The Arbitral Award: Form, Content, Effect

Introduction

Each jurisdiction has its own sovereign power to determine the elements of an arbitral award that is rendered within its territory or in accordance with its laws. Even those jurisdictions that have adopted an arbitration law that is enacted according to the Model Law on International Commercial Arbitration^[2] (the Model Law) may have different perceptions of what constitutes an arbitral award, particularly where and when the jurisprudence shapes the development of the law. Therefore, not only is it impossible to cover in one chapter the requirements on the form, content and effect of an arbitral award for all relevant jurisdictions, it is not necessary, thanks to the individual and specific reports on national jurisdictions in Part II of this guide.

Nevertheless, it is helpful to have an essential understanding of what should and could constitute an arbitral award, specifically on the basis of the most important legal instruments in this regard – the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention (NYC)) and the Model Law. Although in many respects there is a core understanding of what constitutes an arbitral award, it is interesting to note the differences, particularly at the boundaries. Furthermore, for a more comprehensive and systematic view, we have approached the arbitral award from different perspectives. This chapter therefore covers the definition of ‘award’, types of awards, governing law, the content of an arbitral award, the form of the award and the effects of an arbitral award.

Definition of ‘award’

Because the common legal sources, in particular the NYC and the Model Law, do not provide a definition of ‘award’, it is useful to describe what qualifies as an award and what does not.

First, an award is a decision that is rendered by an arbitral tribunal and not by an arbitration institution or by a court. Sometimes, uncertainties could arise if the name of the respective institution could be confused with that of the arbitral tribunal^[3] or if the name of a state court includes a reference to arbitration.^[4] In this context, it should be noted that where the institution makes certain decisions as to prima facie jurisdiction of either the institution or the arbitral tribunal yet to be constituted, those decisions are not to be considered as arbitral awards, as the actual decision on jurisdiction is usually reserved for the competence of an arbitral tribunal.

Another issue that might be controversial is whether an emergency arbitrator qualifies as an arbitral tribunal and, if so, whether his or her decisions would then also qualify as arbitral awards. Although the Singaporean legislator has now clarified that an emergency arbitrator falls under the definition of an arbitral tribunal, so that his or her decisions are enforceable,^[5] other legal commentators would be more hesitant to equate an emergency arbitrator with a proper arbitral tribunal in instances where the legislator has not explicitly answered that question. Since the legal remedy that an emergency arbitrator grants is, by definition, of an interim nature, there are views that – subject to specific language in the arbitration law – an arbitral award is a decision of a proper arbitral tribunal and not of an emergency arbitrator.^[6]

Second, an award is a decision addressing a specific request by the parties to the arbitration (usually the parties’ requests for specific relief). A tribunal may also issue a procedural order (e.g., dealing with procedural provisions to be applied in the arbitration), and that order is not necessarily based on a request by one of the parties. Thus, an arbitral award is a tribunal’s decision about a specific request that a party has put to it.

Third, an award should be final and binding on the parties to the arbitration; in other words, it has res judicata effect. Therefore, once an award is rendered and, with the exception of the procedures on correction of an award or rendering an additional award, the award may not be later revised by a tribunal, which is in contrast to a procedural order or an interim measure issued by a tribunal. Furthermore, the arbitral award is also binding on the arbitrators themselves and they may not – except for the correction of specific errors – amend or revise the award on their own initiative.

Fourth, an arbitral award may be subject to court review in setting-aside and enforcement proceedings. There might also be other court proceedings in which an arbitral tribunal’s decision is reviewed (e.g., a tribunal’s decision whether or not to uphold the challenge of one of the arbitrators or a tribunal’s interim measure), but these usually do not qualify as setting-aside or enforcement proceedings.

Finally, one should note that the distinction between procedural questions and substantive questions (or questions on the merits) is not decisive, as an arbitral tribunal may rule by an award on purely procedural questions, such as on its jurisdiction.

In conclusion, one may say that an arbitral award is a decision of an arbitral tribunal which, upon a specific request by one of the parties, rules on the question in a final and binding manner and is subject to court review in setting-aside or enforcement proceedings.

Types of awards

Different stages of the arbitration

The most common award is the final award that a tribunal renders at the end of an arbitration. A final award should resolve all open questions, both as to procedure and as to merits, and usually also contains a decision on costs.^[7] Typically, one of the orders in the dispositive section of the award would state that ‘all other requests are rejected’ or ‘. . . denied’. By such an order, the tribunal would formally cover all outstanding requests that a party might have raised in the arbitration. However, whether or not the tribunal has also dealt with it on the substance is a different question and would have to be answered by way of interpreting the entire award.

