International Arbitration: Lecture 13

International Arbitration: Lecture 13
Dr. Matteo Zambelli
[email protected]
University of West London
School of Law
1
Overview
A. Types of Arbitration Awards.
B. Enforcement of Arbitration Awards.
C. Non Enforcement of Arbitration Awards.
D. Q&A.
2
Types of Arbitration Awards
An award contains the tribunal’s decision on the substantive issues raised before
it in the arbitration. As such, an award differs from a procedural ruling, which is not
final and can be reopened by the tribunal but cannot be challenged before the
courts in an appeal.
An award will contain the tribunal’s decision determining the issues in dispute
between the parties that it has been asked to resolve, whereas a procedural ruling
will deal with matters of procedure, often involving questions of discretion (see
Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd (The Smaro)
[1999] 1 Lloyd’s Rep 225).
There are 3 main types of awards:
Partial awards.
Provisional awards.
Agreed awards.
3
Partial awards
A partial award disposes finally of some, but not all, of the issues that arise in the
arbitration. Partial awards used to be known as “interim awards”, but the
Departmental Advisory Committee (
DAC) felt this was a misnomer because it
gave the impression that the award was in some way not final. In fact, the partial
award is final as to the claims that it addresses, and under the Arbitration Act
1996, it is simply referred to as “award”.
Section 47(1) of the Arbitration Act 1996 (“awards on different issues”) confers on
the tribunal the power to make a partial award. It states that, unless the parties
agree otherwise, the tribunal “may make more than one award at different times
on different aspects of the matters to be determined”. Examples given in section
47 are awards relating to “an issue affecting the whole claim” or to “a part only of
the claims or cross-claims submitted to it for decision”.
4
(cont.)
The power conferred by section 47(1) can be excluded by agreement
(though this would be relatively rare). It is a discretionary power, and the
tribunal will decide whether a partial award would be fair or appropriate in
the light of its mandatory duties under section 33. Section 47(3) requires
the tribunal to specify in any partial award “
the issue, or the claim or part
of a claim, which is the subject matter of the award
“.
Some institutional rules also confer power on the tribunal to make partial
awards (for example, see article 2(v), ICC Rules (2012, 2017 and 2021),
article 34.1, UNCITRAL Rules (2010 and 2013), article 32.1 and article
26.1, LCIA Rules (2020)).
A partial award has the same effect in law as an “ordinary” award. It is
final and binding on the parties (within the meaning of section 58(1)),
with all the consequences that entails.
5
(cont.)
It is common, normally at the early stages of the arbitral proceedings, such as at a
preliminary procedural meeting, for the parties to raise and the tribunal to decide,
whether the proceedings should be split into discrete issues, such as jurisdiction,
liability and quantum. If this happens, then each time the tribunal makes an award
on these separate issues it will be issuing a partial award.
In addition, the need for a partial award may arise during the course of
proceedings where it becomes apparent that the determination of a factual or
legal issue is likely to enhance the possibility of the remaining issues being
settled. Deciding whether to apply for a partial award will usually involve
considering the overall prospects of settlement and how the partial award may
affect these.
A partial award may also be appropriate where there is a claim that is indisputably
due (or indisputably not due). In the former case, difficult issues may arise where
the defendant wishes to assert a set-off that may operate to reduce or extinguish
the amount which would otherwise be due.
6
Provisional awards
A provisional award is a very different type of award. Some
commentators have doubted whether it should be called an award at all.
A provisional award grants, on a provisional basis, a remedy which the
tribunal would have the power to grant in its final award. Because it is
provisional, it is subject to final adjustments in the tribunal’s final award. It
roughly corresponds to the court’s power to order interim payments.
The Arbitration Act 1996 recognises the tribunal’s power to grant
provisional relief if the parties confer such a power by agreement (see
section 39(1), Arbitration Act 1996). Section 39 provides that the parties
are: “
free to agree that the tribunal shall have power to order on a
provisional basis any relief which it would have power to grant in a final
award
.” A number of arbitral rules provide that the tribunal shall have that
power, and if the parties have agreed to arbitrate in accordance with
those rules, then that will evidence such an agreement (see for example,
article 25(1)(iii), LCIA Rules 2020; article 28(1), ICC Rules 2021).
7
(cont.)
Section 39 gives examples of the types of provisional relief that the tribunal may
grant:
A provisional order for the payment of money or the disposition of property between the
parties.
