the funds at the Court’s direction. In respect of the money held in London, it is difficult for a non-paying defendant to challenge a third-party debt order and ask that the money be paid to it rather than the winning claimant. In this particular case, Petrogat and San Trade decided not to challenge the order. The LCIA did not challenge the order either. Integral, therefore, received the entirety of the funds held by the LCIA, being GBP36,077.72.

Given that the procedure is simple, it generally makes economic sense to run it even if the arbitral institution does not hold much money. The main requirements are that you must have an arbitration award (whether in England or elsewhere) or an English judgment in your favour and the assets which you seek to garnish must be within England and Wales.

For more information, contact info@fortiorlaw.com or get in touch with your usual contact at Fortior Law.

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