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The Guide to Challenging and Enforcing Arbitration Awards - First Edition

Awards: Form, Content, Effect

Introduction

Arbitral awards have a special status under international law by reason of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).[2]

Pursuant to the New York Convention, arbitral awards made in the territory of one contracting state shall be recognised as binding and enforced in another contracting state, subject only to the limited grounds for refusal of recognition and enforcement set out in Article V of the Convention.

Given such special status, the form and content of an arbitral award is clearly important. This chapter considers the following issues:

  • The form of an arbitral award – types of arbitral awards, and formal requirements under the New York Convention and selected national laws.
  • The content of an arbitral award – best practice regarding the contents of arbitral awards, as compared with mandatory requirements under selected national laws and arbitration rules.
  • The effect of an arbitral award – finality, the possibility of challenges to arbitral awards, the limited possibility of appeals to arbitral awards, and enforcement.

The form of an arbitral award

Arbitral award or arbitration award?

To start with, which term is more appropriate – arbitral award or arbitration award?

The New York Convention uses ‘arbitral award’, as do the United Nations Commission on International Trade Law (UNCITRAL) Model Law and the UNCITRAL Arbitration Rules. However, many sets of arbitration rules, including those under the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the International Centre for Dispute Resolution (ICDR), the Stockholm Chamber of Commerce (SCC) and the Singapore International Arbitration Centre, simply use the term ‘award’. The English Arbitration Act also mainly uses the term ‘award’, although the long title of the Act refers to ‘arbitration awards’ and the term ‘arbitral award’ appears in Sections 2(b) and 81(c).

Thus, the correct term is ‘arbitral award’, but the terms ‘arbitration award’ and ‘award’ may also be used.

Types of arbitral awards

As is stated in Article 1(1), the New York Convention applies 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’. Article 1(1) adds that the Convention also applies to ‘arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought’. Further, Article 1(2) provides that the term ‘arbitral awards’ ‘shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted’.

Thus, distinctions can be made between several different types of awards, including:

  • A ‘domestic award’ is an arbitral award made within the territory of a state.
  • A ‘foreign award’ is an arbitral award made – or deemed to be made – in the territory of another state. For example, if the legal place (or seat) of arbitration is London, the arbitral tribunal may nevertheless decide to sign the award in another country for reasons of convenience. Nevertheless, the award will be treated as having been made at the seat pursuant to Section 53 of the English Arbitration Act 1996.[3]
  • An ‘interim award’ (or ‘provisional award’) is an award that is subject to a final determination at a later stage (see, e.g., Section 39 of the English Arbitration Act). Since Article V(1)(e) of the New York Convention requires an arbitral award to have become binding, an interim award is generally considered to be unenforceable. However, some US courts have held that an interim order by an arbitral tribunal, or even by an emergency arbitrator, could be enforced as an award if it finally and definitely disposed of a self-contained issue.[4]
  • A ‘partial award’ determines only part of the claims in dispute between the parties.
  • An ‘agreed award’ is an arbitral award entered into by agreement of the parties and the arbitral tribunal, recording the result of a settlement.

It is important to differentiate an arbitral award from other decisions or orders within an arbitration since it is only awards that can be enforced internationally under the New York Convention, and domestically under national arbitration laws. Although arbitral awards are generally clearly indicated as being awards, it should be noted that the nomenclature used by the arbitral tribunal is not determinative.

Formal requirements for an arbitral award

International conventions generally do not set out any formal requirements in relation to awards. However, the New York Convention imposes an implied written requirement by providing in Article IV that ‘the party applying for recognition and enforcement shall . . . supply: (a) [t]he duly authenticated original award or a duly certified copy thereof’.

Requirements in relation to formalities are primarily set out in national arbitration laws or in applicable arbitration rules. Thus, for example:

  • Many national arbitral laws, including the UNCITRAL Model Law (Article 31), provide that the award shall be made in writing, shall be signed by the arbitrator or arbitrators, and shall state the date of the award and the place of arbitration.[5]
  • It is also often provided that the arbitral tribunal must state the reasons upon which the award is based.[6] This matter is considered in more detail below.

Some national arbitration laws, such as the English Arbitration Act 1996 (Section 52(1)), expressly provide that the parties are free to agree on the form of the award.

Signature

Although not strictly necessary under the New York Convention, in practice it is a fundamental requirement that the award should be signed.