An order to make an interim payment on account of the costs of the arbitration.
As section 39(3) makes clear, any such order “shall be subject to the tribunal’s
final adjudication; and the tribunal’s final award, on the merits or as to costs, shall
take account of any such order”. Apart from stating that the relief should be that
which the tribunal “would have power to grant in a final award”, section 39 does
not contain any limitations on the type of order that can be made.
Because a provisional award is not, truly, a final “award” at all, it is very difficult to
challenge it. Its lack of finality means that it cannot be appealed.
8
Agreed awards
An agreed award records a settlement concluded by the parties. By recording the
settlement in an award, the successful party secures the benefit of the summary
enforcement mechanisms under the Arbitration Act 1996 and, overseas, the
benefit of the enforcement provisions of the New York Convention in contracting
states. If the settlement merely takes the form of an agreement, enforcement
would be much more complex, and would require the party to issue court
proceedings to enforce the settlement agreement.
Section 51(2) of the Arbitration Act 1996 (modelled on article 30 of the UNCITRAL
Model Law) provides that, if claims are settled during arbitral proceedings, the
tribunal “shall terminate the substantive proceedings and, if so requested by the
parties and not objected to by the tribunal, shall record the settlement in the form
of an agreed award”. The power to issue an agreed award can be excluded by
agreement (section 51(1), Arbitration Act 1996), but this is relatively rare.
The agreed award is required to state that it is an award of the tribunal (section
51(3), Arbitration Act 1996).
9
(cont.)
An agreed award is easier to enforce than a settlement agreement. However, the
tribunal may only issue an agreed award when it is requested to do so by both (or
all) of the parties.
A party should therefore ensure that any settlement in his favour includes a term
requiring the issue of an agreed award pursuant to section 51 of the Arbitration
Act 1996. Such party should usually ensure that costs are dealt with as part of the
settlement. If he fail to do so, the tribunal will retain the power to award and
assess costs (section 51(5), Arbitration Act 1996). Similarly, one should ensure
that interests are dealt with as part of the settlement: once the agreed award has
been issued, and the substantive proceedings concluded, the tribunal will no
longer have power to entertain any claim for interest.
The tribunal will retain jurisdiction and will not be functus officio following a
settlement until a final, agreed award is made disposing of all issues, including
costs and interest (see
Martin Dawes v Treasure & Son Ltd [2010] EWHC 3218).
10
Recognition and enforcement of arbitral awards
One advantage of international arbitration over litigation is the existence of an
effective and far-reaching enforcement regime in the form of the New York
Convention. Enforcement of arbitral awards is, accordingly, generally perceived as
being easier than enforcement of judgments.
Signatory states to the NY Convention are permitted to make certain reservations
(see
Article I.3, New York Convention), in particular:
Reciprocity reservation. States may limit the applicability of the New York Convention
to awards made in other contracting states. Therefore, it is necessary to check whether
both the state where enforcement is desired and the state where the award was made
are contracting states (the UK and the US have made this reservation).
Commercial reservation. States may limit the applicability of the New York Convention
to awards relating to commercial matters.
11
(cont.)
There is a fundamental difference between the terms “recognition” and
“enforcement”.
“Recognition” means the acceptance of a foreign award as having the same effects as a
domestic award. The award may accordingly be relied on by way of defence, set-off or
otherwise in any legal proceedings (section 101(1), Arbitration Act 1996).
“Enforcement” means giving an award the same effect as a domestic court judgment.
The court is not ordering execution measures, but merely issuing a declaration of
enforceability, which then serves as the official basis of further execution.
An award may be recognised without being enforced, but if the award is enforced,
it must necessarily first be recognised by the court ordering the enforcement.
Despite the existence of the New York Convention, practical problems can arise in
connection with enforcement. I.e. enforcing an award against an insolvent
respondent will be problematic. The claimant will rank alongside other unsecured
creditors, behind preferential payments such as the expenses of winding up and
secured creditors (see sections 107 and 148 of the Insolvency Act 1986 and rules
4.181 and 4.182 of the Insolvency Rules 1986).
12
(cont.)
The Model Law has shaped the recognition and enforcement rules on the relevant
provisions of the New York Convention. Under article 35 (1) any arbitral award,
irrespective of the country in which it was made, shall be recognized as binding
and enforceable, subject to the provisions of article 35 (2) and of article 36 (the
latter of which sets forth the grounds on which recognition or enforcement may be
refused).
