«ICCA’S GUIDE TO THE INTERPRETATION OF THE 1958 NEW YORK CONVENTION: A HANDBOOK FOR JUDGES INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION ICCA’S ...»
By now it is a widely (though not universally accepted) understanding that the provisions of Article VII(1) also apply to the recognition and enforcement of the arbitration agreements addressed in Article II. Article VII(1) is mostly invoked in order to overcome the formal requirements applicable to the arbitration agreement by virtue of Article II(2) (the writing requirement, see Chapter II at IV.2.1).
In a Recommendation adopted by the United Nations Commission on International Trade Law (UNCITRAL) on 7 July 2006 (see Annex III) it is recommended that “also article VII, paragraph 1 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done in New York, 10
June 1958, should be applied to allow any interested party to avail itself of rights it may have, under the law or treaties of the country where an arbitration agreement is sought to be relied upon, to seek recognition of the validity of such an agreement”.
The history of the Convention also supports this view. The provision on the enforcement of arbitration agreements was included on the last day of the negotiations. The other provisions were not amended to take account of this last-minute addition. Article VII should thus not be construed as excluding arbitration agreements from its scope.
V.2. THE NEW YORK CONVENTION AND OTHER INTERNATIONAL TREATIES
The first part of Article VII provides that the Convention does not affect the validity of other international treaties on the recognition and enforcement of arbitral awards which are in force in the enforcement State. The second part of the same provision specifies that the parties are entitled to seek recognition and enforcement of an award pursuant to either the New York Convention or another treaty or national laws, whichever is more favourable.
The more-favourable-right principle derogates from the classical rules of international law on conflicting treaties (lex posterior and lex specialis).
Pursuant to the more-favourable-right principle, it is the more favourable one that prevails.
V.3. THE NEW YORK CONVENTION AND NATIONAL LAWWith respect to the relationship between the New York Convention and national law of the State in which enforcement is requested, three
situations must be distinguished:
– The New York Convention and national law both have rules on the same issues. In this case, the Convention supersedes national law, unless the national law is more favourable. In some cases the court will have to refer to legislation implementing the Convention (case (i) below);
– The New York Convention contains no rule on a given matter. In this event, courts will apply their national law to supplement the New York Convention (case (ii) below);
– The New York Convention refers explicitly to national law. In this case, the courts must apply national law to the extent permitted by the Convention (case (iii) below).
Case (i) The Convention supersedes national law Case (ii) National law supplements the Convention The New York Convention does not establish a comprehensive procedural regime for the recognition and enforcement of foreign awards. With regard to the procedure, the Convention only provides rules on the burden of proof and the documents to be submitted by the requesting party. It is silent on other procedural matters.
Article III provides that Contracting States shall recognize and enforce arbitral awards in accordance with the rules of procedure of the State where the award is relied upon. Thus, the procedure for recognition and enforcement of foreign awards is governed by national law, except for the issues of burden of proof and the documents to be submitted (see Chapter III).
Without being exhaustive, the following procedural issues are
governed by national law:
– The time limit for filing a request for recognition or enforcement;
– The authority competent to recognize or enforce awards;
– The form of the request;
– The manner in which the proceedings are conducted;
– The remedies against a decision granting or refusing exequatur;
– The availability of a set-off defence or counterclaim against an award.
An issue may arise if a State poses stringent jurisdictional requirements to accept that its courts rule on an enforcement request. In conformity with the purpose of the Convention and its strong pro-enforcement bias, the presence of assets in the territory of the enforcement State should suffice to create jurisdiction for enforcement purposes. In spite of this, certain United States courts have required that they have personal jurisdiction over the respondent and award debtor.
Case (iii) The Convention refers expressly to national law Certain provisions of the New York Convention refer expressly to national law. This is the case for example of Article I (in connection with the commercial reservation), Article III (in connection with the procedure for recognition and enforcement) and Article V (certain grounds of nonenforcement refer to national law). This is not necessarily the law of the forum but the law under which the award was made.
VI. CONSEQUENCES OF THE NON-APPLICATION OF THE NEW YORK CONVENTION
The non-application or incorrect application of the New York Convention engages in principle the international responsibility of the State. A breach of the State’s obligations under the Convention (see this Chapter below at VI.1) may in certain circumstances also constitute a breach of a bilateral or multilateral investment treaty (see this Chapter below at VI.2). In any event, the award will remain unaffected by the breaches (see this Chapter below at VI.3).
VI.1. BREACH OF THE NEW YORK CONVENTIONAlthough the New York Convention does not have a dispute-resolution clause, the New York Convention is an international treaty creating obligations for the Contracting States under international law.
As explained above, the Contracting States have undertaken to recognize and enforce foreign arbitral awards and to recognize arbitration agreements. When a party requests the enforcement and/or recognition of an award or an arbitration agreement falling within the scope of the Convention, a Contracting State must apply the New York Convention. It may not impose stricter procedural rules and substantive conditions upon recognition and enforcement and where the Convention is silent on a procedural matter, it may not impose substantially more onerous procedural conditions than those governing domestic awards.
Within the Contracting States, the principal organs in charge of the application of the New York Convention are the courts. In international law, the acts of courts are regarded as acts of the State itself. Thus, if a court does not apply the Convention, misapplies it or finds questionable reasons to refuse recognition or enforcement that are not covered by the Convention, the forum State engages its international responsibility.
