ENFORCING ARBITRAL AGREEMENTSUnder the New York Convention

• States which have ratified (or acceded to) the New York Convention will recognise an arbitral award and enforce that arbitral award

• Approximately 145 counties have ratified or acceded to the NYC

• An award once enforced in binding and cannot usually be re -litigated or re-arbitrated.

•

Article II of the New York Convention

• Provides internationally accepted minimum standards for the recognition and enforcement of arbitral agreements in the territories of Contracting States

• subject to reciprocity The location of the arbitration must be a signatory to the New York Convention for the convention to apply

• commercial disputes

Some limits to the application of the New York Convention

• Lack of Reciprocity• Approximately half of the signatories to the

NYC have adopted the approach that the convention only applies to awards given in States where there is reciprocity

Conditions for the recognition and enforcement under the NYC

(Article IV) The party ...must supply at the time of its application (with certified translations if not in an official language of the enforcing country):

• The duly authenticated original award or a duly certified copy of it.

• The original agreement referred to in article II or a duly certified copy of it

Article II(1) Writing agreement to settle differences by arbitration and that there is a legal relationship (see earlier notes)

Jurisdictional differences

• As to what enforcement means• In some jurisdictions but not all • an award must first recognised • Only then it is possible to execute the relief

sought under the award.

To be enforced, it must be an arbitral award

• Splosna Plovba v. Agrelak Steamship(Australia)

• Australian court refused to enforce an interim award issued by a tribunal in the USA pending the outcome of the arbitration

• The court said it was not an arbitral award within the meaning of the Convention. as it was only effective for a period of time.

The New York Convention

• Only applies to International awards • Non Domestic awards (the definition of which

is not universally agreed upon)therefore• The award must be made in the territory of a

State other than the State where recognition and enforcement is sought

Different understanding of what amounts to domestic

• It is for each state to decide what is none domestic this can lead to difficulties

• Different approaches can be taken • Compare USA and China

Defences under the NYC Art V (1)(a) The agreement is invalid

• It does not comply with the requirements of the law chosen by the party

• Or the applicable law of the seat of the arbitration

• That the defence under the NYC Art V (2)applies that the agreement is invalid

• See notes on the applicable law

New York Convention Article II(1)

• Article II(1): Each Contracting State must recognise agreements in writing

• But which law decides local law, arbitration agreement, curial law, the law of the likely place or places of enforcement.

• Is it for the court to determine the existence of an arbitration agreement

• Or the arbitrators FAI Tak Engineering v. Sui Chong (Hong Kong, June 2009) (2010) 13 Int ALR N-

• Birse Construction v. St David [2000] BLR 57 (CA

The NARROW Approach should be abandoned.

• Margaret Moses suggests a lenient approach should be taken when interpreting Art 2

• If the national law would enforce the award • despite the fact that it might not meet the

narrow definition within s2 this should be sufficient for enforcement.

Wider approach

• Article V11 (1) to apply to agreements as well as awards

Model Law (Article 7) provide two new alternative definitions

• (1)extends the definition of writing to agreements concluded by conduct or orally, as well as by exchange of case statements, and takes account of modern technology.

• (2) abandons the requirement for writing all together.

• This should discourage courts from not enforcing awards that do not comply with the narrow definition found in Art 1(2)

Article II(3) of the New York Convention

The court of a Contracting State, when seized of an action in matter in respect of which the parties have made an agreement

• within the meaning of article II shall, at the request of one of the parties, refer to the parties to arbitration,

• unless it find that the said agreement is null and void,

• inoperative or incapable of being performed.

ENFORCING ARBITRAL AGREEMENTS Article 8 of the Model Law

• Provides that a court before which an action is brought in a matter that is the subject of an arbitration agreement shall, if a party so requests

• not later than when submitting its first statement on the substance of the dispute, refer to the parties to arbitration,

• unless it finds that the said agreement is null and void, inoperative or incapable of being performed.

Article II(2) difficulties

• Under which the parties undertake to submit to arbitration all or any differences which have arisen

• or which may arise between them in respect of a defined legal relationship,

• whether contractual or not, concerning a subject matter

• capable of settlement by arbitration

Problems

• Different jurisdictions have different views about what is necessary to satisfy the formalities.

