First Impression: Pre-award attachment in international arbitration where there is no connection to New York by way of subject matter or personal jurisdiction proper

The Supreme Court, Appellate Division, First Department was recently asked to determine an issue of first impression in New York State of whether a Japanese creditor could be granted the pre-award attachment of assets in New York, for security purposes only, in anticipation of an award that could be rendered in an arbitration proceeding in a foreign country, where there is no connection to New York by way of subject matter or personal jurisdiction. The Court answered in the affirmative.

The Court delivered a concise and articulate opinion with respect to its reasoning. As a general background introduction, under the original enactment of CPLR 7502(c), courts were granted the authority to entertain an application for an order of attachment in connection with an arbitrable controversy, provided “that the award to which the applicant may be entitled would otherwise be rendered ineffectual without such provisional relief.” However, CPLR 7502(c), as interpreted, did not provide the New York courts with the authority to entertain applications for the provisional remedies of orders of attachment where the situs of the arbitration is outside of New York.

The Court went on to discuss a pivotal opinion issued by the United States Supreme Court, Shaffer v. Heitner, where Justice Marshall distinguished two types of quasi in rem actions, as well as the true in rem action. In both the true in rem action and one type of quasi in rem action, the plaintiff’s claim is directly related to the property that is the subject of the seizure. Justice Marshall noted that where that was the case, “it would be unusual for the state where the property is located not to have jurisdiction.”  But in the second type of quasi in rem action, where the property is unrelated to the cause of action, jurisdiction depends on defendant having other contacts with the forum that satisfy the standards of International Shoe.

The Court acknowledged that they too were similarly persuaded that New York’s attachment statute does not run afoul of Shaffer when it is used for purposes of security rather than to confer in personam jurisdiction.  The Court reasoned that, as the Shaffer Court recognized, 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. In seeking attachment pursuant to CPLR 7502(c), a party is in no way seeking to compel another party to litigate in an improper forum to save her property; the party merely seeks to have the property attached for future execution in the event a recovery is ordered by the out-of-state forum. Prithvi Information Solutions Ltd.  Read Sojitz Corp. v. Prithvi Information Solutions Ltd. 

Bashian & Papantoniou, a full service long island law firm.

Related Posts