In the case of a three-person tribunal with arbitrators in different countries, it is necessary to allow sufficient time for the final agreed award to be couriered between the respective arbitrators to obtain their respective signatures. The arbitrators should also ensure that there is a sufficient number of originals – generally, one original per party, one for each of the arbitrators, and one for the arbitral institution, where applicable.

Although it is usual for all the arbitrators to sign the award – and that is so even where there is a dissenting opinion – it can happen that a dissenting arbitrator refuses to sign the award. The solution in such a situation is usually for the majority to sign the award, or at least the chair or presiding arbitrator, provided an explanation is given for the missing signature.[7]

The place of the award should be stated as being the legal place or seat of arbitration, even if the award is actually signed in a different place. This is important, since the legal seat determines the nationality of the award for the purposes of the New York Convention.

Reasons

As noted above, many arbitration laws and rules require the arbitrators to state the reasons upon which the award is based.[8]

However, note, for example, that the Swedish Arbitration Act of 1999 does not require any reasons to be given, although the SCC Rules do impose such a requirement.

The requirement to give reasons is generally stated to be non-mandatory, but where there is such a requirement and the parties agree to dispense with it, it is important for there to be clear evidence of such an agreement and for this to be clearly recorded in the award itself.

See further below, regarding what may be regarded as sufficient reasoning.

Other formal requirements under some national laws

In addition to the above-mentioned requirements, some national laws impose others that are required to be followed for arbitral awards made in that particular seat of arbitration.

For example:

  • In Sweden, the Swedish Arbitration Act of 1999 provides that the award must contain clear instructions as to what must be done by a party who wishes to challenge the award, (1) where the award concludes the proceedings without a determination on the merits, and (2) as regards challenges to the amount of compensation awarded to the arbitrators (see Sections 36 and 41 of the Act).
  • In Scotland, Rule 51 of Schedule 1 to the Arbitration (Scotland) Act 2010 provides as a default rule that the award should state whether any previous provisional or part award has been made (and the extent to which any previous provisional award is superseded or confirmed).

It is always important for arbitrators to check for any specific rules that may apply in the applicable seat of arbitration or under the applicable arbitration rules.

Time limits

National arbitration laws usually do not set out a time limit for rendering the award in international arbitrations.

However, some arbitration rules provide for time limits. For example, the 2017 ICC Rules provide that the arbitral tribunal shall render its final award within six months of the date of the terms of reference (Article 31(1)). However, the ICC Court may extend the time limit on its own initiative or following a reasoned request for an extension from the arbitral tribunal. The 2017 SCC Rules have a similar provision, setting out a time limit of six months from the date when the case was referred to the arbitral tribunal (Article 43).

The 2014 ICDR Rules state that the arbitral tribunal shall make every effort to deliberate and prepare the award as quickly as possible after the hearing and, unless otherwise agreed by the parties, specified by law, or determined by the ICDR administrator, no later than 60 days after the closing of the hearing (Article 30(1)).

A time limit from the outset of the proceeding has the advantage of putting time pressure not only on the arbitral tribunal but also on the parties, for the award to be rendered within a reasonable time. This can be coupled with a general obligation on all participants to act efficiently, with potential costs consequences on a party that fails to do so.[9] Nevertheless, it is common for the six-month time limit under both the ICC and SCC Rules to be extended, at least in larger cases.

The purpose of a time limit between the closing of the case and the issue of the award is to impose efficiency and discipline on the arbitrators. It also helps to ensure that the parties will not have to wait too long after the hearing to receive the award, and that the arbitrators will consider the evidence and arguments while the case is still fresh in their minds. Some institutions penalise arbitrators for delays in issuing the award.

On the other hand, institutions are generally careful to ensure that time limits are extended where necessary, either upon request by the arbitral tribunal or on the institution’s own initiative, since there is a clear risk that an award that is issued after such a deadline would be liable to be set aside.

In the rare circumstances that the arbitration agreement provides a deadline without the possibility of an extension, the arbitral tribunal needs to ensure that it complies with such a deadline. However, national arbitration laws may provide a statutory possibility for a time limit to be extended. For example, Section 50(1) of the English Arbitration Act provides that ‘[w]here the time for making an award is limited by or in pursuance of the arbitration agreement, then, unless otherwise agreed by the parties, the court may in accordance with the following provisions by order extend that time’.

