2. International Commercial Arbitration
Lecture 10: Recognition and Enforcement of the Arbitral Award
By Feruza Bobokulova

3. Enforcement of the Award
One of the reasons parties include an arbitration clause in an international contract is the relatively certain enforceability of the award
The likelihood of enforcement is high because so many countries have adopted international conventions that are pro-enforcement
The Convention on Recognition and Enforcement of Foreign Arbitral Awards,1 also known as the New York Convention, requires courts of Contracting States to enforce both arbitration agreements and arbitration awards

4. Enforcement of the Award
Currently, more than 140 countries are parties to the New York Convention
The New York Convention has contributed to the growth of international arbitration because parties in Contracting States are confident that if they prevail in an arbitration, they will obtain a remedy

5. Principles of Recognition&Enforcement
Article III of the New York Convention requires countries to recognize arbitral awards as binding, and to enforce them in accordance with national law
Although the terms “recognition” and “enforcement” tend to be said together, they mean different things
When a court “recognizes” an award, it acknowledges that the award is valid and binding, and thereby gives it an effect similar to that of a court judgment
The award has an official legal status, so that issues determined by the award usually cannot be relitigated or rearbitrated

6. Principles of Recognition&Enforcement
Enforcement, on the other hand, may mean different things in different jurisdictions
In some jurisdictions, it may mean simply the process by which an international arbitration award is reduced to a judgment
In other jurisdictions, it may mean using whatever official means are available in the enforcing jurisdiction to collect the amount owed or to otherwise carry out any mandate provided in the award

7. Principles of Recognition&Enforcement
However, another term frequently used for this purpose is ‘execution’
Execution usually refers to the mandate by which relief under an award is obtained pursuant to the legal process of the authorizing jurisdiction

8. Requirements for Enforcement
The Convention was intended to apply to international awards, and expressly states that it covers awards made in a state other than the one where enforcement is sought
It also permits enforcement, however, of awards considered “nondomestic” by the enforcing jurisdiction
An award is nondomestic, even if between citizens of the United States, if the “relationship involves property located abroad, envisages performance of enforcement abroad, or has some other reasonable relation with one or more foreign states.”

9. Requirements for Enforcement
Thus, in the United States, for an award to be covered by the Convention, it can be either rendered in a foreign country, or it can be nondomestic in the sense that it has an international aspect involving in some way the legal system of another country
Many other countries only enforce, under the Convention, awards that were rendered in a foreign state
Contracting States are permitted to make two reservations as to the scope of applicability of the Convention

10. Requirements for Enforcement
The first limitation is one of reciprocity: a Contracting State can provide that it will only apply the Convention to awards that are made in the territory of another Contracting State
This reservation has been adopted by more than half of the Contracting States
Thus, if an enforcement action was brought in a Contracting State that had made a reservation as to reciprocity, and the award had been made in a non-Contracting State, the Convention would not apply
This would be true even if both parties had places of business located in a Contracting State

11. Requirements for Enforcement
It is important to understand that neither citizenship nor location of the parties is a key determinant of the Convention’s applicability
The second permitted reservation is that a Contracting State may “declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial”
There does not appear to be a uniform understanding of the meaning of “commercial.”
In general, however, criminal matters and family matters, such as divorce, custody, and adoption, as well as wills and trusts, are not considered commercial

12. Jurisdiction & Forum Non Conveniens
When an award creditor seeks enforcement in a Contracting State, the presence of the award debtor’s assets in that state will usually suffice to provide a jurisdictional basis for the enforcement of the award under the Convention
In the United States, however, some courts have refused to enforce foreign arbitral awards either on the grounds that there was no personal jurisdiction over the award debtor, or that the forum was inappropriate under the doctrine of forum non conveniens
Forum non conveniens - A court’s determination that an adequate alternative forum exists, and that there are public or private interests that weigh more heavily in favor of a different forum, can cause it to dismiss a case

13. Procedures for Enforcement
Procedures for enforcing an award will vary by jurisdiction, because a Contracting State will enforce an award in accordance with its own rules of Practice
It cannot, however, impose any higher fees or any more onerous conditions on the process than would be applicable in enforcing a domestic award
The only specific requirements imposed by the Convention are that the party applying for recognition and enforcement must provide the court with the authenticated original award or a certified copy, and the original arbitration agreement or a certified copy
In addition, if the award or the agreement is not in the same language used in the enforcing jurisdiction, the party must provide a certified translation of the documents`

14. Grounds for Nonenforcement under the Convention
There are five kinds of defenses found in Article V(1) and two additional defenses in Article V(2)
In brief, the five Article V(1) defenses include:
incapacity and invalidity,
lack of notice or fairness,
arbitrator acted in excess of authority,
the tribunal or the procedure was not in accord with the parties’ agreement,
the award is not yet binding or has been set aside

15. Grounds for Nonenforcement under the Convention
The two Article V(2) defenses are (1) lack of arbitrability and (2) violation of public policy
The five Article V(1) defenses must be established by the party resisting enforcement, who has the burden of proof
The most important characteristic of the defenses is that they are not based on the merits
Under the Convention, a court cannot refuse enforcement of an award because the arbitrators got it wrong, either on the facts or the law

