«ICCA’S GUIDE TO THE INTERPRETATION OF THE 1958 NEW YORK CONVENTION: A HANDBOOK FOR JUDGES INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION ICCA’S ...»
In the First Circuit’s case of Sourcing Unlimited Inc. v. Asimco International Inc.,16 Sourcing Unlimited (Jumpsource) had entered into a written partnership agreement with ATL to split production of mechanical parts and share profits accordingly. Asimco was a subsidiary of ATL and both had the same Chairman. The agreement provided for arbitration in China. The relationship soured and Jumpsource filed suit against Asimco and its Chairman in United States courts notably charging Asimco with intentional interference with contractual and fiduciary relationships between itself and ATL. The respondents filed a request to refer the dispute to arbitration. They contended that although they were not signatories to the partnership agreement, Jumpsource’s claim against them should be heard by an arbitral tribunal as the issues it sought to litigate clearly arose from the partnership agreement. The court upheld the request. It held that “[t]he present dispute is sufficiently intertwined with the Jumpsource-ATL Agreement for application of estoppel to be appropriate”. (Emphasis added) (ii) What if the court finds that a respondent is not bound by the arbitration agreement?
If the court is not satisfied that the non-signatory ought to be bound by the arbitration agreement, it has to decide whether to refer the parties to the arbitration agreement to arbitration while assuming jurisdiction over the dispute with non-signatories – or, conversely, to assume jurisdiction over the entire dispute.
16. United States: United States Court of Appeals, First Circuit, 22 May 2008 (Sourcing Unlimited Inc. v. Asimco International Inc. and John F. Perkowski), 526 F.3d 38, para.
9; Yearbook Commercial Arbitration XXXIII (2008) pp. 1163-1171 (US no. 643).
ICCA Guide to the NYC
CHAPTER IIIndeed the concern that may be raised is that the referral to arbitration of the relevant parties could “split” the resolution of the case between two forums, with the risk of each forum reaching different conclusions on the same matters of fact and law.
Some Italian courts have found that when a dispute brought before them involves parties to an arbitration agreement as well as third parties (which the court considered not bound by the arbitration agreement) and also involves connected claims, the jurisdiction of the court “absorbs” the entire dispute and the arbitration agreement becomes “incapable of being performed”.17 Such a proposition would likely not be followed in other jurisdictions and should not be considered as reflecting a universal approach.
Article II(3) compels a court to refer the parties to an arbitration agreement to the arbitral forum chosen, when requested to do so, provided that the conditions of Article II(3) are met. Accordingly, upon a request of one party, a court would have limited room for not referring the parties who have signed the agreement to arbitration while assuming jurisdiction over the dispute with non-signatories.
IV.6. IS THIS PARTICULAR DISPUTE ARBITRABLE?A court may be seised of the plea that the arbitration agreement concerns a subject matter not “capable of settlement by arbitration” for the purposes of Article II(1), and therefore, should not be recognized or enforced.
17. Italy: Corte di Cassazione, 4 August 1969, no. 2949 and Corte di Cassazione, 11 February 1969, no. 457, quoted by A.J. van den Berg, The New York Arbitration Convention of 1958 – Towards a Uniform Interpretation (Kluwer, 1981) p. 162 fn. 124.
IV.6.1. Subject Matter “Capable of Settlement by Arbitration” Means “Arbitrable” The terms are generally accepted as referring to those matters deemed non-“arbitrable” because they belong exclusively to the domain of the courts. Each State indeed decides which matters may or may not be resolved by arbitration in accordance with its own political, social, and economic policy. Classic examples include domestic relations (divorces, paternity disputes...), criminal offences, labour or employment claims, bankruptcy, etc. However, the domain of non-arbitrable matters has considerably shrunk over time as a consequence of the growing acceptance of arbitration. It is now not exceptional for certain aspects of employment claims or claims relating to a bankruptcy to be arbitrable.