Based on the desire of overcoming territorial restrictions, reciprocity is not
included as a condition for recognition and enforcement.
The Model Law does not lay down procedural details of recognition and
enforcement, which are left to national procedural laws and practices. The Model
Law merely sets certain conditions for obtaining enforcement under article 35 (2).
13
(cont.)
The proceedings for the recognition and enforcement of awards under article 35
are court proceedings, and the procedural rules of the country where recognition
and enforcement is sought apply to such proceedings. The law of the State where
recognition and enforcement is sought is also relevant for the determination of
time limits within which a party must apply for the relevant action.
The court’s power under article 35 is limited to decide whether the award will be
recognized and enforced in its own jurisdiction, and cannot extend to the setting
aside of an award.
Whether a decision by an arbitral tribunal constitutes an arbitral award is
determined primarily on the basis of the law of the State where recognition and
enforcement is sought. Awards on agreed terms have been recognized and
enforced on the same terms as any other arbitral awards (see
Bundesgerichtshof,
Germany
, III ZB 55/99, 2 November 2000). Also, preliminary rulings in the sense
of article 16 (3) in which the arbitral tribunal confirms its jurisdiction have been
declared enforceable, at least where they contain a final decision on cost (see
Bundesgerichtshof, Germany, III ZB 35/06, 18 January 2007).
14
(cont.)
In the UK an award which is, on its face, valid will be enforced by the court, unless
the respondent raises a defence to enforcement. The award debtor must produce
the award and the arbitration agreement to the court. The burden then shifts to the
respondent to raise a defence to enforcement, failing which judgment will be
entered in terms of the award.
The available defences vary according to the applicable enforcement regime.
Under the Arbitration Act 1996:
Sections 100 to 103 provide for enforcement of arbitral awards under the New York
Convention.
Section 66 applies to all domestic or foreign arbitral awards.
Enforcement under section 66 or as an action on the award will be more difficult
than enforcement under the New York Convention, which specifies very limited
grounds for refusing recognition and enforcement. The grounds for refusing
recognition and enforcement at common law and under section 66 are broader
and less closely defined. Therefore, a party should only consider enforcement
under section 66 or as an action on the award if it is not possible to bring the
enforcement proceedings under one of the applicable Conventions.
15
Defences to enforcement
The grounds on which recognition or enforcement may be refused are listed in
article V of the New York Convention (identical provisions are found in Article 36 of
the Model Law).
Article V of the New York Convention provides for limited grounds on which the
enforcement of a Convention award can be refused:
The parties to the agreement were under some incapacity, or the agreement is not valid
under the law to which the parties have subjected it.
The party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings.
The award deals with a difference not contemplated by or not falling within the terms of
the submission to arbitration.
The composition of the arbitral authority was not in accordance with the agreement of the
parties.
The award has not yet become binding on the parties, or has been set aside or
suspended.
16
(cont.)
Article VII.1 of the New York Convention provides that its provisions do not
deprive any interested party of any right he may have to avail himself of an arbitral
award in the manner and to the extent allowed by the law of the treaties of the
country where such award is sought to be relied upon
.”
This provision (the “more favourable right” provision) allows the application of
domestic rules relating to the recognition and enforcement of foreign awards which
are more favourable than those set out in the Convention. The enforceability of
awards therefore varies even as between signatories to the New York Convention.
Exequatur: in some jurisdictions an additional step is required where a party
seeking recognition and enforcement of an arbitral award has to first seek
exequatur, which is a declaration by which the award is given the same status as a
national judgment.
17
(cont.)
The New York Convention grounds are enacted in English law in section 103 of the
Arbitration Aact 1996. The courts have discretion to enforce an award even if one
of the grounds set out in sections 103(2) and (3) has been established. In
China
Agribusiness Development Corporation v Balli Trading
[1998] 2 Lloyd’s Rep 76,
Longmore J held that: “
It is clear from the terms of the statute that refusal to
enforce a convention award is a matter for the discretion of the court.

However, even where a party has good grounds for challenging the recognition
and enforcement of the award, the discretion of the court may be limited (
Yukos Oil
Co v Dardana Ltd
[2002] EWCA Civ 543).
Apart from issues of arbitrability and public policy (which the court may consider of
its own motion), the burden of proof rests squarely on a respondent who resists
enforcement to prove the existence of one of the grounds of refusal (
Rosseel NV v
Oriental Commercial Shipping Ltd
[1991] 2 Lloyd’s Rep 625).