Subject to specific remedies provided for under the applicable arbitration rules, such as on correction of the award or on an additional award, a final award marks the end of the arbitration.

In contrast to that, an interim^[8] award or a partial award deals – as indicated by the term – only with a specific issue in arbitration. An interim award^[9] usually deals with a question that is then considered final and binding for the remainder of the arbitration (e.g., the question of jurisdiction over the entire matter or certain issues in arbitration). Accordingly, an interim award could also deal with questions of the applicable law or the statute of limitations. However, there is no common consensus on a clear terminology and thus, the term ‘interim award’ might also be used in instances where the decision of the tribunal is indeed of a merely interim nature, such as interim relief of an arbitral tribunal or of an emergency arbitrator.^[10]

Although there is no strict distinction between an interim award and a partial award, the latter will typically be rendered when the parties put a number of claims to the tribunal, which then decides on certain claims at an earlier stage and on the remaining claims at a later stage, unless the parties settle regarding the remaining claims, which is often the underlying purpose or intention of having a partial award.

Whether or not a tribunal may render more than one final award (i.e., to decide certain issues in separate awards such as an interim or partial award) is usually subject to party agreement. If the parties have not agreed otherwise, the tribunal’s right to do so would normally be derived from the rules and laws governing the arbitration or, ultimately, from the tribunal’s general power to conduct the proceedings as it deems appropriate.

Article 47 of the UK Arbitration Act 1996 explicitly stipulates that, where the parties have not agreed otherwise, ‘the tribunal may make more than one award at different times on different aspects of the matters to be determined’. Article 188 of the Swiss Private International Law Act (PILA) contains a similar provision. Many other arbitration laws are silent on this question. However, arbitration rules^[11] do include a provision on the tribunal’s power to resolve the matter in more than one (final) award.^[12] In any event, if the parties have agreed that the tribunal should decide all claims in one final award because they want to have expeditious proceedings or, conversely, if the parties agree on a bifurcation of the proceedings, the tribunal should comply with the parties’ agreement if it does not want to risk a setting aside of the award (or awards) or a refusal of enforcement, in particular in accordance with Article V(1)(d) of the NYC. In arbitration proceedings under the Arbitration Rules of the International Chamber of Commerce (ICC Rules), drawing up the terms of reference pursuant to Article 23 of the ICC Rules is often an opportunity for the tribunal to include the provision that it has the discretion to render separate awards.

Content of the award

Although arbitration laws are often silent on different types of awards (particularly with regard to an interim award or partial award), various arbitration laws do refer to an arbitral award that decides on jurisdiction. Articles 186(3) and 190(3) of PILA and Section 592(1) of the Austrian Code of Civil Procedure provide that an arbitral tribunal may decide on its own jurisdiction by way of an arbitral award. The tribunal’s power to make an award on the issue of jurisdiction stems from the principle of Kompetenz-Kompetenz generally acknowledged in inter­national arbitration. According to this principle, a tribunal has the ‘competence’ to say whether it has the ‘competence’ to decide a matter (which would normally be reserved for the courts).

In contrast to such explicit statutory provisions, the Model Law and jurisdictions following this specific concept of the Model Law merely provide that the tribunal may rule on its own jurisdiction ‘either as a preliminary question or in an award on the merits’.^[13] Irrespective of whether a tribunal decides the issue of jurisdiction by way of a separate ‘award on jurisdiction’ or in a different form, this decision is subject to court review. Parties should be aware of the kind of legal remedy that they have against such a decision of the tribunal, in particular where time limits for raising the legal remedy are relatively short (e.g., Section 1040(3), sentence 2 of the German Code of Civil Procedure provides for a deadline of one month to challenge a decision of the tribunal that it has jurisdiction over a certain matter).

