«ICCA’S GUIDE TO THE INTERPRETATION OF THE 1958 NEW YORK CONVENTION: A HANDBOOK FOR JUDGES INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION ICCA’S ...»
Most legal systems confer effects on arbitral awards that are identical or similar to those of court judgments, notably that of res judicata. As with court judgments, the final and binding force of an award is in principle limited to the territory of the State where the award was made. The New York Convention provides for their recognition and enforcement outside that territory.
The recognition of arbitral awards is the process that makes arbitral awards part of a national legal system. Recognition is most often sought in the context of another proceeding. For example, a party will request the recognition of an arbitral award in order to raise a defence of res judicata and thus bar the re-litigation in court of issues that have already been resolved in a foreign arbitration, or a party will seek set-off in court proceedings on the basis of a foreign arbitral award. Because recognition often acts as a defensive mechanism, it is frequently described as a shield.
By contrast, enforcement is a sword. Successful parties in arbitration will seek to obtain what the arbitrators have awarded them. It is true that most awards are complied with voluntarily. However, when the losing party does not comply, the prevailing party may request court assistance to force compliance. The New York Convention allows parties to request such assistance.
In other words, recognition and enforcement may give effect to the award in a State other than the one where the award was made (see Chapter I). When a court has declared an award enforceable within the forum State, the prevailing party may resort to the execution methods available under local laws.
ICCA Guide to the NYC
THE NEW YORK CONVENTION AS AN INSTRUMENT
OF INTERNATIONAL LAW
TABLE OF CONTENTS
I. INTERPRETATIONI.1. Treaty Interpretation: Vienna Convention
I.2. Interpretation in Favour of Recognition and Enforcement:
II. MATERIAL SCOPE OF APPLICATIONII.1. Arbitral Award II.1.1 Autonomous Interpretation II.1.2. Conflict-of-Laws Approach II.2. Arbitration Agreement
III. TERRITORIAL SCOPE OF APPLICATIONIII.1. Awards III.1.1. Awards Made in the Territory of a State Other Than the State Where Recognition and Enforcement Are Sought III.1.2. Non-domestic Awards III.2. Arbitration Agreements
IV. RESERVATIONSIV.1. Reciprocity (Article I(3) First Sentence) IV.2. Commercial Nature (Article I(3) Second Sentence)
V. RELATIONSHIP WITH DOMESTIC LAW AND OTHER
TREATIES (ARTICLE VII)V.1. More Favourable Law V.2. The New York Convention and Other International Treaties V.3. The New York Convention and National Law
VI. CONSEQUENCES OF THE NON-APPLICATION OF THE
NEW YORK CONVENTIONVI.1. Breach of the New York Convention ICCA Guide to the NYC
CHAPTER IVI.2. Breach of Investment Treaty VI.3. Award Is Unaffected
The New York Convention is an international treaty. As such, it is part of public international law. Consequently, the courts called upon to apply the Convention must interpret it in accordance with the rules of interpretation of international law, which are codified in Articles 31 and 32 of the Vienna Convention on the Law of Treaties.1
1. Vienna Convention on the Law of Treaties, done at Vienna on 23 May 1969, entered into force on 27 January 1980, United Nations Treaty Series, vol. 1155, p. 331.
Article 31 reads:
“General rule of interpretation
1. A treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.
2. The context for the purpose of the interpretation of a treaty shall comprise, in
addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all the parties in connection with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connection with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty.
3. There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions;
(b) any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations between the parties.
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THE NEW YORK CONVENTION AS AN INSTRUMENT OF INTERNATIONAL LAWArticles 31 and 32 have to be followed in sequence: e.g., if the clarity of the meaning is not achieved by reference to the general rule embodied in Article 31, one looks to the supplementary rules embodied in Article 32.
National rules of interpretation do not apply. In accordance with international law, courts should interpret the New York Convention in an autonomous manner (see this Chapter below at I.1) and in favour of recognition and enforcement (see this Chapter below at I.2).
I.1. TREATY INTERPRETATION: VIENNA CONVENTION
In principle, the terms used in the Convention have an autonomous meaning (Article 31 Vienna Convention). If the text of the New York Convention is ambiguous, one should defer to its context, intent and travaux préparatoires (Articles 31 and 32 Vienna Convention).2 The terms must be understood taking into account the context and the purpose of the Convention. Therefore, courts should not interpret the terms of the
4. A special meaning shall be given to a term if it is established that the parties so intended.”
“Supplementary means of interpretation Recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of article 31, or to determine
the meaning when the interpretation according to article 31:
(a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable.”
2. The Convention was drawn up in five official texts: Chinese, English, French, Russian and Spanish.
New York Convention by reference to domestic law. The terms of the Convention should have the same meaning wherever in the world they are applied. This helps to ensure the uniform application of the Convention in all the Contracting States.
In jurisdictions that have implemented the Convention into their legal system by means of an implementing act, it is important to have regard to its terms. In some cases, they alter the terms of the Convention.3 Current case law unfortunately sometimes diverges in the application of the Convention and therefore does not always provide a useful guideline. In that case, courts should always interpret the New York Convention on a pro-enforcement bias. Courts can also rely on scholarly writings such as the commentary on the New York Convention by Professor Albert Jan van den Berg.4
INTERPRETATION IN FAVOUR OF RECOGNITION AND ENFORCEMENT:
PRO-ENFORCEMENT BIASAs stated above, treaties should be interpreted in light of their object and purpose. The purpose of the New York Convention is to promote international commerce and the settlement of international disputes
3. See Report on the Survey Relating to the Legislative Implementation of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1958). Note by the UNCITRAL Secretariat. A/CN.9/656 and A/CN.9/656/Add.1, 5 June 2008.
