11 Recognition and Enforcement of Arbitral Awards
Nigel Blackaby, Constantine Partasides QC, Alan Redfern, Martin Hunter
Nigel Blackaby, Constantine Partasides, Alan Redfern, Martin Hunter
- Recognition and enforcement
11.01 The successful party in an international commercial arbitration expects the award to be performed without delay. This is a reasonable expectation. The purpose of arbitration, unlike mediation and most other methods of alternative dispute resolution (ADR), is to arrive at a binding decision on the dispute. Once this decision has been made in the form of an award, it is an intrinsic element of every arbitration agreement that the parties will carry it out.1 To put the point beyond doubt, this is expressly set out in international and institutional rules of arbitration. For example, the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) state that the award ‘shall be final and binding on the parties’, and that ‘the parties undertake to carry out the award without delay’.2
11.02 Such statistics as are available suggest that most arbitral awards are, in fact, carried out voluntarily—that is, without the need for enforcement proceedings in national (p. 606) courts.3 However, comprehensive and reliable statistics about arbitration are not readily available for two main reasons: first, because arbitration is a private process; and secondly, in any event, there is no particular reason why an arbitral tribunal (or indeed an arbitral institution) should know whether or not an award has been carried out. Unlike a national court, an arbitral tribunal has no role to play in the enforcement of its decision. Once the award has been rendered, the arbitral tribunal usually has nothing more to do with the dispute, unless it is required to make an additional award, or to correct or interpret its award.4 When an arbitral tribunal has made a final award, its work is usually done and the tribunal is functus officio.
11.03 It is sometimes said that the test of a good arbitral award is that it leaves both parties feeling disappointed! Whether or not this is so, it is often true that, in practice, at least one party to an arbitration is dissatisfied with the result. Arbitration is not like conciliation or mediation, in which the process has failed if it does not produce a result acceptable to both parties. In arbitration, there is almost always a ‘winner’ and a ‘loser’.
11.04 What happens if the winner is, in fact, dissatisfied with an award, considering that there were other claims too that should have succeeded? In a national court, an appeal on some aspects of the judgment might be possible. In certain circumstances and under limited conditions, as indicated elsewhere in the volume,5 an appeal may be possible in arbitration—but the trend is towards the acceptance of arbitral awards, good or bad, unless they can be attacked on grounds of excess jurisdiction, lack of due process, or breach of public policy. A winning party who challenges an award because of dissatisfaction with certain aspects of it risks winning a Pyrrhic victory—that is, there is a risk that if the challenge is successful, the award will be set aside entirely. If this happens, the winner then faces the prospect of being obliged to start, or face, fresh proceedings. This will involve either a new arbitration, or if the reason for setting aside was lack of jurisdiction on the part of the arbitral tribunal, say, a court action.
11.05 The losing party generally has more room for manoeuvre. First, such a party may simply carry out the award voluntarily, in accordance with its undertaking so to do. Secondly, the losing party may use the award as a basis for negotiating a settlement. It is perhaps surprising that the successful party to an arbitration might settle for less than the amount awarded, but it might be considered better to accept a lesser payment forthwith than to face further challenge or enforcement proceedings to recover the full amount. Thirdly, and as discussed in Chapter 10, the losing party may challenge the award if this is possible under the rules of arbitration or (p. 607) the relevant law.6 Finally, it may resist any attempt by the winning party to obtain recognition or enforcement of the award, in whatever jurisdiction this is sought.
(b) Performance of awards
11.07 As already stated, the vast majority of awards are performed voluntarily. However, if the losing party fails to carry out an award, the winning party needs to take steps to enforce performance of it. Effectively, only two steps may be taken. The first is to exert some form of pressure, commercial or otherwise, in order to show the losing party that it is in its interests to perform the award voluntarily. The second is to invoke the powers of the state, exercised through its national courts, in order to obtain a hold on the losing party’s assets, or in some other way to compel performance of the award.7
(i) Commercial and other pressures
11.08 A successful party may be in a position to exert commercial pressure on a party who fails or refuses to perform an award. For example, if a continuing trade relationship exists between the parties, it may well be in the interests of the loser to perform the award, since failure to do so might entail the loss of further profitable business. If a government or state agency is concerned, other pressures may be brought to bear by the diplomatic services of the successful party. It may be pointed out, for instance, that further development loans depend upon the carrying out of existing awards, or that foreign companies may be discouraged from making further investments if outstanding obligations are not honoured.8
22.1 In the event of any party to an arbitration or an appeal held under these Rules neglecting or refusing to carry out or abide by a final award of the tribunal or board of appeal made under these Rules, the Council of GAFTA may post on the GAFTA Notice Board, Web-site, and/or circulate amongst Members in any way (p. 608) thought fit notification to that effect. The parties to any such arbitration or appeal shall be deemed to have consented to the Council taking such action as aforesaid.9
Before ‘posting’, GAFTA communicates with the defaulter and asks whether there is anything to be said, for example whether there is an outstanding balance due to him or her from the successful party. However, where GAFTA is satisfied that there is a default, its members are informed. This will naturally make them reluctant to deal with the defaulter unless and until the award has been carried out.
11.10 Similarly, but less explicitly, debtor states that end up as losing parties in arbitrations under the International Centre for the Settlement of Investment Disputes (ICSID) may feel (rightly or wrongly) that refusal to perform an award voluntarily may adversely affect their creditworthiness at the World Bank. It may therefore be no coincidence that, to date, the overwhelming majority of ICSID awards have been voluntarily performed.10
(ii) Arbitrator’s duty to render an enforceable award
11.11 Some rules of arbitration contain an express provision that the arbitrator shall ‘make every effort’ to ensure that the award is enforceable.11 This is an obligation to use best endeavours, rather than an obligation to secure a result. It is difficult to see how it could be otherwise. The most conscientious arbitrator in the world cannot guarantee that the tribunal’s award will be enforceable in whatever country enforcement may be sought. The most that can be expected is that the tribunal will do its best to ensure that the appropriate procedure is followed and, above all, that each party is given a fair hearing.
(iii) Enforcement by court proceedings
11.12 The ultimate sanction for non-performance of an award is enforcement by proceedings in a national court. This is something that should be borne in mind from the outset of an arbitration.12 Sometimes, one of the parties (usually the (p. 609) claimant) urges the arbitral tribunal to run through the proceedings as quickly as possible, so as to obtain a speedy decision. This is understandable—but it is in the interests of the party that stands to gain most from the arbitration (whether by way of claim or counterclaim) to ensure that the proper procedures are followed, in case it should become necessary to apply to a national court for enforcement of the award.
11.13 Enforcement usually takes place against assets.13 This means that, as a first step, it is necessary to trace the assets of the losing party—money in a bank account, an aircraft or a ship, a cargo of oil in transit, or whatever it may be—before applying to the relevant national court for an order against those assets, or, less constructively, for an order that the trade or business of the losing party should be liquidated, if payment of the award continues to be refused.14
11.14 There are four ways in which a national legal system might provide for the enforcement of arbitral awards. The first arises when the award is deposited, or registered, with a court or other authority,15 following which it may be enforced as if it is a judgment of that court. The second arises when the laws of the country of enforcement provide that, with the leave of the court, the award of an arbitral tribunal may be enforced directly without any need for deposit or registration.16 The third arises when it is necessary to apply to the court for some form of recognition, or exequatur, as a preliminary step to enforcement.17 The fourth is to sue on the award as evidence of a debt, on the basis that the arbitration agreement constitutes a contractual obligation to perform the award. This last method is cumbersome and frequently leaves it open to the losing party to reopen, by way of defence, the issues already determined by the arbitral tribunal. It is therefore to be avoided, unless no other method is available.
(p. 610) 11.15 The procedures to be followed in any given case vary from country to country and from court to court. It is not possible to lay down detailed procedural guidelines here nor would it be particularly helpful to do so, since if action has to be taken to enforce an award in a particular jurisdiction, it is necessary to obtain competent advice from experienced lawyers who practise in that jurisdiction.
11.16 What follows, therefore, is a review of the general principles underlying: recognition and enforcement; the choice of the appropriate forum (including ‘forum shopping’); the role of the international conventions (in particular the New York and ICSID Conventions) in assisting recognition and enforcement; and the defences that may be raised, including that of state immunity.
(c) General principles governing recognition and enforcement
11.17 The challenge of an arbitral award, discussed in Chapter 10, is concerned with attacking an award at its source, in the hope of having it modified or set aside in whole or in part. Recognition and enforcement, by contrast, are concerned with giving effect to the award, either in the state in which it was made or in some other state(s).
11.18 A distinction may be drawn at the outset between (a) the enforcement of an award in the state that is the ‘seat’ of the arbitration, and (b) the enforcement of an award that is regarded as a ‘foreign’, or ‘international’, award because it was made outside the territory of the state in which recognition or enforcement is sought. Enforcement of an award in the country that is the seat of the arbitration is usually a relatively easy process. It generally involves the same processes as are required for the enforcement of an award in a domestic arbitration.18 Enforcement of an award that is regarded by the place of enforcement as a ‘foreign’, or ‘international’, award is a more complex matter. This section is mainly concerned with the recognition and enforcement of such ‘foreign’ awards.19
(d) Difference between recognition and enforcement
11.19 It is necessary to distinguish recognition from enforcement. The terms are sometimes used as though they are always inextricably linked. For example, the New York Convention itself speaks of ‘recognition and enforcement’ of foreign arbitral awards.20 The terms are, however, distinct. On this point, the 1927 Geneva (p. 611) Convention was more precise, when it spoke of ‘recognition or enforcement’.21 An award may be recognised without being enforced.22 However, if it is enforced, then it is necessarily recognised by the court that orders its enforcement. The precise distinction, in other words, is between ‘recognition’ and ‘recognition and enforcement’.
11.20 Recognition on its own is generally a defensive process.23 It will usually arise when a court is asked to grant a remedy in respect of a dispute that has been the subject of previous arbitral proceedings. The party in whose favour the award was made will object that the dispute has already been determined. To prove this, it will seek to produce the award to the court, and will ask the court to recognise it as valid and binding upon the parties in respect of the issues with which it dealt. The award may have disposed of all of the issues raised in the new court proceedings and so put an end to those new proceedings as res judicata—that is, as matters in issue between the parties that in fact have already been decided. If the award does not dispose of all of the issues raised in the new proceedings, but only some of them, it will need to be recognised for the purposes of issue estoppel, so as to prevent those issues with which it does deal from being raised again.
11.21 The use of recognition on its own may be illustrated by considering the example of a company that is made a defendant in legal proceedings by a foreign supplier for goods sold and delivered, but allegedly not paid for. Suppose that the dispute between the company and the foreign supplier has already been submitted to arbitration, and that an award has been made, in which the foreign supplier’s claim was dismissed. In these circumstances, the company will ask the court to recognise the award as a valid defence to the foreign supplier’s new claim. If the court is prepared to do this, the claim is dismissed. The legal force and effect of the foreign award will have been recognised, but the award itself has not been enforced.
11.22 By contrast, where a court is asked to enforce an award, it is asked not merely to recognise the legal force and effect of the award, but also to ensure that it is carried out, by using such legal sanctions as are available. Enforcement goes a step further than recognition. A court that is prepared to grant enforcement of (p. 612) an award will do so because it recognises the award as validly made and binding upon the parties to it, and therefore suitable for enforcement. In this context, the terms ‘recognition’ and ‘enforcement’ do run together: one is a necessary part of the other.
(iii) A shield and a sword
11.23 As the example shows, the purpose of recognition on its own is generally to act as a shield. Recognition is used to block any attempt to raise in fresh proceedings issues that have already been decided in the arbitration that gave rise to the award of which recognition is sought.24 By contrast, the purpose of enforcement is to act as a sword. Enforcement of an award means applying legal sanctions to compel the party against whom the award was made to carry it out. Such legal sanctions may take many forms. When the defaulting party is an individual, sanctions may include seizure of property and other assets, forfeiture of bank accounts, and even, in extreme cases, imprisonment. Where the defaulting party is a corporate body, enforcement is usually directed primarily against the property and other assets of the corporation, such as its stock-in-trade, bank accounts, trading accounts, and so on. In certain situations, however, the directors of the company may be held personally liable (for instance on a guarantee). In such cases, the sanctions may be directed against them personally.
(e) Place of recognition and enforcement
11.24 A party who simply seeks recognition of an award will generally do so because he or she needs to rely on the award by way of defence or set-off, or in some other way in court proceedings. For this purpose, the party asks the court concerned to recognise the award as binding on the parties between whom it was made. But the choice of court is not made by the party seeking recognition; it must be a court of the place where the proceedings against him or her are brought—and this fact, of itself, emphasises how important it is that international awards should be accepted as truly ‘international’ in their validity and effect.
11.25 Where, however, the successful party in an arbitration is seeking to enforce an award, the position is different. The first step is to determine in which country, or countries, enforcement is to be sought. To reach this decision, it is necessary to locate the state or states in which the losing party has, or is likely to have, assets available to meet the award. This usually calls for careful (and possibly difficult) investigative work. If enquiries suggest that assets are likely to be available in only one state, the party seeking enforcement of the award has no choice: for better or worse, he or she must seek enforcement in that state. Where there is a choice, (p. 613) the party seeking enforcement is able to proceed in one or more places as seems appropriate.
11.26 Court proceedings are necessary to obtain title to a defaulting party’s assets or their proceeds of sale, and these proceedings are usually25 taken in the state or states in which the property or other assets of the losing party are located. However, the party seeking enforcement should always be mindful to consider whether undertaking such a process, which invariably involves further costs, is worthwhile. For example, an order by the French courts for seizure and sale of the defaulting party’s goods and chattels in France would not produce any real money if those assets were to prove to be non-existent; nor would an order for the attachment of the defaulting party’s bank accounts in England if those accounts were to turn out to be overdrawn.26
11.27 A further factor to be taken into account in selecting a forum for the enforcement of an award is whether, under the New York Convention or some other relevant international convention, the prospective forum recognises and enforces awards rendered at the place of arbitration. Another factor is the attitude of the local courts to requests for recognition and enforcement of foreign awards, and notably whether their outlook is likely to be internationalist or parochial. The attitude that the prospective forum adopts on the question of state immunity27 is yet another relevant factor if enforcement is being sought against a state or a governmental agency.28
(i) Forum shopping
11.28 The need to locate the place(s) in which a defaulting party has assets is not confined to international arbitration. In domestic court proceedings, it may also be necessary to locate the defaulting party’s assets in order to enforce a court’s judgment or an arbitral tribunal’s award. However, in a domestic dispute, the assets of the losing party are usually situated within the country in which the proceedings take place, since this is normally the country of that party’s residence or place of business. In international arbitration, the contrary is likely to be the case. The place of arbitration29 will usually have been chosen, by or on behalf of the parties, precisely because (inter alia) it is a place with which they have no connection. In (p. 614) other words, the place of arbitration has been chosen as a neutral forum. It would be purely fortuitous if the parties were to happen to have assets situated within this neutral country. If the award has to be enforced, it must generally be enforced in a country other than that in which it was made. As will be further explained later in this chapter,30 this is why it is important that international awards should be recognised and enforced internationally, and not merely in the country in which they are made.
