ENFORCING ARBITRAL AGREEMENTS

Under 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 rearbitrated.

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 Lloyds 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. Socit

Dallah (Feb 2011, Paris CA)
Pakistans attempt to set the awards aside failed.
The CA concluded that under French law: "the implication
of [Pakistan]... together with its behaviour during the precontractual 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. Tecnoqumicas
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.SocitdInvestisment 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

USA
Courts have refused enforcement

No personal jurisdiction over the

award debtor
Base Metal Trading Ltd V OJSC
The decision in this case was widely
critised
A difference decision was reached in
Glencore Grain Rotterdam B.V.

USA
Courts 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
Lloyds 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)820
A 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 envisages

forum
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 Lloyds 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 Lloyds

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
narrowly
USA
Parsons & Whittemore Overseas Co Inc v Societe
Generale De InIndustrie du Papier stated
denied .....only where enforcement would violate the
forums most basic notions of morality and justice
Mitsubishi Motors Corp v. Soler ChryslerPlymouth 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 Russia
Lugana v. OAO Ryazan (Russia SCC,
February 2010) at (2010) Int ALR N
In India
Penn 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 Partys 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