Moreover, many leading jurisdictions recognize a distinction between purely domestic arbitrations and those that are of an international nature, and allow a broader scope of arbitrability with respect to the latter.
IV.6.2. The Law Applicable to the Determination of Arbitrability
Article II(1) is silent on the issue of the law under which arbitrability is to be determined, leaving it to the court to decide this issue.
As regards arbitrability at the early stage of a dispute, courts may choose between several options, including the lex fori (the court’s own national standards of arbitrability); the law of the arbitral seat; the law governing the parties’ arbitration agreement; the law governing the party involved, where the agreement is with a State or State entity; or the law of the place where the award will be enforced.
In practice, the most suitable and least problematic solution is the application of the lex fori. It is the most suitable (as long as the court would have jurisdiction in the absence of an arbitration agreement) under the Convention since this approach accords with Article V(2)(a)
ICCA Guide to the NYC CHAPTER II
which provides for the application of the standards of arbitrability of the lex fori in relation to the enforcement of awards. And it is the least problematic as the application of foreign standards of arbitrability by domestic courts is made difficult by the fact that those standards are not always contained in statutes but rather set forth by case law, implying a thorough inquiry of foreign legal orders.
In cases involving a State as party, it is now becoming generally accepted that a State may not invoke its own law on the non-arbitrability of the subject matter.18 IV.6.3. International Arbitration Agreements Should Be Subject to Consistent Standards of Arbitrability In any event, arbitrability standards should be interpreted with regard to the presumptive validity of international arbitration agreements enshrined in the Convention. Accordingly not all non-arbitrability exceptions that may succeed with regard to purely domestic arbitration agreements may be usefully invoked against international arbitration agreements.
There is no universal criterion to distinguish between exceptions of non-arbitrability that may be disregarded in international cases. Some laws contain formal definitions (such as diversity of nationalities); others refer more intuitively to “international transactions” without further definition.
18. The Swiss Private International Law Act, Article 177(2) provides:
“If one party to an arbitration agreement is a State or an enterprise dominated by or an organization controlled by a State, it may not invoke its own law to contest the arbitrability of a dispute or its capacity to be subject to an arbitration.”
Based on the concise overview of the Convention’s regime on enforcement of arbitration agreements, the following summary principles apply with respect to arbitration agreements falling within the scope of
1. The Convention has been established to promote the settlement of international disputes by arbitration. It has laid down a “proenforcement”, “pro-arbitration” regime.
2. An arbitration agreement should be held formally valid when the court is reasonably satisfied that an offer to arbitrate – made in writing – was met with acceptance by the other party. The Convention sets out a maximum uniform standard of form. However, the court may apply less stringent national standards than those laid down in Article II.
3. Courts should only allow a limited number of national law defences of non-existence and invalidity.
4. An arbitration agreement may be binding on non-signatories.
5. The court should verify the existence of a dispute between the parties.
6. Non-arbitrability is not directly governed by the Convention, but deferred to the national law regimes. However, exceptions of nonarbitrability should be admitted restrictively.