4. Albert Jan van den Berg, The New York Arbitration Convention of 1958 – Towards a Uniform Judicial Interpretation (Kluwer, 1981); see also Professor van den Berg’s Consolidated Commentary on the 1958 New York Convention in Volume XXVIII (2003) of the Yearbook Commercial Arbitration, covering Volume XXII (1997) to Volume XXVII (2002), and the Consolidated Commentary on the 1958 New York Convention in Volume XXI (1996) of the Yearbook Commercial Arbitration, covering Volume XX (1995) and Volume XXI (1996).
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THE NEW YORK CONVENTION AS AN INSTRUMENT OF INTERNATIONAL LAWthrough arbitration. It aims at facilitating the recognition and enforcement of foreign arbitral awards and the enforcement of arbitration agreements. Consequently, courts should adopt a pro-enforcement approach when interpreting the Convention.
If there are several possible interpretations, courts should choose the meaning that favours recognition and enforcement (the so-called proenforcement bias). This implies in particular that the grounds for refusing enforcement specified in Article V should be construed narrowly (see Chapter III at III.4).5 In line with the pro-enforcement bias, which is key to the interpretation of the New York Convention, the principle of maximum efficiency applies: if more treaties could be applicable, the courts should apply the treaty under which the award is enforceable. This is reflected in Article VII (see this Chapter below at V.2).
In a case before the Spanish Supreme Court,6 two treaties were potentially applicable to determine the enforceability of the award: a bilateral treaty between France and Spain and the New York Convention.
The Court held that, of the two principles relevant to determining
whether the Bilateral Treaty or the Convention applied, one was:
“... the principle of maximum efficiency or greater favourability to the recognition of foreign decisions. [Taken together with the other relevant principles this leads to the Court concluding that the
5. A court seised with an application to enforce an award under the Convention has no authority to review the decision of the arbitral tribunal on the merits and replace it by its own decision, even if it believes that the arbitrators erred in fact or law. Enforcement is not an appeal of the arbitral decision (see Chapter III at III.1).
6. Spain: Tribunal Supremo, Civil Chamber, First Section, 20 July 2004 (Antilles Cement Corporation v. Transficem) Yearbook Commercial Arbitration XXXI (2006) pp. 846Spain no. 46).
ICCA Guide to the NYC
CHAPTER IConvention was the applicable provision as it] establishes a presumption of the validity and efficacy of both the arbitration agreement and the related arbitral award and decision [and] consequently shifts the burden of proof onto the party against whom the arbitral award is invoked.”
II. MATERIAL SCOPE OF APPLICATIONTo determine whether a particular award or agreement falls within the subject matter of the Convention, a court should ascertain whether it qualifies as an arbitration agreement or an arbitral award.
II.1. ARBITRAL AWARD There is no definition of the term “arbitral award” in the Convention.
Therefore, it is for the courts to determine what the term means for the
purposes of the Convention. They must do so in two steps:
1. First, they must review whether the dispute had been submitted and resolved by arbitration. Not all out-of-court dispute-settlement methods qualify as arbitration. There are a variety of disputesettlement mechanisms involving private individuals that do not have the same characteristics as arbitration. Mediation, conciliation or expert determination are a few examples. The New York Convention covers only arbitration.
2. Second, they must review whether the decision is an award. Arbitral tribunals may issue a variety of decisions. Some of them are awards, others are not.
Courts have adopted two different methods to determine the meaning of the terms “arbitration” and “award”. They either (1) opt for autonomous interpretation or (2) refer to national law using a conflict-oflaws method.
II.1.1. Autonomous Interpretation The first step is to inquire whether the process at issue qualifies as arbitration. Arbitration is a method of dispute settlement in which the parties agree to submit their dispute to a third person who will render a final and binding decision in place of the courts.
This definition stresses three main characteristics of arbitration. First, arbitration is consensual: it is based on the parties’ agreement. Second, arbitration leads to a final and binding resolution of the dispute. Third, arbitration is regarded as a substitute for court litigation.
The second step is to review whether the decision at issue is an award.
An award is a decision putting an end to the arbitration in whole or in part or ruling on a preliminary issue the resolution of which is necessary to reach a final decision. An award finally settles the issues that it seeks to resolve. Even if the tribunal would wish to adopt a different conclusion later, the issue cannot be reopened or revised.
Consequently, the following arbitral decisions qualify as awards:
– Final awards, i.e., awards that put an end to the arbitration. An award dealing with all the claims on the merits is a final award. So is an award denying the tribunal’s jurisdiction over the dispute submitted to it;
– Partial awards, i.e., awards that give a final decision on part of the claims and leave the remaining claims for a subsequent phase of the arbitration proceedings. An award dealing with the claim for extra costs in a construction arbitration and leaving claims for damages for
ICCA Guide to the NYC CHAPTER I
defects and delay for a later phase of the proceedings is a partial award (this term is sometimes also used for the following category, but for a better understanding, it is preferable to distinguish them);