W13: Recognition and Enforcement of Arbitral Awards

Question 1

Recognition v Enforcement

Answer 1

1. Terms sometimes used as though they are ALWAYS inextricably linked.
   - E.g., NYC: ‘recognition AND enforcement’ of foreign arbitral awards.
2. Terms are however DISTINCT
   - E.g., GP 1927: ‘recognition OR enforcement’
3. An award may be recognised w/OUT being enforced
4. HOWEVER, if it is enforced, then it is necessarily recognised by the court that orders its enforcement
   - ‘Recognition’ and ‘Recognition and Enforcement’

Question 2

R v E: Recognition

Answer 2

On its own, generally a defensive process

1. It will usually arise when a court is asked to grant a remedy wrt a dispute that has been the sub: previous arbitration. proceedings
2. Party in whose favour the award was made will object that the dispute has ALREADY been determined
3. To PROVE this: it will seek to produce the award to the court - and ask the court to RECOGNISE it as VALID and BINDING upon the parties wrt issues with which it dealt
   i. All Issues Disposed: put an end to new proceedings as RJ; i.e., as matters in issue b/w the parties that have already been decided
   ii. Some Issues Disposed: recognise for the purpose of ISSUE ESTOPPEL, so as to prevent already dealt w/issues from being raised again
4. ILLUSTRATION:
   i. CLAIMANT: Foreign Supplier of Goods
   ii. DEFENDANT: Co.
   iii. ISSUE: Goods supplied but NOT paid for
   iv. AWARD: Foreign Supplier’s claim dismissed
   v. RECOGNITION: Co. will ask court to recognise the award as a valid defence to foreign supplier’s new claim
   vi. PENDING ENFORCEMENT: Legal force and effect of the foreign award will have been recognised, but the award itself has not been enforced

Question 3

R v E: Enforcement

Answer 3

1. Goes a step further than recognition
2. Where a court is asked to enforce an award, it is asked not merely to RECOGNISE the legal force and effect; but also to ENSURE it is carried out - by using available legal sanctions
3. A court that is prepared to GRANT ENFORCEMENT of an award will do so because it RECOGNISES the award as VALIDLY MADE and BINDING upon the parties - therefore, SUITABLE for enforcement
4. In this context: ‘recognition’ and ‘enforcement’ DO run together: one a necessary part of the other

Question 4

A Shield and a Sword

Answer 4

1. PURPOSE OF RECOGNITION: on it’s own - act as a SHIELD
   - Block any attempt to raise in fresh proceedings issues that have already been decided in the arb. that give rise to the award of which recognition is sought
2. PURPOSE OF ENFORCEMENT: act as a sword
   - Applying legal sanctions to compel the party against whom the ward was made to carry it out
3. FORMS OF SANCTIONS:
   i. INDIVIDUAL DEFAULTING PARTY
   a) seizure of property and other assets
   b) forfeiture of bank a/c’s
   c) imprisonment (extreme cases)
   ii. CORPORATE DEFAULTING PARTY:
   a) corporation assets (strock-in-trade, bank a/c’s, trading a/c’s, etc)
   b) directors held personally liable (e.g. insurance on a guarantee) [certain situations]

Question 5

NYC: General Principles

Answer 5

1. Replaces GP 1927
   - Substantial improvement - provides for simpler, more effective method of obtain R and E of foreign awards
2. Replaces GP 1923
   - Substantial improvement - gives much wider effect to validity of AAs than u/the protocol
3. EULOGISED AS: the single most imp. pillar on which the edifice of int’l arb. rests
   - “perhaps could lay claim to be the most effective instance of int’l legislation in the entire history of commercial law”

For these reasons, many remain reluctant to countenance the possible disruption that would accompany the modernisation of the Convention’s existing text

Question 6

NYC: General Principles

[Details]

Answer 6

1. ENFORCING THE AA:
   - Altho title of NYC only refers to R and E of ‘foreign arbitral awards’, it also deals w R and E of AAs
2. ENFORCING FOREIGN AWARDS:
   “This Convention shall apply to R and E of arbitral awards made in the territory of a Sate other than the State where the R and E of such awards are sought, and arising out of differences b/w persons, whether physical or legal. It shall also apply to arbitral awards not considered domestic awards in the State where their R and E are sought

