In 2009 the Amsterdam Court of Appeals granted the enforcement of the Yukos award even after it had been set aside by the Russian Court at the seat of the arbitration. Now, for the first time, the Supreme Court has confirmed the discretion of the enforcement judge to enforce an arbitral award,(1) even if a ground for refusal as enumerated in Article V(1)(e) of the New York Convention applies.
On November 24 2017 the Supreme Court ruled that a Dutch court may enforce an annulled arbitral award if, among other things:
- the local annulment decision is based on grounds other than those set out in Article V(1)(a)-(d) and which are not internationally recognised; or
- the annulment decision is irreconcilable with Dutch private international law.
The case concerned a dispute between Russian billionaire Nikolay Maximov and steel producer NMLK over a 2008 share purchase agreement concerning OJSC Maxi-Group, which was decided by an arbitral tribunal at the International Commercial Arbitration Court of the Chamber of Commerce and Industry of the Russian Federation. It issued an award of Rb8.9 billion in favour of Maximov. The Moscow Arbitrazh Court subsequently annulled the award based on non-arbitrability and public policy grounds. The Russian Appellate Court confirmed this ruling and refused leave to apply to the Russian Supreme Court.
Nevertheless, Maximov started enforcement proceedings in France, the United Kingdom and the Netherlands, essentially arguing that the annulment decision had resulted from bias. While the Paris Court of Appeal subsequently enforced the award regardless of such annulment, the UK High Court, in a judgment predating the Dutch Supreme Court ruling, refused enforcement. It found that the annulment decision was not "so extreme and incorrect" to allow enforcement. The Amsterdam Court of Appeal did not enforce the award either – a decision that was confirmed by the Supreme Court. The Supreme Court decision is particularly relevant for its interpretation of Article V(1)(e) of the New York Convention allowing discretion to the enforcement court to scrutinise the legal reasoning (under foreign law) of the annulment decision in order to decide whether the annulled award may still be enforced.
Maximov argued before the Dutch Supreme Court that Article V(1)(e) of the New York Convention provides the court with discretion to enforce an award that has been set aside at the seat. The court noted that the Spanish and English versions of the convention contain wording suggesting some discretionary power (eg, the use of the word 'may' rather than 'shall' or 'must') whereas the French version seemingly does not ("shall only be refused").
The Supreme Court applied the Vienna Convention on the Law of Treaties to interpret Article V(1)(e). It found that interpreting the New York Convention in light of its application and interpretation by the contracting parties could not resolve the issue, as state practice differed widely.
The Supreme Court subsequently considered that the enforcement of foreign arbitral awards is the New York Convention's objective, and that its purpose is to reduce barriers to such enforcement. Accordingly, under Article V of the convention, courts must enforce awards, save for a limited number of refusal grounds. Further, Article VII clarifies that the convention intends to increase the existing possibilities to enforce awards, not limit them. The Supreme Court therefore found that Article V(1) provides an (albeit limited) discretionary power for the enforcement judge to enforce an award, even in case one or more of the enumerated refusal grounds apply.
Consequently, an annulled award may still be recognised or enforced where:
- the annulment decision is based on grounds other than those provided for in Article V(1)(a)-(d) and which are not internationally recognised; or
- the annulment decision cannot be recognised under Dutch private international law.(2)
The party requesting enforcement must submit and prove the grounds for enforcing such award despite its annulment.
The Amsterdam Court of Appeal and Supreme Court judgments were particularly relevant because:
- the Supreme Court clarified under which conditions a Dutch may court may exercise its discretion to enforce an award that has been annulled at the seat; and
- the Amsterdam Court of Appeal's willingness to assess in detail the application of Russian law demonstrated that courts are prepared to assess in detail the (legal reasoning of the) annulment decision in deciding whether (and how) to apply its discretion to enforce the award regardless.
In 2009 the Amsterdam Court of Appeal refused to recognise an annulment decision by a Russian court, holding that the latter had violated standards of due process. On this basis it allowed enforcement of the related arbitral award. Now, at Supreme Court level, it has been confirmed that such violation of due process standards is only one of the grounds for non-recognition of the annulment of an arbitral award and its subsequent enforcement.
The Supreme Court grants the Dutch courts discretion to enforce awards that have been annulled on grounds not provided for in the New York Convention and which are not 'internationally acceptable'. Therefore, Dutch courts petitioned to enforce an award may need to assess the legitimacy of the grounds of annulment.
The proceedings before the Amsterdam Court of Appeal and the UK High Court(3) indicate that while they use different instruments, both courts assess in detail the legal reasoning of the foreign annulment judgment to determine whether it should be recognised when deciding on the enforcement of the award. Given the inquiry into foreign law, expert opinion on foreign law may be required (eg, concerning the interpretation of particular procedural orders and rules). Both judgments equally show that even while courts may (strongly) question the outcome of the foreign annulment proceedings, they will normally defer to the annulment decision. The threshold for the enforcement of an annulled arbitral award – by not recognising the annulment decision – remains high, even despite concerns regarding the annulment proceedings.
The Supreme Court judgment offers important guidance as to the Dutch courts' discretion to enforce annulled awards. It also shows that the court of the arbitral seat (deciding upon a request for annulment) will, similar to the arbitral tribunal, be bound by due process and other standards. If the court at the arbitral seat disregards these standards, the award rendered by the tribunal may prevail.
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