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Commercial Division Rules that Arbitration Awardee Lacked Standing to Enforce Award Based on Collection Procedures Agreed to in the Underlying Contract

Arbitration is a creature of contract and, as such, enforcing an arbitral award requires strict adherence to the procedures set forth in the relevant agreements.  This is true even where those procedures might preclude a party to the arbitration from taking steps to enforce its own award. In Zachariou v. Manios,[1] Justice Andrea Masley of the Commercial Division dismissed an awardee’s enforcement action for lack of standing on the ground that the relevant arbitration agreement conferred exclusive authority over collecting and enforcing party distributions to a third-party trustee—and not to the plaintiff.


Plaintiff Evangelia Zachariou and defendant Vassilios Manios were siblings who, as a result of inheritance, became co-owners of their family’s worldwide shipping business and real estate holdings.  The two eventually decided to disentangle their business relationship.  In 1999, the parties entered an agreement recognizing plaintiff’s 50% ownership of the inherited business interests, but permitting defendant to manage those interests for the benefit of the both of them. 

Thereafter, on March 13, 2002, the parties entered a new written agreement in London whereby plaintiff would sell her 50% stake to defendant for $6.5 million (the “London Agreement”).  That contract designated a third-party trustee (the “Trustee”) to oversee the distribution of assets—called “party distributions” in the London Agreement—and identified the Trustee’s specific duties in performing that function.

The London Agreement referred to, and annexed as an exhibit, a separate written agreement that the parties had executed the same day providing for an accounting of the finances of the U.S.-based companies that were under defendant’s management (the “U.S. Agreement”).  The U.S. Agreement contained an arbitration clause permitting appointment of an arbitrator to determine whether either party should receive additional funds in party distributions based on facts discovered during the accounting.

After allegations of embezzlement at the U.S. companies surfaced in 2003, plaintiff embarked upon a nearly decade-and-a-half effort to recover funds as to which she allegedly had been deprived.  She commenced an arbitration before the International Centre for Dispute Resolution of the American Arbitration Association (“AAA”).  In 2014, the tribunal issued an award granting $10,855,452.75 in total party distributions.  Defendant, however, failed to make the payment that was directed.

On September 11, 2018, plaintiff commenced an action before the Commercial Division seeking an order compelling defendant to specifically pay the distribution.  Defendant moved to dismiss for lack of standing.


The Commercial Division found the following facts to be undisputed: the AAA had awarded plaintiff over $10 million in party distributions to be paid by defendant; defendant had not yet satisfied the award; and the U.S. Agreement required the Trustee to collect and distribute any outstanding party distributions according to the terms set forth in the London Agreement.  The issue before the court was whether plaintiff had standing to bring the enforcement action, or “whether payment must be enforced by the Trustee, who is designated to collect such payment.”[2]

Looking to the pertinent contractual provisions of the London Agreement and its incorporated documents, the Court concluded that plaintiff did not have standing to maintain an enforcement action against the defendant.  Justice Masley quoted provisions of the London Agreement specifying that (1) “[t]he Trustee will collect from all sources available all monies payable to either . . . [party],” including “[a]ny monies found to be due to . . . [plaintiff] pursuant to the U.S. Agreement”; and (2) the Trustee “shall use all reasonable efforts to procure collection from all sources available of all monies payable to either [defendant] or [plaintiff] pursuant to the U.S. Agreement and the London Agreement.”[3] 

The Commercial Division held that the relevant agreements “clearly require” that defendant pay any party distributions owed to plaintiff directly to the Trustee for distribution and, failing that, that the Trustee use “reasonable efforts to procure collection.”[4]  In other words, the party distributions “are owed to the Trust, and it is up to the Trustee to enforce this pursuant to the procedures both parties agreed to.”[5]  Accordingly, in the Court’s view, plaintiff had standing to sue the Trustee to enforce these collection procedures, but under the contractual arrangement did not have standing to sue defendant directly to compel payment of the arbitral award.[6]  The enforcement action was therefore dismissed.

Zachariou appears to be a case of first impression (and the Court cited no cases which reached similar results), in which a court declined to permit a party to an arbitration award to enforce the award due to restrictive contractual provisions that defined who could enforce obligations in the underlying contract.

By Stephen P. Younger and Ian C. Kerr

[1] No. 654501/2018, 2019 BL 378137 (Sup. Ct. Sept. 27, 2019).

[2] Id. at *4-5.

[3] Id. at *4.

[4] Id. at *4-5.

[5] Id. at *5.

[6] See id.