ICCA Guide to the NYC `
REQUEST FOR THE RECOGNITION AND
ENFORCEMENT OF AN ARBITRAL AWARD
TABLE OF CONTENTS
II. PHASE I – REQUIREMENTS TO BE FULFILLEDBY PETITIONER (ART. IV) II.1. Which Documents?
II.2. Authenticated Award or Certified Copy (Article IV(1)(a)) II.2.1. Authentication II.2.2. Certification II.3. Original Arbitration Agreement or Certified Copy (Article IV(1)(b)) II.4. At the Time of the Application II.5. Translations (Article IV(2)) III. PHASE II – GROUNDS FOR REFUSAL (ARTICLE V) – IN
GENERALIII.1. No Review on the Merits III.2. Burden for Respondent of Proving the Exhaustive Grounds III.3. Exhaustive Grounds for Refusal of Recognition and Enforcement III.4. Narrow Interpretation of the Grounds for Refusal III.5. Limited Discretionary Power to Enforce in the Presence of Grounds for Refusal
IV. GROUNDS FOR REFUSAL TO BE PROVEN BYRESPONDENT (ARTICLE V(1)) IV.1. Ground 1: Incapacity of Party and Invalidity of Arbitration Agreement (Article V(1)(a)) IV.1.1. Incapacity of Party IV.1.2. Invalidity of Arbitration Agreement
ICCA Guide to the NYC CHAPTER III
IV.2. Ground 2: Lack of Notice and Due Process Violations; Right to a Fair Hearing (Article V(1)(b)) IV.2.1. Right to a Fair Hearing IV.2.2. Lack of Notice IV.2.3. Due Process Violations: “Unable to Present His Case” IV.3. Ground 3: Outside or Beyond the Scope of the Arbitration Agreement (Article V(1)(c)) IV.4. Ground 4: Irregularities in the Composition of the Arbitral Tribunal or the Arbitration Procedure (Article V(1)(d)) IV.4.1. Composition of the Tribunal IV.4.2. Arbitral Procedure IV.5. Ground 5: Award Not Binding, Set Aside or Suspended (Article V(1)(e)) IV.5.1. Award Not Yet Binding IV.5.2. Award Set Aside or Suspended (i) Award set aside (ii) Consequences of being set aside (iii) Award “suspended”
V. GROUNDS FOR REFUSAL TO BE RAISED BY THE COURTEX OFFICIO (ARTICLE V(2)) V.1. Ground 6: Not Arbitrable (Article V(2(a)) V.2. Ground 7: Contrary to Public Policy (Article V(2)(b)) V.2.1. Examples of Recognition and Enforcement V.2.2. Examples of Refusal of Recognition and Enforcement
award was made, enforcement is usually based on the New York Convention. The legal effect of a recognition and enforcement of an award is in practice limited to the territory over which the granting court has jurisdiction.
National courts are required under Article III to recognize and enforce foreign awards in accordance with the rules of procedure of the territory where the application for recognition and enforcement is made (see Chapter I) and in accordance with the conditions set out in the Convention.
National laws may apply three kinds of provisions to enforce awards:
– a specific text for the implementation of the New York Convention;
– a text dealing with international arbitration in particular;
– the general arbitration law of the country.
Article III obliges Contracting States to recognize Convention awards as binding unless they fall under one of the grounds for refusal defined in Article V. Courts may, however, enforce awards on an even more favourable basis (under Article VII(1), see Chapter I). Examples of matters not regulated by the Convention and thus regulated by national
– the competent court(s) to be seised with the application;
– production of evidence;
– limitation periods;
– conservatory measures;
– whether the grant or denial of recognition and enforcement is subject to any appeal or recourse;
– criteria for execution against assets;
– the extent to which the process of recognition and enforcement is confidential.
ICCA Guide to the NYC CHAPTER III
In any event, the imposition of jurisdictional requirements cannot be such as to amount to going back on a State’s international obligation to enforce foreign awards (see Chapter I at VI).
The New York Convention requires that there shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which the Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards. This provision has not led to problems in practice and has been applied in respect of various aspects of enforcement. The Supreme Court of Canada held, for example, that under Article III no Canadian province can impose a time limit for seeking enforcement that is shorter, and thus more onerous, than the most generous time limit available anywhere in Canada for domestic awards.1 The rules of procedure referred to in the New York Convention are limited to questions such as the form of the request and the competent authority for which the New York Convention defers to national law. The conditions for the enforcement, however, are those set out in the New York Convention itself and are exclusively governed by the New York Convention: i.e., the petitioner – the party seeking recognition or enforcement – only needs to submit an original or copy of the arbitration agreement and arbitral award and, possibly, a translation thereof and the respondent can only rely on the exhaustive grounds listed in the New York Convention. These aspects shall be examined in detail below.