Reid & Wise Wins $23 Million EB-5 Arbitration Award

Our firm recently concluded an EB-5 arbitration in California, securing an arbitration award of more than $23 million for our client. We are now petitioning the court to confirm the award and convert it into an enforceable judgment. The victory is significant not only for its dollar amount. More importantly, it confirms a practical reality: arbitration is not a "second-class" way to resolve disputes — it is a legal path with real substantive force and enforceability.

When an investment in the EB-5 Immigrant Investor Program goes wrong, many investors' first instinct is to ask: "Can I sue? Can I take this to court?" Increasingly, however, we encounter investors who discover — only when they are finally ready to assert their rights — that the investment agreement has long provided that disputes may be resolved only through arbitration.

That is no coincidence. It reflects how EB-5 project structures, and the risks built into them, have evolved.

Why Do EB-5 Disputes Arise? The Problem Is Often a Structure With No Oversight

In the cases our EB-5 investment litigation team has handled, disputes rarely stem from a weak market or bad luck alone. In a large share of troubled projects, the root cause is structural: the developer sets up and fully controls the general partner (GP) or managing entity, with almost no external checks on its conduct.

The practical reality looks like this:

• Investors live overseas and face severe information asymmetry;
• Investors are numerous and dispersed, making collective action difficult;
• The GP actually controls the funds, yet is subject to little effective supervision.

As a matter of law, a GP owes investors strict fiduciary duties and must act in their interests. In practice — especially against a backdrop of high interest rates and tightened financing — genuinely self-disciplined sponsors are not the majority. In our cases, we have seen investor funds diverted to non-project uses, moved among affiliated companies, and even funneled directly into the pockets of the sponsor or its principals.

When the problems surface, investors naturally turn to legal remedies — and at that moment, the arbitration clause in the agreement often becomes the first practical hurdle.

Why Many EB-5 Disputes Must Be Arbitrated, Not Litigated

Traditionally, EB-5 investors could join together and sue the developer, the regional center, or the responsible individuals in a U.S. court. But court litigation has one defining feature: filings are, as a rule, public.

That means:

• Investors in the same developer's other projects can see the dispute;
• Potential lenders, banks, and business partners may learn of it;
• The developer's reputation and future financing both suffer.

For precisely this reason, we have seen more and more EB-5 investment agreements expressly include an arbitration clause requiring that all investment-related disputes be resolved through arbitration rather than in court.

The sponsor's motivation is not hard to understand: arbitration is private and confidential; disputes are handled in a relatively closed setting; and the fallout is easier to contain. For investors, the clause is easy to overlook at signing — and impossible to avoid once a dispute arises.

EB-5 Arbitration vs. Court Litigation: A Restriction, or a Different Path?

Many investors' first reaction to "arbitration only" is: "Does that put me at a disadvantage?" The answer is not absolute.

There are real differences to understand in advance: arbitrators' fees are typically shared by the parties, and while the procedure is more flexible, the scope of discovery is comparatively limited. At the same time, EB-5 arbitration is by no means a second-class path — in some situations, it can be even more effective.

First, the proceedings are faster and more focused. Compared with slow, procedurally complex court litigation, arbitration usually reaches the merits sooner and reduces prolonged attrition.

Second, the award is highly final. An arbitration award is, as a rule, not appealable, and courts will not substantively re-examine the arbitrator's findings of fact or law. Once the award is issued, the outcome is far more certain, and the opposing side has limited room to stall.

Third, an award can quickly become an enforceable court judgment. After prevailing in arbitration, the investor simply petitions the court to confirm the arbitration award. The confirmation procedure is usually summary in nature, and courts generally grant it quickly. Once confirmed, the award becomes a formal court judgment and can support asset execution, recovery, and liens just like any other judgment.

The Real Question Is Not "Arbitration or Litigation" — It Is Whether You Take the Right First Step

When an EB-5 dispute can only be resolved through arbitration, what truly matters is not the forum itself, but whether the investor can:

• See through the project structure and identify the responsible parties;
• Accurately pinpoint the legal duties owed by the sponsor and its principals;
• Protect their rights to the fullest extent, both procedurally and strategically.

Investors who end up in a passive position usually do not lack legal tools. They lack a sufficient understanding of the rules at the moments that matter most. Whether the path is EB-5 arbitration or court litigation, the real difference often comes down to taking the right action at the right time — with counsel experienced in investment dispute resolution.