Another type of award that is explicitly recognised in arbitration laws or arbitration rules is that of the ‘consent award’ or ‘award on agreed terms’.^[14] Where parties to an arbitration settle their dispute without the need for the arbitral tribunal to rule on the parties’ specific requests, they may consider jointly requesting the tribunal to render an award on agreed terms.^[15] As the term itself indicates, an award on agreed terms is an arbitral award rendered by the tribunal; not merely a settlement agreement approved or recorded by the tribunal. As a consequence, a tribunal must review the content of the ‘agreed terms’ submitted by the parties and make its own assessment. The tribunal may not render an award in breach of the law or public policy at the place of arbitration, or where there are other doubts as to the correctness of the requested award on agreed terms. After all, by transforming the parties’ agreed terms into an arbitral award, the parties’ agreement becomes final and binding and is an enforceable title (particularly under the NYC).^[16]

Although there should be no discussion that a tribunal’s final decision on costs, if it is not included in the award on all remaining issues, may also be included in a cost award, there has been debate concerning the correct form of the decision in another scenario relating to costs: if one party is in default of paying its share of the advance on costs and the other party substitutes that payment. In such a case, the party who has advanced both shares could immediately request the tribunal to order the defaulting party by way of an award^[17] to reimburse the defaulting party’s share without waiting until the end of the arbitration when the tribunal would render the final award, including the tribunal’s decision on costs.^[18]

A term that might sometimes arise and create (legal) confusion is the ‘default award’. As in court proceedings, it may happen that the respondent does not participate in the proceedings. According to many civil procedural laws, the judge may, or might even be required to, render a default judgment by which he or she considers the factual allegations or legal grounds (or both) of the plaintiff to be correct and thus awards the relief requested by the plaintiff without any further review or with only a limited review. In arbitration, this ‘automatism’ is generally not accepted, as the arbitral tribunal usually has the duty to examine whether it has jurisdiction over the matter and whether the relief as requested by the claimant may be granted based on the claimant’s factual and legal assertions.

The Model Law, most arbitration laws and most arbitration rules provide for the possibility to render an additional award, which is actually rendered after the final award. As a principle, an additional award may be rendered only upon the application of a party where the tribunal has omitted a decision on a claim, or a request raised by one party.^[19]

Law governing the award

When making an arbitral award, a tribunal should make sure that it complies with the various legal sources that might be applicable to the award. First, it is the law at the place of arbitration, the lex arbitri, that governs certain important aspects of an award. The law at the place of arbitration would usually not only explicitly stipulate the requirements as to the form and content of the award. From a wider perspective, the law at the place of arbitration sets the framework for the setting-aside regime. Since there should be no uncertainty as to the law at the place of arbitration, it is fair to say that a tribunal has the task and the duty to render an award that should withstand the scrutiny of setting-aside proceedings. In contrast, it is not necessarily possible for a tribunal to foresee the jurisdiction in which enforcement will be sought, and thus a tribunal may not necessarily be aware of all national-specific requirements that would render an arbitral award universally enforceable.

Within the mandatory framework of the arbitration law at the place of arbitration, parties in arbitration usually enjoy a high degree of autonomy to agree on procedural and substantive aspects. Where they have done so, the tribunal should observe any party agreements even though it depends on the jurisdiction as to whether non-compliance with a specific agreement of the parties would lead to a successful challenge of the award.

The law applicable to the merits of the dispute is equally relevant to understand the reasoning and, most importantly, the specific orders of the award in the dispositive section.

It has been widely debated whether arbitrators should apply the NYC since the NYC is addressed to the contracting states and provides mainly for the legal requirements at the enforcement stage, thus after an arbitral award has been rendered. Although this chapter is not a suitable place to continue this debate, it is generally advisable for arbitrators to take into consideration certain grounds for refusal. The most frequent instance that arbitrators might encounter and a situation that is explicitly governed under the NYC is the question of what law governs the substantive validity of the arbitration agreement (Article V(1)(a)). When the arbitrators must determine whether they have jurisdiction over the matter (and the lex arbitri does not provide otherwise), the answer of the conflict-of-law provision under the NYC is clear: it is the law designated by the parties^[20] or, failing any such designation, the law at the place of the arbitration.^[21]

Content of an arbitral award

Both arbitration laws and commonly used arbitration rules require that an arbitral award states the date on which it is made.^[22] The exact date an arbitral award was made has legal implications in various respects.

First, arbitration rules often prescribe that the tribunal should render its award within a certain time limit.^[23] Although time limits are generally seen as being of a purely ‘administrative’ nature and extensions are granted for specific reasons (by the arbitration institution), the rendering of the award outside a prescribed time limit may be used by an unsatisfied party to challenge the award. Apart from such legal aspects in a narrow sense, calculating the amount of time taken by the tribunal to render an award may have an effect on the financial remuneration of the arbitrators or at least serve as a useful tool for evaluating the efficient conduct of the arbitration.

