Can a Foreign Creditor Attach Assets in New York in Anticipation of an Award in an International Arbitration?

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This complex issue of attaching property in the United States prior to the initiation of an international arbitration outside the U.S. came before the New York State Appellate Division, First Department, in the matter of Sojitz Corporation v. Prithvi Information Solutions, Ltd., 82 A.D.3d 89 (1st Dep’t 2011). An attachment, as a provisional remedy, allows one party (usually the petitioner or plaintiff) to bring the property of another (typically the respondent or defendant) into the custody of the court when there is a belief that the defending party will remove or dispose of the property, rendering an expected judgment in favor of the petitioner useless.

In Sojitz, the Petitioner, a Japanese telecommunications company, sought to recover a sum of over $40,000,000.00 from the Respondent, a company whose principal place of business was located in India. The dispute arose out of Respondent’s failure to procure payment to Petitioner in accordance with a Telecommunications Contract entered into between the parties in or around November of 2007. The Agreement was governed by English law and subject to mandatory arbitration in Singapore.

When it became abundantly clear that Respondent would not be providing full payment under the Agreement, Petitioner initiated a proceeding in New York State to attach Respondent’s assets in New York in an amount exceeding $18,000,000.00. While the lower court granted the Order of Attachment, Respondent appealed the decision to the Appellate Division.

In reviewing the determination of the lower court, the Appellate Division was left with task of answering (a) can a New York court issue an attachment as a provisional remedy when an arbitration is going to take place outside of the United States? and (b) can a New York court attach assets when there is no personal jurisdiction over the party whose assets will be subject to the attachment?

Relying on Supreme Court case law and CPLR 7502(c), the Appellate Division ultimately held:

“Attachment for security pending litigation in a proper out of state forum does not raise the same due process concerns as are implicated by attachment for jurisdictional purposes… A petitioner is no way seeking to compel a respondent to litigate in an improper forum to save her property; [she] merely seeks to have the property attached for future execution in the event a recovery is ordered by the out-of-state forum… We see nothing fundamentally unfair about an attachment for security pending arbitration in a proper forum.”  Sojitz at 95.

In other words, a New York Court may attach assets located in NY even when there is no jurisdiction over the party whose assets are being attached for the limited purpose of providing security pending the outcome of an international arbitration. Of course, before a court can order an attachment of assets, the moving party must still show, for example, a likelihood of success on the merits, and that any award issued by the arbitrator would be rendered ineffectual if the relief of attachment was not granted.

ROSS PITCOFF LAW  www.rosspitcofflaw.com 

Questions about commercial litigation? Comments on international arbitration or attachments? Contact Ross E. Pitcoff, Esq. at Ross@rosspitcofflaw.com or via telephone at (347) 903-6291

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