«ICCA’S GUIDE TO THE INTERPRETATION OF THE 1958 NEW YORK CONVENTION: A HANDBOOK FOR JUDGES INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION ICCA’S ...»
basis recognized by American contract law or the law of agency”.
In the recent decision of Dallah Real Estate & Tourism Holding Co v.
Pakistan the English Supreme Court clarified the scope of the doctrine of competence-competence in England.26 The Supreme Court held that while an arbitral tribunal has the power to determine its own jurisdiction as a preliminary matter, upon an application for enforcement under the New York Convention, where an objection to its jurisdiction is made, the court has the power to reopen fully the facts and issues to determine the jurisdictional issue.
The Supreme Court reviewed how the doctrine of competencecompetence is applied in various jurisdictions around the world. At paragraph 25 it noted that “every country... applies some form of judicial review of the arbitrator’s jurisdictional decision. After all, a contract cannot give an arbitral body any power... if the parties never entered into it.” (Citing the United States China Minmetals case; see footnote 16.) Thus the fact that a tribunal can determine its own jurisdiction does not give it an exclusive power to do so. An enforcing court which is not
25. United States: United States Court of Appeals, Second Circuit, 14 April 2005 (Sarhank Group v. Oracle Corporation) Yearbook Commercial Arbitration XXX (2005) pp. 1158-1164 (US no. 523).
26. United Kingdom:  EWCA Civ 755;  2 W.L.R. 805 (CA (Civ Div)).
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CHAPTER IIIat the seat of the arbitration has the power to re-examine the jurisdiction of the tribunal.
Whilst the Court (Lord Collins) accepted that the trend internationally is to limit reconsiderations of findings of tribunals and also stressed the pro-enforcement policy of the New York Convention, he found that neither of those took precedence. He held that under the 1996 Act (section 30) in England a tribunal is entitled to inquire as a preliminary matter as to whether it has jurisdiction. However, if the issue comes before a court, the court is required to undertake an independent investigation rather than a mere review of the arbitrators’ decision. The Supreme Court considered that the position was no different in France, where the award had been made. Shortly after the decision of the English Supreme Court, the French Court of Appeal rejected a request to set aside the three awards at issue, holding that the arbitral tribunal’s decision that it had jurisdiction was correct.27 Although the court did not express a view on the scope of judicial review of the arbitral tribunal’s jurisdiction, it reviewed its decision fully.
(See also Chapter II at III.2, regarding the scope of review by the court requested to refer the parties to arbitration.)
27. France: Cour d’Appel, 17 February 2011 (Gouvernement du Pakistan – Ministère des Affaires Religieuses v. Dallah Real Estate and Tourism Holding Company).
“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.” Article V(1)(b) provides for the ground for refusal that the party against whom the award is invoked was not given any, or any fair, opportunity to present his case because: (i) he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings; or (ii) was otherwise unable to present his case.
This ground, however, is not intended for the court to take a different view to that of the tribunal on procedural issues. What has to be shown is that the party resisting enforcement somehow was deprived of its right to have its substantive case heard and determined by the arbitral tribunal.
IV.2.1. Right to a Fair Hearing
Article V(1)(b) requires that parties be afforded a fair hearing that meets the minimal requirements of fairness. The applicable minimum standards of fairness were described by the United States Court of Appeals for the Seventh Circuit as including “adequate notice, a hearing on the evidence, and an impartial decision by the arbitrator”. Thus the arbitrators have a broad discretion as to how they may conduct proceedings, etc.
IV.2.2. Lack of Notice It is unusual for a party not to be given notice of the appointment of the arbitrator or of the arbitration proceedings. If a party has actively participated in an arbitration, it is impossible for it to complain later that notice was inadequate.
In proceedings where the respondent defaults, on the other hand, proof of notice must be given serious attention at all stages.
There can be no notice, for example, where one party has changed address without informing the other party or is located in a part of the world where faxes or other means of communication cannot be reliably received. In those cases, the arbitrators and the claimant in the arbitration should do all that is reasonably possible to bring the existence of the arbitration and the appointment of the arbitral tribunal to the attention of the respondent and to have independent evidence of such efforts. If they fail to do so, enforcement of the resulting award may be denied. In one such case, the Swedish Supreme Court denied enforcement, finding that the arbitrators ignored the fact that communications sent to an earlier address of the Swedish party had been returned undelivered.28 Default, however, may be simply the choice of the party. Where actual notice of an arbitration has been received by the respondent but the respondent fails or refuses to participate in the arbitration, courts hold that there is no violation of due process under Article V(1)(b). If a party chooses not to take part in the arbitration, this is not a ground for refusing enforcement.
28. Sweden: Högsta Domstolen, 16 April 2010 (Lenmorniiproekt OAO v. Arne Larsson & Partner Leasing Aktiebolag) Yearbook XXXV (2010) pp. 456-457 (Sweden no. 7).
IV.2.3. Due Process Violations: “Unable to Present His Case” The well-known United States case of Iran Aircraft Industries v. Avco Corp.
is an example of where recognition and enforcement were refused because the respondent was unable to present its case.29 After consulting with the chairman of the tribunal (who was subsequently replaced), the respondent had decided on the chairman’s advice not to present invoices to support an analysis of damages by an expert accounting firm. The respondent relied only on its summaries – but indicated that it was prepared to furnish further proof if required. The tribunal eventually refused the damages claim on the basis that there was no supporting evidence. The United States Court of Appeals for the Second Circuit denied recognition and enforcement of the award on the basis that the losing party had been unable to present its case on damages.