Second, the date of the award may be the starting point for calculating the time limit for a correction or interpretation of the award. Although Section 57(4) of the UK Arbitration Act applies this starting point to both applications by a party and the tribunal’s own initiative, other rules count from the date of the award only if the tribunal adopts a correction on its own initiative.^[24]

Third, when a party intends to raise a legal remedy, the starting point for the calculation of the relevant time limit is usually not the date of the award but the date of notification to that party. This applies to applications for correction, interpretation and an additional award as well as to setting-aside claims.

Another important substantive requirement is indicating the place of arbitration. Although there might be arbitrations without a place of arbitration,^[25] the common perception is that either the parties have agreed on a place prior to the dispute (in particular in the arbitration agreement) or after the dispute has arisen. Agreement on the place of arbitration may also be reached by reference to where the chosen arbitration rules have a default provision in the event that the parties do not explicitly designate a place of arbitration.^[26] Alternatively, if the parties cannot agree on the place of arbitration, not even by a default mechanism, in institutional arbitration it is either the institution (e.g., the court in proceedings under the ICC Rules pursuant to Article 18(1)) or the tribunal (e.g., under Article 22.1 of the DIS Rules^[27]) that determines the seat. Arbitration laws commonly provide for the tribunal’s competence to decide this question absent any agreement of the parties. The place of arbitration thus determines which law is applicable to arbitration and consequently the mandatory rules for any setting-aside claim (or other legal remedies against the award).

Furthermore, under the concept of the NYC, a contracting state has the obligation to recognise and enforce a foreign award; that is, an award that has been rendered or that has been made under the laws of a country other than the jurisdiction of enforcement.^[28] Therefore, indicating the place of arbitration entails important legal implications particularly with regard to the determination of the legal provisions for setting-aside and enforcement proceedings.

Another substantive mandatory requirement that is regularly mentioned in arbitration laws and arbitration rules is the reasoning.^[29] The reasoning is not limited to the legal reasons for the decision on the parties’ requests, but should also include an overview of the procedure and the tribunal’s finding of the relevant facts based on the taken evidence. In comparison to other arbitration laws, Articles 1481 and 1482 of the French New Code of Civil Procedure indicate in some detail the various items that should be included in an award. Arbitrators should pay attention to whether parties are allowed to waive the reasoning^[30] or whether even in the case of an award on agreed terms, the reasoning must be included unless otherwise agreed by the parties.

Although, in general, the ‘wrong’ finding of facts or a simple ‘wrong’ application of the law would not lead to a successful challenge of the award (be it in setting-aside or enforcement proceedings), the lack of the entire reasoning or an insufficient reasoning might lead to the conclusion that the proceedings were not conducted in a fair manner or that a party’s right to be heard has been violated. Thus, based on the NYC, a flawed reasoning of the award might constitute a ground for refusal under Article V(1)(b)^[31] or the corresponding ground for setting aside under Article 34(2)(a)(ii) of the Model Law.

Many institutions in the arbitration community have developed helpful tools for arbitrators to draft proper and complete awards.^[32] Even though it is rarely explicitly mentioned in arbitration laws and arbitration rules, one part of an award that is of essential relevance to the parties is the dispositive section, in which the arbitrators phrase the actual orders regarding what a party must do or should refrain from doing. The dispositive section is usually the most relevant part, or at least the starting point for the enforcement court and for any measures of execution to be taken in that country. The most common order is the order for payment of a specific amount of money. However, questions may arise if the award orders payment in a specific currency and if and how that currency may or should be converted if it is not the official currency in the country of enforcement or not even recognised in that country. In recent times, an enforcement creditor might also face – be it practical or legal – challenges if the award orders the payment or transfer in a cryptocurrency.

Another aspect in the dispositive section is the order that the debtor should pay interest. Particularly in countries where Islamic law is relevant, interest could be an issue, and it may be advisable to make a distinct separation in the award so that a partial enforcement would be an option for the enforcement creditor.

