Third Circuit revives foreign award holder’s U.S. collection bid

For award holders, the practical message is simple: U.S.-based property may not be off-limits just because the debtor itself is hard to haul into court. The Third Circuit said a federal judge in Delaware can use quasi in rem jurisdiction, a property-based form of jurisdiction, to enforce an already adjudicated foreign arbitral award.

That matters in a case like this one, where the fight is over collection, not whether the arbitration was decided correctly in the first place.

A collection tool, not a redo of the arbitration

SCMS went to federal court in Delaware under section 207 of the Federal Arbitration Act, or FAA, which implements the New York Convention, the treaty framework for recognizing and enforcing foreign arbitral awards in the United States. The company asked the court to confirm, recognize and enforce a final award against Webuild.

The panel said Shaffer v. Heitner allows traditional quasi in rem jurisdiction in an action to collect on an already adjudicated liability. In plain English, that means a court can look to property tied to the dispute when the debtor is otherwise out of reach, so long as the case is about enforcing an existing obligation rather than relitigating it.

Back to the district court

The ruling did not end the collection fight. The Third Circuit vacated the lower court’s decision and remanded the case, sending it back for further proceedings.

What happens next is narrower but still important: the district court must revisit whether the property tied to the alleged successor in interest can support enforcement here. For companies and creditors in cross-border disputes, that leaves one more path to test when the defendant itself is difficult to pin down.