«ICCA’S GUIDE TO THE INTERPRETATION OF THE 1958 NEW YORK CONVENTION: A HANDBOOK FOR JUDGES INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION ICCA’S ...»
– Preliminary awards, sometimes also called interlocutory or interim awards, i.e., awards that decide a preliminary issue necessary to dispose of the parties’ claims, such as a decision on whether a claim is time-barred, on what law governs the merits, or on whether there is liability;
– Awards on costs, i.e., awards determining the amount and allocation of the arbitration costs;
– Consent awards, i.e., awards recording the parties’ amicable settlement of the dispute.
An award issued by default, i.e., without the participation of one of the parties, also qualifies as an award to the extent it falls within one of the categories listed above.
By contrast, the following decisions are generally not deemed awards:
– Procedural orders, i.e., decisions that merely organize the proceedings;
– Decisions on provisional or interim measures. Because they are only issued for the duration of the arbitration and can be reopened during that time, provisional measures are not awards. Courts have held the contrary on the theory that such decisions terminate the dispute of the parties over provisional measures, but this is unpersuasive: the parties did not agree to arbitration in order to resolve issues of arbitral procedure.
Finally, the name given by the arbitrators to their decision is not determinative. Courts must consider the subject matter of the decision
and whether it finally settles an issue in order to decide whether it is an award.
II.1.2. Conflict-of-Laws Approach If, rather than using the preferred autonomous method for all the above questions, a court were to refer to a national law, it would start by deciding which national law will govern the definition of arbitral award.
In other words, it would adopt a conflict-of-laws method. It could apply either its own national law (lex fori) or the law governing the arbitration (lex arbitri). The latter will generally be the law of the seat of the arbitration, much less frequently the law chosen by the parties to govern the arbitration (not the contract or the merits of the dispute, which is a different matter).
II.2. ARBITRATION AGREEMENT
Article II(1) of the New York Convention makes clear that it applies to agreements “in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not”.
The use of the words “have arisen or may arise” show that the Convention covers both arbitration clauses contained in contracts and dealing with future disputes, on the one hand, and submission agreements providing for resolution by arbitration of existing disputes, on the other hand.
Under Article II(1), the arbitration agreement must relate to a specific legal relationship. This requirement is certainly met for an arbitration clause in a contract which concerns disputes arising out of that very contract. By contrast, it would not be met if the parties were to submit to
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arbitration any and all existing and future disputes over any possible matter.
The disputes covered by the arbitration agreement may concern contract and other claims such as tort claims and other statutory claims.
Finally, the Convention requires that the arbitration agreement be “in writing”, a requirement defined in Article II(2) and discussed in Chapter II.
III. TERRITORIAL SCOPE OF APPLICATIONArticle I(1) defines the territorial scope of application of the New York
Convention with regard to arbitral awards in the following terms:
“This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.” Accordingly, the Convention deals only with the recognition and enforcement of foreign and non-domestic arbitral awards (see this Chapter below at III.1). It does not apply to the recognition and enforcement of domestic awards. The Convention contains no similar provision with regard to arbitration agreements. However, it is established that the Convention only applies to “foreign” or international arbitration agreements (see Chapter II).
III.1. AWARDS III.1.1. Awards Made in the Territory of a State Other Than the State Where Recognition and Enforcement Are Sought Any award made in a State other than the State of the recognition or enforcement court falls within the scope of the Convention, i.e., is a foreign award. Hence, the nationality, domicile or residence of the parties is without relevance to determine whether an award is foreign. However, these factors may be important when determining if an arbitration agreement falls within the scope of the Convention (see Chapter II and Chapter III). Moreover, it is not required that the State where the award was made be a party to the Convention (unless of course the State where recognition or enforcement is sought has made the reciprocity reservation; see this Chapter below at IV.1).
Where is an award made? The Convention does not answer this question. The vast majority of Contracting States considers that an award is made at the seat of the arbitration. The seat of the arbitration is chosen by the parties or alternatively, by the arbitral institution or the arbitral tribunal. It is a legal, not a physical, geographical concept. Hearings, deliberations and signature of the award and other parts of the arbitral process may take place elsewhere.
III.1.2. Non-domestic Awards
The second category of awards covered by the Convention are those which are considered as non-domestic in the State where recognition or enforcement is sought. This category broadens the scope of application of the Convention.
The Convention does not define non-domestic awards. Very rarely, it is the parties that indicate whether the award to be rendered between
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them is non-domestic. Each Contracting State is thus free to decide which awards it does not regard as domestic and may have done so in the legislation implementing the Convention.7 In the exercise of this freedom, States generally consider all or some
of the following awards as non-domestic:
– Awards made under the arbitration law of another State;
– Awards involving a foreign element;
– A-national awards.
