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Does the court have the power to revoke a foreign arbitral award?
One of the reasons of the success of arbitration as alternative dispute resolution (ADR) method is due to the Convention on Recognition and Enforcement of Foreign Arbitral Award (1958), commonly known as the New York Convention, signed by 164 states.
The Convention requires courts of contracting states to give effect to private agreements to arbitrate, recognize and enforce arbitration awards made in other contracting states. Widely considered the foundational instrument for international arbitration. It applies to arbitrations that are not considered as domestic awards in the state where recognition and enforcement are sought. However, the Convention provides grounds on which the recognition and enforcement can be refused.
The grounds to refuse the recognition and enforcement are stated in Art. V of the New York Convention. This article divided the grounds into two categories. In paragraph 1 of the said article mentioned that the grounds have to be raised by the party against whom the recognition and enforcement are invoked. These grounds are namely: the incapacity of a party and the invalidity of the arbitration agreement; issues related to the notification of the arbitrator’s appointment or proceeding; impossibility for a party to present his case; the decision contained in the award exceed the limits set by the arbitration agreement; issues concerning the composition of the arbitral tribunal or the arbitral proceeding and lastly the setting aside of the award. In paragraph 2 stated that the grounds can be found by the court without any action by the parties. These grounds are related to the arbitrability of the dispute and the public policy [1].
Thailand became a member of the New York Convention in 1959, for more than 25 years, no arbitration law was implemented in the country. It was only in 1987, with the Arbitration Act B.E. 2530, Thailand has enforced its first arbitration, nevertheless, this law lacks provisions for the annulment of the award. This problem was fixed in 2002 when the new Arbitration Act B.E. 2545 has drafted when the UNCITRAL Model Law (1985) came into force. In particular, the prevision regarding the annulment of the award is in Section 40 paragraph 1:
“The annulment of the arbitral award may be made by a request to the court that has jurisdiction to annul the award as provided in this section […]”
and the one about refusing the recognition and enforcement of the award was introduced by Section 43, paragraph 6.
“The court has the power to refuse recognition and enforcement of an arbitral award, even if the seat of arbitration is in another country if the party against whom it is invoked furnishes proof that: […]
6) 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 […] “
Provisions in Section 40 paraphrase the ones in Art. V, paragraph 1(e) of the New York Convention. However, in reporting the part “[…] by a competent authority of the country in which, or under the law of which, that award was made.” Thai authorities used the wording “Court with jurisdiction […]”, this leads to interpretation problems.
In the Arbitration Act 2002, the court’s jurisdiction is defined in Section 9, paragraph 2 and the same wording is also used in Section 40, so the interpretation of the latter is made in the light of the definition of Section 9. Such interpretation allows Thai courts to set aside awards made in other countries, this uncertainty in the interpretation is well displayed in the different views of the Intellectual Property Court and the Supreme Court.
The Intellectual Property Court is of the view that courts have the power to set aside foreign awards accordingly with Section 9 of the Arbitration Act 2002, this is shown in case n. Kor Khor 151-152/2550 [3]. This case concerns a sales agreement in which one party refused to open a letter of credit causing the opposing party damages. The latter started arbitration in the UK, accordingly to the arbitration agreement included in the contract and the arbitral tribunal decided in favour of the claimant issuing an award for damages. The respondent challenged the award in the Intellectual Property Court asking for setting aside the award. The Court found that there was no contract between the parties, consequently, the arbitration agreement included in the contract did exist. Accordingly, the Court set aside the award under Section 40 paragraph 1(b) and Section 43 paragraph 2 of the Arbitration Act 2002. The decision was appealed in the Supreme Court, that was required to find if the Intellectual Property Court has the power to set aside a foreign award. In the decision n. 5511-5512/2552, although Section 40 of the Arbitration Act 2002 states that the setting aside has to be searched at the court of the seat of arbitration, the Supreme Court found that the Thai courts have the power to refuse the recognition and enforcement of the award and the power to set aside the award.
In the case n. Kor Khor 119/2557, the losing party of arbitration with the seat in the UK, requested the Intellectual Property Court to set aside the award. The Court granted the request basing its decision on Section 25 of the Arbitration Act 2002 [4].
The Supreme Court is of the view that under the Arbitration Act 2002, courts do not have the power to set aside foreign arbitral awards, this can be seen in the decision n. Kor Khor 80-81/2553 [5] concerning an award rendered in Singapore. In the award, the claimant has to pay damages to the respondent according to the sales agreement. For this reason, the claimant requested the Intellectual Property Court to set aside the award. The Court rejected the request, then the claimant appealed to the Supreme Court, that agreeing with the judges of the Intellectual Property Court rejected the appeal. In the decision n. 13535-13536/2556, the Supreme Court explained that powers in Sections 40, 43 and 44 of the Arbitration Act 2002 have the same origin but are separated in different sections to comply with Art. V, paragraph 1(e) of the New York Convention. Accordingly, only the court at the place of the seat of arbitration has the power to set aside the award.
In the Supreme Court decision n. 8539/2560, the judges, based on the provisions of the New York Convention and the Arbitration Act 2002, agreed on the fact that Thai courts have only the power to annul domestic awards or international awards whose seat is in Thailand. Consequently, the Intellectual Property Court has no power to set aside the award made in the UK concerning the International Cotton Association.
Taking into consideration what just explained, it is important to follow up on the issue regarding the power of Thai courts to set aside foreign awards. Hopefully soon, the views of the Supreme Court and the Intellectual Property Court on the interpretation of the Arbitration Act 2002 will be more consistent.
To sum up, according to Art. V, paragraph 1(e) of the New York Convention, an award can only be set aside by courts at the seat of arbitration. Therefore, if a foreign award is set aside by Thai courts, that decision does not bound courts of other countries because it is in contrast with the provisions of the New York Convention.