As soon as the notification of the Convention is effective for a given Contracting State, the responsibility of that State will be engaged on the international level irrespective of whether the Convention has been properly implemented by national legislation or whether it has been published or otherwise promulgated under domestic rules. Hence, the fact that the text of the Convention has for example not been published in the relevant official gazette does not change the State’s obligations to comply with the Convention under international law.
VI.2. BREACH OF INVESTMENT TREATYDepending on the circumstances, a breach of the obligation to recognize and enforce arbitration agreements and awards can give rise to a breach of another treaty. This may be so of the European Convention on Human Rights and especially its first Protocol and, as recent developments have shown, of investment treaties. Through the latter, States guarantee foreign investors, among other protections, that they will receive fair and equitable treatment and will not be subject to expropriation (unless specific conditions are met). Two recent decisions in investment treaty arbitrations have held that a State had breached its obligations under a bilateral investment treaty because its courts had failed to recognize a valid arbitration agreement.8
VI.3. AWARD IS UNAFFECTED
An award is unaffected by the refusal of a State to enforce or recognize it in violation of the New York Convention. The State’s decision only has effect within the territory of that State. The successful party will thus still be entitled to rely on the award and ask for its enforcement in other States.
8. Saipem SpA v. Bangladesh, International Centre for Settlement of Investment Disputes (ICSID) case no. ARB/05/07 and Salini Costruttori SpA v. Jordan, ICSID case no. ARB/02/13, both available online at www.icsid.world bank.org.
ICCA Guide to the NYC
REQUEST FOR THE ENFORCEMENT OF AN
TABLE OF CONTENTS
II. BASIC FEATURES OF THE CONVENTION’S REGIME ON
ARBITRATION AGREEMENTSII.1. Arbitration Agreements Are Presumed Valid II.2. The Parties to a Valid Arbitration Agreement Must Be Referred to Arbitration II.3. How to “Refer” Parties to Arbitration II.4. No Ex Officio Referral
III. GENERALLY ACCEPTED PRINCIPLESIII.1. Arbitrators Have Jurisdiction to Determine Their Own Jurisdiction III.2. Scope of Judicial Review of Challenges to the Arbitral Tribunal’s Jurisdiction III.3. Arbitration Clauses Are Not Usually Affected by the Invalidity of the Main Contract III.4. Timing of the Referral Request in the Course of Court Proceedings III.5. No Consideration Needed for Concurrent Arbitration Proceedings
IV. ROAD MAP TO ARTICLE IIIV.1. Does the Arbitration Agreement Fall Under the Scope of the Convention?
IV.2. Is the Arbitration Agreement Evidenced in Writing?
IV.2.1. Theoretical Background IV.2.2. Practice
ICCA Guide to the NYC CHAPTER II
(i) Arbitration clause included in a document referred to in the main contractual document (the “incorporation by reference” issue) (ii) Arbitration clause in contractual document not signed but subsequently performed by all parties according to its terms
• Contract offer is sent with an arbitration clause and confirmed. However, the confirmation contains general reservations or conditions subsequent
• Contract offer containing an arbitration clause is sent by a party to the other, who does not reply but nonetheless performs the contract (iii) Arbitration agreement contained in exchange of electronic communications IV.3. Does the Arbitration Agreement Exist and Is It Substantively Valid?
IV.3.1. Theoretical Background IV.3.2. Practice (i) “Null and void” (ii) “Inoperative” (iii) “Incapable of being performed”
• Where the referral to arbitration is optional
• Where the contract provides for arbitration as well as jurisdiction of the courts
• Where the arbitration rules or arbitral institution are inaccurately designated
• Where there is no indication whatsoever as to how the arbitrators are to be appointed (“blank clauses”) IV.4. Is There a Dispute, Does It Arise out of a Defined Legal Relationship, Whether Contractual or Not, and Did the Parties Intend to Have This Particular Dispute Settled by Arbitration?
IV.4.1. Theoretical Background 34 ICCA Guide to the NYC
REQUEST FOR THE ENFORCEMENT OF AN ARBITRATION AGREEMENTIV.4.2. Practice (i) Should the language in an arbitration clause be interpreted broadly?
(ii) What if the arbitration agreement contains some exceptions to its scope?
IV.5. Is the Arbitration Agreement Binding on the Parties to the Dispute That Is Before the Court?
IV.5.1. Theoretical Background (i) Arbitration agreements are binding only on the parties (ii) Non-signatories may also be parties to the arbitration agreement (iii) How to determine the subjective scope of the arbitration agreement (iv) The law applicable to the determination of the subjective scope of the arbitration agreement IV.5.2. Practice (i) When exactly does a respondent have a right to be referred to arbitration?
(ii) What if the court finds that respondent is not bound by the arbitration agreement?
IV.6. Is This Particular Dispute Arbitrable?
IV.6.1. Subject Matter “Capable of Settlement by Arbitration” Means “Arbitrable” IV.6.2. The Law Applicable to the Determination of Arbitrability IV.6.3. International Arbitration Agreements Should Be Subject to Consistent Standards of Arbitrability V. SUMMARY
As explained in Chapter I, the New York Convention was intended to promote the settlement of international disputes by arbitration. To that purpose, it was fundamental to ensure that the courts of the Contracting States would give effect to the parties’ agreement to arbitrate and to the resulting arbitral award.
With respect to arbitration agreements, the drafters sought to secure that the parties’ original intention to have their disputes settled by arbitration would not be frustrated by a subsequent unilateral submission of the dispute to courts. Accordingly, they set out the conditions under which courts must refer the parties to arbitration, and limited the grounds on which a party to an arbitration agreement could challenge its validity.
This led to the adoption of Article II, which reads as follows:
“(1) Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.