In a recent decision the Supreme Court confirmed that an arbitral award acts as executory title for interest only if the award explicitly provides for interest.
A dispute arose in a contract for works between the parties, which led to arbitration. On concluding that there were certain failings by the contractor in executing its obligations, the arbitral tribunal issued two rulings:
- The tribunal ordered the contractor to pay monetary compensation if it did not make good its failings within a four-month period, but without providing for interest (as there was no such request).
- The tribunal also ordered the payment of separate monetary compensation with interest (as requested).
The winning party sought to enforce the arbitral award and, in the order addressed to the competent bailiff, it calculated and demanded the payment of interest not only under the second ruling (which did provide for interest), but also under the first ruling (which did not). The contractor contested the enforcement on grounds of a lack of executory title regarding interest under the first ruling.
The first instance and appellate courts held in favour of the contractor. On appeal before the Supreme Court, confirming the appellate court's judgment, the Supreme Court held that enforcement can take place only in virtue of an executory title. It further held that an arbitral award that provides only for the principal and not for interest constitutes executory title only for the former. The court noted that an executory title for interest did not exist, as the necessary requirement for the validity of the enforcement and hence of the order to the bailiff was missing, since they both lacked legal foundation (ie, an award addressing and deciding the issue of interest). Therefore, the enforcement procedure was being validly pursued only for the principal amount regarding the first ruling of the arbitral award and the order to the bailiff was annulled in regard to the demand for interest under the first ruling.(1)
Arbitral tribunals enjoy considerable freedom in ruling on the substance of disputes referred to them. Only limited control is exercised by state courts on the merits through the mechanism of public policy. However, an arbitral tribunal cannot go beyond the parties' requests and order something that they have not demanded. In such cases the arbitral award will be at least partly annulled for exceeding the powers conferred on the arbitrator by the parties. In the case at hand the claimant did not request interest in its first claim and the tribunal was correct not to address this issue. The partial annulment of the enforcement that followed was the inevitable consequence of the claimant demanding an item that had not been requested in the first place and, as expected, had not been addressed by the tribunal.
Even if the claimant had requested interest in its first claim, it follows from the Supreme Court's reasoning that the result would not differ if the tribunal had not dealt with the request. The existence of a request is not enough to achieve the desired result. An arbitral tribunal must address a request and specifically decide on it, even though a requested claim (eg, for interest) may appear as an inevitable consequence of another claim (eg, for principal) that has been addressed and accepted by the tribunal. This is so even in case of identical claims, some of which have been accepted while others have not even been addressed; no claim can be regarded as accepted by inference. Therefore, if the arbitral tribunal omitted (even inadvertently) to deal with a specific request, even though it had done so for an identical request under a separate ruling, this issue will not be covered by the award. Thus, no executory title will exist and no enforcement proceedings can follow for this particular issue.
For further information on this topic please contact Antonios Tsavdaridis at IK Rokas & Partners by telephone (+30 210 361 6816), fax (+30 210 361 5425) or email ([email protected]).