Delivery of the award to the parties

National arbitration laws usually require that the arbitral award should be communicated to the parties without delay.

For example, Section 31 of the Swedish Arbitration Act provides that ‘[t]he award shall be delivered to the parties immediately’. Section 55(2) of the English Arbitration Act provides that, in the absence of any other agreement between the parties, ‘the award shall be notified to the parties by service on them of copies of the award, which shall be done without delay after the award is made’. Similar provisions can be found in most institutional rules.

In most cases, it is the chair of the arbitral tribunal that delivers the award to the parties. However, under some institutional arbitration – notably under the ICC, LCIA and ICDR Rules[10] – it is the institution that delivers the award.

Traditionally, arbitral awards have been delivered to the parties by courier, but this can give rise to the unfortunate situation that one party might receive the award several days in advance of another party, if the parties are situated on different continents. To avoid such a situation, it is common for arbitral tribunals to deliver the award to the parties initially by email, with the originals to follow by courier.

It is good practice for arbitral tribunals to ask parties to acknowledge receipt of the award. This is important not only to ensure that the award has been duly delivered, but also for the purpose of calculating time limits for any corrections, or for possible applications to set aside the award.

Under English law, the arbitral tribunal has the power to withhold delivery of the award pending full payment of its fees and expenses – although a party can ask the English court to intervene in this situation.[11] Conversely, Section 40 of the Swedish Arbitration Act expressly states that the arbitrators may not withhold the award pending payment of compensation. In institutional arbitration, the arbitral institution invariably ensures that the requisite fees and costs have been paid in good time prior to the delivery of the arbitral award.

Correction of the award

Arbitration laws and rules generally provide that either a party may apply to the arbitral tribunal for correction of any clerical, computational or typographical error within a set time limit, typically within 30 days from the date of the award. It is also generally possible for a party to ask for an interpretation of a specific part of the award within the same time limit. Moreover, if the arbitral tribunal has failed to rule upon any claim presented to it, a party may ask for an additional award in respect of that claim. Such powers can also generally be exercised by the arbitral tribunal on its own initiative.[12]

It should be noted, however, that the powers of the arbitral tribunal to correct or supplement the arbitral award cannot be used to alter the substance of the award to any extent.

The content of an arbitral award

In considering the content of an arbitral award, it is important to distinguish between international best practice on the one hand, and, on the other hand, the minimum content that may be deemed necessary for the award to be considered to be valid and enforceable pursuant to the applicable arbitration law at the seat of arbitration.

Since there are good policy reasons for arbitral awards to be enforceable, the minimum requirements are generally set at a very low level. Nevertheless, international arbitration would not be acceptable as a system of international dispute resolution if arbitrators and arbitral institutions were content to abide by such minimum requirements.

International best practice

International arbitration is inherently flexible, and it is right and proper that there should also be flexibility in relation to the style of drafting of arbitral awards.

Guidelines on the proper drafting of arbitral awards

Nevertheless, it has become increasingly common for arbitral institutions and other organisations to publish guidelines for arbitrators on the proper drafting of arbitral awards. These guidelines include:

  • ICC Award Checklist;
  • IBA Toolkit for Award Writing;
  • Chartered Institute of Arbitrators Practice Guideline on Drafting Arbitral Awards – Part I (General), Part II (Interest); and
  • many private initiatives from law firms and other bodies in different jurisdictions.

It can be suggested that an arbitral award should, at the very least, include the following sections:

  • details of the parties and their counsel;
  • the procedural history;
  • details of the applicable contract, including the arbitration agreement;
  • details of the background facts and circumstances;
  • the claims and arguments advanced by each party;
  • a list of issues, where appropriate;
  • the arbitral tribunal’s detailed reasoning regarding jurisdiction, where applicable;
  • the arbitral tribunal’s detailed reasoning regarding the substantive merits of the case, dealing with each disputed issue in turn; and
  • the operative part of the award.

Minimum requirements

Formal requirements

As noted above, there are various formal requirements under most national laws and arbitration rules that generally need to be complied with.

If an award does not follow the applicable formal requirements, it may be subject to annulment at the seat of the arbitration since such requirements are usually mandatory. Arguably, it could also be an argument for non-recognition in other jurisdictions, although Article V of the New York Convention does not set out such a basis for non-recognition. In practice, however, such formal requirements rarely create any problems – and when errors do occur, it is generally possible for the errors to be corrected as noted above.

