Recognition and enforcement of arbitral award:
The New York Convention
Scope of application : Article 1
In article 1 from NYC ;
1. 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.
According to the cited provision an arbitral award qualifies as foreign in tow situations:
1- when the award is made in the territory of another state, or
2 – when it is not considered a domestic award in the state where recognition and enforcement is sought.
The question whether an award is domestic or foreign is of the particular importance because in many jurisdiction the enforcement proceeding
From the general rule in article I (1) it follows that the new York convention applies to all
foreign awards irrespective of the country where they were made .
Therefore., a foreign award will be recognized and enforced by a signatory party to the convention regardless of whether the award was rendered inside or outside the territory of another contracting state . this presupposes that the award satisfies all the requirements laid down in the convention.
Neverthless the drafter of the Convition made it possible to limit the broad scope of the general rule mentioned above by providing a reservation in article 1(3) States taking advantage of the “ first reservation ” , as it is called , limit the application of the convention to foreign award made in the territory of another contracting state , on the basis of reciprocity . more than 50 per cent of the contracting state have made the reciprocity reservation in article I(3) , which reads as follows :
” 3. 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. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.”
In the first paragraph of article I, the phrase “person , whether physical or legal ” specifies that the convention applies to both natural person and legal entities such as companies .
Finally ,article I (2) should be briefly mentioned , more for the sake of clarification than real importance . at the time the NYC was drafted , there was a strong division between countries with market and planned economies , which also had an effect on arbitration. The latter countries had “permanent arbitral bodies” to which the parties submitted their disputes . Pursuant to this paragraph , awards made by such bodies are also to be deemed arbitral awards in the sense of article I of the convention.
ARBITRATION AGREEMENT ; ARTICLE II (1) AND (2 )
As provided in the first two paragraph of article II
” 1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.”
Based on the above , it is clear that the NYC sets broad limits as to the type of the arbitration agreement : it may be either in the from of a clause in the contract or a separate agreement , and it may concern an existing dispute or one that arise in the future . it further follows that the dispute may concern a contractual or non-contractual legal relationship as long as it is specifically defined . A problem that often arises , especially when the parties disagree , is whether the disputed issue actually falls under the phrasing used in the arbitration agreement . it is general held that doubts as to the scope of the issues arbitrable under a specific arbitral clause should be answered in favoure of arbitration.
The NYC prescribes no specific requirement for the content of the arbitration agreement .This implies that any phrase expressing the parties common intention to submit a dispute arising from the defined legal relationship to arbitration would suffice. A case in point is the simple clauses : “arbitration in city X ”
Pursuant to article II (2) , there id only one formal requirement for the validity of the arbitral agreement : is must be in writing .
The arbitral clause must be in a contract or agreement signed by the parties , or contained in an exchange of letters or telegrams. With respect to these alternative , one should keep in mind that this provision reflects the level of technology when the NYC was adopted in 1958 .
The issue of multi-party arbitration does not cause problems as long as it does not involve third parties who have not signed the initial arbitration agreement . sometimes the third party has an interest to join the arbitration proceedings on the side of one of the parties, especially in case where the third party is the guarantor of performance of the obligation of one of the parties to an arbitration agreement, or a person whose performance is a precondition for the performance of the obligation of one of the parties , usually a subcontractor . it may also occur that two already existing arbitral proceedings involve common issue of law and fact. Since the question whether they may be consolidated in a single proceeding is not resolved by the NYC rules, national law governs that matter.
• REFERRAL By court to arbitration ARTICLE II (3)
” 3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.”
By referring to the definition of arbitration agreement set out in the first two paragraphs of ARTICLE II NYC , this expression raises the issues of the scope of the arbitration agreement and the arbitrability of the subject matter.
Since the wording of article II(3) does not explicitly specify which arbitration agreements are covered, this is left to court to decide . if interpreted in accordance with the scope of the NYC laid down in article I, this provision would apply to arbitration agreement made in the territory of a state other than the one of the court seized. However there may be exceptions such as when a contracting state has made a reservation according to article I(3) declaring that it will apply the NYC only under the condition of reciprocity .
Mandatory nature of the referral :
The use of “shall” in article II(3) NYC obliges the court to refer the parties to arbitration if all the condition are fulfilled .
At the request of one of the parties :
This condition makes it clear that the court is not ex officio obliged to refer the parties to arbitration ; it does so only when one of the parties , usually the defendant , invokes the arbitration agreement . an important question in this context is the time limit for raising the jurisdictional objection. Since the NYC is silent on the issue , it is to be resolved according to the lex fori . as a rule, national laws require the objection to be submitted before the defendant present its arguments on the merits of the case.
