Waving your award goodbye - a reminder about challenge and enforcement
As an arbitrator, I am often reminded of the saying about owning boats. Apparently the two happiest days of your life as a boat owner are the day that you buy the boat and the day that you sell it. Similarly in arbitration, the happiest moments could be said to be the day that you are appointed and the day that you render your award.
Once rendered, it goes without saying that you really don’t want to see your award again. Having recently written an article on the New York Convention I have been reminded both of the brilliance of this unassuming document but also of the need to be highly familiar with its provisions to ensure, as far as possible, that the award is complied with and not challenged either at the courts of the seat of arbitration or where the assets are located.
So here’s a brief reminder:
The Convention clearly has a “pro-enforcement” bias, but this should not be cause for complacency.
There are a number of limited grounds upon which a party can resist the enforcement of an award against them. Article V of the Convention allows the party against whom the enforcement of an award is sought to challenge its enforcement. It is divided into two sections, Article V(1), which allows the losing party to challenge the execution of the award on, essentially, the basis of a violation of its right to due process; and Article V(2), which does not protect the interests of the losing party per se, but allows the courts of a contracting state to deny enforcement on the grounds that permitting the award to be enforced would breach the public policy of the state. As an arbitrator, there is no real need to concern oneself with the public policy ground as there is nothing that you can really do to influence that, but it is important to be extremely familiar with the provisions of Article V(1) to ensure that the award cannot be challenged on one of the largely due process grounds listed.
In full, these grounds are:
“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
(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, that award was made.”
To properly carry out their duties as an international arbitrator, the arbitrator must be familiar with the grounds in (a)-(d) above. In relation to (e), most courts at the seat of arbitration will have enacted legislation which reflects the grounds listed in (a)-(d) as grounds to successfully challenge an award.
The diligent arbitrator will therefore always confirm the validity of the arbitration agreement under which they are appointed and will always ensure that notice has been given of their appointment and the proceedings (particularly important in the case of unopposed arbitrations). The arbitrator will ensure that the parties have been given an opportunity to present their case and acquaint themselves with any particularities of the law of the seat of the arbitration to make sure that the arbitration was conducted in accordance with local laws. Protecting the award at the challenge stage will, at the least, remove ground (e) from the options available to the party resisting enforcement. It will be of some comfort to an arbitrator that defences to enforcement under the Convention are, as indicated above, construed narrowly.
Finally, a moment to acknowledge the Convention itself. Out of a total of 195 countries in the world, 80% are contracting states to the New York Convention. 16 Articles in 5 brief pages in 1958 became, as fabulously described by the late Lord Mustill, the “single most important pillar on which the edifice of international arbitration rests” . Yes, it can be criticised but we owe our international arbitration practices to it. Pausing to read it every now and again is no bad idea.