Reasons

If there is a requirement under the arbitration law or the applicable arbitration rules, or both, to give reasons, the question arises as to whether a failure to give reasons for all or part of the decision constitutes a valid ground for seeking to set aside the award.

Courts generally set a rather low standard for the requirement to give reasons, partly because of the general policy requirement to ensure that arbitral awards are generally enforceable, and partly because it is recognised that arbitrators are not required to be legally trained and it would therefore be wrong to impose the same standards as may be required of a judge.

In the English case Bremer Handelsgesellschaft mbH v. Westzucker GmbH (No. 2),[13] Lord Justice Donaldson stated:

All that is necessary is that the arbitrators should set out what, in their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. Where [an] . . . award differs from a judgment is that the arbitrators will not be expected to analyse the law and the authorities. It will be quite sufficient that they should explain how they reached their conclusion.

Similarly, in Navigation Sonamar Inc v. Algoma Steamships Limited,[14] an attempt to set aside an arbitral award for lack of reasons was refused, taking account not only what was expressly stated but also what was implicit in the award. The court held that the arbitrators could not be criticised for expressing themselves as commercial men and not as lawyers.

In the Soyak II case,[15] the Swedish Supreme Court decided that only a total lack of reasons would be sufficient to constitute grounds to set aside an award. This was a case under the SCC Rules in which one of the parties sought to set aside the award on the basis of a lack of reasons. The Supreme Court stated, inter alia, as follows:

There can be different reasons for a provision in the arbitration agreement that the award should contain reasons. In the absence of more precise provisions concerning what should be included in the reasons, the parties can also have more or less extensive expectations regarding how the arbitral tribunal should explain its decision-making. However, the question of what the parties with or without justification expected and what can be said to be good practice among arbitrators must be distinguished from whether the arbitral tribunal’s reasoning is so lacking that it constitutes a ground for setting aside the award.
The provision of sufficient reasoning in an arbitral award constitutes a guarantee of legal certainty, since it forces the arbitral tribunal to analyse the legal issues and the evidence. However, the value of having full reasoning for the outcome must be balanced, as regards set-aside grounds, against the interest of having finality. Determination of a challenge to an arbitral award does not provide room to judge the substance of the arbitral tribunal’s decisions. For that reason, and since a qualitative judgment of the reasoning would give rise to significant difficulties in drawing the line between procedure and substance, it follows that only a total lack of reasons, or reasons that in the circumstances must be considered to be so insufficient that they can be equated with a lack of reasons, can be sufficient to constitute a procedural irregularity. On the other hand, where there is such a serious procedural irregularity, it can be presumed that the lack of reasons has affected the outcome of the award.[16]

Scrutiny

The ICC

It is one of the main distinguishing features of ICC arbitration that the ICC Court scrutinises the award as to form before it is issued. Article 34 of the 2017 ICC Rules provides that ‘[b]efore signing any award, the arbitral tribunal shall submit it in draft form to the Court’.

Article 34 goes on to state that ‘[t]he Court may lay down modifications as to the form of the award and, without affecting the arbitral tribunal’s liberty of decision, may also draw its attention to points of substance’.

Thus, the purpose of the scrutiny process is to ensure that the award follows the formal requirements set out in the ICC Rules. In practice, the Court makes proposals for modifications to the award in almost every case. In 2012, the Court approved 483 of 491 awards after making some amendments. Only eight awards were approved without any comment from the Court. In 59 cases, the Court requested that the award shall be resubmitted to the Court for potential approval.[17]

Other institutional rules

Other institutional rules have taken inspiration from the ICC scrutiny. The China International Economic and Trade Arbitration Commission (CIETAC) has a light form of scrutiny; Article 51 of the 2015 CIETAC Rules provides that CIETAC ‘may bring to the attention of the arbitral tribunal issues addressed in the award on the condition that the arbitral tribunal’s independence in rendering the award is not affected’. Thus, CIETAC may raise issues for the arbitral tribunal to consider, but the arbitral award is not formally subject to approval.

The Danish Institute of Arbitration also has a light form of scrutiny. Article 28 of the 2013 Rules provides that the Secretariat ‘may propose modifications as to the form of the award and without affecting the Arbitral Tribunal’s jurisdiction, draw its attention to other issues, including issues of importance to the validity of the award and its recognition and enforcement’, but it is stressed that the responsibility for the contents of the award lies exclusively with the arbitral tribunal.