11.29 If, as often happens in international commerce, assets are located in different parts of the world, the party seeking enforcement of the award has a choice of country in which to proceed—a chance to go ‘forum shopping’, as it is sometimes expressed.31 In looking for the appropriate forum, not merely the location of assets, but also the other factors mentioned (such as the attitude of the local courts, the adherence of the target country to the New York Convention, and so on), must be taken into account.
(f) Methods of recognition and enforcement
11.30 Internationally, it is generally much easier to obtain recognition and enforcement of an international award than of a foreign court judgment. This is because the network of international and regional treaties providing for the recognition and enforcement of international awards is more widespread and better developed than corresponding provisions for the recognition and enforcement of foreign judgments.32 Indeed, this is one of the principal advantages of arbitration as a method of resolving international commercial disputes.33
(p. 615) 11.31 The method of recognition and enforcement to be adopted in any particular case depends on the place where the award was made (that is, whether it qualifies, for example, as a New York Convention award). It also depends on the relevant provisions of the law at the place of intended enforcement (the ‘forum state’). On this aspect, it is usually essential to obtain advice from experienced lawyers in the forum state.34
11.32 Local formalities are bound to be involved, whether or not one of the international conventions is applicable. For example, the original or certified copies of the arbitration agreement and award are usually required. The language of the award may well be different from the language of the court of the forum state, so that a translation is required—and it may be necessary for this to be undertaken with considerable formality (for example by consular attestation in the country of origin).
(g) Time limits
11.33 Time limits for the commencement of proceedings for the recognition and enforcement of an arbitral award are usually laid down in national legislation. Careful attention must be paid to such time limits (and to any other time limits contained in the rules of court of the forum state). In this respect, it would be foolhardy not to consult an experienced local practitioner—and this applies as much to the party seeking recognition or enforcement of an award as it does to the party wishing to challenge an award. In the United States, for instance, time limits vary from state to state and, when it comes to recognition or enforcement of an award, the relevant period may be anything from one year to three years.35
(h) Consequences of refusal of recognition or enforcement
11.34 The immediate consequence of a refusal to enforce an award is that the winning party fails to get what it wants—namely, seizure of the loser’s assets in the place in which enforcement was sought. Although this is a disheartening result for the party seeking enforcement, it should be borne in mind that it may still have an award that can be enforced in another state in which the losing party has assets. Much depends upon the reason for which enforcement was refused. If, for example, enforcement was refused for local public policy considerations, it may be possible to find another country in which the same considerations do not apply. (p. 616) However, if enforcement was refused because of a fundamental failure by the arbitral tribunal to give the losing party an opportunity to present its case, it may not be possible to enforce the award elsewhere, since other courts may take the same view.36 In such an event, the party seeking enforcement may have no option but to recommence arbitral proceedings, assuming that the right to do so has not been lost by lapse of time.
(i) Role of the international conventions
11.35 The dependence of the international arbitral process upon national systems of law is most clearly seen in the context of the recognition and enforcement of international awards. An arbitral tribunal is limited in the powers that it can exercise—and these powers, although usually adequate for resolving a particular dispute, fall short of the coercive powers possessed by national courts. Indeed, a state is generally reluctant to confer on a private arbitral tribunal the sanctioning powers that it confers on the judges in its own courts. The power to enforce an award against a reluctant party by such summary methods as the attachment of bank accounts or the sequestration of assets is a power that forms part of the prerogative of the state. In consequence, the enforcement of awards must take place via the national court at the place of enforcement, operating under its own procedural rules. The detailed procedures adopted in these courts will vary from country to country. However, the effect of the international conventions, culminating in the New York Convention, has been to secure a considerable degree of uniformity in the recognition and enforcement of awards in most of the important trading countries of the world.
11.36 The main international treaties that apply to the recognition and enforcement of international awards are reviewed in the next section. In particular, this chapter includes a discussion of the New York Convention, the ICSID Convention, and a number of regional conventions.
11.37 The New York Convention has the widest scope of application. Subject to two reservations that may restrict its application, the New York Convention facilitates the recognition and enforcement of foreign arbitral awards in the territories of any of its more than 140 signatory states, irrespective of the arbitration rules under which the proceedings were conducted.37 Enshrining as it does a strong pro-enforcement policy, the New York Convention provides for the recognition and enforcement of foreign arbitral awards by national courts, subject to a handful of procedural and substantive grounds for objecting to enforcement that are intended to be limited in scope.
(p. 617) 11.38 Similarly, the ICSID Convention (sometimes also known as the ‘Washington Convention’) provides for the enforcement of those arbitral awards that were rendered in proceedings involving a national of one contracting state and another contracting state. Awards falling under the scope of the ICSID Convention are directly enforceable within the territories of all states parties to ICSID.38 Like the New York Convention, the ICSID Convention has the vast number of more than 140 contracting states.
11.39 In this chapter, we also briefly discuss a number of regional conventions. The application of these regional conventions is far more limited than the application of the New York and ICSID Conventions, not the least because the New York Convention will apply to almost all disputes, thus superseding those regional conventions.
11.40 The origins of the New York Convention have already been described in Chapter 1. The New York Convention replaces the 1927 Geneva Convention as between states that are parties to both Conventions,39 and is a substantial improvement, since it provides for a simpler and more effective method of obtaining recognition and enforcement of foreign awards. The Convention also replaces the earlier 1923 Geneva Protocol as between states that are bound by both,40 and again constitutes a substantial improvement, because it gives much wider effect to the validity of arbitration agreements than that given under the Protocol. As a result, the New York Convention has been rightly eulogised as ‘the single most important pillar on which the edifice of international arbitration rests’,41 and as a convention that ‘perhaps could lay claim to be the most effective instance of international legislation in the entire history of commercial law’.42 It is for this reason that, for now, many remain reluctant to countenance the possible disruption that would accompany the modernisation of the Convention’s existing text.43
11.41 Although the title of the New York Convention refers only to the recognition and enforcement of ‘foreign arbitral awards’, the Convention also deals with the recognition and enforcement of arbitration agreements. This has already been discussed in Chapter 1. In this chapter, the authors focus only on the recognition and enforcement of ‘foreign arbitral awards’.
This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.44
If this opening Article were to stand without qualification, it would mean that an award made in any state (even if that state were not a party to the New York Convention) would be recognised and enforced by any other state that was a party, as long as the award satisfied the basic conditions set down in the Convention. There is, however, a qualification: Article I(3) of the Convention allows states that adhere to it to make two possible reservations. The first of these is the reciprocity reservation; the second is the commercial reservation, which was also in the 1923 Geneva Protocol.
When signing, ratifying or acceding to this Convention, or notifying extension under Article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State.45
To the extent that states take advantage of it, the reciprocity reservation has the effect of narrowing the scope of application of the New York Convention. Instead of applying to all foreign awards, wherever they are made, the scope of the New York Convention may be limited to ‘Convention awards’—that is, awards made in a state that is a party to the New York Convention.46
(p. 619) 11.44 States that have entered into the New York Convention on the basis of reciprocity have agreed, in effect, that they will recognise and enforce only Convention awards. Accordingly, when seeking a suitable state in which to hold an international commercial arbitration, it is advisable to select a state that has adopted the New York Convention, so as to improve the chances of securing recognition and enforcement of the award in other Convention countries.
11.45 Nevertheless, the limiting effect of the first reservation should not be exaggerated. The number of states that make up the international network for the recognition and enforcement of arbitral awards established by the New York Convention grows year by year. The Convention now links the world’s major trading nations: Arab, African, Asian, and Latin American, as well as European and North American. As more countries become Convention countries, the reciprocity reservation becomes less significant. The Model Law, for example, in Articles 35 and 36, requires the recognition and enforcement of an arbitral award ‘irrespective of the country in which it was made’.
11.46 Article I(3) of the New York Convention contains a further reservation. This entitles a contracting state to declare that it will apply 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’.47
In my opinion, in order to invoke the provisions of [the Convention], it is not enough to establish that an agreement is commercial. It must also be established that it is commercial by virtue of a provision of law or an operative legal principle in force in India.50
… is a word of the largest import and takes in its sweep all the business and trade transactions in any of their forms, including the transportation, purchase, sale and exchange of commodities between the citizens of different countries.52
It should be noted that the view of the learned single Judge of the Bombay High Court in Indian Organic Chemical Ltd’s case has not been approved by the Division Bench of the Bombay High Court. The Division Bench after setting out the view of [the judge] in the aforesaid decision, ultimately disagreed with it …53
… construing the expression ‘commercial’ in Section 2 of the Act it has to be borne in mind that the ‘Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereof by providing for speedy settlement of disputes arising in such trade through arbitration and any expression or phrase occurring [therein] should receive, consistent with its literal and grammatical sense, a liberal construction’ … The expression ‘commercial’ should, therefore, be construed broadly having regard to the manifold activities which are an integral part of international trade today.
11.50 Nevertheless, the point remains that each national state may decide for itself, under the provisions of the New York Convention, what relationships it considers to be ‘commercial’ for the purposes of the commercial reservation.55
11.51 The New York Convention provides for both recognition and enforcement of awards to which the Convention applies. As far as recognition is concerned, a state bound by the Convention undertakes to respect the binding effect of awards to which the Convention applies; accordingly, as has been seen, such awards may be relied upon by way of defence or set-off in any legal proceedings. As far as enforcement is concerned, a state that is a party to the Convention undertakes to enforce awards to which the Convention applies, in accordance with its local procedural rules. It also undertakes not to impose substantially more onerous conditions, or higher fees or charges, for such enforcement than are imposed in the enforcement of its own domestic awards.56
[ … ]
(a) The duly authenticated original award or a duly certified copy thereof; [and]
(b) The original agreement referred to in article II, or a duly certified copy thereof.58
11.53 Despite these requirements of Article IV of the Convention, courts in a number of jurisdictions have enforced awards in the absence of an original of the (p. 622) arbitration agreement,59 or indeed without a written arbitration clause at all. By way of example, the Supreme Court of Spain enforced an award of the China International Economic and Trade Arbitration Commission (CIETAC) even though it did not identify the parties thereto, reasoning that the respondent fully participated in the arbitration, thus proving its intention to submit its dispute with the claimant to arbitration.60
11.54 If the award and the arbitration agreement are not in the official language of the country in which recognition and enforcement is sought, certified translations are needed.61 Once the necessary documents have been supplied, the court will grant recognition and enforcement unless one or more of the grounds for refusal, listed in the Convention, are present.
(b) Refusal of recognition and enforcement
11.55 The various grounds for refusal of recognition and enforcement of an arbitration award that are set out in the New York Convention must be discussed in detail. This is not only because of the importance of the Convention itself, but also—and equally crucially—because the provisions of the Model Law governing recognition and enforcement of awards (in Articles 35 and 36) are almost identical to those set out in the Convention.
11.56 First, neither the New York Convention nor the Model Law permit any review on the merits of an award to which the Convention applies.62
11.57 Secondly, the grounds for refusal of recognition and enforcement set out in the New York Convention (and in the Model Law) are exhaustive. They are the only grounds on which recognition and enforcement may be refused.
11.58 Thirdly, the New York Convention sets out five separate grounds on which recognition and enforcement of a Convention award may be refused at the request of the party against whom it is invoked.63 It is significant that, under both the Convention and the Model Law (which follows the Convention in this respect), the burden of (p. 623) proof is not upon the party seeking recognition and enforcement.64 The remaining two grounds on which recognition and enforcement may be refused, which relate to the public policy of the place of enforcement, are grounds that may be invoked by the enforcing court on its own motion.65
11.59 Fourthly, even if grounds for refusal of recognition and enforcement of an award are proved to exist, the enforcing court is not obliged to refuse enforcement. The opening lines of Article V(1) and (2) of the Convention say that enforcement ‘may’ be refused; they do not say that it ‘must’ be refused. The language is permissive, not mandatory.66 The same is true of the Model Law.67
11.60 Fifthly, the intention of the New York Convention and of the Model Law is that the grounds for refusing recognition and enforcement of arbitral awards should be applied restrictively. As a leading commentator on the Convention has stated: ‘As far as the grounds for refusal for enforcement of the Award as enumerated in Article V are concerned, it means that they have to be construed narrowly.’68
11.61 Most national courts have recognised this. There has been approval in the United States, for example, of the ‘pro-enforcement bias’ of the Convention.69 However, not all courts follow this internationalist approach. Practitioners of international commercial arbitration are aware, either from their own experience or from the experience of others, of the difficulties that may arise in seeking enforcement of an award under the New York Convention. In particular, the ‘public policy’ exception70 enables some states to play the game less fairly than others. Nor is this the only problem.71 There are states that have ratified the Convention, but have (p. 624) either not brought it into effect or have brought it into effect inadequately. There are states in which the local courts or the local bureaucracy are unfamiliar with international arbitration—and perhaps even suspicious of it. There are also oddities of legislation, such as those provisions of a past law in India (now repealed) stating that where the governing law was that of India, the ensuing award was deemed to be a domestic award, even though the seat of the arbitration was in a foreign state.72
11.62 Problems of this kind cannot be ignored, but they should not be exaggerated. The New York Convention has proved to be a highly effective international instrument for the enforcement of arbitration agreements and, more importantly in the present context, arbitration awards.73 The Convention is now somewhat dated,74 and it is by no means applied consistently by all of the states that have adopted it (or which claim to have done so),75 but it has made the greatest single contribution to the internationalisation of international commercial arbitration. Even though the Model Law may eventually take its place, decisions under the Convention will remain important, since the Model Law’s provisions governing recognition and enforcement of arbitral awards are taken directly from the New York Convention.
(c) Grounds for refusal
[ … ]
(a) The parties to the arbitration agreement … were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law (p. 625) to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his [or her] case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The 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.
Recognition and enforcement … may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
These grounds for refusal of recognition and enforcement of foreign arbitral awards are of considerable importance. They represent an internationally accepted standard, not only because of the widespread acceptance of the New York Convention throughout the world, but also because the Model Law adopts the same grounds (although not in precisely the same words) for refusal of recognition and enforcement of an arbitral award, irrespective of the country in which that award was made.76 In addition, six of these seven grounds for refusal are also set out in the Model Law as grounds for the setting aside of an arbitral award by the national court of the place of arbitration.77
11.65 In an ideal world, the provisions of the New York Convention and of the Model Law would be interpreted in the same way by courts everywhere. Sadly, this does not happen. There are inconsistent decisions under the New York Convention, just as there may be inconsistent decisions within a national system of law (although the latter may be corrected on appeal). Nevertheless, it is useful to consider how national courts in different parts of the world have applied the different grounds for refusal set out in the New York Convention. Whilst these decisions have no binding authority (p. 626) on national courts in other jurisdictions, they may provide useful guidelines for the interpretation of a particular ground for refusal in a particular case.