• It is the procedural law of the enforcing state, that will decide whether the formalities are satisfied.

• This may lead to differences as to when these conditions are met.

Difficulty

• Different jurisdictions interpret articles IV and II and to article V(1)(and how they interrelate to each other in different ways

The USA

• Some jurisdictions that do not regard that establishing compliance with article II is part of the requirements imposed by article IV.

China Minmetals v. Chi Mei Corporation (USA) 334 F 3d274;• The contention was that the arbitration agreement was void

abinitio, the allegation being that the documents provided were forged

• The Federal Court of Appeal decided that what was required under art IV was to provide the purported arbitration agreement and, if disputed, establish that the parties had agreed to the evidenced terms as a matter of contract law, not by reference to

article II(2).

The United Kingdom

• Dardana Ltd v. Yukos Oil Co [2002] 2 Lloyd’s Rep 327 (CA).160

• The case concerned the enforcement of a Swedish award in England and Wales.

• The court held the applicant had to provide documentation containing a valid arbitration clause which the arbitrators had accepted and that the parties had agreed to arbitration. The award was valid was valid

• AA1996, s. 103(2)(b)was equivalent to that part of article V(1)(a) of the New York Convention concerned with the validity of the alleged agreement.

Narrow approach

Some Jurisdictions require the enforcing party to satisfy the formal and/or substantive requirements of articles IV and II, and articles II(1) and II(2).

Switzerland A Ltd v. BAG(Switzerland) YB Comm Arb

XXVIII,8

Dallah Real Estate v. Pakistan [2010] UKSC 46

• The enforcing of a French Award in England. • Pakistan, apart from providing some submissions

on jurisdiction under protest, took no part in the arbitration contending that it was not a party to the arbitration agreement.

• The SC found that the tribunal had not applied the correct principles of French law in deciding whether Pakistan was a party and applying what it found were the correct principles concluded it was not.

Gouverment du Pakistan v. Société Dallah (Feb 2011, Paris CA)

• Pakistan’s attempt to set the awards aside failed. • The CA concluded that under French law: "the implication of

[Pakistan]... together with its behaviour during the pre-contractual negotiations, confirm that the creation of the Trust was a pure formality and that [Pakistan]… behaved as if it were the true Pakistani party during the economic operation.” Thus Pakistan was a party.

• The French court also considered that it was entitled to fully review the question

• in practice only reviewed the factual and legal Elements considered by the arbitrators.

To arbitrate all or any differences

• Under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them

• Merck & Co Inc v. Tecnoquímicas SA(Columbia: Corte Suprema de Justicia 26 January and 1st March 1999) YB Comm Arb XXVI, 755.

Defined legal relationship,

• Whether contractual or not, concerning a subject matter

• which is considered as commercial under the law of the enforcing State.

• Some states have stated that they will only apply the convention to commercial matters

Commercial does not have universal understanding

• There is no definition of commercial within the NYC

• Each state is left to decide what amounts to commercial.

RMInvestment v. Boeing (India) YB Comm Arb XXII, 710;151Taie Haddad v.Sociétéd’Investisment Kal (Tunisia) YB Comm Arb XXIII, 770

Convention applies to differences arising out of a legal relationship

• Whether contractual or not which are considered as commercial

• A significant number have stated that they will only apply the convention to commercial matters

• This is decided by each state so there is no uniformed definition of commercial

JURISDICTIONAL considerations

• The assets of the losing party in a State where enforcement is sought will generally be sufficient to provide court jurisdiction in that State

Capable of settlement by arbitration

• The scope of what can be arbitrated• Some matters are not capable of settlement

by Arbitration.• Public policy will be decided by each

Jurisdiction• This will vary from jurisdiction to jurisdiction

USACourts have refused enforcement

No personal jurisdiction over the award debtor• Base Metal Trading Ltd V OJSCThe decision in this case was widely critised• A difference decision was reached in Glencore

Grain Rotterdam B.V.

