Article V(1)(a)
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (…)
Travaux préparatoires on Article V(1)(a)
A. Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Comments by Governments and Organizations
A.1. ECOSOC: Report of the Committee on the Enforcement of Foreign Arbitral Awards: 18 March 1955
A.2. Comments by Governments and Organisations on the Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards: January 1956 - March 1958
- E/2822 - Report by the Secretary-General, Recognition and Enforcement of Foreign Arbitral Awards, 31 Jan 1956
- E/CONF.26/3 - Comments by New Zealand on Articles 1, 4, 5
- E/CONF.26/3/Add.1 - Comments by the Netherlands on Articles 4, 5 and Suggestion of an Additional Article
A.4. Comments on the Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards: Note by the Secretary-General: 6 March 1958
B. United Nations Conference On International Commercial Arbitration: Documents
B.2. Amendments to the Draft Convention Submitted by Governmental Delegations : 21 -28 May 1958
- E/CONF.26/L.17 - Netherlands: amendments to Articles 3, 4, 5
- E/CONF.26/L.34 - Federal Republic of Germany: amendments to Articles 3, 4, 5
B.3. Comparison of Drafts Relating to Articles III, IV and V of the Draft Convention - 29 May 1958
B.5.Further Amendments to the Draft Convention Submitted by Governmental Delegations - 29 May -3 June 1958
B.7. Text of Articles III, IV and V of the Draft Convention Proposed by Working Party III: 3 June 1958
B.10. Text of Articles Adopted by the Conference: 4-6 June 1958
B.11. Text of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards as Provisionally Approved by Drafting Committee 6-9 June 1958
- E/CONF.26/L.61 - Text of the Convention as provisionally approved by the Drafting Committee on 6 June 1958
- E/CONF.26/8 - Text of the Convention as as provisionally approved by the Drafting Committee on 9 June 1958
B.12. New Text of Articles I (3), V (1)(a), (b), and (e) Adopted by the Conference at its 23rd Meeting - 9 June 1958
B.14. Final Act and Convention on the Recognition and Enforcement of Foreign Arbitral Awards
C. Summary Records of the United Nations Conference on International Commercial Arbitration, New York, 20 May - 10 June 1958
- 11 th meeting [E/CONF.26/SR.11 - E/2704/Rev.1, E/2822 and Add.1-6, E/CONF.26/2, 6/3 and Add.1, 26/4, 26/7, E/CONF.26/L.6-L.31]
- 13 th meeting [E/CONF.26/SR.13 - E/2704 and Corr. 1, E/2822 and Add.1 to 6, E/CONF.26/2, 26/3 and Add.1, 26/4, 26/7, E/CONF.26/L.8 and Corr.1, L.15/Rev.1, L.16, L.17, L.22 to L.25, L.30 to L.36]
- 14 th meeting [E/CONF.26/SR.14 - E/2704 and Corr.1, E/2822, E/CONF.26/L.17, L.31, L.33/Rev.1, L.34. L.38 and L.40]
- 17 th meeting [E/CONF.26/SR.17 - E/2704 and Corr.1, E/CONF.26/L.31, L.37/Rev.1, L.43 and L.45]
- 23 rd meeting [E/CONF.26/SR.23 - E/CONF.26/L.60; Adoption and signature of the Final Act and Convention (E/CONF.26/8, 9, E/CONF.26/L.28, L.49, L.58, L.61)]
- 24 th meeting [E/CONF.26/SR.24 - Adoption and signature of the Final Act and Convention (E/CONF.26/8 and 9, E/CONF.26/L.63), Report of the Credentials Committee (E/CONF.26/10)]
D. Committee on the Enforcement of International Arbitral Awards
- E/C.2/373 - Enforcement of international arbitral awards: statement submitted by the International Chamber of Commerce, a non-governmental organization having consultative status in category A
- E/AC.42/4 - Report of the Committee on the Enforcement of International Arbitral Awards
D.1. Summary Records of the Committee on the Enforcement of International Arbitral Awards
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INTRODUCTION
1. Article V (1)(a) sets forth the first enumerated defence to the recognition and enforcement of a foreign arbitral award. It enables the courts of a Contracting State to refuse recognition and enforcement in two situations: first, if “[t]he parties to the [arbitration] agreement [...] were, under the law applicable to them, under some incapacity” and, second, if the “[arbitration] agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.”
2. The 1927 Geneva Convention addressed these defences to recognition and enforcement in a different manner. Pursuant to article 1(a) of the 1927 Geneva Convention, it was for the party seeking recognition and enforcement of an award to prove the validity of an arbitration agreement under the law applicable to it. In accordance with article 2(b), the enforcing court was required to refuse recognition and enforcement of an arbitral award if it was satisfied that “the party against whom it is sought to use the award [...], being under a legal incapacity, [...] was not properly represented [...]”.