(d) First ground for refusal—incapacity; invalid arbitration agreement
The issue of capacity to enter into an arbitration agreement, which may raise particular difficulties in relation to states and state agencies, has already been discussed in Chapter 2, as have issues as to the validity of the arbitration agreement.
11.67 A classic example of a successful defence to enforcement based on invalidity is provided by the decision of the Administrative Tribunal of Damascus in Fougerolle SA (France) v Ministry of Defence of the Syrian Arab Republic.79 The Tribunal, in its decision of 31 March 1988, refused enforcement of two awards under the Arbitration Rules of the International Chamber of Commerce (ICC), holding that they were ‘non-existent’ because they were rendered ‘without the preliminary advice on the referral of the dispute to arbitration, which must be given by the competent Committee of the Council of State’.80
The tribunal’s own view of its jurisdiction has no legal or evidential value, when the issue is whether the tribunal had any legitimate authority in relation to the Government at all. This is so however full was the evidence before it and however carefully deliberated was its conclusion. It is also so whatever the composition of the tribunal.85
11.69 The English Supreme Court’s decision is to be contrasted with the outcome of the application for the annulment of the same award before the Paris Cour d’Appel, the Paris court having reached the opposite conclusion on the question as to whether the government was bound by the arbitration agreement as a matter of French law.86
11.70 An example that illustrates an unsuccessful attempt to use this defence to enforcement is a decision by the Supreme Court of Austria. In O Ltd (Hong Kong) v S GmbH (Austria),87 the Court rejected the defendant’s argument that a power of attorney to conclude an arbitration agreement must be in writing. In so finding, the Court reasoned that although this formality is required by Austrian law, the New York Convention—which applied to the foreign award at issue—does not.
(e) Second ground—no proper notice of appointment of arbitrator or of the proceedings; lack of due process
This is the most important ground for refusal under the New York Convention (and the Model Law). It is directed at ensuring that the arbitration itself is properly conducted, with proper notice granted to the parties and procedural fairness.
11.72 The point as to notice is a matter of formality, but it is important nonetheless. However, the main thrust of this provision of the Convention is directed at ensuring that the requirements of ‘due process’ are observed and that the parties are given a fair hearing. If parties from different countries are to have confidence in arbitration as a method of dispute resolution, it is essential that the proceedings should be conducted in a manner that is fair and which is seen to be fair. This is (p. 628) something that should be borne in mind, by parties and arbitrators alike, from the very outset of the arbitration.
11.73 The court of the forum state will naturally have its own concept of what constitutes a ‘fair hearing’. In this sense, as was said in a leading case in the United States, the New York Convention ‘essentially sanctions the application of the forum state’s standards of due process’.88 This does not mean, however, that the hearing must be conducted as if it were a hearing before a national court in the forum state. It is generally enough if the court is satisfied that the hearing was conducted with due regard to any agreement between the parties, and in accordance with the principles of equality of treatment and the right of each party to have a reasonable—rather than exhaustive—opportunity to present its case.
11.74 The national court at the place of enforcement thus has a limited role. Its function is not to decide whether or not the award is correct, as a matter of fact and law; its function is simply to decide whether there has been a fair hearing. Only a significant and material mistake in the course of the proceedings should be sufficient to lead the court to conclude that there was a denial of ‘due process’.
11.75 By way of example, in a case to which reference has already been made,89 a US corporation, which had been told that there was no need to submit detailed invoices, had its claim rejected by the Iran–United States Claims Tribunal, for failure to submit detailed invoices! The US court—rightly, it is suggested—refused to enforce the award against the US company. In different circumstances, a German court held that an award that was based upon arguments that had not been raised by the parties or the tribunal during the arbitral proceedings, and thus on which the parties had not had an opportunity to comment, violated due process and the right to be heard.90 In France, in Overseas Mining Investments,91 the successful claimant had not pleaded the grounds on which the arbitral tribunal had found in its favour. In these circumstances, the French Cour de Cassation held that the tribunal’s failure to invite both the parties to express their views on the grounds in question violated the principe de la contradiction, which was essential for the conduct of a fair hearing. Similarly, in Kanoria and ors v Guinness,92 the English Court of Appeal decided that the respondent had not been afforded the chance to present its case when critical legal arguments were made by the claimant at the hearing, which the respondent could not attend because of serious illness. In the circumstances, the (p. 629) Court decided that ‘this [was] an extreme case of potential injustice’ and resolved not to enforce the arbitral award.
11.76 Examples of unsuccessful ‘due process’ defences to enforcement are, however, more numerous.93 In Minmetals Germany v Ferco Steel,94 the losing respondent in an arbitration in China opposed enforcement in England on the grounds that the award was founded on evidence that the arbitral tribunal had obtained through its own investigations. An English court rejected this defence, on the basis that the respondent was given an opportunity to ask for the disclosure of evidence at issue and to comment on it, but had declined to do so. The court held that the due process defence to enforcement was not intended to accommodate circumstances in which a party had failed to take advantage of an opportunity duly accorded to it.95
11.77 Another example of an unsuccessful attempt to rely on this ground is Jorf Lafar Energy Co. SCA (Morocco) v AMCI Export Corporation (US).96 The parties were given the opportunity at an early stage of the arbitration to submit witness statements, but AMCI chose not to do so. At a later stage in the proceedings, AMCI requested an oral hearing to present witness evidence. Having been denied the opportunity to do this, AMCI was unsuccessful in its attempt to resist enforcement of the award for violation of due process. The US District Court for the Western District of Pennsylvania held that AMCI had been given an equal and fair opportunity to present its case, and thus had to suffer the consequences of its own failure to present its case when given that opportunity.97
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognised and enforced …
(p. 630) It is becoming increasingly common for the issue of jurisdiction to be raised as the first line of defence in a reference to arbitration. The issue may be raised as part of a plea that there was no valid agreement to arbitrate,98 in which case it would fall under Article V(1)(a) of the New York Convention, or it may be raised under the present heading. Jurisdictional issues as a ground for challenging an award have already been discussed,99 and it has been noted that the right to raise such an issue may have been lost because of failure to do so at the appropriate time.100
11.79 The first part of this ground for refusal of enforcement under the Convention (and under the Model Law) envisages a situation in which the arbitral tribunal is alleged to have acted in excess of its authority—that is, ultra petita—and to have dealt with a dispute that was not submitted to it. According to a leading authority on the Convention, the courts almost invariably reject this defence.101 By way of example, the German courts have rejected ultra petita defences raised in complaint of an arbitral tribunal’s application of lex mercatoria102 and an arbitral tribunal’s award of more interest than was claimed.103 A further robust rejection of such a defence comes from the US Court of Appeals for the District of Columbia, in a case in which it was pleaded that the arbitral tribunal had awarded a considerable sum of damages for consequential loss when the contract between the parties clearly excluded this head of damage.104 The Court stated that, without undertaking an in-depth review of the law of contract, it could not state whether a breach of contract would abrogate a clause that excluded consequential damages. However, ‘the standard of review of an arbitration award by an American Court is extremely narrow’,105 and (adopting the words of the US Court of Appeals (p. 631) in the well-known case of Parsons Whittemore106) the Convention did not sanction ‘second-guessing the arbitrators’ construction of the parties’ agreement’, nor would it be proper for the court to ‘usurp the arbitrators’ role’.107 Accordingly, enforcement was ordered.
11.80 A further example of an unsuccessful attempt to use this ground to resist enforcement is a decision by the US District Court for the Northern District of Illinois, Eastern Division.108 The respondents argued that the arbitral tribunal had exceeded its authority by giving a preclusive effect to findings of an English court, rather than holding an evidentiary hearing to make its own findings. The US court held that since the parties’ arbitration agreement neither stipulated any specific hearing procedure to be followed nor prohibited the tribunal from deciding on issues of preclusion, these were issues to be decided by the arbitral tribunal.109
11.81 The second part of this ground for refusal is concerned with the situation in which it is alleged that the tribunal exceeded its jurisdiction in some respects, but not in others. In such a situation, even if the partial excess of authority is proved, that part of the award which concerns matters properly submitted to arbitration may be saved and enforcement ordered. For example, in a case that came before the Italian courts, the court examined the award to determine whether or not the arbitral tribunal had exceeded the limits of its jurisdiction.110 Having done so, the Italian court granted partial enforcement of the award, to the extent that it dealt with matters within the jurisdiction of the arbitral tribunal.
(p. 632) (g) Fourth ground—composition of tribunal or procedure not in accordance with arbitration agreement or the relevant law
The 1927 Geneva Convention provided that enforcement of an award could be refused if the composition of the arbitral tribunal, or the arbitral procedure, was not in accordance both with the agreement of the parties and the law of the place of arbitration. This double requirement meant that if an arbitration was not held in strict accordance with the procedural law of the place of arbitration, the consequent award would not be enforced. Under the New York Convention, the double requirement has been dropped and the agreement of the parties comes first. Only if there is no agreement are the arbitration laws of the place of arbitration to be taken into account.
11.83 In a case that came before the Supreme Court of Hong Kong in 1994, it was argued that enforcement of an award made in China should be refused because the composition of the arbitral tribunal was not in accordance with the agreement of the parties.111 The arbitrators who had been appointed were on the Shenzhen list of arbitrators, but not (as specified in the arbitration agreement) on the Beijing list.
It is clear therefore that the only grounds upon which enforcement can be refused are those specified … and that the burden of proving a ground is upon the defendant. Further, it is clear that even though a ground has been proved, the Court retains a residual discretion.112
I conclude therefore, somewhat reluctantly, that technically the arbitrators did not have jurisdiction to decide this dispute and that in all the circumstances of this case, the ground specified in the section has been made out. I say technically because the parties did agree to have a CIETAC Arbitration and that is what they got, even though it was held at a place within China not specified in the contract and by arbitrators who apparently were not on the Beijing list.113
If the doctrine of estoppel can apply to arguments over the written form of the arbitration agreement under Article II(2), then I fail to see why it cannot also apply to the grounds of opposition set out in Article V. It strikes me as quite unfair for a party to appreciate that there might be something wrong with the composition of the tribunal yet not make any formal submission whatsoever to the tribunal about its own jurisdiction, or to the arbitration commission which constituted the tribunal and then to proceed to fight the case on the merits and then two years after the award, attempt to nullify the whole proceedings on the grounds that the arbitrators were chosen from the wrong CIETAC list.114
[E]ven if a ground of opposition is proved, there is still a residual discretion left in the enforcing court to enforce nonetheless. This shows that the grounds of opposition are not to be inflexibly applied. The residual discretion enables the enforcing court to achieve a just result in all the circumstances …115
[T]he [English court]’s premature appointment of [the third arbitrator] irremediably spoiled the arbitration process … the issue of how the third arbitrator was to be appointed is more than a trivial matter of form. Article V(1)(d) of the New York Convention itself suggests the importance of arbitral composition …117
This fifth ground for refusal of recognition and enforcement of an arbitral award (which, like the others, also appears in the Model Law) has given rise to more controversy than any of the previous grounds. First, there is the reference to an award being ‘not binding’. In the 1927 Geneva Convention, the word ‘final’ was used. This was taken by many to mean that the award had to be declared as ‘final’ by the court of the place of arbitration and this gave rise to the problem of the double exequatur. It was intended that the word ‘binding’ would avoid this problem, particularly since many international and institutional rules of arbitration state in terms that the award of the arbitral tribunal is to be accepted by the parties as final and ‘binding’ upon them.118 However, some national courts still consider it necessary to investigate the law applicable to the award to see if it is ‘binding’ under that law119—although the better position appears to be that an award is ‘binding’ if it is no longer open to an appeal on the merits, either internally (that is, within the relevant rules of arbitration) or by an application to the court.120
11.88 There are other problems too, with this fifth ground for refusal, which have led to considerable controversy. At first sight, the proposition that an award may be refused recognition and enforcement if it has been set aside or suspended by a court at the place (or seat) of the arbitration seems reasonable enough. If, for example, an award has been set aside in Switzerland, it will be unenforceable in that country—and it might be expected that, if only as a matter of international comity, the courts of other states would regard the award as unenforceable also.
11.89 This is not necessarily so, however. Courts in other countries may take the view (and indeed, as will be described,121 in some countries they have taken the view) (p. 635) that they will enforce an arbitral award even if it has been set aside by the courts of the seat of the arbitration. This leads to a situation in which an award that has been set aside and so is unenforceable in its country of origin may be refused enforcement under the New York Convention in one country, but granted enforcement in another.
11.90 The problem arises because the New York Convention does not in any way restrict the grounds on which an award may be set aside or suspended by the court of the country in which, or under the law of which, that award was made.122 This is a matter that is left to the domestic law of the country concerned, and this domestic law may impose local requirements (such as the need to initial each page of the award) that judges and lawyers elsewhere would not regard as sufficient to impeach the validity of an international arbitral award.
… a hitherto rock-solid rampart against the true internationalisation of arbitration, because in the award’s country of origin all means of recourse and all grounds of nullity applicable to purely domestic awards may be used to oppose recognition abroad …123
Another experienced commentator has referred to the ‘anathema of local particularities’, which are capable of leading to the setting aside of international awards, and has suggested that ‘such local standard annulments’ should be given only local effect and should be disregarded internationally.124
11.92 The argument in favour of the fifth ground is a familiar one. It is the classic argument that the courts of the place of arbitration should have some control over arbitral proceedings conducted on their territory, if only to guard against lack of due process, fraud, corruption, or other improper conduct on the part of the arbitral tribunal. Perhaps the real argument is: how far should this control go? Should it be limited to the first four grounds of the New York Convention,125 or should it go further? And if so, how much further? The problem is to strike the correct balance between regulation and laissez-faire.
The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of the arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.
In this way, the New York Convention recognises explicitly that, in any given country, there may be a local law that, whether by treaty or otherwise, is more favourable to the recognition and enforcement of arbitral awards than the Convention itself. The Convention gives its blessing, so to speak, to any party who wishes to take advantage of this more favourable local law.