16. Incapacity and Invalidity
The first defense found in Article V(1)(a) of the Convention has two parts: (1) there is some incapacity of the party, or (2) the agreement is invalid, either under the law chosen by the parties, or, if the parties did not choose a governing law, then under the law of the country where the award was made
The incapacity issue could involve issues such as sovereign immunity, or perhaps a question of whether the arbitration agreement was signed by someone who did not have authority to act for the corporate party

17. Incapacity and Invalidity
The invalidity question that must be resolved under the parties’ chosen law or the law of the seat of the arbitration may simply be a question of meeting the form requirements of the law in question, or it may involve the proper formation of a contract to arbitrate
Generally, consent to arbitrate must be clear, and most laws require that it be demonstrated by a writing
The Convention’s writing requirement is contained in Article II, which requires Contracting States to recognize an arbitration agreement that is in writing

18. Lack of Notice or Fairness
Article V(1)(b) provides the second ground for refusal to enforce, which is based on a lack of notice to the parties, or a lack of fairness in the process
A party must be provided with notice of the appointment of the arbitrator and of the arbitral proceedings
Parties must also be given a full opportunity to present their case

19. Lack of Notice or Fairness
Thus, the award will not be enforced if the party did not receive proper notice, or if the arbitrators prevented a party from being able to present its case, that is, if the party was denied a fair hearing
Generally, a court will not try to second-guess an arbitrator with respect to its handling of admission of specific evidence, or its limitation on the number of witnesses or the extent of their testimony
But arbitrator decisions as to the way parties can make their case, if viewed as essentially denying justice, may cause a court to hold that there has been a denial of due process

20. Arbitrator Acting in Excess of Authority
The third ground for non-enforcement pertains to arbitrator conduct
An arbitrator’s power comes from the consent of the parties, and if she exceeds the authority specifically given to her under the parties’ arbitration agreement, then the resulting award is not enforceable under the Convention
Article V(1)(c) provides that an award will not be enforced if it deals with a difference not contemplated by the terms of the parties’ agreement, or if the decision rendered applies to matters beyond the scope of the agreement

21. the Parties’ Agreement
The Tribunal or the Procedure is Not in Accord with the Parties’ Agreement
the Parties’ Agreement
Article V(1)(d) provides for nonenforcement if either (1) the constitution of the tribunal or (2) the arbitral procedure was not consistent with the agreement of the parties
If the parties did not reach an agreement on either of these two matters, then the constitution of the tribunal and the arbitral procedure must be in compliance with the law of the country where the arbitration took place

22. The Award is not Yet Binding, or Has Been Set Aside
A Binding Award Under the fifth defense, found in Article V(1)(e), the award is not enforceable unless it has become binding upon the parties
Although no definition of “binding” is provided in the Convention, most courts consider that an award is binding if there is no way of bringing an appeal on the merits

23. The Award is not Yet Binding, or Has Been Set Aside
Article V(1)(e) also provides that to be enforceable, the award should not have been previously set aside or vacated in the country where rendered, or under the law to which it was subjected
To vacate an award, a losing party must apply to the local court where the award was rendered
To enforce an award, the prevailing party must apply to a court where the losing party’s assets are located.
When a party succeeds in having an award vacated in the court where the arbitration took place, the traditional view is that such an award has no further legal force or effect, and cannot be enforced in any other jurisdiction

24. The Award is not Yet Binding, or Has Been Set Aside
Certainly, the award cannot be enforced in the jurisdiction where it was set aside
The effect is different, however, for an award for which enforcement has been refused
When an award is not enforced, unlike a vacated award, it is not annulled
Rather, if assets of the award debtor are available in more than one jurisdiction, then the award creditor who did not succeed in enforcing the award in the first jurisdiction can pursue the award in a second jurisdiction, perhaps with better results

25. Last Two Defenses under Article V
The second subsection of Article V deals with grounds for enforcement that can be raised by the court sua sponte
If a court finds that the subject matter of the dispute is not arbitrable under the law of its jurisdiction, or if it finds that enforcement would be contrary to the country’s public policy, then recognition and enforcement may be refused

26. Last Two Defenses under Article V
Subject Matter not Arbitrable
A country’s laws may provide that certain types of disputes are not arbitrable
For example, child custody disputes, criminal matters, bankruptcy, the validity of trademarks or patents, and other kinds of disputes that will have an impact on third parties or have some kind of consequences in the public domain will usually have to be decided in a court of law

27. Last Two Defenses under Article V
Public Policy
The Convention provides in Article V(2)(b) that recognition or enforcement of an arbitral award may be refused if a court finds that it would be contrary to the public policy of that country
Public policy is not defined in the Convention, and thus presents the possibility of another broad loophole for refusing enforcement

28. Bibliography
Moses, M., The Principles and Practice of International Commercial Arbitration, 2nd end. Cambridge: Cambridge University Press

29. Thank You for your Attention!