A short decision by the District Court in Chinmax Medical Systems Inc. v. Alere San Diego, Inc., 10cv2467 (S.D. Cal. 8 Dec. 2010), deserves brief mention. Chinmax, a Chinese company, was involved in an arbitration with Alere San Diego. Chinmax sued to vacate an arbitration award and filed a motion to stay an interim final award pending the District Court’s review, lest the right to seek review would be “mooted in the absence of a protective stay before compliance would otherwise be required under the deadlines in the interim final award”.
The District Court recognized that it had the power to issue a stay pending its review and followed the Ninth Circuit’s decision in Golden Gate Rest. Ass’n v. City & County of San Francisco, 512 F.3d 1112 (9th Cir. 2008), requiring either a strong showing of success on the merits and the possibility of irreparable harm, or serious legal questions” and the balance of hardships tipping “sharply” in favor of the movant.
The District Court ruled that a central purpose of the New York Convention was “to expedite the recognition of foreign arbitral awards with a minimum of judicial interference” (quoting Wartsila Finland OY v. Duke Capital LLC, 518 F.3d 287 (5th Cir. 2008)). As a result, the District Court found: “Just as ‘exceptional circumstances’ must exist in order to prevent a Court from compelling arbitration, a party seeking a stay to the enforcement of an arbitration award should be required to make a similarly strong showing”.
The District Court did not explain why a lenient standard for enforcing arbitrations should be the same one used to challenge an arbitral ruling. Nor did the District Court address whether the temporary nature of the requested stay should change the standard, so that the litigant’s right to seek review was not frustrated.