… the award rendered in Switzerland is an international award which is not integrated in the legal system of that State, so that it remains in existence even if set aside and its recognition in France is not contrary to international public policy.128
While Article V provides a discretionary standard, Article VII of the Convention requires that, ‘The provisions of the present Convention shall not … deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law … of the country where such award is sought to be relied on.’131
[A]n international arbitral award, which does not belong to any state legal system, is an international decision of justice and its validity must be examined according to the applicable rules of the country where its recognition and enforcement are sought.133
More recently, in a decision of the US District Court for the Southern District of New York in COMMISA v Pemex,134 a Mexican award was enforced under the 1975 Inter-American Convention on International Commercial Arbitration (the (p. 638) Panama Convention),135 despite being set aside at the seat. A Mexican court had applied a statute that was not yet in existence at the time the parties entered into the contract, and had set aside the award on the basis that, as a matter of Mexican law, arbitral tribunals lacked the competency to hear and decide cases brought against the Mexican state, or an organ of the state (such as Pemex, Mexico’s state-owned oil company). In rejecting the Mexican court’s ruling and confirming the award, the US court was careful to explain that it was ‘neither deciding, nor reviewing, Mexican law’; rather, its decision was made on the basis that the Mexican court’s ruling ‘violated basic notions of justice in that it applied a law that was not in existence at the time the parties’ contract was formed and left COMMISA without an apparent ability to litigate its claims’.136
11.97 Notwithstanding decisions such as Hilmarton, Chromalloy, Putrabali, and Pemex, the enforcement of awards that have been set aside by the courts of the place of arbitration remains controversial. With some notable exceptions, courts around the world are more likely than not to decline to enforce annulled awards.137
Decisions of foreign courts under the Convention uniformly support the view that the clause in question means procedural and not substantive (that is, in most cases, contract law) …
Accordingly, we hold that the contested language in Article V(1)(e) of the Convention … refers exclusively to procedural and not substantive law, and more precisely to the regimen or scheme of arbitral procedural law under which the arbitration was conducted.141
The court went on to hold that since the seat of the arbitration was Mexico, only the Mexican court had jurisdiction to set aside the award.142
11.99 However, courts are not always immune to such creative attempts to resist enforcement. The Indian Supreme Court,143 for example, has in the past accepted that an award rendered in London that was the object of enforcement proceedings in the United States could be set aside in India simply because the parties had chosen Indian law to govern the substance of their dispute.144 This type of decision is very (p. 640) much the exception that proves the rule, and the Indian Supreme Court itself has subsequently recognised this. Thus, in its decision in Bharat Aluminium Co. v Kaiser Aluminum Technical Service, Inc.,145 the Indian Supreme Court affirmed that Indian courts have no jurisdiction, in either a supportive or supervisory role, where the seat of arbitration is outside India.
11.100 This completes this review of the five grounds for refusal of recognition and enforcement of an arbitral award laid down in the New York Convention, and the Model Law, and which it is for the party resisting enforcement to prove. As already mentioned, however, there are two other grounds that may be invoked by the enforcement court itself. These concern, first, arbitrability, and secondly, public policy.
… if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country …146
11.102 Arbitrability has already been discussed in Chapter 2. As indicated, each state has its own concept of what disputes should be reserved for the courts of law and what disputes may be resolved by arbitration. This question may arise both at the beginning of an arbitration (‘is this dispute capable of being referred to arbitration?’) and at the end (‘would this dispute have been capable of settlement by arbitration under the law of the enforcement state?’). The issue of ‘arbitrability’ under the New York Convention is, of course, an issue for the law of the enforcement state and, being governed largely by questions of public policy, varies from state to state.
11.103 For example, Russian courts have recently interpreted provisions of the Russian Commercial Procedure Code stipulating the exclusive jurisdiction of certain Russian courts over corporate governance disputes as precluding the arbitrability of such disputes. In Maximov v Novolipetsky Metallurgicheskiy Kombinat,147 following the agreement of a contract to purchase shares in a Russian-incorporated company, a dispute arose between the seller and buyer over the purchase price. The seller, who alleged that he had not received the price required under the agreement, (p. 641) obtained an arbitral award at the Moscow-based International Commercial Arbitration Court (ICAC). However, the Supreme Commercial Arbitrazh Court, upholding the decision of a lower court to set aside the award, held that corporate governance disputes are non-arbitrable under Article 225(1) of the Arbitration Procedural Code.
11.104 In another example, the Supreme Court of Singapore ruled that whether a person is the alter ego of a company is an issue that does not have a public interest element, so is within the scope of submission to arbitration and is therefore arbitrable.148 The defendant had argued that the arbitrator could not hold that he was bound by the arbitration clause based on a finding of an alter ego, since the issue of an alter ego was not arbitrable under Arizona law (the governing law of the contract). The Court dismissed this argument, holding that Arizona law was irrelevant, since the issue of arbitrability in a Singapore court as a ground for refusing enforcement is to be determined under Singapore law.149
11.105 Recognition and enforcement of an arbitral award may also be refused if it is contrary to the public policy of the enforcement state.150 It is understandable that a state may wish to have the right to refuse to recognise and enforce an arbitration award that offends its own notions of public policy, and in some jurisdictions an enforcing court is required to examine the possibility of a public policy violation ex officio.151 Yet when reference is made to ‘public policy’, it is difficult not to recall the sceptical comment of the English judge who said, almost two centuries ago: ‘It is never argued at all but where other points fail.’152
The Court is in our view concerned to preserve the integrity of its process, and to see that it is not abused. The parties cannot override that concern by private agreement. They cannot by procuring an arbitration conceal that they, or rather one of them, is seeking to enforce an illegal contract. Public policy will not allow it.155
11.107 Rare exceptions such as this aside, in most countries the ‘pro-enforcement bias’ of the New York Convention has been faithfully observed.156 Indeed, this pro-enforcement bias is itself considered a matter of public policy, as the English courts confirmed in Westacre Investments Inc. v Jugoimport-SPDR Holding Co. Ltd.157 This dispute arose from a ‘consultancy’ agreement for the procurement of contracts for the sale of military equipment in Kuwait. Westacre commenced arbitration, claiming payment of its ‘consulting fee’. Jugoimport defended the claim on the grounds that, in violation of Kuwaiti law and public policy, the contract involved Westacre bribing various Kuwaitis to exert their influence in favour of entering sales contracts with Jugoimport. The agreement between Westacre and Jugoimport was governed by Swiss law, and provided for arbitration in Switzerland. The arbitral tribunal found that there was no evidence of corruption and that lobbying by private enterprises to obtain public contracts was not illegal under Swiss law. The award was first challenged in the Swiss Federal Court, which rejected the challenge on the basis that allegations of corruption had already been dealt with and rejected by the arbitral tribunal. Attempts to enforce the award were subsequently challenged in the English courts, where Jugoimport filed new affidavit evidence in support of its allegation of corruption.
11.108 In decisions that have attracted some critical commentary,158 the English courts rejected the challenge to enforcement, both at first instance and in the Court of Appeal, on the grounds that: the arbitral tribunal itself had considered the allegations of bribery and found that they had not been substantiated; ‘lobbying’ was (p. 643) not, as such, an illegal activity under the governing law chosen by the parties; and the Court was faced with international arbitration awards that had been upheld by the Swiss Federal Tribunal, and therefore had to balance the public policy of discouraging international commercial corruption against the public policy of sustaining international arbitration awards.
11.109 It is clear that the ‘public policy’ referred to in the New York Convention is the public policy of the enforcement state.159 The real question is whether that public policy differentiates between international awards and purely domestic awards.
The line of decisions which conclusively tip the judicial scale in favour of arbitration [are] a line of United States Supreme Court opinions which enthusiastically endorse an internationalist approach towards commercial disputes involving foreign entities. These decisions, The Bremen v Zapata Offshore Co (forum selection clauses in international commercial contract enforced); Scherk v Alberto-Culver Co (international arbitration clause held enforceable when in conflict with federal securities laws); and most recently Mitsubishi (international arbitration clause held enforceable when in conflict with Federal Antitrust laws) eschew the parochial tendencies of domestic tribunals in retaining jurisdiction over international commercial disputes. The Supreme Court powerfully advocates the need for international comity in an increasingly interdependent world. Such respect is especially important, in this Court’s view, when parties mutually agree to be bound by freely negotiated contracts.164
11.111 A similar line of reasoning is found in the decision of the New York District Court in the well-known case of Parsons Whittemore Overseas Co. Inc. v Société Générale de l’Industrie du Papier (RAKTA).165 The court was confronted by an argument that recognition and enforcement of an award should be refused on the grounds that diplomatic relations between Egypt (the respondent’s state) and the United States had been severed. The court rejected this argument and referred to the ‘general pro-enforcement bias’ of the New York Convention.166 It held that the Convention’s (p. 644) ‘public policy’ defence should be construed narrowly, and that enforcement of foreign arbitral awards should be denied on this basis only ‘where enforcement would violate the forum state’s most basic notions of morality and justice’.167
This raises the question of whether the narrower concept of public policy as applicable in the field of public international law should be applied or the wider concept of public policy as applicable in the field of municipal law. The Court held that the narrower view should prevail and that enforcement would be refused on the public policy ground if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.169
11.114 These decisions, from courts in different parts of the world, show a readiness to limit—sometimes severely—the public policy defence to enforcement. However, the boundaries of national public policy are not fixed. There are cases, for example, in which the Turkish courts have allowed the public policy defence in circumstances in which, to an outside observer, it seems to be unjustified.173 Japanese legislation applies the test of ‘public policy or good morals’ in the enforcement process;174 Vietnamese legislation requires that the award should not be contrary to the basic principles of Vietnamese law.175 In the United Arab Emirates (UAE), the concept of ‘public policy’ has been held to extend to matters of acquisition and termination of ownership rights over property, rendering disputes concerning real estate non-arbitrable.176
11.115 Rather than refer to ‘public policy’, Chinese law refers to the ‘social and public interest’, which is potentially an even more oblique concept. Chinese courts have recognised an obligation to consider, in every case, whether this ‘social and public interest’ is violated, even if neither party has raised it.177 The Supreme People’s (p. 645) Court has issued a statement of how to interpret this ‘social and public interest’ ground, asking:
[U]nder what circumstances does the principle of public interest apply? The principle of public interest can apply where there are breaches of fundamental principles of Chinese law, national sovereignty or national security, or breaches of the principles of social ethics and fundamental moral value.178
Commentators have summarised this position as meaning that, in China,‘public policy’ is broader than ‘public morals’, and includes ‘traditional and societal sentiment’.179
11.116 Such broad conceptions of public policy may explain decisions such as Heavy Metal.180 In that case, the Supreme People’s Court had to decide whether to enforce a foreign-related arbitral award, which directed the respondent to pay compensatory damages to a US heavy metal band, whose performances had been banned by the Chinese Ministry of Culture on the grounds that the artists performed ‘outrageous acts’ such as drinking, smoking, splashing water, lying on the stage floor while performing, and jumping down from the stage. A CIETAC tribunal awarded damages for the band’s lost income. When the band sought enforcement, the Supreme People’s Court denied enforcement, on the grounds that the tribunal’s findings were in manifest disregard of the underlying facts that the performance of heavy metal music was against ‘national sentiments’, and accordingly contrary to the social and public interests.181 Whatever one may think of heavy metal music, it is difficult not to reach the conclusion that this amounted to a troublingly broad interpretation of the public policy exception to the enforcement of arbitral awards.
11.117 The requirement now that lower courts must obtain leave of the Supreme People’s Court to refuse recognition or enforcement has certainly helped to reduce the incidence of the use of overly broad interpretations of public policy grounds to deny enforcement of awards in China.182 According to a 2008 speech by Deputy Chief Justice Wan E’xiang, of the Supreme People’s Court, between 2000 and 2008 the Court did not uphold a single decision by the Chinese lower courts that refused to enforce a foreign arbitral award on public policy grounds.183 Attempts by parties to equate the social and public interest, for example, with a simple violation of (p. 646) Chinese law, or (more worryingly) the interests of state-owned enterprises, have been rejected as falling short of a breach of public policy.184
11.118 Russian courts are likewise notorious for expansive interpretations of the notion of public policy. For instance, Russian courts have often declined the enforcement of arbitral awards if the amount of damages awarded under foreign law was ‘punitive’, or ‘disproportionate to the breach’, in the eyes of Russian courts.185
11.119 In an attempt at harmonisation, the Committee on International Commercial Arbitration of the International Law Association (ILA) has sought to offer definitions of the concepts of ‘public policy’, ‘international public policy’, and ‘transnational public policy’, and recommends that ‘[t]he finality of awards rendered in the context of international commercial arbitration should be respected save in exceptional circumstances’, such exceptional circumstances being the violation of international public policy.186 The Committee defined ‘international public policy’ as that ‘part of the public policy of a state which, if violated, would prevent a party from invoking a foreign law or foreign judgment or foreign award’.187
[A] national court, to which application is made for annulment of an arbitration award must grant that application if it considers that the award in question is in fact contrary to Article 81 EC (ex Article 85), where its domestic rules of procedure require it to grant an application for annulment founded on failure to observe national rules of public policy.189
11.121 The French courts (including the French Cour de Cassation) have taken a narrow approach to the impact of EU competition law on the enforceability of awards, setting aside awards on EU competition law grounds only if they show a ‘flagrant, specific and concrete breach’ of French international public policy.190 The Swiss (p. 647) Federal Court has taken an even more restrictive approach. In its decision of 8 March 2006, it held that EU competition law could not be considered to form part of the foundation of all legal orders such as to qualify as a matter of public policy, and, on that ground, simply dismissed the case.191 For their part, and in contrast, the Dutch and Belgian courts have shown themselves ready to undertake a substantive review of awards from a competition law perspective, and have not refrained from subsequently annulling awards that were found to be in violation of EU competition law (in particular Article 81 EC).192
11.122 In the United States, too, the interplay between public policy and the enforcement of antitrust arbitral awards has proved significant. The general approach was set by the US Supreme Court in the case of Mitsubishi v Soler Chrysler-Plymouth,193 in which it confirmed the arbitrability of antitrust claims, but emphasised that US national courts would have the opportunity to have a ‘second look’ at such arbitral awards in the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws had been addressed by the arbitral tribunal. In practice, however, US appellate courts have demonstrated different views with respect to their power to review an arbitral award au fond. For instance, in 2003, a divided Court of Appeal for the Seventh Circuit, considering the enforcement of a domestic award, quoted Mitsubishi, stating that a court should confirm only that the arbitral tribunal ‘took cognizance of the antitrust claims and actually decided on them’; no further review of the merits had to be carried out.194 However, one year later, the US Court of Appeal for the Fifth Circuit did not refrain from a substantive review of the merits of a domestic antitrust arbitral award.195
11.123 Although the grounds for refusal of enforcement listed in Article V of the New York Convention are exhaustive, some courts have refused enforcement on grounds derived from other articles of the Convention. Thus, in the US case Monegasque de Reassurance SAM (Monde Re) v NAK Naftogart of Ukraine and State of Ukraine,196 the Second Circuit refused enforcement of a Moscow award on grounds of forum non conveniens—a judicial procedural discretion that exists in the common law world, but is unknown in the civil law world. In so doing, it rejected the contention (p. 648) that Article V sets forth the only grounds for refusing to enforce a foreign arbitral award, and held that Article III made the enforcement of foreign arbitral awards subject to the rules of procedure of the courts where enforcement is sought, which, so it held, included the rule of forum non conveniens.