• INTERPRETATION of NYC ART. I(3):
  i. An award made in any state (even non-party to NYC) would be R and E by any other state that was a party
  ii. As long as the award satisfied the basic conditions set down in the Convention
• RESERVATIONS U/NYC ART. I(3): (to narrow down scope of NYC)
  i. Reciprocity Reservation
  ii. Commercial Reservation (also in GP 1923)

Question 7

Reservations: Reciprocity

Answer 7

1. “When signing, ratifying or acceding to this Convention, or notifying extension u/Art. X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the R and E of awards MADE ONLY in the territory of another Contracting State
2. ADVANTAGE TO: States
3. LTD SCOPE: to ‘Convention Awards’; i.e., awards made in a state that is party to NYC
   iv. States that have entered into NYC on basis of reciprocity have agreed that they will R and E only Convention awards.
   - ADVICE: When seeking a suitable state to hold ICA, advisable to select one that HAS adopted the NYC so as to improve chances of securing R and E of the award in other convention countries
4. LIMITING EFFECT: Not to be exaggerated in light of growing number of states making up network for the R and E of arbitral awards estd. by the NYC
   - Reciprocity Reservation becomes less significant
5. ML Arts. 35-36: required R and E of an arbitral award ‘IRRESPECTIVE of the country in which it was made’

Question 8

Reservations: Commercial Relationships

Answer 8

1. Entitles contracting state to declare that it will wooly the Convention only to those differences arising out of legal relationships, whether contractual or not, that are “considered as commercial under the national law of the state making such declaration”.
2. State discretion on which disputes = commercial has raised problems in application of NYC
   * Indian Organic Chemical Ltd. case
   * RM Investment and Trading Co. v Boeing Co.

Question 9

NYC: R and E

Answer 9

1. RECOGNITION:
   - State bound by the Convention undertakes to respect the binding effect of awards to which the Convention applies
   - Such award may be relied upon as way of defence/set-off in any legal proceedings
2. ENFORCEMENT:
   - State that is a party to NYC undertakes to enforce awards to which the Convention applies, in accordance w/local procedural rules
   - Also undertakes NOT to impose substantially more onerous conditions, or higher fees/charges for such enforcement that are imposed in case of its own domestic awards
3. FORMALITIES (NYC Art. IV):
   i. Party seeking such R and E merely reqd. to produce to the relevant court:
   a) duly authenticated original award/duly certified copy thereof
   b) original AA ref: in Art. II/duly certified copy thereof
   - Despite these requirements, courts in a no. of jurisdictions have enforced awards in the absence of an original of the AA, or w/out a written arb. clause at all.
   - TRANSLATION: if awards and AA not in the official language of the country in which R and E is sought, CERTIFIED TRANSLATIONS are needed. Once necessary docs have been supplied, court will grant R and E; UNLESS one or more grounds for refusal (listed in NYC) are present

Question 10

Refusal of R and E

Answer 10

1. Neither the NYC nor the ML permit any review on the merits of an award to which the convention applies
2. Grounds for refusal of R and E set out in NYC (and ML) are exhaustive. They are the ONLY grounds on which R and E may be refused
3. The NYC sets out 5 separate grounds for refusal
   - (NYC and ML): Burden of Proof is NOT upon party seeking R and E
   - Remaining 2 grounds wrt public policy are grounds that may be invoked by the enforcing court suo motu.
4. Even if grounds for refusal of R and E are proved to exist, the enforcing court is NOT OBLIGED to refuse enforcement
   - Art. V(1)-(2): enforcement MAY be refused; not MUST be refused (permissive, NOT mandatory language; same in ML)
5. Intention of the NYC and ML: grounds for refusing R and E should be applied restrictively
   - to be construed narrowly
   [Pro-Enforcement Bias]
6. PROBLEMS:
   i. Public Policy exception
   ii. Ratified but but not brought into effect/effected inadequately
   iii. Unfamiliarity w/Int’l Arb. - suspicious
   iv. Oddities of legislation (India, now repealed)

