Cuba is Safe for Arbitration

The President’s bombshell announcement that the United States would be moving toward normalizing relations with Cuba has certainly touched off a lively debate. Whether one favors the move, it does raise questions. For most people, thoughts turned to prospects of resumed trade, restored tourism, long-separated relatives reuniting, and of course cigars.¹ Not me. I immediately thought of what this meant for arbitration. The good news is that potential business partners need not fear having to resolve disputes in the court system of the other party. Why? Because both the United States and Cuba have already signed UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Convention”).

What is the Convention?

The Convention, sometimes also called the “New York Convention,” was promulgated in 1958. By signing up, a country agrees to enforce arbitration agreements and awards issued in the other country, subject to very limited court review. According to the UN “The Convention’s principal aim is that foreign and non-domestic arbitral awards will not be discriminated against and it obliges Parties to ensure such awards are recognized and generally capable of enforcement in their jurisdiction in the same way as domestic awards. An ancillary aim of the Convention is to require courts of Parties to give full effect to arbitration agreements by requiring courts to deny the parties access to court in contravention of their agreement to refer the matter to an arbitral tribunal.” Some 153 nations² have become parties to the Convention. This article offers an excellent summary of the Convention.

Are Cuba and the US Signatories?

The short answer is “yes.” Countries can sign up completely, or with one (or both) of a couple of exceptions. A nation can elect the “reciprocity reservation” which essentially means that it will only enforce awards if the other nation has signed the Convention. Similarly, a country can sign up subject to the “commercial reservation,” meaning it will only enforce arbitration awards issued in business disputes.

The United States signed the Convention in 1970;⁴ Cuba five years later. Already there is common ground: both countries became parties subject to both the reciprocity and commercial reservations. The U.S. enacted enabling legislation in the form of Chapter 2 of the Federal Arbitration Act, 9 U.S.C. §§ 1 et seq.

And this Means?

Normalized relations means the potential for a huge increase in business between companies in the two countries. Inevitably, there will be contracts backing up business deals. It’s only natural that disputes will arise from time to time. As I’ve written several times, court is no place for business partners to be. The home court of your business partner is certainly no place to be. Arbitration is the international community’s preferred way to settle disputes (and online ADR is perhaps the best means of dispute resolution for parties, counsel, evidence and witnesses scattered throughout the globe⁵ ). In short, the framework is already in place for peaceful, fair, and efficient resolution of business disputes arising from increased trade between the United States and Cuba. On the other hand, I have disappointing news for SONY: North Korea is not a party to the Convention.

¹_{A very small part of me is just a little sad I gave up stogies 8 years ago. Just a small part. The adult in me realizes quitting was a good thing.}

²_{Extra credit for those of you who knew that the last country to become a party was the Republic of the Congo last November 5^th.}

³_{Why the 12-year delay? Think Cold War.}

⁴_{I had to say that. I’m Chairman of the Board of an online dispute resolution service.}