OF CARTS AND HORSES: IS THERE ROOM FOR ATTACHMENT OR ENFORCEMENT AHEAD OF RECOGNITION OF ARBITRAL AWARDS IN MEXICO?

Securing assets to cover anticipated or actual monetary arbitral awards is a key concern for arbitration users. Many jurisdictions treat the matter as an issue of provisional remedies. For example, in New York State, CPLR § 7502(c) allows for the attachment of assets in connection with a pending award, even if the arbitration is yet to be commenced, but only if the award to which the applicant may be entitled “may be rendered ineffectual without such provisional relief”. Similar standards typically apply even after an award is issued. Actual enforcement, including attachment of assets without needing to meet the standards for provisional remedies, is frequently available only after a court confirms or recognises the award, i.e., reduces the award to a final judgment.

In countries that follow the UNCITRAL Model Law on International Commercial Arbitration, including Mexico, this phased approach is associated with the requirement for “recognition” of arbitral awards as separate from ‘enforcement’. As provided in Article 35(1) of the Model Law, and Article 1461 of the Mexican Commerce Code, “[a]n arbitral award … shall be recognized as binding and, upon application in writing to the competent court, shall be enforced…” (emphasis added). In other words, no recognition (or pending recognition) frequently means no enforcement – the enforcement cart cannot go ahead of the confirmation horse.

In Mexico, as in many other countries, this situation can create an uncertainty of enforcement. The concern is all the more acute given that recognition proceedings in this country can take anywhere between a few months and several years. Will the petitioner be able to sustain the requirements for provisional relief during the pendency of the recognition action? If not, will there be assets available at the end of the proceedings? While there are remedies available under Mexican law in the event of dispersion of assets, including civil and criminal actions, the need to resort to such remedies is likely to be considered a last resort (and possibly a near-worst case scenario) by most litigants.

Oct-Dec 2013 issue

White & Case LLP