The first type of awards will only arise in connection with an arbitration having its seat in the State of the court seised of the recognition or enforcement but which was governed by a foreign arbitration law. This will be a rare concurrence because it implies that the national law of the recognition or enforcement court allows the parties to submit the arbitration to a lex arbitri other than that of the seat.
7. For example, the United States Federal Arbitration Act (Title 9, Chapter 2) has
made the following provision with respect to a “non-domestic award”:
“Sect. 202. Agreement or award falling under the Convention An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in section 2 of this title, falls under the Convention. An agreement or award arising out of such a relationship which is entirely between citizens of the United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states. For the purpose of this section a corporation is a citizen of the United States if it is incorporated or has its principal place of business in the United States.” 22 ICCA Guide to the NYC
THE NEW YORK CONVENTION AS AN INSTRUMENT OF INTERNATIONAL LAWThe second category refers to awards made within the State of the recognition or enforcement court in a dispute involving a foreign dimension, such as the nationality or domicile of the parties or the place of performance of the contract giving rise to the dispute. The criteria for an award to be considered non-domestic under this category are usually established by the States in their implementing legislation (see at fn. 7 for the example of the United States). Very rarely, the parties indicate that their award is non-domestic.
The third type refers to awards issued in arbitrations that are detached from any national arbitration law, for example, because the parties have explicitly excluded the application of any national arbitration law or provided for the application of transnational rules such as general principles of arbitration law. Although there has been some discussion as to whether a-national awards fall within the scope of the New York Convention, the prevailing view is that the Convention does apply to such awards. These cases are extremely rare.
III.2. ARBITRATION AGREEMENTS
The New York Convention does not define its scope of application with respect to arbitration agreements. However, it is well established that the New York Convention does not govern the recognition of domestic arbitration agreements. It is equally accepted that the Convention is applicable if the future arbitral award will be deemed foreign or nondomestic pursuant to Article I(1). Some courts reason that the Convention applies if the arbitration agreement is international in nature.
The internationality of the agreement results either from the nationality or domicile of the parties or from the underlying transaction.
When determining whether an arbitration agreement falls within the
scope of the Convention, courts should distinguish three situations:
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– If the arbitration agreement provides for a seat in a foreign State, the court must apply the New York Convention;
– If the arbitration agreement provides for a seat in the forum State, the court
• must apply the Convention if the future award will qualify as non-domestic pursuant to Article I(1), second sentence;
• may apply the Convention if the arbitration agreement is international due to the nationality or domicile of the parties or to foreign elements present in the transaction;
– If the arbitration agreement does not provide for the seat of the arbitration, the court must apply the Convention if it is likely that the future award will be held to be foreign or non-domestic in accordance with Article I(1). In addition, it may apply the Convention if the court deems the agreement to be international.
IV. RESERVATIONSIn principle, the Convention applies to all foreign or international arbitration agreements and to all foreign or non-domestic awards.
However, Contracting States can make two reservations to the application of the Convention.
Contracting States may declare that they will apply the Convention only to the recognition and enforcement of awards made in the territory of another Contracting State. Approximately two-thirds of the Contracting States have made this reservation. A court in a State which has made the reservation of reciprocity will apply the Convention only if the award has
Contracting States may also declare that they will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are deemed commercial under the national law of the State making such declaration. Approximately one-third of the Contracting States have made this reservation.
Although the language of the Convention refers to the national law of the forum State (as an exception to the principle of autonomous interpretation), in practice courts also give consideration to the special circumstances of the case and to international practice. In any event, considering the purpose of the Convention, courts should interpret the notion of commerciality broadly.
Even though the Convention speaks of reservations only in the context of recognition and enforcement of awards, it is generally understood that the reservations also apply to the recognition of arbitration agreements.
V. RELATIONSHIP WITH DOMESTIC LAW AND OTHER
TREATIES (ARTICLE VII)Article VII(1) of the New York Convention addresses the relationship between the Convention and national laws of the forum and other international treaties binding upon the State where enforcement is sought
in the following terms:
“The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.”
V.1. MORE FAVOURABLE LAW
Article VII(1) is called the more-favourable-right provision, since it allows a party seeking recognition and enforcement to rely on rules that are more favourable than those of the Convention. More favourable rules may be found: (i) in the national law of the forum or (ii) in treaties applicable in the territory were recognition and enforcement are sought.
In practice, treaties or national law will be more favourable than the New York Convention if they permit recognition and enforcement by reference to less demanding criteria, whether in terms of procedure or of grounds for non-enforcement.