Question 11

Grounds for Refusal of R and E

Answer 11

1. NYC Art. V(1):
   R and E of an award MAY be refused if the opposing party proved that:
   a) Parties to the AA were u/law applicable to them, u/some incapacity, or the said AA is not valid u/the law to which parties have subjected it, or failing any indication thereon, u/law of country where award was made (Seat)
   b) Party against whom the ward is invoked was not given proper notice of the appointment of the arbitrator or of the arb. proceedings or was otherwise unable to present his/her case
   c) Award deals w a difference not contemplated by or not falling w/in the terms of the submission to arb., or it contains decisions on matter beyond the scope of the submission to arb., provided that, if the decisions on matters submitted to arb. can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arb. may be recognised and enforced
   d) Composition of the arbitral authority or the arbitral procedure was not in accordance w the agreement of the parties, or failing such agreement, was not in accordance w the law of the country where arb. took place
   e) Award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which the award was made
2. NYC Art. V(2):
   R and E may also be refused if the competent authority in the country where R and E is sought finds that:
   a) Subject matter of the difference is not capable of settlement by arb. u/law of that country
   b) R/E of the award would be contrary to the public police of that country

• Represent an int’lly accepted standard, not only b/c of the widespread acceptance of the NYC thru out the world, but also because the ML adopts same grounds (altho not in same words) for refusal of R and E of an arbitral award, irrespective of the country in which it was made
• 6 of the 7 grounds are also set out in the ML as grounds for SETTING-ASIDE of an arbitral award by the national court of the place of arb.

Question 12

Grounds for Refusal

[Summary]

Answer 12

1. Incapacity, invalid AA [Art. V(1)(a)]
2. Lack of due process; no proper notice of appointment of arbitrator or of the proceedings [Art. V(1)(b)]
3. Jurisdictional issues [Art. V(1)(c)]
4. Composition of tribunal/procedure not in accordance w AA/relevant law [Art. V(1)(d)]
5. Award suspended/set-aside [Art. V(1)(e)]
6. Arbitrability [Art. V(2)(a)]
7. Public Policy [Art. V(2)(b)]

Question 13

Defence of State Immunity

Answer 13

1. Where unsuccessful party = Sovereign State/State Agency
2. MEANING: a sovereign state cannot be compelled to submit to the jurisidiction of another state
3. TYPES:
   i. Jurisdictional Immunity
   ii. Immunity from Execution

Question 14

Conditions for R and E

Answer 14

NYC Art. IV
- Implemented into English law thru EAA 1997 S. 102

S. 102 - Evidence to be produced by party seeking R/E:

1. Party seeking the R/E of a NYC award must produce -
   a) Duly authenticated original award/duly certified copy
   b) Original AA/duly certified copy
2. If the award/AA is in a foreign language, the party must also produce a translation, certified by an official/sworn translator or by a diplomatic/consular agent

Question 15

Interplay b/w R and E, and Setting Aside

Answer 15

NYC Art. V(1)(e)
[EAA 1996 S. 103(2)(f)]

1. Setting aside has a universal effect u/NYC - reflected in wording of Art. V(1)(e)
2. There are 2 courts competent to set-aside an Award:
   i. Courts @ Seat
   ii. Courts of country u/whose law award as made
3. Effects of Application to Set-Aside on country where R and E is sought:
   i. Stay of proceedings
   ii. Order for provision of suitable security
   [NYC Art. VI; EAA 1996 S. 103(5)]
4. Under Art. V(1)(e):
   - Diff. philosophies of arb.; i.e., Territorial Conception and Delocalised/Transnational Conception clash
5. INT’L CASES:
   i. FRENCH LAW:
   * PT Putrabali Adyamulia (Indonesia) v Rena Holding (2007) [Paris Cour de Cassaction]
   - Refusal: An int’l arb. awatd, not anchored in any national legal order, is a decision of int’l justice whose validity must be ascertained wrt the rules applicable in the country where its R and E are sought
   - Grounds: NYC Art. VII(1); EAA 1996 S. 104
   * Hilmarton cases (1994, 1997 & 1999)

ii. UK LAW:
* Dallah Estate v Pakistan (2010) [UK SC]
- Refusal: Arbitrators lacked jurisidiction to rule on merits of the case
- Grounds: French law wrt validity of int’l AAs (misapplied)
- Paris Cour d’Appel: Refused to set aside and gave award full effect

iii. RUSSIAN LAW:
* Yukos Capital SarL v OJSC Rosneft Oil Co. (2012)
* Maximov v Open Joint Stock Co. (2017)