This phrase is also not defined by the NYC , as a result of which the court seized applies its national law . relevant case law is divided on this issue : while the courts of certain countries apply the law of the forum , other countries favour application of the law chosen by the parties to govern the arbitration agreement or the law of the country of the seat of the arbitration.
* ENFORCEMENT PROCEDURE : ARTICLE III
Article III sets out the general obligation of each Contracting state to recognize and enforce an arbitral award in accordance with the condition laid down in article III , which reads as follows :
” Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”
Condition provided by the NYC
In general, article IV requires the petitioner to submit an original or a copy of the arbitration agreement and the arbitral award and a translation thereof. Article V contains an exhaustive list of grounds that the respondent my invoke against the recognition and enforcement .
Basic differences in national enforcement rules
The fact that a large number of countries throughout the world has adopted arbitration rules based on the UNCITRSL Model law has contributed significantly to the harmonization of national arbitration rules.
• REQUEST FOR RECOGNTION AND ENFORCEMENT : FORMAL REQUIREMENTS ATRICLE IV
” 1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a) The duly authenticated original award or a duly certified copy thereof;
(b) The original agreement referred to in article II or a duly certified copy thereof.
2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.”
The party requesting recognition or enforcement must fulfill two formal requirements : he must supply the “ duly authenticated original ” or a “ duly certified copy ”thereof . in other words, the original award must be authenticated ; I . e . the signature must be attested to be genuine ; or if a copy of the award is submitted, it must be certified, I .e . the copy must be attested to be a true copy of the original. The same applies if a copy of the arbitration agreement is submitted.
Dead line for submission
The first sentence of the first paragraph of article IV contains the phrase “ at the time of application ” , thus raising the question whether the failure to submit the original award and the arbitration agreement together with the application for enforcement can be cured by later submission . whereas the Italian Corte.
Translation of documents
If the documents submitted by the party seeking recognition or enforcement are in a language other than that of the court, they have to be translated into the official language of the country of the court where recognition or enforcement of the award is requested.
A sworn translator, who may be citizen of either country, must certify that the translation of the submitted documents is correct . the same applies if the translation is certified by consular or diplomatic representatives of either country.
In this context the question arises whether the court should reject a request if the award is only partly translated and certified.
* GROUNDS FOR REFUSAL OF RECOGNITION AND ENFORCEMENT WHICH MAY BE INVOKED BY THE PARTIES, ARTICLE V(1)
The grounds prescribed in article V may be divided into two categories : 1) those that may be invoked by the parties ( article V(1)), and 2) those that the court may invoke ex officio (article V(2)). Whereas the first category is intended to protect the interests of the award-debtor, the second serves the vital interest of the forum country.
Grounds that may be invoked by the parties
The Grounds that may be invoked by the parties to refuse the recognition and enforcement of an arbitral award are listed in the first paragraph of article V, which reads as follows
” 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law 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 case; or”
In capacity of the parties and formal invalidity
Since the issue of the capacity of the parties to conclude the arbitration agreement is not resolved under the convention , it is to be decided according to the applicable law designated by the choice-of-law rules of the court conducting the enforcement procedure . a specific problem arises when one of the parties to the arbitration agreement is a state , a state trading agency or other body of public law and that party invokes sovereign immunity as a defense in order to avoid arbitration . as a rule, such a defence is unsuccessful. This is in keeping with the view that a state enjoys immunity from jurisdiction only in cases where it acted iure imperii, whereas immunity cannot be acknowledged in case where the state entered into the legal relationship iure gestionis.
The formal validity of the arbitration agreement may also be invoked as a ground to prevent the award from being enforced. According to the wording of the provision , the formal validity of the agreement is determined primarily according to the law chosen by the parties to govern the agreement .subsidiarily , the law of the country where the award was made shall apply. Despite these choice-of-law rules, the most frequently invoked ground under article II(2) is the invalidity of the arbitration agreement.
Violation of due process
The wording of the provision on due process provides that, if the party against whom the award is invoked, (a) was not given proper notice of the appointment of the arbitrator or of the arbitration proceeding or (b) was other wise unable to present his case , the court may refuse the enforcement of the award, in other words, this provision concerns the fundamental principle of procedural law to enable both parties to present their case. Different stands are taken in legal scholarship and the case law on this issue. While scholars maintain that this ground should be interpreted as a uniform convention rule, the courts believe it should be construed with reference to domestic notions (lex fori of the place of enforcement) of due process violations.
The notion of “ proper notice” implies that the notice of the appointment of the arbitrator and of the arbitral proceedings must be adequate and appropriate.
