New Zealand July 9 2024
Once an award has been issued, the successful party may still need to take steps to secure payment. Fortunately, the process for enforcing an arbitral award in New Zealand is relatively simple. There are limited grounds for the court to reject enforcement. That being said, there are a number of considerations that parties should keep in mind to ensure that they do not jeopardise a successful award or prejudice their rights to secure payment.
In this article, we examine the process to enforce a domestic arbitral award in New Zealand and the recourse available to parties against enforcement.
Recognition and enforcement
Article 35 of Schedule 1 to the Arbitration Act 1996 (New Zealand) (Act) provides that an arbitral award, regardless of the country in which it was made:
- must be recognised as binding; and
- on application to a court, must be enforced by entry as a judgment.
Entering an award as a judgment
An award can be entered as a judgment in either the District or High Court, depending on the value of the award. There are different processes depending on whether all parties agree that the award may be entered as a judgment.
If there is agreement, the process is straightforward. The parties jointly apply to the court registrar, who must enter the award as a judgment as soon as practicable.
If the parties do not agree, the party wishing to enforce the award has two options:
Enforcement by originating application
A party to the award can file an originating application, together with an affidavit in support providing the original award (or a certified copy) and an original (or certified copy) of the arbitration agreement. Unless the plaintiff is seeking to enforce the award on a without notice basis, the application documents must be served on the defendant. If the defendant does not take any steps within the prescribed time, the court registrar will enter the award as judgment. A defendant who opposes the entry of the award as judgment must file its own application seeking an order for refusal of recognition and enforcement. This must be done promptly: if the defendant takes no steps within 10 working days of the plaintiff’s application being served (or a shorter timeline, if required by the court), the registrar must enter the award as a judgment and the defendant will have lost its opportunity to oppose enforcement.
If there are exceptional circumstances, the plaintiff can apply for an order that the award be entered as judgment on an ex parte basis. This means that the plaintiff is not required to serve the documents on the other party. There will need to be convincing reasons to use this procedure, such as where there are difficulties in serving the application on the defendant or there is a risk that the defendant may dissipate assets before the award can be enforced.
Enforcement by action
An award may be enforced “by action” – that is, by commencing a claim in the District or High Court. This is a rare and more expensive approach to enforcing an award. It is generally appropriate only where entry of the award as a judgment is unsuitable, such as where the arbitral award provides for in rem relief (that is, where the arbitration involves parties’ rights in property, rather than losses which can be compensated by the payment of money). Given the courts’ current caseload and timeframes in the wake of the Covid-19 pandemic, parties may experience delays if they choose enforcement by action. The more common approach is to file an originating application.
Any application to enter an award as judgment should be filed within six years of the date on which the judgment or award became enforceable. While neither the Act nor the Limitation Act 2010 define the date on which an award becomes enforceable, commentary indicates that the six year period starts from the date on which a defendant refuses to comply with the award.
Enforcing a court judgment
Once the award is entered as a judgment, it can be enforced just like any other judgment. If the award provides for payment of money and the debtor is a company, the plaintiff can issue a statutory demand requiring the defendant to pay the amount of the award as a debt due within 15 working days.
Recourse against an arbitral award
Potential recourse includes setting aside, or in some cases, appealing an award.
There are a narrow set of grounds to set aside an arbitral award or obtain an order refusing recognition and enforcement. These are set out in articles 34(2) and 36 of Schedule 1 to the Arbitration Act respectively. An arbitral award may be set aside or recognition/enforcement refused if it was not made in accordance with natural justice or due process, if the arbitral tribunal did not have jurisdiction to make the award, or if the award contravenes the public policy of New Zealand (including where the award was induced or affected by fraud or corruption).
If another party has not taken steps to apply to the court to enforce an award, a party may apply to set aside an award within three months of receipt of the award.
Unless parties contract out of Schedule 2 of the Act, in some circumstances a party may appeal to the High Court on a question of law arising out of an award. The High Court may confirm, amend or set aside the award, or send it back to the arbitral tribunal for consideration in light of the High Court’s opinion on the question of law.
The court may also refuse to enforce an award which is so defective as to be incapable of enforcement Examples of these include awards where the relief provided for in the award is uncertain or incomplete (for example, where the applicable currency is unclear, or where the award provides for interest but fails to include an interest rate). Courts are not permitted to fix awards which are defective or to remit them back to the arbitral tribunal to be fixed. Instead, the court will decline to enforce the award, or will suspend the application to set aside for a period of time under article 34(4) of schedule 1 to the Act, to enable the arbitral tribunal to eliminate the issue that gave rise to the application. A party then needs to request the arbitral tribunal to correct the award under article 33 of schedule 1 to the Act. Once corrected, the party can then apply to the court for enforcement as usual.
Further considerations
Arbitration is the preferred forum of dispute resolution in most standard-form construction contracts used in New Zealand. It is important to be aware of the ways in which arbitration both interacts with, and is different to, litigation conducted through the courts.
If parties are concerned about ease of enforcement and prefer to resolve their disputes without proceeding to litigation, arbitration is often a good option. Ultimately, enforcement of an arbitral award made in New Zealand is a relatively simple process which can enable a successful party to receive payment due to it in a timely and cost-effective manner.