In general, both the parties when phrasing their final requests for relief (for instance in the post-hearing briefs) and the arbitrators when writing the award should pay particular attention to the language of the dispositive section. In a recent decision of the Swiss Federal Court as the final instance in enforcement proceedings, the enforcement of a cost decision against two award debtors was denied, as it was unclear whether the debtors were jointly and severally liable.^[33]

Form of the award

Under most arbitration laws and particularly under the NYC (as well as under the Model Law), an arbitral award should be in writing.^[34] In other words, an oral announcement of the tribunal’s decision would – other than with court judgments in many jurisdictions – not qualify as an award. If a tribunal is empowered to render an oral award, that award would not be enforceable under the NYC, although it might be enforceable under applicable domestic provisions.^[35]

Although the ‘writing requirement’ may be undisputed in a theoretical sense, and having hard copies of the arbitral award has been the rule until recently, digitalisation of the legal industry can lead to new technical possibilities that entail new legal challenges: particularly during the covid-19 pandemic, the electronic signing and transmission of documents has become a vital part of conducting proceedings. Although modern arbitration laws and rules have adopted explicit language to include electronic communication, explicit provisions regarding the electronic or digital condition or transmission of arbitral awards are still rare. For instance, Article 36(5) of the Vienna Rules^[36] allows the Secretary General of the Vienna International Arbitral Centre to send a copy of the award in electronic form ‘if it is not possible or feasible to send the award in hardcopy form within a reasonable time’. Article 26.7 of the Arbitration Rules of the London Court of International Arbitration (the LCIA Rules)^[37] goes one step further and considers electronic notification to be the rule and even to prevail in the event of any disparity between the electronic and hard copy of the award.

Although the NYC does not explicitly mention that an arbitral award needs to be signed by the arbitrators, Article IV(1)(a), which stipulates the ‘duly authenticated award’ as a requirement for enforcement, implies the assumption that the award must bear the arbitrators’ confirmation in some manner. All relevant arbitration laws and arbitration rules explicitly require the signatures of the arbitrators. Until recently, this has been understood as a wet-ink signature on a paper hard copy. It is interesting to note that Article 26.2 of the LCIA Rules provides that the award may also be signed electronically.

In this context, there is also the eIDAS Regulation of the European Union,^[38] which regulates technical requirements and legal effects of electronic signatures. More specifically, Article 25.2 stipulates that a qualified electronic signature (QES) has the ‘equivalent legal effect of a handwritten signature’. This provision may be relevant where arbitration laws and arbitration rules refer to the ‘signature’ of the arbitrators as a requirement of an arbitral award. There are good reasons to assume that a QES fulfils the signature requirement under the various provisions in any event, but that other forms of electronic signing, such as an ‘advanced electronic signature’ under Article 26 of the eIDAS Regulation would be subject to interpretation by the relevant state authorities.

Effects of an arbitral award

An arbitral award must be notified to the parties to the arbitration in order to become final and binding on them. Both arbitration laws and arbitration rules usually stipulate that an arbitral award must be notified to the parties. When an institution administers the arbitration, the rules usually provide that the institution notifies the award. In ad hoc proceedings, this is the duty of the arbitrators. Where a party has not participated in the arbitration, or the factual delivery of documents, including the arbitral award, faces difficulties, it might be questionable whether the notification can be effectuated by the application of (legal) fictions of notification. Questions could also arise when an award orders that the debtors are jointly and severally liable but the award cannot be notified to all award debtors.

An arbitral award is binding not only on the parties but also on the arbitrators. Thus, with the exception of the limited grounds for a correction of the award, which may also be performed on the tribunal’s own initiative, the arbitrators may not amend or revise the award.

In some jurisdictions, an award may be deposited, or perhaps must be deposited, with a competent authority. Although this may have legal implications for the domestic legal effects of the award, it is generally recognised that the fulfilment of any such requirement is not relevant under the NYC.^[39] In other jurisdictions, the arbitral award requires a declaration of enforceability in order to have the same, or at least comparable, legal effects as a court judgment in that jurisdiction. In any event, the intention of the NYC was clearly to facilitate the enforcement of foreign awards. Thus, whatever might be necessary for a domestic award to become final and binding or enforceable may not be construed as an additional legal impediment that is not provided under the NYC.^[40]

Whether an award is truly ‘final’ and only subject to setting-aside proceedings at the place of arbitration is a matter of party agreement and the law at the place of arbitration. Although it is conceivable that parties could agree on an ‘appeal tribunal’ that reviews the award as an appellate body, this is rarely the case and would undermine the advantages of arbitration proceedings.

Notes