The wording “unable to present his case” implies a concept restricted to serious violations of the arbitral procedural rules. It includes the arbitrators duty to inform the other party of whether arguments and evidence had been submitted by the opposing party, thus giving the former a chance to reply.
Relationship between paragraphs 1(b) and 2 (b) of article V
While paragraph 1(b) deals with due process, paragraph 2(b) of article V stipulates the ground for refusal of enforcement if the arbitral award is contrary to the to the public policy of the country where enforcement is sought .
Excess of authority by the arbitrator (art.V(1) (c))
Excess of authority by the arbitrator as a ground for refusal of recognition and enforcement does not involve cases where an arbitrator lacked competence entirely. Such situations fall under article V(1)(a). similarly, article V(1)1(c) does not apply to case of lack competence on the ground of invalidity of the arbitration agreement .
This expression covers situations where an arbitrator has decide matters covered neither by the arbitration agreement nor by the terms of reference . in other word, the arbitrator has decide claims not considered by the parties or outside the arbitration agreement . for example , paragraph 1(c) applies to situation when an arbitrator decide the dispute ex aequo et bono without proper authorization or where the award is rendered outside the time limit set by the parties.
Article V(1)(c) permits enforcement of the part of the award dealing with questions submitted to arbitration , provided the relevant part of the award can be separated from the parts that do not comply with the terms of the arbitration agreement.
Violation of composition of the arbitral tribunal / arbitration proceedings
Under paragraph 1(d) of article V the respondent may oppose recognition and enforcement on the ground that the composition of the arbitral tribunal or the arbitration proceedings did not comply with the parties agreement or, where there is no agreement , that it did not comply with the law of the country where the arbitration took place .
Agreement by parties VS. national rules
An agreement by the parties regarding the composition of the arbitral tribunal or the arbitral proceedings supersedes the national rules if the country where the arbitration took place , expect for the fundamental requirements of due process. Generally , the law of the country where the arbitration took place comes into play in the absence of an agreement.
The recognition and enforcement of the award may also be refused if “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, that award was made”.
Award is not yet binding
Contrary to the situation prior to the New York convention “ an award need not be declared enforceable under the law of the place of arbitration in order to be binding within the meaning of article V(1)(e)” . its generally accepted that the law applicable to the award applies when determining whether the award has become binding on the parties. There are, however relevant court decision and views in legal scholarship that advocate resolving this matter in an autonomous manner independent of the applicable law. As a rule , it can be said that, as long as an award can be challenged before courts with ordinary jurisdictions or before an arbitral appellate body , such an award has not yet become binding on the parties. In all cases, the burden is on the party resisting enforcement to prove that the award has not yet become binding.
However , in cases where the parties have agreed that the arbitral award shall be final and binding , the question has been raised whether national rules of the country where the award was rendered or the will of the parties shall be decisive.
Setting aside or suspension of the award
Alternative grounds for refusal of recognition and enforcement of the award under article V(1)(e) are the setting aside or suspension of the award by the court of the country in which the award was rendered or under the law of which the award was made . again ,the burden is on the party resisting enforcement to prove that the award has been set aside or suspended . As regards suspension , the party resisting enforcement “must prove that the suspension of the award has been effectively ordered by a court in the country of origin …. The automatic suspension of the award by operation of law in the country of origin is not sufficient.
* GROUNDS FOR EX OFFICIO REFUSAL OF THE RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS : ARTICLE V(2)
Grounds for ex officio refusal
The grounds that the court may invoke ex officio for the refusal to recognize and enforce an arbitral award are laid down in the second paragraph of article V, which reads:
” 2. Recognition and enforcement of an arbitral award 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.”
Distinction between domestic and international disputes
As a means of limiting court of the arbitrability of domestic and international disputes . according to gaillard and savage , such a distinction enables “a disputes to be found non-arbitrable under a country s domestic law ,without necessarily preventing the recognition in that country of a foreign award dealing with the same subject matter” by using this approach , united states federal courts have recognized the arbitrability in international arbitration of disputes concerning securities and antitrust law, although at the time these subjects were considered non-arbitrable under national law .
Interpretation of public policy
With regard to the public policy ground for refusal , the question arises whether the notion of public policy is to be interpreted in the same way in both domestic and international cases . as seen in the alberto-culver case, the courts may make a distinction between these two situation . although paragraph 2(b) is not explicit on this point, the view prevails that the reference in that provision to public policy is “in fact a reference to the international public policy of the host jurisdiction”. As a rule, the courts construe this ground for refusal narrowly.