3. Initially, the draft of the ECOSOC ad hoc Committee reiterated only the provision related to the legal incapacity of a party but not that related to the validity of the arbitration agreement.597 However, during the United Nations Conference on International Commercial Arbitration convened for the preparation and adoption of the Convention, State delegates decided to abandon this provision on the ground that, as reported by the Norwegian delegate, it would be rare in practice for a party to be improperly represented during arbitral proceedings.598 Furthermore, during the Conference, the drafters of the Convention introduced a provision related to the validity of the arbitration agreement. It was, at first, added as an independent ground for obtaining recognition and enforcement, but then modified to become a ground for refusing to recognize and enforce an arbitral award.599 This provision was revised to clarify that the “law applicable” to the arbitration agreement should mean the “national law to which the parties have subjected their agreement, or, failing any indication thereon, under the law of the country where the award was made”.600
597. See Travaux préparatoires, Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Report of the Committee on the Enforcement of International Arbitral Awards, E/2704, E/AC.42/4/ Rev.1, Annex, p. 2. Article IV (c) of the ECOSOC draft provided that recognition and enforcement may be refused if “the competent authority in the country where recognition of enforcement is sought, is satisfied: [...] that the party against whom the award is invoked, being under a legal incapacity, was not properly represented.”
598. See Travaux préparatoires, Text of the Convention as provisionally approved by the Drafting Committee on 6 June 1958, E/CONF.26/L.61, p. 3; Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Seventeenth Meeting, E/CONF.26/SR.17, p. 9.
599. See Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Seventeenth Meeting, E/CONF.26/SR.17, p. 3; Travaux préparatoires, Text of Articles III, IV and V of the draft Convention proposed by the Working Party for adoption of the Conference, E/CONF.26/L.43, p. 1.
600. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Twenty-third Meeting, E/CONF.26/SR.23, p. 14.
4. It was on the very last day of the Conference that article V (1)(a) surfaced in its current form at the recommendation of the Dutch delegate, who proposed to reintroduce a defence based on party incapacity.601
601. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Twenty-fourth Meeting, E/CONF.26/SR.24, p. 7.
5. Article V (1)(a) extends the principles enriched in article II to the recognition and enforcement stage. Just as parties cannot be referred to arbitration under article II if they are not bound by a valid arbitration agreement,602 national courts may deny recognition and enforcement of an award pursuant to article V (1)(a) if the consent of the parties is not valid either because the parties lacked the capacity to agree to arbitrate or because the arbitration agreement is invalid under the law applicable to it.
602. For a more detailed discussion, see the chapter of the Guide on article II, paras. 13-23.
6. While the incapacity defence under article V (1)(a) has been of limited relevance in practice, the invalidity of the arbitration agreement defence is often invoked by parties opposing recognition and enforcement of an arbitral award.603 However, in the majority of reported cases, courts have rejected challenges to recognition and enforcement of an arbitral award based on article V (1)(a).
603. See. e.g., Stefan Kröll, Recognition and Enforcement of Awards, in Arbitration in Germany: The Model Law in Practice 506, 530 (K. H. Böckstiegel, S. Kröll and P. Nacimiento eds., 2007).
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ANALYSIS
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INCAPACITY OF THE PARTIES
7. Article V (1)(a) provides in its first limb that recognition and enforcement may be refused if “[t]he parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity [...]”.
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A. Meaning of “the parties to the agreement referred to in article II”
8. Article V (1)(a) refers to “the parties to the agreement referred to in article II”. This departs from the language of the 1927 Geneva Convention, which referred to “the party against whom it is sought to use the award”.604 This change in the wording suggests that the incapacity defence may be raised with respect to the party opposing enforcement or the party seeking enforcement.605 The Italian Court of Cassation confirmed that the party opposing enforcement could raise the incapacity defence with respect to the parties seeking enforcement.606
604. See article 2(b) of the 1927 Geneva Convention. See also Ignacio Suarez Anzorena, The Incapacity Defence Under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 615, 616-18 (E. Gaillard, D. Di Pietro eds. 2008).
605. See Patricia Nacimiento, Article V (1)(a), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 205, 218 (H. Kronke, P. Nacimiento et al. eds., 2010); Todd J. Fox, Stephan Wilske, Commentary of Article V (1)(a), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 267, 271 (R. Wolff ed., 2012).
606. Société Arabe des Engrais Phosphates et Azotes—SAEPA and Société Industrielle d’Acide Phosphorique et d’Engrais—SIAPE v. Gemanco srl, Court of Cassation, Italy, 9 May 1996, XXII Y.B. Com. Arb. 737 (1997).
9. Although article V (1)(a) refers to the incapacity of “the parties” in the plural, courts have interpreted this provision as meaning that the lack of capacity of one party is sufficient for the enforcing court to deny recognition and enforcement.607 Commentators have generally supported the reading of article V (1)(a) that proof of the incapacity of one, and not necessarily both, of the parties suffices to deny recognition and enforcement of an arbitral award.608
607. See, e.g., Sokofl Star Shipping Co. Inc. v. GPVO Technopromexport, District Court of Moscow (Civil Department), Russian Federation, 11 April 1997, XXIII Y.B. Com. Arb. 742 (1998); Agrimpex S.A. v. J.F. Braun & Sons, Inc., Supreme Court, Greece, 14 January 1977, IV Y.B. Com. Arb. 269 (1979).