18
(cont.)
A party to the arbitration agreement was (under the law applicable to him)
under some incapacity
: the incapacity is to be judged under the law applicable
to the party to the arbitration agreement.
The incapacity may relate to the age or competence of a party to enter into the
arbitration agreement.
Alternatively, it may relate to whether the party is prohibited from entering into an
arbitration agreement by the law applicable to it.
The defence of incapacity has never been raised in enforcement proceedings in
England in relation to a New York Convention award.
A court in Uganda held that the existence of incapacity of a party to the arbitration
agreement must be assessed when the parties entered into the arbitration
agreement (
SDV. Transami Ltd. v. Agrimag Limited et al., Kampala High Court,
Commercial Division, Uganda, 19 June 2008).
19
(cont.)
The arbitration agreement was not valid under the law to which the parties
subjected it or, failing any indication thereon, under the law of the country
where the award was made
: the invalidity refers to a defect in the arbitration
agreement rather than the incapacity of the parties or arbitrability.
If the parties have not indicated the governing law of the arbitration agreement then
the validity of the arbitration agreement is determined by the law of the country
where the award was made. The English court will interpret this to mean the law of
the seat of the arbitration and will have regard to that country’s substantive rules of
law, rather than its conflicts of law rules (see
Dallah Real Estate & Tourism Holding
Co v Ministry of Religious Affairs
[2010] UKSC 46 although see the UK Supreme
Court’s decision in
Enka v Chubb [2020] UKSC 38).
Awards rendered against non-signatories, which cannot be considered to be parties
to the arbitration agreement, have in general not been declared enforceable. By
contrast, defences based on an alleged lack of precision have rarely been
successful.
20
(cont.)
A party was not given proper notice of the appointment of the arbitrator or
of the arbitration proceedings, or was otherwise unable to present its case
:
the English courts have interpreted this provision as meaning that the
requirements of natural justice should be met.
In Minmetals Germany GmbH v Ferco Steel Ltd [1999] CLC 647, Colman J stated
that this provision imposed “
the requirements of natural justice reflected in the
audi alteram partem rule
” (at page 656) (this is the rule that a fair opportunity to
be heard is a fundamental principle of justice (
R v Chancellor of Cambridge
University
(1723) 1 Stra 557)).
This provision contemplates that the enforcee has been prevented from
presenting his case by matters outside his control, which will normally cover the
case where the procedure adopted has been operated in a manner contrary to the
rules of natural justice (see
Cukurova Holding AS v Sonera Holding BV [2014]
UKPC 15).
21
(cont.)
The award deals with a difference not contemplated by or not falling within
the terms of the submission to arbitration or contains decisions on matters
beyond the scope of the submission to arbitration
: this refers to the tribunal’s
obligation to deal only with the matters that are referred to it under the arbitration
agreement. Where the tribunal deals with matters that do not fall within its
jurisdiction, partial enforcement of the award may be possible, but only where the
courts can identify the areas of the award that are not outside the jurisdiction of
the tribunal.
The composition of the tribunal or the arbitral procedure was not in
accordance with the agreement of the parties or, failing such agreement,
with the law of the country in which the arbitration took place
: where the
parties have made an agreement for the appointment of the tribunal and the
conduct of the arbitration, enforcement of any subsequent award may be refused
if this agreement has not been complied with. In each case the court will examine
the agreement and decide whether a party has waived the breach of the
agreement. In some cases this may occur by the party not objecting at the outset,
or within a reasonable time after the breach took place.
22
(cont.)
The award has not yet become binding on the parties, or has been set aside
or suspended by a competent authority of the country in which, or under the
law of which, it was made
: this contemplates any of the following three sets of
circumstances: (a) the award has not become binding; (b) the award is set aside;
(c) the award is suspended.
An award is generally binding as soon as the tribunal makes it. However, the rules
of arbitration may provide that, prior to the award becoming binding, it must be
approved by an arbitral institution. Alternatively, the laws of the seat of the
arbitration may require some formality to be undertaken before the award obtains
a binding status. An award that is annulled or set aside is no longer binding on the
parties (
Beiser v Ibolya Weyler, 19 March 2002, United States Court of Appeals,
Fifth Circuit, No 01-20152; 284 Federal Reporter, Third Series (5th Cir 2002)
pages 665-675). A party who alleges that an award is not binding has the burden
of proving this (
Rosseel NV v Oriental Commercial Shipping Ltd, Yearbook Comm
Arb’n XVI (1991), page 615).