11.124 More recently, the Second Circuit Court of Appeals in Figueiredo Ferraz E Engenharia de Projeto Ltda v Republic of Peru197 reversed, on grounds of forum non conveniens, a lower court’s confirmation of a Peruvian arbitral award. Figueiredo had obtained an award against the Peruvian government, which the latter began paying out gradually, in accordance with a subsequently enacted Peruvian statute that limits the amount of money that an agency of the Peruvian government may pay annually to satisfy a judgment to 3 per cent of the agency’s annual budget. The Second Circuit held that Peru was a more appropriate forum for the enforcement of the award than New York for a number of reasons, including the Peruvian cap statute. Similarly to the court in Monde Re, the Court in Figueiredo held that Article III of the New York Convention and its equivalent Article IV of the Panama Convention, providing for the application of local procedural law at the enforcement stage, allow for the application of forum non conveniens. However, Judge Lynch, in a powerful dissent, opined that recognising a forum non conveniens defence would undermine the enforceability of arbitral awards in general. Indeed, the very idea of forum non conveniens is incompatible with the concept of international enforcement of foreign awards, which takes as its starting point that the places of arbitration and principal performance of the obligation are likely to be different, while the resulting award can be enforced internationally subject to limited grounds for refusal. Almost by definition, there is likely to be another jurisdiction with a closer connection to the underlying dispute than the place of enforcement. Nevertheless, the whole point of enforcement under the New York Convention is to internationalise the enforcement of awards rendered elsewhere, not to constrain a party to enforce in the jurisdiction of origin.
11.125 The ICSID Convention established ICSID to facilitate the resolution of international investment disputes and thereby to promote foreign investment.198 This Convention is considered in some detail in Chapter 8. The only point that needs to be emphasised in the present context is that, unless an ICSID award is revised or annulled under ICSID’s own internal procedures, each contracting state must recognise an ICSID award as if it were a final judgment of its own national courts and enforce the obligation imposed by that award.199 To this end, contracting states (p. 649) must designate a competent court or authority, which will deal with any requests for enforcement of an ICSID award.200
11.126 At the time of writing, the ICSID Convention was in force in some 150 countries.201
11.127 Under Article 53(1) of the ICSID Convention, ICSID awards ‘shall be binding on all parties and shall not be subject to any appeal or to any other remedy except those provided for in this Convention’. Article 54(1) of the ICSID Convention requires state parties to ‘recognize an award rendered pursuant to [the] Convention as binding and enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State’. The remedies mentioned in Article 53(1) are restricted to annulment, revision, or interpretation of an award, and they can be obtained only through ICSID. Thus only an ICSID annulment committee may annul the award. Setting aside or any other review of ICSID awards by domestic courts is not available. Article 52(1) contains an exhaustive list of grounds for annulment of ICSID awards, including that (a) the tribunal was not properly constituted,202 (b) the tribunal has manifestly exceeded its powers,203 (c) there was corruption on the part of a member of the tribunal, (d) there was a serious departure from a fundamental rule of procedure,204 or (e) the award failed to state the reasons on which it is based.205 There was a period in ICSID history during which these grounds were interpreted quite broadly, resulting in de facto appeals on points of law and fact.206 However, in recent years, annulment committees have (p. 650) taken a narrower approach,207 and annulments of ICSID awards have become rarer. The grounds for annulment are considered in further detail in Chapter 8.
11.128 In the face of multiple ICSID claims, several Latin American countries have withdrawn from the Convention—namely, Bolivia, Ecuador, and Venezuela. The possible effects of these withdrawals on the jurisdiction of arbitral tribunals for claims brought under the ICSID Convention are discussed in Chapter 8.
11.129 In a less dramatic, but nevertheless far-reaching, step, Argentina has reacted to the growing number of ICSID awards against it by arguing that the enforcement of ICSID awards is not automatic. Specifically, Argentina has argued that Article 54 of the Convention requires the claimant party to seek recognition of the award rendered against the respondent state in that state’s national court. To recall, Article 54 requires each contracting state to enforce ‘the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that State’. This interpretation has become known as the ‘Rosatti doctrine’, following its espousal by former Argentine Minister of Justice Dr Horacio Rosatti. However, and perhaps unsurprisingly, it has now been repeatedly rejected by ad hoc annulment committees in Enron v Argentine Republic208 and Compañia Aguas del Aconquija SA and Vivendi Universal v Argentina.209
(a) Moscow Convention
11.131 The Moscow Convention was signed on 26 May 1972, the original signatories being those Central and Eastern European states that were grouped together in the Council for Mutual Economic Assistance (CMEA). Now that the German (p. 651) Democratic Republic has ceased to exist and Poland, the Czech Republic, and Hungary have withdrawn, it applies only to Bulgaria, Cuba, Mongolia, Romania, and Russia, although there is little evidence of current usage.
11.133 The Convention provides that arbitration awards ‘shall be final and binding’,210 and they are to be ‘voluntarily’ enforced by the parties, failing which they may be enforced in the same way as final decisions made in the courts of the country of enforcement.211 Enforcement proceedings must be brought within two years of the date of the award, and the three grounds of refusal of enforcement closely parallel those in the New York Convention—namely, lack of jurisdiction, denial of a fair hearing, and when the award has been set aside.212
(b) Panama Convention
11.134 In January 1975, following the Inter-American Conference on Private International Law in Panama, the Panama Convention was signed by twelve South American states.213 The Convention represents a significant shift away from former hostility toward international arbitration, as reflected in the Calvo doctrine.214
An arbitral decision or award that is not appealable under the applicable law or procedural rules shall have the force of a final judicial judgment. Its execution or recognition may be ordered in the same manner as that of decisions handed down by national or foreign ordinary courts, in accordance with the procedural laws of the country where it is to be executed and the provisions of international treaties.216
11.136 Where an application has been made to annul or suspend the award, the authority before which recognition and execution is sought may,219 under the Panama Convention, postpone its decision; at the request of the party seeking execution, it may also instruct the other party to provide appropriate guarantees.220
11.137 It is clear that the Panama Convention was strongly influenced by the provisions of the New York Convention. Indeed, many of the provisions of the former have been copied more or less word for word from the latter. According to one informed commentator, the Panama Convention ‘has a tremendous and vital significance’.221 Certainly, whether because of the Convention or because of other influences—such as the Model Law—arbitration is becoming a more acceptable way of settling disputes in Latin America.
(c) Middle Eastern and North African Conventions
11.138 The Riyadh Arab Agreement on Judicial Cooperation, known as the ‘Riyadh Convention’, entered into force in 1985,222 and is one of the most commonly used conventions in the Middle East for the recognition and enforcement of arbitral awards. Importantly, however, and unlike the New York Convention, the Riyadh Convention requires that, to enforce an award made in another Arab country, leave to enforce must be obtained in the country in which the award was made.223 In the same way, the Agreement on the Execution of Rulings, Requests of Legal (p. 653) Assistance and Judicial Notices, entered into by the Gulf Co-operation Council in 1995 and thus known as the ‘GCC Convention’,224 has the same requirement, and while it does not specifically refer to arbitral awards, it is considered applicable to them.225
11.139 States in this region have also entered into regional investment agreements— notably, the Agreement for Promotion, Protection and Guarantee of Investments, entered into by the Organisation of Islamic Cooperation member states and thus known as the ‘OIC Agreement’,226 and the Unified Agreement for the Investment of Arab Capital in the Arab States, entered into by the member states of the Arab League (hence the ‘Arab League Investment Agreement’).227 These agreements provide for the settlement of investor–state disputes by international arbitration. If an arbitral award rendered under the Arab League Investment Agreement is not implemented, or if the parties fail to resort to arbitration, or the tribunal fails to render an award within a prescribed period of time, the dispute shall be heard by a permanent Arab Investment Court. The decisions of arbitral tribunals under the OIC Agreement and of the Arab Investment Court under the Arab League Agreement are, like ICSID awards, enforceable as though they were final and enforceable decisions of national courts of the state in which enforcement is sought.228
11.140 This review of various regional conventions is not intended to be exhaustive. Parties or lawyers who are concerned with the recognition and enforcement of arbitration agreements or arbitral awards would be well advised to consider whether there are any regional conventions that may be both relevant and helpful.
11.141 The defences to recognition and enforcement of an international arbitral award, which are laid down in the New York Convention and the Model Law, have been (p. 654) considered.229 There is one standard form of defence, however, that is not mentioned in the Convention or the Model Law, but which may be encountered in practice, where the unsuccessful party is either a sovereign state or a state agency: the defence of state immunity, or ‘sovereign immunity’ as it is often known. This defence, in essence, means that a sovereign state cannot be compelled to submit to the jurisdiction of another state:
The sovereign was a definable person, to whom allegiance was due. As an integral part of this mystique, the sovereign could not be made subject to the judicial processes of his country. Accordingly, it was only fitting that he could not be sued in foreign courts. The idea of the personal sovereign would undoubtedly have been undermined had courts been able to exercise jurisdiction over foreign sovereigns. This personalisation was gradually replaced by the abstract concept of state sovereignty, but the basic mystique remained. In addition, the independence and equality of states made it philosophically as well as practically difficult to permit municipal courts of one country to manifest their power over foreign sovereign states, without their consent.230
11.142 State immunity does not prevent a state or state agency from agreeing to submit to the authority of an arbitral tribunal. It is a well-established principle of international law that a sovereign is bound by an agreement to arbitrate contractual disputes,231 and the ability so to submit may itself be seen as an incident or attribute of sovereignty.
11.143 State immunity exists at two levels: first, at the level of jurisdiction; and secondly, at the level of execution. Accordingly, there may be both immunity from jurisdiction and immunity from execution, and in considering state immunity, a distinction may need to be made between acts of a state taking place in its capacity as a state (acts jure imperii) and those taking place in its commercial capacity (acts jure gestionis). As a distinguished Swiss commentator has written, this distinction is clear in theory, but difficult to apply in practice.232 The distinction is important because some states claim absolute immunity—that is, immunity for all acts carried out by or on behalf of the state—whilst others claim restricted immunity—that is, immunity only for acts jure imperii.233 In La Générale des (p. 655) Carrières et des Mines,234 the Privy Council of England and Wales considered whether a mining company owned by the Democratic Republic of Congo represented the state in its capacity as a state or in its commercial capacity. In holding to the latter view, the Privy Council observed that where a separate juridical entity is formed by the state for commercial or industrial purposes with its own management and budget, subject to ‘quite extreme’ circumstances to the contrary, the separate legal personality should be respected.235
(a) Jurisdictional immunity
11.144 During the course of arbitration proceedings to which a state is a party, the distinction between absolute and restricted immunity should be of no relevance. The arbitration can proceed validly only on the basis that the state concerned has agreed to arbitrate, and such an agreement is generally held to be a waiver of immunity. This is also taken to extend to the jurisdiction of the relevant court at the seat of the arbitration to supervise the arbitration taking place in its territory.
11.145 The restricted theory of sovereign immunity has been adopted by national courts in many countries,236 and in some countries the position has been established by legislation. Indeed, it is possible now to state that a majority of states adhere to the doctrine of restricted immunity, although with notable exceptions, such as China, Hong Kong, Brazil, and other Latin American countries.237 In the United Kingdom, for example, the State Immunity Act 1978 provides that where a state has agreed in writing to submit existing or future disputes to arbitration, the state is not immune in respect of proceedings in the courts of the United Kingdom that relate to the arbitration.238 Once again, however, the precise position adopted by a given country can be established only by reference to the law and practice of that country. In the United States, for example, it was not clear under the Foreign (p. 656) Sovereign Immunities Act of 1976,239 as enacted, whether a foreign state’s agreement to arbitrate could be regarded as a waiver of immunity from the jurisdiction of a US court. Following the Liamco case,240 in which an award made against the Libyan state was recognised, an amendment to the 1976 Act241 made it clear that the US courts have jurisdiction, inter alia, to confirm an arbitration award made under an agreement to arbitrate where the arbitration takes place, or is authorised to take place, in the United States, or where the award is governed by a treaty to which the United States is a party.242
(b) Immunity from execution
11.146 Problems are most likely to arise when a winning party attempts to enforce and execute its award against a state or state entity. If the state concerned wishes to evade its obligations,243 it may do so by claiming immunity from execution.244 It may be thought inappropriate that a state or state entity can escape its legal obligations in this way, but this is the logical result of conferring immunity upon states. Moreover, whilst the existence of an arbitration agreement is usually held to be a waiver of immunity from jurisdiction, such a waiver is generally not held to extend to immunity from execution. By way of example, statute in England245 requires separate waivers in respect of execution and jurisdiction.
11.147 Thus, under the ICSID Convention, an ICSID award must be treated by a contracting state as if it were a final judgment of a court of that state. However, this provision for the automatic recognition of such an award does not mean that (p. 657) it will be treated as overriding any immunity from execution that exists in the contracting state. Indeed, Article 55 of the ICSID Convention states that immunity from execution is a matter of national law. It is surprising that, in a convention that was intended to encourage investment, the state parties did not agree to waive their immunity from execution. It seems, however, that ‘abandonment of immunity of execution was mentioned by only one representative and his statement found no echo whatsoever’.246
11.148 However, courts in some instances have found ways of circumventing this obstacle to the efficacy of the arbitral process. The decision of the French Cour de Cassation in Creighton v Qatar is a notable example.247 In 1982, Creighton Ltd, a Cayman Islands corporation with offices in the United States, contracted with the Government of Qatar to build a women’s hospital in Doha. After obtaining the necessary authorisations, Creighton entered into a contract with the Qatari Ministry of Municipal Affairs and Agriculture on 19 June 1982. In November 1986, Creighton was expelled from the project by the Government of Qatar; in 1987, pursuant to the arbitration clause in the agreement, Creighton commenced ICC arbitration in Paris. In October 1993, final awards were rendered against Qatar.
11.149 After a failed Qatari attempt to challenge the award in France, Creighton sought to enforce the awards against, inter alia, bank accounts held in France by the Qatari ministry. Following Creighton’s seizure of those accounts, Qatar initiated proceedings before the Paris Tribunal de Grande Instance to have those seizures lifted, on the grounds of Qatar’s immunity from execution. In January 1997, the Paris Tribunal ordered the lifting of the seizures and concluded that the subject matter of the agreement prevented any waiver of Qatar’s immunity from execution. Specifically, it held that the construction of a hospital was an activity of a public nature, and therefore subject to state immunity.
