«ICCA’S GUIDE TO THE INTERPRETATION OF THE 1958 NEW YORK CONVENTION: A HANDBOOK FOR JUDGES INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION ICCA’S ...»
For example, the parties might have designated an appointing institution to appoint the chairman or arbitrator in the arbitration clause, but in fact someone else appoints the arbitrator. A similar problem arises if the arbitrator is to be chosen from a certain group of people, but then is chosen from another group. In this case the court should, however, examine carefully whether it is really necessary to refuse enforcement because the party opposing recognition and enforcement of the award was deprived of its rights, or whether, in essence, it got a fair arbitration procedure with only a minor procedural deviation. This is an illustration of the type of case in which the court can decide to grant enforcement if the violation is de minimis (see this Chapter above at III.5).
ICCA Guide to the NYC CHAPTER III
In these cases, the court should pay close attention to whether the fact that the arbitrator is missing a prescribed quality is in fact a procedural unfairness. For example, if the arbitration clause requires that the arbitrator shall be a “commercial man”, or somebody with specific industry experience, and instead a lawyer without that qualification is appointed, it might be well justified to enforce the award notwithstanding this.
Examples of unsuccessful objections under this first option of Article
– The Munich Court of Appeal denied the objection that the composition of the arbitral tribunal was not in accordance with the agreement of the parties. The arbitral body had been comprised of one arbitrator rather than two or more arbitrators as agreed in the arbitration clause. The court noted that the respondent was aware of
33. Hong Kong: Supreme Court of Hong Kong, High Court, 13 July 1994 (China Nanhai Oil Joint Service Corporation Shenzhen Branch v. Gee Tai Holdings Co. Ltd.) Yearbook Commercial Arbitration XX (1995) pp. 671-680 (Hong Kong no. 8).
the composition of the arbitral tribunal but did not object during the arbitration;34 – In a case before the Spanish Supreme Court, the arbitration agreement provided for arbitration of disputes at the Association Cinématographique Professionnelle de Conciliation et d’Arbitrage (ACPCA) in France. When the respondent in the arbitration failed to appoint an arbitrator, the appointment was made by the president of the International Federation of Film Producers Associations. The Court denied the respondent’s objection that this appointment was in violation of the parties’ agreement, finding that it complied with the relevant provisions in the ACPCA rules.35 Examples of successful objections under this first option of Article
– In 1978, the Florence Court of Appeal found that a two-arbitrator arbitral tribunal with seat in London was in breach of the parties’ arbitration agreement, although it was in accordance with the law of the country where the arbitration took place. The arbitration clause had provided that three arbitrators should be appointed, but the two party-appointed arbitrators did not appoint a third arbitrator as they were in agreement as to the outcome of the case – English law at the time permitted this;36
34. Germany: Oberlandesgericht, Munich, 15 March 2006 (Manufacturer v. Supplier, in liquidation) Yearbook Commercial Arbitration XXXIV (2009) pp. 499-503 (Germany no. 117).
35. Spain: Tribunal Supremo, Civil Chamber, 11 April 2000 (Union Générale de Cinéma, SA v. X Y Z Desarrollos, SA) Yearbook XXXII (2007) pp. 525-531 (Spain no. 50).
36. Italy: Corte di Appello, Florence, 13 April 1978 (Rederi Aktiebolaget Sally v. srl Termarea) Yearbook Commercial Arbitration IV (1979) pp. 294-296 (Italy no. 32).
ICCA Guide to the NYC
CHAPTER III– The United States Court of Appeals for the Second Circuit refused to recognize and enforce an award on the ground that the parties’ agreement as to the composition of the arbitral tribunal had been breached, as the appointment procedure in the agreement had not been followed. A court had appointed the chairman upon the application of a party, rather than the two party-appointed arbitrators being given time to attempt to agree upon the chairman, as provided for under the relevant arbitration agreement.37
IV.4.2. Arbitral Procedure
The Convention does not intend to give the losing party a right to an appeal on procedural decisions of the arbitral tribunal. This option of Article V(1)(d) is not aimed at refusing to recognize or enforce an award if the court called upon is of a different legal view than the arbitrators, regarding, for example, whether or not to hear a witness, to allow recross examination or how many written submissions they would like to allow.
Rather, this second option of Article V(1)(d) is aimed at more fundamental deviations from the agreed procedure, which include situations in which the parties agreed to use the rules of one institution but the arbitration is conducted under the rules of another, or even where the parties have agreed that no institutional rules would apply.
Examples of unsuccessful objections under this second option of
Article V(1)(d) include:
37. United States: United States Court of Appeals, Second Circuit, 31 March 2005 (Encyclopaedia Universalis S.A. v. Encyclopaedia Britannica, Inc.) Yearbook Commercial Arbitration XXX (2005) pp. 1136-1143 (US no. 520).
– The Bremen Court of Appeal dismissed the respondent’s argument that the arbitral proceedings, which were held in Turkey, were not in accordance with the Turkish Code of Civil Procedure because the arbitral tribunal did not grant the respondent’s request for an oral hearing and disregarded its offer of new evidence. The court held that the arbitral tribunal acted in accordance with the Arbitration Rules of the Istanbul Chamber of Commerce, to which the parties had agreed;38 – Before the United States District Court in Northern Florida, the respondent Devon (the claimant in the arbitration, which had been held at the China Maritime Arbitration Commission (CMAC)) argued that the arbitration had not been in accordance with the law of PR China because the CMAC had rejected the other party’s counterclaim but then permitted it to file a separate action that was subsequently consolidated with Devon’s claim. The court dismissed this argument, finding that Devon failed to show that the CMAC decision was improper under Chinese law.39 Examples of successful objections under this second option of Article
– A Swiss court of appeal refused recognition and enforcement of a German award, finding that the arbitration procedure had not been in accordance with the agreement of the parties; the arbitration
38. Germany: Hanseatisches Oberlandesgericht, Bremen, 30 September 1999 (Claimant v. Defendant) Yearbook Commercial Arbitration XXXI (2006) pp. 640-651 (Germany no. 84).