23
(cont.)
The award is in respect of a matter not capable of settlement by arbitration:
the enforcing court applies its own law in deciding whether a matter is capable of
settlement by arbitration or not.
Under English law, matters that would not be capable of settlement by arbitration
would include decisions that:
Affect the legal status of the parties.
Affect the legal status or rights of non-parties.
Are not quasi-judicial (for example, valuations, mediations and appraisements).
A court, applying this held that an award for costs cannot be enforced against a
person who was not party to an arbitration agreement but was found by an
arbitrator to be a party to the arbitral proceeding. The court considered the
provisions of the New York Convention and the Model Law, and concluded that
only a party named in the arbitration agreement could be subjected to
enforcement proceedings under the relevant international instruments (
Javor v.
Francoeur, Supreme Court of British Columbia
, Canada, 6 March 2003).
24
(cont.)
Enforcement of the award would be contrary to public policy to recognise or
enforce the award:
the public policy defence should be applied only if the arbitral
award fundamentally offended the most basic and explicit principles of justice and
fairness in the enforcement State, or evidences intolerable ignorance or corruption
on part of the arbitral tribunal.
The public policy defence was considered in Westacre Investments v JugoimportSDPR Holding Co Ltd [1998] 2 Lloyd’s Rep 111. A distinction is made between
domestic public policy and public policy as it applies to the enforcement of
international arbitration awards. The Court of Appeal held that it was difficult to
see why acts, outside the field of universally condemned activities (such as
terrorism, drug trafficking, prostitution, paedophilia), or anything short of corruption
or fraud in international commerce, should invite the attention of English public
policy where the contracts are not performed within the jurisdiction of the English
courts.
25
(cont.)
Procedural public policy: In Oberlandesgericht München, Germany, 34 Sch
26/08, 22 June 2009, it was held that procedural public policy was violated only if
the award was the result of a procedure which differed from the fundamental
principles of procedural law of the enforcement State, or, if it could not be
considered the result of a fair and constitutional procedure, because it contained
substantial errors touching upon the very foundations of public and economic life.
According to the German court, such fundamental principles are the right to be
heard and the right to actively participate in the proceedings.
Substantive public policy: it concerns primarily the content of the award.
Consequently, courts in several jurisdictions have repeatedly stated that ensuring
conformity with substantive public policy did not permit a review of the merits of
the case. The principle of proportionality as a part of public policy has been
invoked by parties in various instances where they disagreed with the amount
awarded regarding either performance or breach of a contract, or costs. Only
extreme violations of the principle of proportionality can constitute a violation of
public policy. The mere fact that the arbitral award violated certain laws or
regulations of the enforcement State was not sufficient to constitute a violation of
public policy.
26
Mandatory and Discretionary grounds for refusing
enforcement in the UK
Section 66 of the Arbitration Act 1996 – mandatory grounds: the court will not
grant leave to enforce an award where the defendant shows that the tribunal
lacked substantive jurisdiction to make the award (section 66(3)). This is the only
mandatory ground for refusing leave to enforce an award under section 66.
However, the right to raise such an objection may have been lost if the objection
was not raised without delay under section 73 or within 28 days of the date of the
award (section 70(3)).
Section 66 of the Arbitration Act 1996 – discretionary grounds: the courts
have also recognised certain grounds on which enforcement may be refused as a
matter of discretion. These grounds are not exhaustive, but generally correspond
to the defences for enforcement of a New York Convention award. Thus, the court
may refuse leave to enforce the award where the award is defective or
ambiguous, or where the applicant has waived its right to have the award
enforced by seeking to enforce it out of time.
27
(cont.)
Estoppel: an applicant may be estopped from having an award enforced by reason of
there being a foreign judgment on the merits of the action, or because the enforcement
proceedings are time barred.
In Good Challenger Navegante v Metalexportimport [2003] EWCA Civ 1668, the
Romanian Supreme Court refused to enforce an award made in London on the ground
that the enforcement proceedings were time barred under Romanian law. Under
Romanian law a foreign award was unenforceable if it was time barred under the
limitation rules of both Romanian law and the law applicable to the arbitration, which in
this case was English law. Good Challenger Navegante sought to have the award
enforced in an English court and Metalexportimport claimed that they were estopped
from doing so as the issue had been decided in the Romanian court. The Court of
Appeal confirmed the order to enforce the award and held that to establish an issue
estoppel arising from the judgment of a foreign court, the following 4 conditions had to
be satisfied:
The judgment had to be given by a foreign court of competent jurisdiction.