(p. 658) 11.150 In June 1998, the Paris Cour d’Appel confirmed that there was no waiver of immunity from execution. Creighton appealed again, and on 6 July 2000 the Cour de Cassation overturned the Paris Cour d’Appel’s decision. Relying on Article 24 of the then applicable ICC Rules (now reflected in Article 34(6) of the 2012 ICC Rules), by which the parties are ‘deemed to have undertaken to carry out the resulting award without delay and to have waived their right to any form of appeal insofar as such waiver can validly be made’, the Cour de Cassation found that, in agreeing to ICC arbitration, a state waives not only its immunity from jurisdiction, but also its immunity from execution.248 Following Creighton, the French courts maintained the position that once a state had waived its immunity from execution, it had opened itself to enforcement against its commercial assets. However, in three simultaneous decisions involving the enforcement of interim measures ordered by a foreign court, the Cour de Cassation applied a more exacting test to the waiver of sovereign immunity from execution.249 All three cases dealt with attachments made by NML Capital on debts owed to Argentina by each of BNP Paribas, Air France, and Total Austral. The Cour de Cassation held that waivers can be effective only if made in an express and specific manner, such that the assets or the category of assets over which the waiver is granted are specifically identified.
11.151 As to the assets over which the immunity from execution can be waived, the position varies. The successful party to an arbitration against a state or state entity is in a better position where the forum state allows execution against the commercial assets of a foreign sovereign. This is the position, for example, in countries such as Austria, England, France, Germany, Sweden, and the United States, amongst others. Execution is allowed against funds held by the defaulting state or state entity for commercial purposes. Care must be taken to ascertain whether all commercial property of the foreign state is subject to execution (such as in England), or merely that property which is (or was) used for the commercial activity upon which the claim is based.250
11.152 However, even where execution against state assets is allowed, national legislation and national courts have traditionally tended to show considerable respect for foreign states. In the United Kingdom, for example, the State Immunity Act 1978 provides that a certificate from the head of a state’s diplomatic mission that certain (p. 659) property is not used for commercial purposes is sufficient evidence of that fact unless the contrary is proved.251 Consequently, in 1984, the highest appellate court in England decided that a declaration by the ambassador of a foreign state that its account with a London bank was not held for commercial purposes should be accepted as sufficient evidence of this fact, unless the contrary could be proved by showing that the account was used almost exclusively for commercial purposes.252 In reaching this decision, the court was strongly influenced by a decision of the Constitutional Court of the Federal Republic of Germany in the Philippine Republic case,253 in which a similar dispute was decided according to principles of public international law. In recent years, however, courts in some jurisdictions have broadened the scope of government assets that are considered commercial.254
11.153 Other important targets in the execution of awards against states are assets held by foreign central banks or monetary authorities. The English State Immunity Act 1978, for example, affords those assets complete immunity irrespective of the purposes for which they are used.255
11.154 In the United States, the Liberian Eastern Timber Company (Letco), a company registered in France, failed in its attempt to enforce an ICSID award256 against those assets of the Government of Liberia that were in the United States. There were a series of proceedings in the courts and Letco was permitted to enter judgment against the Liberian government. However, because of state immunity, Letco was refused leave to execute this judgment, first against shipping fees due to the Liberian government, and secondly (and more predictably), against Liberian embassy bank accounts.257
(p. 660) 11.155 More recently, in France, the Compagnie NOGA d’Importation et d’Exportation SA, a Swiss company, was frustrated in its attempt to enforce an ICC award rendered in Stockholm against assets of the Russian Federation. In March 2000, the Paris Tribunal de Grande Instance granted exequatur of the award; in May 2000, NOGA proceeded, inter alia, to seize bank accounts opened in the names of the embassy of the Russian Federation in France, the commercial delegation of the Russian Federation, and the permanent delegation of the Russian Federation at the United Nations Educational, Scientific and Cultural Organization (UNESCO). Following Russia’s failed attempt to have the seizures lifted by the Paris Tribunal, Russia appealed to the Paris Cour d’Appel. Notwithstanding explicit contractual waivers of immunity from execution in the underlying agreements, the Cour d’Appel held that Russia had not waived its diplomatic immunity, which is governed by the distinct regime of the 1961 Vienna Convention on Diplomatic Relations. A general waiver of immunity from execution therefore did not extend to diplomatic assets.258 The Paris Cour d’Appel based its decision on Articles 22(3) and 25 of the Vienna Convention, and concluded that all of the accounts that had been seized by NOGA were held by Russian diplomatic bodies and, as such, could not be part of Russia’s waiver of immunity from execution.259 Following failed attempts to enforce its Stockholm award in France against a Russian ship in the port of Brest and Russian Mig fighter jets participating in an air show outside of Paris, NOGA sought to enforce the award in Switzerland, inter alia, against bank accounts of the Russian central bank.260 However, the Swiss Federal Supreme Court went on to refuse NOGA’s attempt to block an award subsequently rendered in Paris in the Russian Federation’s favour, which declared that the claim underlying the debt collection proceedings did not exist.261
2 UNCITRAL Rules, Art. 34(2). The final and binding nature of the award is further underlined by the optional waiver language contained in the Annex to the UNCITRAL Rules, which states: ‘The parties hereby waive their right to any form of recourse against an award to any court or other competent authority, insofar as such waiver can validly be made under the applicable law.’
3 See Queen Mary University of London, School of International Arbitration, and Pricewaterhouse Coopers LLP, International Arbitration: Corporate Attitudes and Practices 2008, available online at http://www.pwc.co.uk/en_UK/uk/assets/pdf/pwc-international-arbitration-2008.pdf, pp. 8 and 10, which suggests that in only 11 per cent of cases did participants need to proceed to enforce an award and, in those cases, in less than 20 per cent did enforcing parties encounter difficulties in enforcement.
4 See Chapter 10, paragraphs 10.17ff.
5 See Chapter 10, paragraphs 10.64ff.
6 As to which, see Chapter 10, paragraphs 10.34ff.
8 The establishment of the Iran–United States Claims Tribunal, mentioned in Chapter 1, is an example of state action to protect private investors.
10 In recent years, the record of overwhelming voluntary performance has been eroded somewhat. Nevertheless, voluntary performance remains the norm. For a description of the voluntary performance of ICSID awards, see Chapter 8.
11 See, e.g., International Chamber of Commerce (ICC) Arbitration Rules, Art. 41; London Court of International Arbitration (LCIA) Rules, Art. 32(2); World Intellectual Property Organization (WIPO) Arbitration Rules, Art. 62(e) (providing that the ‘Tribunal may consult the Center with regard to matters of form, particularly to ensure the enforceability of the award’).
12 Or even when drafting the arbitration agreement. For example, if any enforcement action is likely to take place in the United States, the arbitration agreement should include an ‘entry of judgment’ clause. This clause states that judgment may be entered upon the award in any court of competent jurisdiction. The provision seeks to facilitate arbitration, by making it clear that a national court may enforce the arbitration agreement and any award resulting from it. Although the court may well have this power irrespective of the agreement of the parties, an ‘entry of judgment’ clause will help to avoid a challenge that its omission indicates the parties’ intent to exclude any court procedure on the award.
13 Although there might be an award ordering the return of a specific object, such as a valuable painting or, as in The Temple of Preah-Vihear case (1962) ICJ 6, at 36–37, the return of artefacts and national treasures. It has been said by some that arbitral tribunals should not, in general, grant orders for specific performance: see Elder, ‘The case against arbitral awards of specific performance in transnational commercial disputes’ (1997) 13 Arb Intl 1. But, as always, this depends on the scope of the arbitration agreement and the relevant applicable law(s): see Chapter 9.
14 The successful party may sometimes seek recognition and enforcement of an award in a country in which the losing party may have no assets in order (so to speak) to obtain the imprimatur of a respected court upon the award.
15 As, e.g., under the Swiss Private International Law Act 1987 (Swiss PIL), Ch. 12, s. 193. See also the Egyptian Ministerial Decree, made under s. 47 of the Egyptian Arbitration Law No. 27 of 1994 and published in the Official Gazette, No. 230 of 7 October 2008. Further, see also art. 825 of the Italian Code of Civil Procedure (Book 4, Title VIII, ‘Arbitration’)—as amended by Legislative Decree No. 40, 2 February 2006.
16 As, e.g., in England, under the English Arbitration Act 1996, s. 66. See also s. 35(2) of the Australian International Arbitration Act 1974, as amended. Further, see also s. 19 of the Singaporean International Arbitration Act 1994, as amended in 2002.
17 As, e.g., in France, under art. 1487 of the Code of Civil Procedure, as modified by Decree No. 2011-48 of 13 January 2011. See also art. 66(d) of Law No. 30 of 1999 Concerning Arbitration and Alternative Dispute Resolution. Further, see also art. 518 of the Argentinian National Code of Civil and Commercial Procedure (Further Articles).
18 Enforcement provisions in China, similarly, differentiate between purely domestic awards and those awards that have been made in the People’s Republic of China (PRC), but have a foreign element, such as (a) a foreign party, (b) the relevant relationship was formed, changed, or terminated in a foreign country, or (c) the subject matter of the dispute is situated outside the PRC.
19 The New York Convention, the full title of which is the ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards’ (emphasis added), also applies to arbitral awards that are ‘not considered as domestic awards in the State where their recognition and enforcement is sought’ (Art. 1(1)). This may lead to an award made in one state being enforced in that same state under the New York Convention, on the basis that it is not regarded as a domestic award.
21 The usage is followed in the English Arbitration Act 1996, which distinguishes between the ‘recognition’ of a New York Convention award (s. 101(1)) and its ‘enforcement’ (s. 101(2)). The statute also makes this distinction in other relevant sections.
22 As happened, e.g., in Dallal v Bank Mellat  QB 441, in which the English judge held that an award of the Iran–United States Claims Tribunal was not enforceable under the New York Convention, but should nevertheless be recognised as the valid judgment of a competent tribunal. The case is also reported in (1986) XI YBCA 547, at 553.
24 As expressed in the English Arbitration Act 1996, s. 101(1), the award is recognised ‘as binding on the persons as between whom it was made’, so that it may accordingly be used by these persons ‘by way of defence, set-off or otherwise’ in any legal proceedings in England and Wales or Northern Ireland.
26 Unfortunately, in practice, all that is generally known is that the defaulting party is a holder of bank accounts in the country concerned. The status of those accounts is not usually known until an order is issued against the bank.
27 For a discussion of state immunity, see paragraphs 11.141ff.
29 The chosen place of arbitration is a geographical location, in a given country, or, more usually, in a given town or city. The arbitration agreement generally states, e.g., that any arbitration is to take place in Paris, or that it is to take place in New York, or wherever it may be. But, as has been seen in Chapter 3, once chosen, the physical ‘place’ of arbitration becomes the juridical ‘seat’ of the arbitration—an event that may have important legal consequences, depending on the lex arbitri.
30 See paragraphs 11.35ff.
31 While the existence of assets within a particular jurisdiction is most commonly used as a basis for enforcement in that jurisdiction, jurisdiction ratione personae over a party can sometimes also be used to seize assets outside the jurisdiction in which enforcement is sought. The New York Court of Appeals has held, in Koehler v Bank of Bermuda Ltd 12 NY.3d 533 (2009), that assets located outside New York can be ordered to be brought within the jurisdiction for enforcement purposes, as long as a New York court has jurisdiction over the owner or custodian of those assets: see Friedman, ‘Enforcement of international arbitration awards in New York: If you take them there, you can collect from anywhere’ (2011) 27 Arb Intl 575.
32 Within the European Union, Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, which replaced the Brussels Convention of 1968, provides for the enforcement of European national court judgments solely within Europe. In the international arena, The Hague Conference on Private International Law has been struggling in recent years to agree the text of a convention dealing with jurisdiction, and the recognition and enforcement of foreign judgments, in civil and commercial matters. However, this endeavour has been unsuccessful to date. All that the delegates have been able to date to agree is the mutual recognition and enforcement of judgments that were rendered pursuant to exclusive choice of court agreements: the Hague Convention on Choice of Court Agreements of 30 June 2005. In addition, the 2005 Hague Convention has been ratified in only one country, Mexico (and signed, but not yet ratified, by the United States on 19 January 2009 and the European Union, which succeeded on 29 January 2010 to the European Community’s signature on 1 April 2009). It therefore contrasts dramatically with the ubiquity of the New York Convention.
33 See Chapter 1.
34 Recognition and enforcement is likely to be easiest to obtain under an international convention where the forum state is bound by such a convention, but other methods of recognition and enforcement may be available, as discussed at paragraphs 11.131ff.
35 See also English Limitation Act 1980, s. 7: ‘An action to enforce an award, where the submission is not by an instrument under seal, shall not be brought after the expiration of six years from the date on which the cause of action accrued.’ For India, the equivalent period is three years under the Limitation Act 1963, Sch. 1, para. 101. The Canadian Supreme Court has concluded that domestic limitation periods are applicable to enforcing awards under the New York Convention: Yugraneft Corporation v Rexx Management Corporation  SCC 19.
43 However, see van den Berg, ‘Hypothetical Draft Convention on the International Enforcement of Arbitration Agreements and Awards: Explanatory Note’, Paper prepared for the ICCA Conference, Dublin, 2008, available online at http://www.newyorkconvention.org/userfiles/documenten/draft-convention/64_explanatory.pdf.
46 At the time of writing, 149 states had acceded to the New York Convention. Of these, seventy-four had done so on the basis of the reciprocity reservation. Some countries that had adopted the reciprocity reservation (such as Germany and Switzerland) have subsequently withdrawn it. See UNCITRAL, ‘Status of conventions and model laws’, available online at http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration.html.
48 Of the 149 states that were parties to the Convention by December 2013, forty-six had taken advantage of the commercial reservation. On 12 March 2001, Serbia and Montenegro confirmed Yugoslavia’s declaration of 1982 restricting the application of the Convention to ‘economic’ disputes. Norway’s reservation stated that it would not apply the Convention in any disputes if the subject matter were immovable property in Norway or rights in such property.
