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Domestic Law on Enforcement of Foriegn Award of Arbitration under The Convention on the Recognition and Enforcement of Foriegn Arbitrial Awards 1958
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 or New York Convention is one of the most successful of United Nations treaties in the area of international trade law so there are several international arbitral awards become the enforcement on state’s domestic laws which is the aspect in this article.
Background and Purpose of the Convention
Prior to the New York Convention, the principal regimes applicable to arbitration agreements and awards were the 1923 Geneva Protocol on Arbitration Clauses and the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards. Although important precursors, by the early 1950s, these regimes were considered to be cumbersome and to no longer meet the needs of international trade. The International Chamber of Commerce (ICC) therefore initiated a process to replace these regimes with a new comprehensive convention. This process was subsequently taken over by the United Nations Economic and Social Council. The New York Convention as we know it was ultimately adopted at the 1958 UN conference in New York and it entered into force in 1959[1].
The New York Convention was prepared under the auspices of the United Nations. The purpose of the convention has two fundamental aspects of international arbitration which are how States will treat arbitration agreements and arbitral awards that were made in other jurisdictions. There are currently 169 [CC1] States parties of the convention, so it creates an almost universal, common regime governing these two important issues.
As Recognizing the growing importance of international arbitration as a means of settling international commercial disputes, the convention provides common legislative standards for the recognition of arbitration agreements and court recognition and enforcement of foreign and non-domestic arbitral awards. The Convention’s principal aim is that foreign and non-domestic arbitral awards will not be discriminated and it obliges Parties to ensure such awards are recognized and generally capable of enforcement in their jurisdiction in the same way as domestic awards and require courts of Parties to give full effect to arbitration agreements by requiring courts to deny the parties access to court in contravention of their agreement to refer the matter to an arbitral tribunal.[2]
The Process of Enforcement of Foreign Awards under New York Convention
The process prescribed by the New York Convention is that the party who are seeking enforcement need supply to the court a copy of the arbitration agreement and the arbitral award. Enforcement may be resisted on only the grounds listed in Article V[3] of the convention which set the rules by
- The arbitration agreement is not valid or the parties to the agreement were under some incapacity.
- The respondent was not given proper notice of the appointment of the arbitrator or of the proceedings or was otherwise unable to present its case.
- The award deals with a difference not contemplated by or outside the terms or beyond the scope of the submission to arbitration.
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement[CC2] , not in accordance with the law of the country where the arbitration took place.
- The award is not yet binding on the parties, or has been set aside or suspended at the seat of the arbitration.
- If the competent authority where enforcement is sought finds that the subject matter of the dispute is not arbitrable under the law of that country or enforcement would be contrary to the public policy of that country.
The New York Convention sets out minimum requirements for recognition and enforcement of arbitration agreements and foreign awards. States parties implement those into their domestic laws. The formalities of enforcement must therefore be undertaken in accordance with domestic procedural rules. Although in substance the approaches taken by Contracting States should largely align, there can be procedural differences. Differences can also arise because the New York Convention permits domestic arbitration regimes that are more favorable to recognition and enforcement whether by providing for less rigorous procedural requirements, more restrictive grounds for challenging awards, or other more favorable domestic practices.
Reservation and Challenge of the Enforcement under New York Convention
Even though it is 61 years old, the New York Convention is still modern in its underlying concepts and, more importantly, the New York Convention is simple. It is short and one can easily understand its goals. In addition to simplicity, the other main factors of success for the New York Convention are its efficiency and predictability. It fulfils the needs and demands of international business and satisfies the demands of society.
The impact of reservations on enforcement in their jurisdictions[CC3] have two main reservations which are the commercial reservation – that allows a state to limit the type of awards that would fall within the ambit of the Convention to those involving commercial disputes – and the reciprocity reservation, which allows a state to refuse jurisdiction if the award was not made in the territory of a party to the New York Convention. While the Middle East is not known to be very easy with enforcement, half of the 15 Middle East states who have become parties to the New York Convention have done so without making any reservations, including her home jurisdiction of the United Arab Emirates. However, while there are no reservations in theory, in practice the attitude of the courts has been somewhat conservative. For example, despite the absence of a reciprocity reservation in the UAE’s adoption of the New York Convention, UAE courts in certain cases have essentially made reciprocity a condition of enforcement. Along these lines, there is an example of an ICC case where the court of appeal in a UAE enforcement proceeding requested proof that the United Kingdom had acceded to the New York Convention and refused to enforce the award until that proof was furnished.[4]
Moreover, in Asia cases while Japan has adopted the reciprocity reservation, China has adopted both the commercial reservation and the reciprocity reservation[CC4] . There has not been any negative impact of Japan’s reservation meanwhile China situation regarding to both the commercial and reciprocity reservations is very stable. Interestingly, Chinese state-owned enterprises have thus far not commonly used the commercial reservation as a defence in relation to New York Convention enforcement. In practice, the reciprocity reservation generates little effect because parties can easily get around it by agreeing, in the first place, to a seat in a state that is a party to the New York Convention.
In addition, there is additional limits through legislation to implement the New York Convention or stumbling blocks created through the operation of case law because sometimes courts make enforcement almost impossible by relying on the public policy exception or the validity of the arbitration agreement provision. For example, enforcing judges in Indonesia and elsewhere have found that, even though the seat is in Switzerland, their law governs the arbitration agreement, and it is void. However, if a court applies the New York Convention in a way that is legally wrong, it runs the risk of breaching the Convention. Any treaty runs the risk of not being complied with, and it ultimately depends on the willingness of courts to comply and their interpretation of the treaty provisions.
Conclusion
It is noteworthy that there is nothing in the text or structure of the NYC which can be interpreted as putting limitations on the forums in which an award maybe recognised or enforced. Instead, one of the most fundamental objectives of the NYC is to ensure the broad enforceability of arbitral awards. Consistent, with this objective, NYC should not be construed as limiting the forums in which a party may seek to enforce an award in its favour, but should instead be read to facilitate the maximum enforceability of awards in all available forums. [5]
[1] C. Mark Baker, Pierre Bienvenu, Ad. E., Cara Dowling, Marking the 60th anniversary of the New York Convention A Q&A with Norton Rose Fulbright’s global co-heads of international arbitration, Norton Rose Fulbright, May 2018.
[2] United Nations, Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), Introduction, Objectives, page 1.
[3] United Nations, Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), Article V, page 9-10.
[4] Arie C Eernisse, Shin&Kim, Seoul, Is it true that enforcing an international arbitral award under the New York Convention is easier than enforcing a judgement?, Report on Arbitration Committee session at the 2019 IBA Annual Conference in Seoul, International Bar Association.
[5] Waseem I. Pangarkar, Abhishek Gupta, Aakansha Luhach, MZM Legal, United States: Applicability Of The New York Convention In Enforcement Of A Purely Domestic Award, 31 October 2021.
[CC1]“169”
https://uncitral.un.org/en/texts/arbitration/conventions/foreign_arbitral_awards/status2
[CC2]“…failing such agreement”?
[CC3]Full sentence?
[CC4]Full sentence?
