Thursday, 22 November 2018

Should arbitral awards annulled at the seat of the arbitration be enforced by the courts of other countries?

Article V of the New York Convention could be interpreted as stating that if an award has been annulled by the court of the seat of arbitration, then the courts of other countries must not recognise or enforce the award. This would then be in conflict with Article VII which states that courts must apply domestic law which is more favourable to enforcement of awards. The question is which one of these provisions is more desirable, and I will argue that very different lines of thought concerning enforcement of awards underlie them.
Arguments in favour of enforcing an annulled award: Article VII:
1.     The Convention:
One could argue that one argument in favour of enforcing is that Article VII requires it; however we know that the requirements of the New York Convention are problematic here, and I will be considering more substantive arguments in favour.
2.     Promotes enforcement:
This results in more enforcement, which is the aim of the New York Convention.
3.     Denationalised view of awards:
The argument would be that the law of the home state has no special claim to the award, and so the other countries’ courts are free to enforce an award annulled in foreign courts. This is true in legal theory, but the point is that the Convention has given the home court this special claim, and the question is whether this is justified, rather than whether it is possible.

Arguments against enforcing an annulled award: Article V:
1.     The Convention:
See above
2.     Preserves finality:
If other courts could enforce awards annulled by the home court, then the parties could simply apply to foreign courts for enforcement until one granted it. This would mean that no annulment would ever be final, and would therefore undermine international arbitration. This argument is not necessarily in favour of the home court’s decision being final, but there needs to be some decision which is recognised internationally as final.
3.     The implied choice of the parties:
As above, their needs to be some court decision which is regarded as final regarding the enforceability of the arbitration award. One could argue that the court which has this decision should be determined by the parties. One could argue that the parties have impliedly done this when they chose to submit themselves to arbitration which derives its legal force from the legal system of the country the arbitration takes place in. This should, however, mean that if the parties explicitly choose a different law to determine the final decision, then this should be given effect to.
At the moment, the New York Convention has held that the court with the final say as to the enforceability of an arbitration agreement is the court of the seat of arbitration. There needs to be a court with a final say for international arbitration to work, and it is arguable that this choice gives effect to the implied intentions of the parties, which is a fundamental concern in arbitration law.