In 2018 the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (known as the New York Convention) will celebrate its 60th anniversary. This update answers some key questions about the New York Convention regime and its influence on international arbitration over the past 60 years.
The New York Convention governs two fundamental aspects of international arbitration – namely, how states will treat arbitration agreements and arbitral awards that were made in other jurisdictions. It is arguably the most successful UN convention. There are 157 contracting states to the convention, which creates an almost universal regime governing these two important issues.
In brief, the New York Convention provides that contracting states must recognise written arbitration agreements and, at the request of any party, their courts must refer to arbitration any matter brought before them in respect of which there is an arbitration agreement. The only exception is where the arbitration agreement is null, void, inoperative or incapable of being performed. Contracting states also agree to recognise foreign arbitral awards as binding and enforce them in accordance with their rules of procedure. As discussed further below, there are limited grounds under the New York Convention on which a party can resist the enforcement of an award.
Before the New York Convention, the principal regimes applicable to arbitration agreements and awards were the 1923 Geneva Protocol on Arbitration Clauses and the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards. Although these were important precursors, by the early 1950s they were considered cumbersome and no longer commensurate to the needs of international trade. The International Chamber of Commerce therefore initiated a process to replace these regimes with a new comprehensive convention. This process was subsequently taken over by the UN Economic and Social Council. The New York Convention was adopted at the 1958 UN conference in New York and entered into force in 1959.
The success of international arbitration itself is attributed in great part to the New York Convention, primarily because it facilitates the enforcement of foreign awards almost anywhere in the world. The convention's simple procedure and limited grounds for resisting recognition and enforcement – and its almost global acceptance – have proved a winning combination. There is no equivalent regime for the recognition and enforcement of foreign court judgments.
The process prescribed by the New York Convention is very simple – a party seeking enforcement need only supply the court with a copy of the arbitration agreement and the arbitral award. Enforcement may be resisted only on the grounds listed in Articles V(1) and V(2) of the convention:
- Invalidity or incapacity – the arbitration agreement is invalid or the parties to the agreement are somehow incapacitated.
- Lack of notice or due process – the respondent was not given proper notice of the appointment of the arbitrator or of the proceedings or was otherwise unable to present its case.
- Lack of jurisdiction – the award deals with a difference not contemplated by the terms or beyond the scope of the submission to arbitration.
- Procedural irregularity – the composition of the arbitral authority or the arbitral procedure is not in accordance with the agreement of the parties, or – in the absence of such an agreement – not in accordance with the law of the country where the arbitration takes place.
- Not binding – the award is not yet binding on the parties or has been set aside or suspended at the seat of the arbitration.
- Arbitrability and public policy grounds – recognition and enforcement may also be refused if the competent authority where enforcement is sought finds that:
- the subject matter of the dispute is not arbitrable under the law of that country; or
- enforcement would be contrary to the public policy of that country.
The New York Convention sets out minimum requirements for the recognition and enforcement of arbitration agreements and foreign awards. Contracting states implement these into their domestic laws. The formalities of enforcement must therefore be undertaken in accordance with domestic procedural rules.
This means that, although in substance the approaches taken by contracting states should largely align, there can be procedural differences. Differences can also arise because the New York Convention permits domestic arbitration regimes that are more favourable to recognition and enforcement – whether by providing for less rigorous procedural requirements, more restrictive grounds for challenging awards or other more favourable domestic practices.
The Convention on the International Centre for Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention, also known as the Washington Convention) is a comparable arbitration regime, although – as its name suggests – it is focused on investor-state dispute settlement. It has an equivalent reach (153 states) and arguably an even stricter enforcement regime.
There is no equivalent global regime for the enforcement of foreign court judgments. However, the Hague Convention on Choice of Court Agreements has made some progress towards establishing such a regime. Under the Hague Convention, state parties must recognise exclusive choice of court agreements in civil matters and their courts must stay proceedings before them brought in breach of such an agreement. They must also recognise judgments of the chosen court. The European Union, the United States, Singapore, China, Mexico, Ukraine and Montenegro have signed the Hague Convention, although some have yet to ratify it. If enough other states (key trading nations in particular) sign and ratify the Hague Convention, it could prove an important alternative regime to the New York Convention.
For further information on this topic please contact C Mark Baker at Norton Rose Fulbright LLP's Houston office by telephone (+1 713 651 5151) or email ([email protected]). Alternatively, contact Pierre Bienvenu at Norton Rose Fulbright LLP's Montreal office by telephone (+1 514 847 4747) or email ([email protected]). The Norton Rose Fulbright LLP website can be accessed at www.nortonrosefulbright.com.
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