USACourts have refused enforcement

No Forum non conveniens• Where there was an issue as whether the

property party was before the court and this was to be decided according the Unkrianian law. The more convenient forum would be the Ukraine

An arbitration clause could provide the means for preventing enforcement

The international commercial dispute Committee of the Association of the bar of the City of New York.• Suggest that a carefully worded arbitration

clause could preventing lack of enforcement where there is

• No personal jurisdiction over the award debtor • Forum non conveniens

Article V1b Lack of notice to the parties,

• SEE Earlier notes on Procedural law

Article V1b lack of fairness in the process

• Iran Aircraft Industries v Avco Corp• (Circuit Court denied enforcement of award entered

into by Iran/United States Claims Tribunal against U.S. corporation)

• (But cf. Islamic Republic of Iran v. United States of America, Iran/United States Claims Tribunal, Award No. 586-A27-FT, Jun. 5, 1998,

HeldUnited States liable for failure to make available mechanism to enforce Claims Tribunal awards in the U.S. in favour of Iranian parties)

Article V1c Arbitrator acting in excess of his authority

• An award will not be enforced if it deals with a difference not contemplated by the terms of the parties agreement

• Or if the decision rendered applies to matters beyond the scope of the agreement

• That part of the award which contains decisions on matters submitted to arbitration may be recognised enforced see Lesotho Highlands v. Impregilo [2005] 2 Lloyd’s Rep 310 (HL),

or Article V1d The procedure was not in accordance with the parties agreement

• The composition of the arbitral authority• the procedure was not in accordance with the

agreement of the parties, • or, in accordance with the law of the country

where the arbitration took place.

• See earlier notes on the applicable law

Article V1e The award is not enforceable unless it is binding

• An award is binding if there is no way of bringing an appeal

• The award has not yet become into force • or has been set aside or suspended by a

competent authority of the country in which, or under the law of which, that award was made.

Article V1e The award should not be previously set aside

• The award should not be previously set aside in the country where rendered or under the law to which it was rendered.

• Seems to be open to discretion

Discretion within Article V1e

Article V1e states• that enforcement and recognition may be

refused not must be refused • this would seem to give courts some

discretion as to whether the defences apply• And whether they will enforce an award that

has been vacated in another jurisdiction

Difficulty

• Emmanuel Gaillard the use of the word may rather than shall shows the intention to preserve the discretion of every legal system... Whether the arbitral award meets the conditions of recognition and enforcement...the positions taken by the court of seat.. With respect to validity have no absolute effect in other systems

However Van Den Berg points out

An award annulled in the country of origin has become non existent.....The fact that the award has been annulled implies that the award was legally rooted in the Arbitration law of the country of origin. How then is it possible that courts in another county can consider the same award valid?

Karaha Boas Co v. Perusahaan Pertambangan,

• An application to enforce a Swiss award in Hong Kong,

• The Jakarta court, had annulled the awards, • The Jakarta court was held not to be a court of

competent authority for the purpose of article V(1)(e). because Indonesia was not the seat of the arbitration,

• And therefore could not give rise to an issue estoppel.

Annulling or setting aside or vacating the award

• Where the party has the award set aside in the court at seat

• The award cannot usually be enforced in another court in another jurisdiction

Article V11 More favourable right

• Allows a party in the enforcing courts to take advantage of any laws that might give the party a better chance of enforcing the award

• This right has been used to enforce an award that have been vacated in another jurisdiction

Some jurisdictions will enforce vacated awards

• On the grounds that their law is more favourable

• France • Germany• UK (restricted to the grounds which a court

subsequently asked to enforce the award notwithstanding would deprecate)

USA enforced a vacated award.

Chromalloy Aeroservice v Arab Republic of Egypt

• Decision of Egyptian Court of Appeal nullifying arbitration

award • as matter of United States law was not entitled to res judicata

effect in United States in an action to enforce the award under Convention on Recognition and Enforcement of Foreign Arbitral Awards

• Therefore recognizing the decision of Egyptian court would violate clear United States public policy in favour of final and binding arbitration of commercial disputes. 9 U.S.C.A. § 202

The UK

Dowan Holdings SA v Tazania Electric Supply Co Ltd 1ALL.E.R (Comm)820A plain reading of the words in Art V(1)(e) allows for an interpretation that the enforcement may proceed notwithstanding a setting aside in the home jurisdiction upon one or other of the grounds set out in the subsections, the English courts still retain a discretion to enforce the award.

Recognition of an award means

• That the court recognises the award is valid and binding.

• This will usually mean that the subject matter of the award cannot be re-litigated or re-arbitrated.