55 The Tunisian courts, e.g., have construed the commercial reservation so broadly as to exclude enforcement of an award relating to obligations arising under a contract for professional services. See Société d’Investissement Kal (Tunisia) v Taieb Haddad (Tunisia) and Hans Barrett (1998) XXIII YBCA 770. In China, the Supreme People’s Court’s Circular on Implementing the Convention excludes relationships between ‘foreign investors and the host government’: Notice of the Supreme People’s Court Regarding the Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Acceded to by China  Fa Jing Fa No. 5, effective from 10 April 1987. On the other end of the spectrum is Bautista v Star Cruises 396 F.3d 1289 (11th Cir. 2005), in which a US court denied the application of an exclusion from arbitration under the Federal Arbitration Act of 1925 (FAA) of the ‘contracts of employment of seamen, railroad employees or other class of workers engaged in foreign or interstate commerce’ to the commercial reservation. Its rationale was that ‘to read industry-specific exceptions into the broad language of the Convention Act would be to hinder the Convention’s purpose’: ibid., at 1299.
57 Nevertheless, cases in which the application for enforcement fails are reported, from time to time, in the ICCA Yearbook of Commercial Arbitration (YBCA), usually because a party has failed to comply with these ‘simple’ requirements: see, e.g., the decisions of the Italian Court of Cassation in Lampart Vegypary Gepgyar (Hungary) v Srl Campomarzio Impianti (Italy) (1999) XXIVa YBCA 699; the Bulgarian Supreme Court’s decision in National Electricity Co. AD (Bulgaria) v ECONBERG Ltd (Croatia) (2000) XXV YBCA 678. Equally, some jurisdictions take a liberal and pragmatic approach to the fulfilment of formal requirements. By way of example, a Geneva court recognised a Chinese award that had not been translated into French, noting that the spirit of the Convention was to reduce the obligations for the party seeking recognition and enforcement, and that the burden of proof in respect of any questions relating to the authenticity of the arbitration agreement or the award lay on the party opposing recognition: R SA v A Ltd (2001) XXVI YBCA 863.
58 New York Convention, Art. IV. However, see the discussion of the ‘writing requirement’ in Chapter 2.
59 In Hewlett-Packard, Inc. v Berg 867 F.Supp. 1126, 1130, n. 11 (D. Mass. 1994), the court considered Berg’s motion to confirm an arbitral award made in his favour. While noting that the submission of uncertified copies of the arbitral award and arbitration agreement fell short of the requirements in Art. VI of the Convention, the court nevertheless felt able to confirm the arbitral award, in part because neither party had contested the validity of the documents submitted.
62 This statement, which was made in an earlier edition of this volume, has since been cited with approval by the Supreme Court of India in Renusagar Power Co. Ltd v General Electric Co. (1995) XX YBCA 681. The Court added that, in its opinion, ‘the scope of enquiry before the court in which the award is sought to be enforced is limited [to the grounds mentioned in the Act] and does not enable a party to the said proceedings to impeach the Award on merits’: ibid., at 691.
66 This interpretation of the relevant provision of the Convention seems to be generally accepted, both in court decisions and by experienced commentators: see, e.g., van den Berg, The New York Arbitration Convention of 1958 (Kluwer Law International, 1981), p. 265; Delaume, ‘Enforcement against a foreign state of an arbitral award annulled in the foreign state’ (1997) Revue du Droit International des Affaires 254. For a US decision to this effect, see Chromalloy Aeroservices Inc. v Arab Republic of Egypt 939 F.Supp 907, 909 (DDC 1996); for an English decision, see China Agribusiness Development Corporation v Balli Trading  2 Lloyd’s Rep 76. The suggestion that the French text of the Convention (in contrast to the equally authentic Chinese, English, Spanish, and Russian texts) is mandatory, rather than permissive, is demolished in Paulsson, ‘May or must under the New York Convention: An exercise in syntax and linguistics’ (1998) 14 Arb Intl 227.
67 The same is true for the grounds for refusal under the English Arbitration Act 1996, although it is not based on the Model Law: see, e.g., Kanoria v Guinness  EWCA Civ 222,  Arb LR 513.
70 See paragraph 11.34.
71 For further discussion of these problems, see, e.g., Kerr, ‘Concord and conflict in international arbitration’ (1996) 13 ASA Bulletin 129, paras 1–157 (also published in (1997) 13 Intl Arb 121); Proceedings of the Fourteenth ICCA Congress, Paris, May 1998. See also Paulsson, ‘Why good arbitration cannot compensate for bad courts’ (2013) 30 J Intl Arb 345.
72 Such an award is normally regarded as a foreign (or international) award under the New York Convention. See n. 141.
73 Indeed, it has been estimated (although statistics about arbitration are notoriously difficult to collect) that 98 per cent of awards in international arbitrations are honoured or successfully enforced, and that enforcement by national courts has been refused in less than 5 per cent of cases: see van den Berg, ‘The New York Convention of 1958: Its intended effects, its interpretation, salient problem areas’, in Blessing (ed.) The New York Convention of 1958: A Collection of Reports and Materials Delivered at the ASA Conference Held in Zurich 2 February 1996 (ASA, 1996), p. 25.
75 See, e.g., Paulsson, ‘The New York Convention in international practice: Problems of assimilation’, in Blessing (ed.) The New York Convention of 1958: A Collection of Reports and Materials Delivered at the ASA Conference Held in Zurich 2 February 1996 (ASA, 1996), pp. 100ff; Cheng, ‘Celebrating the fiftieth anniversary of the New York Convention’ (2009) 14 ICCA Congress Series 679. To solve the problem of conflicting interpretations of the New York Convention by various national courts, some commentators have revived Judge Howard Holtzmann’s self-named ‘impossible dream’ of a world court of international arbitral awards with exclusive jurisdiction to determine whether recognition and enforcement of an international arbitration award may be refused for any of the reasons set out in Art. V of the New York Convention: see the discussion in Brower, ‘The coming crisis in the global adjudication system’ (2003) 19 Arb Intl 415, at 434. For now, the dream remains just that.
78 As already noted, this ground for refusal, and the others that follow, also appear in virtually the same terms in the Model Law (as amended in 2006), Art. 36, as grounds for refusing enforcement of arbitral awards wherever made.
89 Iran Aircraft Industries v Avco Corporation 980 F.2d 141 (2nd Cir. 1992). See Chapter 10.
90 See the decision of the Stuttgart Court of Appeal, dated 6 October 2001, referred to in Liebscher, The Healthy Award: Challenge in International Commercial Arbitration (Kluwer Law International, 2003), p. 406.
95 Many jurisdictions have taken a similarly restrictive interpretation of the due process defence to enforcement, e.g. German courts have held that a tribunal’s refusal to hear evidence can breach the right to be heard only if such evidence is relevant: see Decision of the Bremen Court of Appeal, 30 September 1999, (2001) 4 Intl ALR N-26.
97 For a further decision similar to this case, see Industrie Technofrigo Dell’Orto SpA (Italy) v PS Profil Epitoipari Kereskedelmi SS Szolgatato KFT (Hungary) (2007) XXXII YBCA 406. The Italian Supreme Court held that Technofrigo had been granted successive time periods within which to present its questions and file observations, and its inability to file an expert report during these periods did not amount to a violation of due process.
98 As in the Pyramids arbitration: The Arab Republic of Egypt v Southern Pacific Properties, Paris Cour d’Appel, 12 July 1984, published in English at (1984) 23 ILM 1048. The award of the ICC tribunal in this case was challenged by the Egyptian government on the basis that it was not a party to the relevant agreement and so was not bound by the arbitration clause. The Paris Cour d’Appel agreed and the award was set aside. For a discussion of the case, see Redfern, ‘Jurisdiction denied: The pyramid collapses’ (1986) JBL 15. See also (1984) IX YBCA 113 and (1985) X YBCA 487. The claimants then started fresh arbitration proceedings, under the ICSID Convention. For the rest of the story, see Delaume, ‘The pyramids stand: The pharaohs can rest in peace’ (1993) 8 ICSID Rev—Foreign Investment LJ 231; Paulsson, ‘Arbitration without privity’ (1995) 10 ICSID Rev—Foreign Investment LJ 232.
99 See Chapter 10, paragraph 10.42ff.
100 See Chapter 10, paragraph 10.28ff.
101 See van den Berg, ‘Court decisions on the New York Convention’, in Blessing (ed.) The New York Convention of 1958: A Collection of Reports and Materials Delivered at the ASA Conference Held in Zurich 2 February 1996 (ASA, 1996), p. 86.
105 Ibid., at 388. See also Telenor Mobile Communications AS v Storm LLC 584 F.3d 396 (2nd Cir. 2009). In this case, the US Court of Appeals for the Second Circuit rejected Storm’s contention that the arbitral tribunal acted in ‘manifest disregard of the law’ by ignoring a Ukrainian court decision that the arbitration clause in dispute was ‘null and void’. The Court noted that there is a strong presumption against finding manifest disregard of the law by an arbitral tribunal and upheld the confirmation of the award.
109 A further example of where this ground was unsuccessfully relied upon is Aloe Vera of America, Inc. (US) v Asianic Food (S) Pte Ltd (Singapore) and anor (2007) XXXII YBCA 489. One of the defendants argued that he was not a party to the arbitration clause and that, by entering an award against him, the arbitrator went beyond the scope of the submission to arbitration. The Supreme Court of Singapore dismissed this argument and held that the issue of whether the defendant was a party to the arbitration clause did not fall properly under this ground. The Court further held that the defendant had brought no evidence to prove that, under Arizona law, the award contained a decision on a matter beyond the scope of the submission to arbitration. In contrast, and as discussed at paragraph 11.68, the Supreme Court of England and Wales adopted a far less deferential approach, and undertook a full examination of the arbitral tribunal’s jurisdiction when presented with a potential breach of jurisdictional issues in Dallah Real Estate and Tourism Holding Co. v Ministry of Religious Affairs, Government of Pakistan  UKSC 46. The Court also held that while it can have regard to any statements made by the arbitral tribunal on its own jurisdiction, the Court was neither bound nor restricted by such statements.
117 Ibid., at –0. See also HSN Capital LLC (US) v Productora y Comercializador de Television, SA de CV (Mexico) (2007) XXXII YBCA 774, at –. China’s Supreme People’s Court has more recently gone further still: in Bunge Agribuss v Guangdong Fengyuan  Min Si Ta Zi No. 41, the designated arbitral institution appointed an arbitrator on behalf of the respondent because of the latter’s failure to do so within the permitted time limit. Even though this was entirely consistent with the arbitral rules selected by the parties, the Supreme People’s Court held that the failure to consult Fengyuan on the appointment was a valid basis on which to refuse enforcement.
119 van den Berg, ‘Court decisions on the New York Convention’, in Blessing (ed.) The New York Convention of 1958: A Collection of Reports and Materials Delivered at the ASA Conference Held in Zurich 2 February 1996 (ASA, 1996), pp. 87 and 88.
120 Ibid., p. 88. If an appeal is pending, the enforcement court may, if it considers it proper, adjourn the decision on enforcement. It may also order the party against whom enforcement is sought to give security: New York Convention, Art. VI. As to the question of which law determines the ‘binding’ effect of an award, see Antilles Cement Corporation (Puerto Rico) v Transficem (Spain) (2006) XXXI YBCA 846, at –, in which the Supreme Court of Spain held, at , that whether an award is binding ‘is not to be examined in accordance with the law of the State where the award is rendered’.
121 See paragraph 11.94ff.
123 Derains, ‘Foreword’, in ICC (ed.) Hommage à Frédéric Eisemann (ICC, 1978), p. 13, translated in Paulsson, ‘The case for disregarding local standard annulments under the New York Convention’ (1996) 7 Am Rev Intl Arb 99. This is not true of states that have different laws to govern international arbitrations from those that govern domestic arbitrations, but nevertheless the point is a valid one.
124 See ibid. In a sense, this comes back to the ‘delocalisation’ debate, which was a source of lively controversy at the time: see, e.g., Paulsson, ‘Arbitration unbound: Award detached from the law of its country of origin’ (1981) 30 ICLQ 358; Paulsson, ‘Delocalisation of international commercial arbitration: When and why it matters’ (1983) 32 ICLQ 53. See also the discussion in Chapter 3.
126 For a comprehensive survey of instances in which national courts have recognised or enforced awards set aside by the courts of the place of arbitration, see Gharavi, The International Effectiveness of the Annulment of an Arbitral Award (Kluwer Law International, 2002). Article 1526 of the French Code of Civil Procedure now expressly provides that an application to set aside an arbitral award does not stay the proceedings to enforce the award. For commentary on the rationale behind art. 1526, see Kleiman and Saleh, ‘Enforcement of international arbitration awards: Latest developments’, available online at http://www.internationallawoffice.com/newsletters/detail.aspx?g=eb1d34c8-92cf-424e-b4c0-4bc8274ea35b.
128 Ibid., at 664. When a second award in favour of the claimants was subsequently rendered in Switzerland and enforcement was sought in France, the Cour de Cassation held that the issue was res judicata in the French legal order and hence that the award could not be enforced: Hilmarton Ltd v Omnium de Traitement et de Valorisation (OTV) (1994) Rev Arb 327; English excerpts in (1997) XXII YBCA 696.
130 See paragraphs 11.78ff.
132 Société PT Putrabali Adyamulia v Société Rena Holding et Société Mnogutia Est Epices  Rev Arb 507. The first arbitral award was annulled by the High Court of London and a second award with a directly opposite outcome was issued. Both claimant and respondent sought to enforce the awards in France. In the enforcement proceedings of the first award, the losing party argued that the enforcement of the award would be contrary to international public policy, but the Cour de Cassation did not follow that reasoning and enforced the annulled first award. The Cour de Cassation then refused the enforcement of the second award on the basis that res judicata attached to the decision enforcing the first award, which was incompatible with the second award.
[T]he recognition and execution of the decision may be refused, at the request of the party against which it is made, only if such party is able to prove to the competent authority of the State in which recognition and execution are requested … that the decision is not yet binding on the parties or has been annulled or suspended by a competent authority of the State in which, or according to the law of which, the decision has been made.
136 Pemex, at . See also Yukos Capital SARL v OJSC Oil Co. Rosneft  EWHC 2188, in which the English High Court held, as a preliminary issue, that an annulment by the Moscow Arbitrazh Court of arbitral awards rendered in Russia would not prevent the English court from giving effect to the annulled awards (under English common law principles) if it were proven that the annulment offended against basic principles of honesty, natural justice, or English public policy. The awards in question had also previously been enforced by the Amsterdam Appeal Court, despite the local standard annulment in Russia.