39. United States: United States District Court, Northern District of Florida, Pensacola Division, 29 March 2010 (Pactrans Air & Sea, Inc. v. China National Chartering Corp., et al.) Yearbook Commercial Arbitration XXXV (2010) pp. 526-527 (US no. 697).
ICCA Guide to the NYC
CHAPTER IIIagreement provided for arbitration in Hamburg in which “all disputes should be settled in one and the same arbitral proceedings”.
Instead, the arbitration took place in two stages: first a quality arbitration by two experts and thereafter the arbitration proper by a panel of three arbitrators;40 – A Turkish court of appeals refused recognition and enforcement of a Swiss award on the ground that the procedural law agreed upon by the parties had not been applied;41 – The Italian Supreme Court enforced a Stockholm award but not a Beijing award made with respect to the same dispute. The Court held that the Beijing award was contrary to the parties’ agreement that contemplated only one arbitration, either in Stockholm or in Beijing, depending on which party commenced arbitration first.42
“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.”
40. Switzerland: Appellationsgericht, Basel-Stadt, 6 September 1968, (Corporation X AG, buyer v. Firm Y, seller) Yearbook Commercial Arbitration I (1976) p. 200 (Switzerland no. 4).
41. Turkey: Court of Appeals, 15th Legal Division, 1 February 1996 (Osuuskunta METEX Andelslag V.S. v. Türkiye Electrik Kurumu Genel Müdürlügü General Directorate, Ankara) Yearbook Commercial Arbitration XXII (1997) pp. 807-814 (Turkey no. 1).
42. Italy: Corte di Cassazione, 7 February 2001, no. 1732 (Tema Frugoli SpA, in liquidation v. Hubei Space Quarry Industry Co. Ltd.) Yearbook Commercial Arbitration XXXII (2007) pp. 390-396 (Italy no. 170).
Article V(1)(e) provides for refusal of recognition and enforcement of an
award if the respondent proves that the award has either:
– 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.
IV.5.1. Award Not Yet Binding The word “binding” was used by the drafters of the New York Convention in this context rather than the word “final” (which had been used in an equivalent context in the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards).43 The use of the word “binding” was intended to make it clear that a party was entitled to apply for recognition and enforcement of an award once it was issued by the arbitral tribunal. This meant that this party did not need to obtain exequatur or leave to do so from the court of the State in which, or under the law of which, the award was made (known as a double exequatur), as was required under the 1927 Geneva Convention.
The fact that no double exequatur is needed under the Convention is universally recognized by courts and commentators.
Courts differ, however, as to how to determine the moment when an award can be said to be “binding” within the meaning of Article V(1)(e).
Some courts consider that this moment is to be determined under the law of the country where the award was made.44 Other courts decide this
43. Convention on the Execution of Foreign Arbitral Awards, signed at Geneva on 26 September 1927.
44. See, e.g., France: Tribunal de Grande Instance, Strasbourg, 9 October 1970 (Animalfeeds International Corp. v. S.A.A. Becker & Cie) Yearbook Commercial Arbitration II (1977) p. 244 (France no. 2).
ICCA Guide to the NYC
CHAPTER IIIquestion independent of the law applicable to the award and hold that foreign arbitral awards are binding on the parties when ordinary means of recourse are not, or are no longer, available against them.45 This means that the award is no longer open to an appeal on the merits, either to an appellate arbitral instance or to a court. In this context, courts sometimes rely on the agreement of the parties. If the parties have chosen to arbitrate under the rules of the International Chamber of Commerce, for
example, the ICC Rules of Arbitration provide at Article 28(6) that:
“Every Award shall be binding on the parties.”
IV.5.2. Award Set Aside or Suspended
(i) Award set aside Depending on the jurisdiction, this procedure may also be called “vacatur” or “annulment” procedure.
The courts having jurisdiction to set aside an award are only the courts of the State where the award was made or is determined to have been made, i.e., where the arbitration had its seat (see Chapter I at III.1.1).
These courts are described as having “supervisory” or “primary” jurisdiction over the award. In contrast, the courts before which an award is sought to be recognized and enforced are described as having “enforcement” or “secondary” jurisdiction over the award, limited to determining the existence of Convention grounds for refusal of recognition or enforcement.
In order for the objection that the award has been set aside to succeed, in many countries the award must have been finally set aside by the court having primary jurisdiction. An application to set aside the award
45. See, e.g., Switzerland: Tribunal Fédéral, First Civil Chamber, 9 December 2008 (Compagnie X SA v. Federation Y) Yearbook Commercial Arbitration XXXIV (2009) pp. 810-816 (Switzerland no. 40).
does not suffice. This prevents the losing party from being able to postpone enforcement by commencing annulment proceedings.
The situation where an application to set aside or suspend the award has been made is covered by Article VI, which provides that in this case the enforcement court may adjourn the decision on the enforcement of the award if it considers it proper. The application must have been made, however, to the competent court referred to in Article V(1)(e), i.e., the court of primary jurisdiction.