The judgment had to be final and conclusive and on the merits.
There had to be privity between the parties.
There had to be identity of subject matter in that the issue decided by the foreign court had to be the
same as that arising in the English proceedings.
28
(cont.)
In Yukos Capital SARL v OJSC Rosneft Oil Company [2012] EWCA Civ 855 the
issue of estoppel was considered in the context of proceedings to enforce four
Russian awards that had been annulled by the Russian courts. In enforcement
proceedings in the Netherlands, the Amsterdam Court of Appeal decided that the
annulment decisions should not be recognised because they were the result of a
partial and dependent judicial process. In subsequent proceedings in the English
Commercial Court to recover interest on the awards, Yukos argued that the
annulment decisions should not be recognised by the English court because they
offended against English principles of substantial justice.
Hamblen J held, as a preliminary issue, that Rosneft was issue estopped, by the
Amsterdam court’s decision, from denying that the annulment decisions were the
result of a partial and dependent judicial process. However, the Court of Appeal
allowed an appeal against that part of Hamblen J’s decision and held that the
issue to be decided in the English court was not the same as that in the Dutch
court because public policy was invariably different in each country.
29
Enforcement in England: procedure
The procedure for enforcement in England is as follow:
The award debtor applies, without notice and on paper, for an order giving permission to
enforce.
If the court grants the order, the defendant has a limited time in which to apply to set it
aside.
Note that, although commonly described as a “summary” procedure, the court can
determine factual issues (
Sovarex SA v Romero Alvarez SA [2011] EWHC 1661
(Comm)).
The application may be made in respect of the entirety of the award or any part of
the award (including interest or costs) that remains unpaid. However, the court
cannot cure a deficiency within the award in its enforcement order (
Walker v
Rowe
[2000] 1 Lloyd’s Rep 116).
An application for permission to enforce an award is made without notice in an
arbitration claim form, although the court may nevertheless require that the
application be served on the other party (CPR 62.18(1) and (2)).
30
(cont.)
The court will either:
Make the order sought on a without notice basis, in which case the order must state the
right of the award debtor to apply to set the order aside (CPR 62.18).
If it wishes to hear submissions from the award debtor, specify parties to the arbitration
on whom the arbitration claim form must be served.
In Norsk Hydro ASA v State Property Fund of Ukraine and others [2002] EWHC
2120 (Comm), it was held that: “
There is an important policy interest, reflected in
this country’s treaty obligations, in ensuring the effective and speedy enforcement
of such international arbitration awards; the corollary, however, is that the task of
the enforcing court should be as ‘mechanistic’ as possible
.” (para 17)
Therefore, the process of enforcement under the New York Convention simply
requires the court to give judgment “in terms of the award” itself and does not
permit a review of the award.
31
(cont.)
Unless the court orders otherwise, an arbitration claim form must be served on the
defendant within one month from the date of issue (CPR 62.4(2)). Where the
arbitration claim form is served by the claimant, he must file a certificate of service
within seven days of service of the arbitration claim form (PD 62.3.2).
The parties on whom the arbitration claim form is served must acknowledge service
and the enforcement proceedings will continue as if they were an arbitration claim
under the Arbitration Act 1996. With the permission of the court, the arbitration
claim form may be served out of the jurisdiction irrespective of where the award is
made, or is treated as made (CPR 62.18(4)).
The order granting permission to enforce must be served on the defendant by
delivering a copy to him personally, or sending a copy to him at his usual or last
known place of residence or business. Within 14 days after service of the order or,
if the order is to be served out of the jurisdiction, within such other period as the
court may set:
The defendant may apply to set aside the order (CPR 62.18(9)(a)).
The award must not be enforced until after the end of that period, or any application made by the
defendant within that period has been finally disposed of (CPR 62.18(9)(b)).
32
Issues with enforcement
Where there are claims to set aside or suspend the award pending in a
foreign court, the English court may “adjourn the decision on the
recognition or enforcement of the award” until the challenge has been
finally determined (section 103(5), Arbitration Act 1996). This provision
fails to recognise that, in most cases, the court will grant an order giving
permission to enforce the award on a without notice application.
