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While recognizing that the passage of time required some modification to a foreign arbitral award, the Third Circuit Court of Appeals rejected a district court order modifying the award in favor of an order that adhered more closely to the award.
In Admart AG v. Stephen & Mary Birch Foundation, Inc., 457 F.3d 302 (3rd Cir. 2006), Admart agreed to sell an open-air art exhibit to the Stepehen & Mary Birch Foundation (“Birch”) for $6 million. The agreement required all disputes to be arbitrated in Zurich, Switzerland.
In 1991, Birch attempted to rescind the agreement on the ground that Admart had not proven “clear title” to the exhibit. Admart denied any breach of the agreement, so the parties commenced arbitration in Zurich.
In 1994, the arbitration panel issued its award, concluding that Admart had not breached the agreement and ordering Birch to pay the outstanding balance of $3 million in two installments: (1) $2 million upon delivery of the artwork; and (2) $1 million following installation of the exhibit.
In 1995, while Birch was appealing the award to a Swiss court, Admart filed an action in federal district court in Delaware seeking confirmation of the award pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”). The district court stayed the action pending the outcome of Birch’s appeal in Switzerland.
In 1996, the Swiss court affirmed the award without ruling on its enforcement. Several years later, the district court in Delaware lifted its stay and confirmed the award but with three modifications. First, instead of requiring a simultaneous exchange, the modified award did not require Admart to deliver the artwork until 24 hours after payment. Second, the modified award no longer allowed Birch to withhold $1 million until installation. Third, the modified award no longer required Admart to submit specified documents proving the artists’ consent to the transfer.
On appeal, the Court recognized “a distinction between the substance of a foreign arbitral award and its execution” and found that a court has “some flexibility to modify execution of an award without altering its substance.” However, as the Court observed, that leeway “is very small and is available only in limited circumstances so as not to interfere with the Convention’s clear preference for confirmation of awards.”
Applying those principles, the Court noted that “[t]he passage of ten years from the rendition of the [a]ward and the date of [confirmation] understandably necessitated some deviation from the original terms of execution.” However, the Court rejected the district court’s modifications and revised the confirmation order to adhere more closely to the terms of the award.
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