A number of awards have been refused recognition and enforcement where the arbitrators have failed to act fairly under the circumstances.
Examples of these include:
– The Naples Court of Appeal refused enforcement of an Austrian award on the ground that one month’s notice given to the Italian respondent to attend the hearing in Vienna was insufficient because during that time the respondent’s area had been hit by a major earthquake;30
29. United States: United States Court of Appeals, Second Circuit, 24 November 1992 (Iran Aircraft Industries and Iran Helicopter Support and Renewal Company v. Avco Corporation) Yearbook Commercial Arbitration XVIII (1993) pp. 596-605 (US no.
30. Italy: Corte di Appello, Naples (Salerno Section), 18 May 1982 (Bauer & Grossmann OHG v. Fratelli Cerrone Alfredo e Raffaele) Yearbook Commercial Arbitration X (1985) pp. 461-462 (Italy no. 70).
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CHAPTER III– The English Court of Appeal upheld a decision refusing to enforce an Indian award on the ground that the serious illness of one of the parties, unsuccessfully raised by the party during the hearing when seeking an adjournment, meant that it was unrealistic to expect him to participate in the arbitration including to file a defence;31 – The Hong Kong High Court refused enforcement of an award holding that the China International Economic and Trade Arbitration Commission (CIETAC) had not given the respondent an opportunity to comment on the reports from the expert appointed by the arbitral tribunal.32
Examples of unsuccessful objections founded on lack of due processinclude:
– The arbitrator refusing to reschedule a hearing for the convenience of a witness for the party opposing enforcement;
– The tribunal refusing to grant an adjournment and denying additional discovery;
– The tribunal refusing to grant further adjournments and to stay the arbitration because of bankruptcy proceedings;
– The tribunal ruling on presumptions and burden of proof;
– The tribunal allegedly relying on new legal theories in the award that were not previously argued;
– The tribunal curtailing the cross-examination of a witness;
31. United Kingdom: Court of Appeal (Civil Division), 21 February 2006 and 8 March 2006 (Ajay Kanoria, et al. v. Tony Francis Guinness) Yearbook Commercial Arbitration XXXI (2006) pp. 943-954 (UK no. 73).
32. Hong Kong: Supreme Court of Hong Kong, High Court, 15 January 1993 (Paklito Investment Ltd. v. Klockner East Asia Ltd.) Yearbook Commercial Arbitration XIX (1994) pp. 664-674 (Hong Kong no. 6).
– The parties not attending hearings because they feared arrest in the forum State; and – A company representative being unable to attend the hearing because he could not obtain a visa.
“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.” The grounds for refusal provided under Article V(1)(c) are that the
– Deals with a difference or dispute not contemplated by, or not falling within, the terms of the parties’ submission to arbitration, or – Contains decisions on matters beyond the scope of the parties’ submission to arbitration.
The grounds in Article V(1)(c) embody the principle that the arbitral tribunal only has the jurisdiction to decide the issues that the parties have agreed to submit to it for determination.
In determining what the parties have submitted to the arbitral tribunal, regard must be had to the arbitration agreement and the claims for relief submitted to the arbitral tribunal by the parties. The language of the arbitration agreement that sets out what the parties have agreed to
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submit to the arbitral tribunal for determination is critically important;
issues must remain within that scope.
Model clauses published by arbitral institutions are typically drafted to give the arbitral tribunal very broad jurisdiction to determine all disputes arising out of or in connection with the parties’ substantive agreement (usually a contract). Ripeness and similar issues are usually a matter of admissibility (not jurisdiction) and therefore not reviewable by courts. (See also Chapter II at III.1 on the competence-competence of arbitrators and court review of arbitration agreements.) The court has a discretion to grant partial enforcement of an award if the award is only partly beyond the jurisdiction of the arbitral tribunal, provided that the part falling within the jurisdiction of the arbitral tribunal can be separated. This appears from the proviso at the end of Article V(1)(c) (“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 matters submitted to arbitration may be recognized and enforced”).
“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.”
Article V(1)(d) has two types of potential violations, concerning:
– the composition of the arbitral tribunal;
– the arbitral procedure.
IV.4.1. Composition of the Tribunal The first option of Article V(1)(d) is applicable if a party is deprived of its right to appoint an arbitrator or to have its case decided by an arbitral tribunal whose composition reflects the parties’ agreement.
Cases where one party refuses to appoint an arbitrator and the arbitrator is then appointed by a court, or where arbitrators are successfully challenged and replaced in accordance with the applicable rules chosen by the parties and the applicable law, would not succeed under this ground.
Article V(1)(d) provides that a court must first look to see:
1. If the parties have agreed on the composition of the arbitral tribunal;
2. If they have, what they have agreed must be determined;
3. Whether that agreement has been violated;
4. Only if there is no agreement between the parties on the composition of the arbitral tribunal should the court apply the law of the country where the arbitration took place to determine if it was not in accordance with such law.