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Most text books about international arbitration will begin by describing the concept of arbitration as the leading method of resolving international disputes. They will then move forward step by step from the appointment of the tribunal to the end of the process, culminating in the issue of the tribunal’s final award. The Guide to Challenging and Enforcing Arbitration Awards (the Guide) is not like most text books. It begins at the end of the arbitral proceedings. Its starting point is the tribunal’s final award; it then goes on to discuss the possible fate of that award, in a carefully structured volume of more than 700 pages. The object is to discuss the grounds on which an international arbitral award may be challenged (or set aside) and, conversely, to examine the ways in which it may be recognised and enforced in countries around the world.
This serves as an important reminder to lawyers and their clients that obtaining the final award in an international arbitration may not be the end of the affair. By entering into an agreement to arbitrate, the parties undertake (expressly or by necessary implication) that they will carry out the award, but if the losing party refuses or fails to carry out that basic undertaking, the successful party’s lawyers will need to find out what it takes to enforce compliance. This is the least their clients will expect. As the contributing authors to the first chapter of the Guide comment: ‘We have yet to meet a client who is happy incurring costs to obtain an award they cannot enforce.’ The initiative for the production of the Guide came from the general editor, J William Rowley KC, who is himself a leading international arbitrator. Regular reports in the Global Arbitration Review, and from time to time in the international media, suggested that an increasing number of international arbitral awards were being challenged by the losing party in the courts of the seat of the arbitration (in an attempt to have them set aside) or were simply not being carried out, so that the winning party was obliged to take enforcement proceedings in jurisdictions in which assets of the losing party were thought to be situated.
Mr Rowley decided it was high time a reliable treatise on the subject was published.
The present Guide is this treatise. The first edition proved to be a success, which has led to the production of this second edition, revised and expanded to include additional jurisdictions where issues of challenge, recognition and enforcement are likely to arise. The structure of the book remains the same. Part I deals with general topics, such as the challenge of an award on the basis that the agreement to arbitrate was invalid or that a party was not given a proper opportunity to present its case. These general topics are each discussed by specialist lawyers and are helpful in highlighting the kind of problem that arises in the practice of international arbitration.
Part II of the Guide consists of detailed reports from specialist lawyers in important centres or potential centres of international arbitration around the world. These reports were made in response to a series of questions posed by the editors of the Guide as to the manner in which those lawyers would seek both to challenge and to obtain recognition and enforcement of an international arbitral award in their own jurisdiction. This practical approach gives a valuable insight into the points to be borne in mind, not only in respect of a particular jurisdiction but more generally in considering how to challenge an international award and how to obtain recognition and enforcement of it.
The prospect of another lawyer or team of lawyers being required to resist a challenge to an international award, or to seek its enforcement in a foreign court, is unlikely to be warmly welcomed by a client who has spent a considerable sum of money to obtain that award. It is also a prospect that would appear to contradict the accepted notion that one of the principal advantages of international arbitration is that, unlike judgments of national courts, it benefits from a series of international treaties that provide an effective means of enforcement. In reality, there is no such contradiction. Each different national court will have its own particular, and different, national rules and procedures. But as the Guide makes clear, this does not alter the fact that there is generally a common legal regime behind those different rules and procedures.
This common legal regime has been established principally by three international legal instruments, namely the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the New York Convention), the United Nations Commission on International Trade Model Law on International Commercial Arbitration, 1985 (the UNCITRAL Model Law, as subsequently amended), and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States, 1965 (the ICSID Convention). It is worth looking briefly at each of them.
The New York Convention, which has been correctly described as one of the cornerstones of international commercial arbitration, sets out a relatively simple international legal code. Under this code, awards made in one state (characterised in the Convention as foreign awards) may be challenged, or recognised and enforced, by courts in the territory of another state. The ambit of the Convention is worldwide and more than 160 states are now signatories to it. In principle, the Convention applies to any foreign award on any dispute that is capable of settlement by arbitration. However, states are allowed to make two ‘reservations’ and many states have done so. The first is to limit the ambit of the Convention to disputes that are regarded as ‘commercial’ under that state’s own law; the second, on the basis of ‘reciprocity’, is to limit recognition and enforcement to awards made in the territory of states that are themselves signatories of the Convention.
In Article V, the New York Convention sets out five grounds on which enforcement of an award may be refused, including lack of capacity to arbitrate, excess of jurisdiction by the tribunal and lack of due process – for instance, by failing to give a party an opportunity to present its case. There are two additional grounds for refusing enforcement, based on respect for the law of the country of enforcement. The first is where the subject matter of the dispute is not arbitrable under the law of that country; the second is where enforcement would be contrary to the public policy of that country.
The UNCITRAL Model Law began as an attempt to update the New York Convention.
However, it became apparent that its ambitious target (the harmonisation of the arbitration laws of different countries) could be more effectively achieved by providing a model or uniform law for states to adopt if they saw fit to do so. The Model Law has been a considerable success, as the frequent references to it in the Guide indicate. It has been adopted by more than 60 states worldwide. Even states that have not adopted the Model Law have been careful to follow its format and to have close regard to its provisions.
So far as concerns the recognition and enforcement of awards, the Model Law moves away from the territorial concept of the New York Convention. In countries that adopt the Model Law, it will apply to any international award without regard to the country in which it was made. Importantly, however, the grounds for challenge, recognition and enforcement of awards under the Model Law replicate those of the New York Convention.
The ICSID Convention, to which reference is also made in the Guide, was drawn up to provide an International Centre for the Settlement of Investment Disputes between states and investors who are nationals of other states. The dramatic increase in the number of bilateral investment treaties (or BITs) has led to a considerable number of investor-state disputes, which frequently involve very considerable sums of money. They are also likely to involve considerations of the public interest, as represented by the state concerned. Disputes under the ICSID Convention proceed to arbitration under the ICSID Rules. Unlike other international arbitrations, which may be subject to a certain measure of control under national laws, arbitration under the ICSID Rules is a self-contained, autonomous system; and ICSID awards have the privilege of being enforced under the ICSID Convention as if they were themselves judgments of the national court of the contracting state. Even so, they may encounter problems of annulment and enforcement, as explained in the Guide.
This second edition of the Guide contains detailed replies to the editors’ questions about the challenge, recognition and enforcement of international arbitral awards in additional and important states, including Brazil, China and Turkey. It also contains an important chapter on state immunity (Chapter 14), which makes interesting reading as well as giving sound advice. The chapter makes the point that sovereign states that decide not to pay moneys due under an international award have ‘powerful weapons at their disposal to shield their assets from enforcement’. It is the plea that under generally accepted rules of the ‘comity of nations’, a sovereign state is entitled to claim immunity from suit in a foreign court. It is sometimes said that this entitlement is part of the ‘dignity’ of a sovereign: it is perhaps worth recalling that in a case involving the Nizam of Hyderabad, Lord Denning said: ‘It is more in keeping with the dignity of a foreign sovereign to submit himself to the rule of law than to claim to be above it.’ However, if Lord Denning’s stricture is ignored and the plea of immunity is made, there are ways (as the Guide shows) in which that plea can be successfully countered; and we are told that if the worst comes to the worst, it may even be possible to ‘sell’ the award to investors, who will pursue the claim for payment in return for a share of the proceeds.
The Guide to Challenging and Enforcing Arbitration Awards serves two purposes. Part I gives us a valuable commentary from lawyers around the world on salient issues of international arbitration. Part II will be of particular help and assistance to lawyers who are faced with the task of challenging or enforcing awards in foreign courts. Each of these courts is likely to have its own particular rules of procedure, but most of them will have derived those rules from a common legal regime based on international law.