• In the USA Gary Born pointed out the award can be res judicata in effect.

Res judicata

• However enforcement proceedings under New York Convention in one jurisdiction does not necessarily have res judicata effect in other jurisdictions.

Forum shopping on enforcement

• A party can seek enforcement in more than one jurisdiction

• or, having failed in one State, seeking enforcement in another.(more favourable right)

• This may cause problems such as• merger of judgements, and• issue estoppel. (The case is estopped as the

same issues had been considered)

New York Convention envisagesforum

shopping

• Karaha: (US Court of Appeals 5th Circuit, 18

June 2003). The court considered that, since the New York

Convention envisages forum shopping, • Enforcement proceedings under its provisions

in one Jurisdiction does not necessarily have res judicata effect in other jurisdictions.

Good Challenger Navegante SA v. Metalexportimport

SA [2004] 1 Lloyd’s Rep 67 (CA) In a dispute between owner and charterer, the Arbitrator awarded sums to the owner.

• Enforcement sought in a Romanian, court which refused to enforce on the grounds that the action was time barred under Romanian law,

• The Romanian court also said that it was time barred under English Law, and that therefore the Award was no longer executory.

• it was doubted that a foreign judgment concerning the enforcement of an arbitral award could give rise to a cause of action estoppel.

• But it did accept that, applying the principles in The Sennar (No 2) [1985] 1 WLR 490 (HL) it might give rise to an issue estoppel.

Good Challenger v. Metalexportimport SA [2004] 1 Lloyd’s

The Court of Appeal held that, in order to establish an issue estoppel, four conditions must be satisfied :

(1) that the judgment must be given by a foreign court of competent jurisdiction

(2) that the judgment must be final and conclusive and on the merits; (3) that there must be identity of parties; and (4) that there must be identity of subject matter,(must be the same issue in

both the foreign court and the English court)• the decision of the Romanian court could create an issue estoppel

preventing the owner re-litigating that question.• But, on the facts, the Romanian Court's decision on the English limitation

point was obiter, and thus did not give rise to an issue estoppel.

Awards are not enforced if they are contrary to public policy

Public policy to be construed narrowly

[T]he object of the Convention was to encourage the recognition and enforcement of commercial arbitration agreements in international contracts and to unify the standards by which agreements to arbitrate are observed

The subject matter is not arbitrable

• State laws might declare that some types of dispute are not arbitrable but better left to the courts

• Issues such as criminal, family, bankrupts patents etc

• This will vary from jurisdiction to jurisdiction• But in general will involve contractual disputes

where there is no public interest element.

Public policy V (2) (b)

• Rarely used• Not defined in the convention• But many jurisdictional countries define the concept

narrowlyUSA • Parsons & Whittemore Overseas Co Inc v Societe Generale

De In’Industrie du Papier stated denied .....only where enforcement would violate the forums most basic notions of morality and justice

• Mitsubishi Motors Corp v. Soler Chrysler-Plymouth Inc (1985) YB Comm Arb XI, 555 (US Supreme Court).

Public policy V (2) (b)

• Not all jurisdictions take a narrow approach• Turkish supreme court refused to enforce an

award on public policy because the arbitrator had not applied Turkish procedural law (and this was against public policy)

• Eco Swiss China Time v. Benetton International1999 ECR 1-3055 (ECJ)

Arbitrators must apply European antitrust law if it is part of the public policy of member states

Contrary to the public policy of the enforcing state. Article V(2) (b):

Public policy was a ground to resist enforcement In RussiaLugana v. OAO Ryazan (Russia SCC, February

2010) at (2010) Int ALR NIn IndiaPenn Racquet Sports v Mayor International

Ltd(Delhi HC) EX.P. 386/08

What does public policy mean

• Enforcing courts look to international rather than domestic public policy• COSID v. Steel Authority of India, YB Comm Arb XI,

502• (India). The court rejected the distinction between

domestic and international public policy. Refused to enforce an English award on grounds of public policy the tribunal had rejected the Indian Party’s defence of force majeure arising from Indian export prohibition (enforcement had been granted in England).

European Convention in International Arbitration

• Provide narrower grounds for refusing enforcement that the New York Convention

It does not allow the following defences • that the award has not become binding• That it has been set aside at seat• or lack of arbitrability • Or violation of public policy