The public policy exception may also be invoked in cases where the award contains no reasons . however , the failure to provide reasons usually does not amount to a violation of public policy. On the other hand, if the award contains reasons , but there are serious contradictions in the reasoning, this may be considered an infringement of public policy. Ruling on the matter, the French Cour de cassation held that the failure to give reasons is not “in itself contrary to the French understanding of international public policy”.
Only if the applicable procedural law or arbitration rules require that reasons be given, would failure to comply with such requirement “justify the award being set aside or refused enforcement , on the grounds that the arbitrators failed to comply with their brief”.
* DISCRETION TO ADJOURN THE DECISION ON ENFORCEMENT : ARTICLE VI
in order to again a better understanding of setting aside and suspension in the meaning of article V(1)(e) , it is necessary to take article VI of the convention into account, which reads:
” If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.”
adjournment of the decision on enforcement
article VINYC provides of the adjournment of the decision on enforcement of the award in cases where an application for the setting aside or suspension of the award has been made. Whether the court should adjourn the decision on enforcement is a question of fact and of law. The convention uses the term “if it consider proper”, thus suggestion that the competent authority may use its discretion when deciding whether adjourn the decision on enforcement . the same applies when ruling on a request to order the other party to provide suitable security . the usual test seems to be whether the enforcement court considers it likely that, on the basis of the arguments presented, the award will be set aside or suspension in the country of origin.
APPLICATION NATIONAL LAW OR OTHER TREATY : ARTICLE VII
Article VII of the NYC reads as follows :
” 1. 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 an 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.
2. The Geneva Protocol on Arbitration Clauses of 1923  and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927  shall cease to have effect between Contracting States on their becoming bound and to the extent that they become bound, by this Convention.”
More favorable right provision
Paragraph 1 permits a party to base is request for the enforcement of an arbitral award or an arbitral agreement either on national law or on bilateral/multilateral treaties . by providing solution for awards that cannot be enforced under the NYC, this provision attempts to promote the enforceability of as many awards as possible. On the order hand , non-uniform application of the NYC in matters of enforcement leads to uncertainty as to which awards are enforceable . in practice, national law or other international treaties are rarely applied instead of the NYC because the NYC conditions are usually the most favorable .
Application of the NYC does not replace national rules governing the enforcement of foreign arbitral award; however, national rules may apply when the conditions relating to recognition and enforcement contained therein are more favorable . for example , the grounds for disputing enforcement laid down in article 1076(1)(A) of the Netherlands arbitration act 1986 are practically the same as those in article VNYC, however, the Netherlands act limits the possibility to invoke three of those grounds if they were not raised during the arbitral proceeding . while the party requesting enforcement may use either article 1076 of the Netherlands act or the NYC (or any other applicable treaty ) as a basis for enforcement , it is not possible to combine favorable elements from the two .
Enforcement of an award vacated in the place where it was rendered
The question whether a national court may enforce an international arbitral award that has been vacated in the place of its rendering was raised in chromalloy gas turbine corporation v.arab republic of Egypt . such an international arbitral award is neither binding nor existent in the country where it was rendered and thus cannot be enforced unless the court of another state refuse or recognize the foreign vacation or annulment. In chromalloy , the American and Egyptian parties concluded a contract in which the former agreed to provide parts, maintenance and repair or helicopters belonging to the Egyptian air force.
International treaties and the compatibility provision
Matters concerning the relationship between the NYC and other bilateral or multilateral treaties may be resolved by relying on three sets of provision : the NYC, conflicts rules relating to treaties. Application of the NYC does not effect the validity of provision of other international treaties relating to the recognition enforcement of arbitral award . when applying relevant conflicts rules , a distinction can be made between two traditional principles :a later law takes precedence over an earlier law a specialized law over a general law (lex posterior derogal legi priori ; lex specialis derogate legi generali) and the rule of maximum efficacity (la regle d efficacite maxmiale) . the latter, more modern principle favors the international treaty thet upholds the enforcement of the award in question , regardless whether that treaty is older or more general.
The above-mentioned approach of French courts has been criticized by some authors. For example , sir rony goode maintains that following the example of the French courts would reduce article V NYC to a dead letter, no court would have any regard for the decision of foreign courts setting aside an award, and all courts would take refuge in their own arbitration law. Concluding that such an approach is not in accordance with the principle of international cooperation in dispute resolution , goode believe that s strong case can be made for amending article VII NYC to “ apply only to treaties entered into by the enforcing state”.
Abrogation in paragraph 2
The NYC was intended to replace both the Geneva convention on the execution of foreign arbitral awards of 1927 and the Geneva protocol on arbitration clauses of 1923. therefore , these treaties can no longer be applied by the contracting states to the NYC .