The German Arbitration Institute’s 2018 Arbitration Rules also include provision for scrutiny of the award (Article 39.3).

The effect of an arbitral award

Finality

One of the main features of arbitration as opposed to domestic litigation is that arbitration is generally a single-instance procedure, without recourse to any substantive appeal on the merits.

England provides a notable exception, since Section 69 of the English Arbitration Act allows for an appeal on a point of law subject to leave of the court. However, it should be noted that this provision is generally only applicable in ad hoc arbitration; institutional arbitration, such as under the ICC or LCIA Rules, generally excludes any appeal on the merits.[18]

All awards that finally decide either some or all of the issues referred to the arbitral tribunal by the parties are ‘final’ in relation to those issues. However, the term ‘final award’ is reserved for those awards that conclude the arbitration proceeding by finally deciding upon all the outstanding issues. A final award in that sense renders the arbitral tribunal functus officio. In other words, the ‘final award’ completes the mandate of the arbitral tribunal.

It is common that the parties set out in the arbitration agreement that the award shall be ‘final and binding’. Further, Article III of the New York Convention provides that ‘[e]ach Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon’. National laws and arbitration rules also generally provide that the award will be final and binding on the parties.

What ‘finality’ really means will depend on the grounds for setting aside awards at the seat of arbitration, and on the enforcement regime at any place where the arbitral award is sought to be enforced. If the state where the award is made and the state where enforcement is sought have ratified the New York Convention, finality usually entails that enforceability of the award may only be refused if there is a serious procedural irregularity or if the award is contrary to public policy. The arbitration laws of New York Convention states generally replicate the rules for recognition and enforcement of foreign arbitral awards as set out in the Convention.[19]


Notes

[1] James Hope is a partner at Advokatfirman Vinge KB.

[2] The New York Convention has been described as the most successful treaty in private international law, having been ratified by 159 countries, as at the time of writing (see www.newyorkconvention.org).

[3] Where the award is actually signed is, under most modern arbitration laws, irrelevant. Section 53 of the English Arbitration Act 1996 negates the effect of the English case Hiscox v. Outhwaite [1992] 1 AC 562, in which the UK House of Lords came to the unfortunate conclusion that an award in an English arbitration was a French award merely because the arbitrator happened to sign the award in France.

[4] See Island Creek Coal Sales Company v. City of Gainesville Florida (1985), 729 F2d 1046, USCA, 6th Circuit; Yahoo! v. Microsoft Corporation, 983 FSupp 2d 310 (SDNY 2013).

[5] See, for example, the 2013 UNCITRAL Rules (Article 34), the 2014 LCIA Rules (Article 26), the 2017 SCC Rules (Article 42) and the 2014 ICDR Rules (Article 30).

[6] See, for example, the 2017 ICC Rules (Article 32(2)), the 2013 UNCITRAL Rules (Article 34(3)), the 2014 LCIA Rules (Article 26.2), the 2017 SCC Rules (Article 42(1)), the 2014 ICDR Rules (Article 30(1)).

[7] See, for example, the 2013 UNCITRAL Rules (Article 34(4)), the 2014 LCIA Rules (Article 26.6), the 2017 SCC Rules (Article 42(3)), the 2014 ICDR Rules (Article 30(2)).

[8] See, for example, Article 31(2) of the UNCITRAL Model Law.

[9] See Articles 2, 49(6) and 50 of the 2017 SCC Rules.

[10] See Articles 35(1), 26.7 and 30(4) of those Rules, respectively.

[11] English Arbitration Act, Section 56.

[12] See, for example, UNCITRAL Model Law (Article 33).

[13] [1981] 2 Lloyd’s Rep 130 and 132.

[14] (1994) XIX YCA 256, Superior Court of Quebec (Rapports Judiciaires de Québec 1987, 1346).

[15] NJA 2009 page 128.

[16] Unofficial translation from the original Swedish.

[17] Webster and Bühler, Handbook of ICC Arbitration, 2014, at 33–1.

[18] See, e.g., Article 26.8 of the 2014 LCIA Rules, which provides that ‘the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other legal authority, insofar as such waiver shall not be prohibited under any applicable law’. See also Article 35(6) of the 2017 ICC Rules, which states that the parties ‘shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made’.

[19] For more information regarding enforcement of awards, see Chapter 9.