137 See, e.g., Baker Marine (Nig.) Ltd v Chevron (Nig.) Ltd 191 F.3d 194 (2nd Cir. 1999), in which, notwithstanding Chromalloy, the US Second Circuit refused to enforce an award that had been set aside by the court of the place of arbitration (in this case, Nigeria). See also Spier v Tecnica 71 F.Supp.2d 279 (SDNY 1999); TermoRio SA ESP v Electrificadora Del Atlantico SA ESP 421 F.Supp.2d 87 (DDC 2006), in which the US court denied the enforcement of a Colombian arbitral award that had been set aside by the Colombian courts on the ground that Colombian law in effect at the date of the agreement did not expressly permit the use of ICC procedural rules, which the parties had designated in their arbitration clause. This decision was subsequently upheld by the US appellate court. For a discussion of Putrabali and TermoRio, see Gaillard, ‘Note—29 juin 2007—Cour de Cassation (1re Ch. Civ.)’  Rev Arb 517. In Germany, courts take into account the status of the award in the jurisdiction in which it was rendered. In 1999, the Court of Appeal of Rostock refused to enforce an award rendered by the Moscow Maritime Arbitration Commission that had been set aside in Russia: Oberlandsgericht Rostock, 28 October 1999, (2000) XXV YBCA 717, at 719. However, when the Russian Supreme Court overturned the lower courts’ decisions setting aside the award, the German Federal Supreme Court similarly reversed the decision of the Court of Appeal of Rostock and deemed it enforceable: Bundesgerichtshof, 22 February 2001, (2004) XXIX YBCA 724. A similar approach is taken in Chile: see EDF Internacional SA v Endesa Internacional SA and YPF SA, Supreme Court of Chile, 8 September 2011, (2012) 5 Arbitraje: Revista de Arbitraje Comercial y de Inversiones 915, in which the Court held that an Argentinean award set aside at the place of arbitration could not be enforced in Chile.
139 See Chapter 3.
144 Venture Global Engineering v Satyam Computer Services 233 Fed. Appx 517 (6th Cir. 2007). Similar decisions have been rendered by courts in Indonesia and Russia. In Karaha Bodas Co. LLC (Cayman Islands) v Persusahaan Pertambangan Minyak Dan Gas Bumi Negara aka Pertamina (Indonesia), US District Court, Southern District of Texas, Houston Division, 17 April 2003, (2003) XXVIII YBCA 908, the Central Jakarta District Court annulled a Swiss arbitral award applying Indonesian substantive law in favour of Karaha against Pertamina. In Russia, similar arrogations of authority to annul an award have occasionally emerged: see OAO Stoilensky GOK v Mabetex Project Engineering SA, et al. and Interconstruction Project Management SA v OAO Stoilensky GOK, Case No. A08-7941/02-18, Federal Commercial Court of the Central District, 2 September 2003; Collective Fishing Farm Krasnoye Znamya v White Arctic Marine Resources Ltd, Case No. А05-4274/2007, Federal Commercial Court of the North-Western District, 25 July 2007, in which Art. IX(1) of the European Convention on International Commercial Arbitration was used as a basis to set aside awards rendered in Sweden and Norway, respectively, simply because Russian law applied to the substance of the dispute.
146 New York Convention, Art. V(2)(a). See also the discussion of ‘public policy’ as a ground to challenge an award at Chapter 10, paragraphs 10.81ff.
156 See the discussion of Parsons Whittemore Overseas Co. Inc. v Société Générale de l’Industrie du Papier (RAKTA) 508 F.2d 969 (2nd Cir. 1974) at paragraph 11.61. See also the Second Circuit decision in MGM Productions Group Inc. v Aeroflot Russian Airlines WL 234871 (2nd Cir. 2004), in which Aeroflot sought to challenge a Stockholm award because it compensated the claimant for Aeroflot’s non-performance of an agreement, the provisions of which allegedly violated the United States–Iran Transactions Regulations adopted pursuant to executive orders issued by the President of the United States under the International Emergency Economic Powers Act of 1977. The Second Circuit rejected the challenge, holding, at , that: ‘Courts construe the public policy limitation in the Convention very narrowly and apply it only when enforcement would violate the forum state’s “most basic notions of morality and justice”.’ In this case, even if the agreement in operation did violate the Iranian Transactions Regulations, which the arbitral tribunal itself had found was not the case, the award would not contravene public policy, because ‘a violation of United States foreign policy does not contravene public policy as contemplated in Art V of the Convention’: ibid., at .
159 This is clear from the text of Art. V(2) itself and, accordingly, the Supreme Court of India was right to reject the argument that the references (in the Indian statute that enacted the Convention) to ‘public policy’, rather than to the ‘public policy of India’, meant that the words were not restricted to India, but would extend to the laws governing the contract and the place of arbitration: see Renusagar Power Co. Ltd (India) v General Electric Co. (US) (1995) XX YBCA 681.
165 See the discussion of Parsons Whittemore Overseas Co. Inc. v Société Générale de l’Industrie du Papier (RAKTA) 508 F.2d 969 (2nd Cir. 1974) at paragraph 11.61.
174 Ibid., at 141.
176 Baiti Real Estate Development v Dynasty Zarooni Inc., Petition No. 14 of 2012, Reasons, Dubai Court of Cassation, 16 September 2012, as summarised in Arab, Hammoud, and Lovett, Summaries of UAE Courts’ Decisions on Arbitration (ICC, 2013), p. 122.
185 See Presidium of Supreme Commercial Arbitrazh Court, Information Letter No. 96, 22 December 2005, s. 29; Presidium of Supreme Commercial Arbitrazh Court, Information Letter No. 156, 26 February 2013, s. 6.
187 Ibid. See also SA Compagnie commercial André v SA Tradigrain France  Rev Arb 773.
190 See Thales Air Defence BV v GIE Euromissile et al., Paris Cour d’Appel, 18 November 2004; also the recent judgment in SNF SAS v Cytec Industries BV (Holland), Cour de Cassation, Ch. Civ. 1ere, 4 June 2008, in which the Cour de Cassation explicitly reiterated the narrow approach to the application of public policy.
198 For the meaning of this term, see Chapter 8, paragraphs 8.17ff.
200 The courts and authorities designated by each contracting state can be found by clicking into each state listed online in the ‘Membership’ tab, online at https://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/Database-of-Member-States.bak.aspx. See also ICSID Administrative and Financial Regulations, reg. 20(f).
201 For a list of contracting states and signatories to the ICSID Convention, see online at https://icsid.worldbank.org/apps/ICSIDWEB/about/Pages/Database-of-Member-States.bak.aspx.
202 This provision is not intended to be an opportunity to challenge members of the tribunal de novo; rather, an ad hoc committee would be able to annul an award under Art. 52(1)(a) only if there had been a failure to comply properly with the procedure for challenging members. See Azurix Corporation v Argentine Republic, Decision on the Application for Annulment of the Argentine Republic, ICSID Case No. ARB/01/12, 1 September 2009, at .
203 A tribunal can exercise an ‘excess of powers’ not only in exercising a jurisdiction that it does not have, but also in failing to exercise a jurisdiction that it does possess: see, e.g., Compañía de Aguas del Aconquija SA and Vivendi Universal (formerly Compagnie Générale des Eaux) v Argentine Republic, Decision on Annulment, ICSID Case No. ARB/97/3, 3 July 2002, at .
204 Ad hoc committees have restricted annulment on this ground to violations of those principles that are essential to a fair hearing, observing that a violation of a non-fundamental rule, no matter how serious, would not call into question the validity of an award: see, e.g., Malicorp Ltd v Arab Republic of Egypt, Decision on Annulment, ICSID Case No. ARB/08/18, 3 July 2013, at .
205 This ground of annulment applies only in a clear case in which there has been a failure by the tribunal to give any reasons for its decision on a particular question, and not in a case in which there has merely been a failure by the tribunal to give correct or convincing reasons: see, e.g., Enron Creditors Recovery Corporation (formerly Enron Corporation) and Ponderosa Assets, LP v Argentine Republic, Decision on the Application for Annulment of the Argentine Republic, ICSID Case No. ARB/01/3, 30 July 2010, at .
206 See, e.g., the much-criticised Patrick Mitchell v Democratic Republic of Congo, Decision on Annulment, ICSID Case No ARB/99/7, 1 November 2006, in which the ad hoc committee overturned the award on the grounds that the tribunal in the original proceedings had, in its view, incorrectly determined that the claimant held a protected investment within the meaning of the ICSID Convention. The annulment committee deemed that such determination constituted ‘manifest excess of powers’ under Art. 52(1)(b) of the Convention.
207 See, e.g., AES Summit Generation Ltd and AES-Tisza Erömü Kft v Republic of Hungary, Decision of the Ad Hoc Committee on the Application for Annulment, ICSID Case No. ARB/07/22, 29 June 2012, at  (‘annulment is an exhaustive, exceptional and narrowly circumscribed remedy and not an appeal’).
208 See Enron Corporation Ponderosa Assets, LP v Argentine Republic, Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award, 7 October 2008, at , , and .
209 See Aguas del Aconquija SA and Vivendi Universal v Argentine Republic, Decision on the Argentine Republic’s Request for a Continued Stay of Enforcement of the Award Rendered on 20 August 2007, 4 November 2008, at – and .
213 The text of the Convention appears in (1978) III YBCA 15 and in (1975) 14 ILM 336. See also Blackaby, Lindsey, and Spinillo (eds) International Arbitration in Latin America (Kluwer Law International, 2002), pp. 3–6. The Convention came into effect in the United States on 27 October 1990.
214 At time of writing, nineteen states had ratified this Convention, including the United States: see online at http://www.oas.org/juridico/english/sigs/b-35.html. For a commentary on US participation, see Lowry, ‘The United States joins the Inter-American Arbitration Convention’ (1990) 7 J Intl Arb 83.
215 Panama Convention, Art. 1. Unlike the New York Convention, however, it does not deal with the problem of enforcing an arbitration agreement if one of the parties takes court proceedings notwithstanding the agreement to arbitrate.
222 The following countries are signatories to the Riyadh Convention: Algeria, Bahrain, Djibouti, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, UAE, and Yemen.
226 The following countries have ratified the OIC Agreement: Afghanistan, Albania, Bangladesh, Cameroon, Côte d’Ivoire, Djibouti, Gambia, Guinea, Guinea-Bissau, Indonesia, Iran, Jordan, Kuwait, Lebanon, Libya, Malaysia, Morocco, Nigeria, Oman, Pakistan, Palestine, Qatar, Saudi Arabia, Senegal, Somalia, Sudan, Syria, Tajikstan, Tunisia, Turkey, UAE, Uganda, and Yemen.
227 The following countries are party to the Arab League Agreement: Algeria, Bahrain, Comoros, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Somalia, Sudan, Syria (temporarily suspended at the time of writing), Tunisia, UAE, and Yemen.
229 See paragraphs 11.63ff.
230 Shaw, International Law (6th edn, Cambridge University Press, 2008), p. 698. See also Lauterpacht, ‘The problem of jurisdictional immunities of foreign states’ (1951) 28 BYIL 220; Higgins, ‘Certain unresolved aspects of the law of state immunity’ (1982) 29 NILR 265.
231 This principle of international law is highlighted in the award of 12 April 1977 of Mahmassani, sole arbitrator in Libyan American Oil Co. (Liamco) v Government of the Libyan Arab Republic (1982) 62 ILR 140, at 178. It was noted that even UN General Assembly Resolution No. 1803, dated 21 December 1962, which proclaims permanent sovereignty over natural resources, confirms the obligation of states to respect arbitration agreements.
233 The United Nations Convention on Jurisdictional Immunities of States and their Property attempts to harmonise the approach taken by states. Adopted by the UN General Assembly in December 2004, it will only come into force once thirty states have ratified it. At time of writing, only eighteen states had done so (while twenty-eight states have signed the Convention): see online at http://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=III-13&chapter=3&lang=en.
235 Notwithstanding the robust position on sovereign immunity taken by English courts, the British Parliament introduced another obstacle to the enforcement of awards against developing sovereigns, styled ‘heavily indebted poor countries’ (HIPCs), in the form of the Debt Relief (Developing Countries) Act 2010, which aims to diminish debt in the world’s poorest economies, including Africa and Asia. The Act seeks to complement the HIPC initiative and prohibits private creditors from pursuing in English courts any claims against such countries above a limited amount, set by the HIPC Initiative formula: Barratt and Michael, ‘Degrees of immunity: A lesson from the Privy Council’, in The European, Middle Eastern and African Arbitration Review (GAR, 2013), pp. 6–7.
[I]f a State enters into an agreement in writing with a foreign natural or juridical person to submit to arbitration differences relating to a commercial transaction, that State cannot invoke immunity from jurisdiction before a court of another State which is otherwise competent in a proceeding which relates to:
unless the arbitration agreement otherwise provides.
242 See, e.g., Chevron Corporation v Republic of Ecuador 2013 WL 2449172 (DDC 2013), in which the US District Court for the District of Columbia held that the arbitration exception to sovereign immunity under the Foreign Sovereign Immunities Act of 1976 applied in the case of enforcement of an award under a bilateral investment treaty (BIT), which was being enforced under the New York Convention.
244 For further discussion of this topic, see van den Berg, ‘The enforcement of arbitral awards against a state: The problem of immunity from execution’, in Lew (ed.) Contemporary Problems in International Arbitration (CCLS/Kluwer, 1986), p. 359.
246 See Broches, ‘Awards rendered pursuant to the ICSID Convention: Binding force, finality, recognition, enforcement, execution’ (1987) 2 ICSID Rev—Foreign Investment LJ 287, at 332. See, e.g., Decision 5A_681/2011 of the Swiss Federal Supreme Court, 23 November 2011, which, in considering the enforcement of an ICSID award rendered against Kyrgyzstan, held that the assets of Kyrgyzaeronavigatsia (a Kyrgyz government agency in charge of aerospace control) were protected by sovereign immunity, since they were used for the exercise of sovereign authority. For a view that the problem of immunity from execution of an ICSID award is more theoretical than real, by reason, inter alia, of the obligation in ICSID Convention, Art. 53, to comply with the award, see Delaume, ‘Sovereign immunity and transnational arbitration’ (1987) 3 Arb Intl 28, at 43.
247 Creighton Ltd (Cayman Islands) v Minister of Finance and Minister of Internal Affairs and Agriculture of the Government of the State of Qatar, Cour de Cassation, 6 July 2000, (2000) XXV YBCA 458 and  Rev Arb 114; cf. Yugoslavia v SEEE, Paris Tribunal de Grande Instance, 6 July 1970, (1970) 65 ILR 47, at 49 (‘waiver of jurisdictional immunity does not in any way involve waiver of immunity from execution’); Paris Cour d’Appel, 21 April 1982,  J du Droit Intl 145.
248 See Meyer-Fabre, ‘Enforcement of arbitral awards against sovereign states: A new milestone’ (2000) 15 Mealey’s Intl Arb Rep 9, at 48–52. See also Carrier, ‘France: Shrinking of immunity from execution and discovery of diplomatic immunity from execution’ (2003) 18 Mealey’s Intl Arb Rep 1, at 46–50, in which Carrier suggests that the wording of ICC Rules, Art. 24 (now 2012 ICC Rules, Art. 34(6)) is not clear enough to deduce such a waiver.