By the time the defendant has learned of the enforcement proceedings
(and the order), it will be too late for an adjournment: what is needed,
instead, is a stay of execution of the order, under CPR 83.7. In
Yukos Oil
Company v Dardana
Ltd [2002] EWCA Civ 543, the Court of Appeal
confirmed that, in such a situation, the court has power to grant a stay of
execution.
33
(cont.)
Under CPR 83.7, the court may grant a stay of execution of an order in
specified circumstances, including if it is satisfied that there are special
circumstances that render it inexpedient to enforce the judgment or
order. For example, a stay of execution may be granted where the award
debtor asserts counterclaims or cross-claims that exceed or equal the
amount of the award debt and there is doubt as to the ability of the award
creditor to repay the amount of such counterclaim or cross-claim.
The court will generally be more cautious about staying execution of an
order granting enforcement of a New York Convention award (see
Far
Eastern Shipping Co v AKP Sovcomflot
[1995] 1 Lloyd’s Rep 520).
34
(cont.)
State Immunity: where the award debtor is a state or state entity, state immunity
might block enforcement. This is not a simple question of national courts applying
national law to protect their state’s assets from enforcement. State immunity is
internationally recognised as a defence to enforcement, but its scope varies
widely between jurisdictions.
The first thing to know is what doctrine of state immunity is applied in the
expected country of enforcement. Some states, including China and Hong Kong,
apply a broad doctrine (absolute immunity). Under absolute immunity, a state
entity is absolutely immune from suit, irrespective of the legal nature of its acts.
Most states apply a more restrictive doctrine, with immunity extending only to a
state entity’s acts in the exercise of sovereign power, and not to its commercial
activities.
35
(cont.)
Possible re-examination of questions of fact or law: what is remarkable about
the six grounds in Article V.1 of the Convention is that many involve the court in
the state of enforcement hearing questions of fact and law which fall within the
remit of the arbitral tribunal, the courts at the seat, or both. In doing so, the court
in the state of enforcement is required to second guess, or even re-hear, matters
already decided by a tribunal or a court at the seat. It may often need to resolve
questions of the law of another jurisdiction. The Convention thus creates a
framework for the multiple re-assessment of issues going to the root of
enforceability.
An example of this is Dallah Real Estate and Tourism Holding Company v The
Ministry of Religious Affairs, Government of Pakistan
[2010] UKSC 46, in which
the question of the validity of the arbitration agreement (in the sense of an
agreement between the parties to the arbitration and the subsequent litigation)
was decided first by the tribunal, then re-heard a total of four times: by the English
Commercial Court, Court of Appeal, and UK Supreme Court, and again by the
French Court of Appeal. Different courts may well come to different conclusions
from the tribunal and from each other, and an award that is enforceable in one
Convention country may not be enforceable in another.
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How to maximise the chances of enforcement
Location of assets: if one is trying to enforce an award made in a New York
Convention state against a respondent’s assets located in a New York Convention
state, enforcement is theoretically a simple and easy process. If the assets are not
located in a New York Convention state, it may be more difficult. In either case,
local advice should be sought on how the award will be enforced before
commencing proceedings.
Freezing injunctions: though it does not provide any security over the assets, a
freezing injunction obtained at an early stage may be particularly useful in cases
where a party wishes to make sure that the respondent has sufficient assets to
comply with the award, or as a method of securing assets for the enforcement of
an award. In
U&M Mining Zambia Ltd v Konkola Copper Mines Plc [2014] EWHC
3250 (Comm), Teare J noted that, where the seat of arbitration is England and
Wales, it will usually be appropriate for the English court to make orders in
support of arbitration and the English court has jurisdiction to do so. The fact that
most of the defendant’s assets were not in Zambia, where enforcement would
take place, and that the Zambian courts could grant a freezing order, did not make
it inappropriate for the English court to grant the freezing order.
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(cont.)
Appointment of receivers: as well as freezing injunctions, the court has
power under section 44 of the Arbitration Act 1996 to order the
appointment of receivers.
In Cruz City 1 Mauritius Holdings v Unitech Ltd and others [2014] EWHC
3131 (Comm), the Commercial Court appointed a receiver over the
defendant’s foreign assets, to help prevent the dissipation of the assets
and thereby assist with enforcement of an award against them.
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Q&A
Any Questions?
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