608. See Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 275 (1981) who gives the section on incapacity the title “Incapacity of a party”; Patricia Nacimiento, Article V (1)(a), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 205, 218 (H. Kronke, P. Nacimiento et al. eds., 2010); Todd J. Fox, Stephan Wilske, Commentary of Article V (1)(a), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 267, 271-72 (R. Wolff ed., 2012).
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B. Concept of incapacity
10. Neither the Convention nor the travaux préparatoires define “incapacity”.
11. “Capacity” is traditionally defined as the legal ability of a person to act and enter into an agreement in its own name and on its own behalf.609 The text of article V (1)(a) confirms that incapacity refers to the legal restriction preventing a party from entering into a legal and binding relationship, here an arbitration agreement, in its own name and on its own account.610 In the few reported cases, parties have alleged the incapacity of individuals and of legal entities.
609. Fouchard Gaillard Goldman on International Commercial Arbitration 242, para. 453 (E. Gaillard, J. Savage eds., 1999). See also Ignacio Suarez Anzorena, The Incapacity Defence Under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 615, 621 (E. Gaillard, D. Di Pietro eds., 2008).
610. Ignacio Suarez Anzorena, The Incapacity Defence Under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 615, 621 (E. Gaillard, D. Di Pietro eds., 2008).
12. With respect to the incapacity of individuals, in one Canadian reported case, a party opposed recognition and enforcement on grounds that that party did not have the opportunity to obtain independent legal advice during the negotiation and conclusion of the contract at issue, which contained the arbitration agreement.611 In interpreting the Canadian law incorporating the UNCITRAL Model Law on International Commercial Arbitration which contains a similar provision to that of article V (1)(a), the court did not object that the incapacity defence could apply in this situation. It, however, ultimately rejected it on the facts as the defendant had failed to show evidence of “oppression, high pressure tactics or misrepresentation.”
611. Grow Biz International Inc. v. D.L.T. Holdings Inc., Supreme Court, Province of Prince Edward Island, Canada, 23 March 2001, XXX Y.B. Com. Arb. 450 (2005). See also in a case where the court denied recognition and enforcement because he was not given proper notice pursuant to Section 103(2) (c) of the English 1996 Arbitration Act (implementing article V (1)(b) of the Convention) as a result of his serious and life-threatening cancer: Ajay Kanoria, Esols Worldwide Limited, Indekka Software PVT Ltd. v. Tony Francis Guinness, Court of Appeal, England and Wales, 21 February 2006, [2006] EWCA Civ 222.
13. There are no reported cases where recognition has been challenged pursuant to article V (1)(a) on the grounds that an arbitration agreement was entered into by a minor or a disabled person. However, commentators generally agree that the incapacity defence should cover the situation in which an individual is unable to judge where its own interest lies.612
612. ICCA’S Guide to the Interpretation of the 1958 New York Convention: a Handbook for Judges 84 (P. Sanders ed., 2011); Fouchard Gaillard Goldman on International Commercial Arbitration 317, para. 539 (E. Gaillard, J. Savage eds., 1999); also Ignacio Suarez Anzorena, The Incapacity Defence Under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 615, 621, 625, 628 (E. Gaillard, D. Di Pietro eds., (2008).
14. With respect to incapacity of legal entities, national courts have entertained the incapacity defence in relation to both public and private legal entities. The text of the Convention confirms this approach. Indeed, article V (1)(a) refers only to a “party” and draws no distinction between public and private entities. Furthermore, article I, which defines the scope of application of the Convention, refers to “persons, whether physical or legal”.613 In this context, parties have, in a number of situations, opposed recognition and enforcement on the grounds of a legal entity’s incapacity, although courts have often rejected this defence.
613. See, e.g., Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 276-79 (1981); Domenico Di Pietro, Martin Platte, Enforcement of International Arbitration Awards—the New York Convention of 1958, 138 (Cameron May 2001); Fouchard Gaillard Goldman on International Commercial Arbitration 984, para. 1695 (E. Gaillard, J. Savage eds., 1999); Ignacio Suarez Anzorena, The Incapacity Defence Under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 615, 622 (E. Gaillard, D. Di Pietro eds., 2008); Todd J. Fox, Stephan Wilske, Commentary of Article V (1)(a), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 267, 271 (R. Wolff ed., 2012).
15. First, the District Court of Moscow accepted a challenge to enforcement based on article V (1)(a) where an award was rendered in favour of a company which did not exist, as it had never been registered at its purported seat of incorporation.614
614. Sokofl Star Shipping Co. Inc v. GPVO Technopromexport, District Court of Moscow (Civil Department), Russian Federation, 11 April 1997, XXIII Y.B. Com. Arb. 742 (1998). See also Sojuznefteexport v. Joc Oil Ltd., Court of Appeal, Bermuda, 7 July 1989, XV Y.B. Com. Arb. 384 (1990).
16. Second, legal entities have challenged enforcement pursuant to article V (1)(a) on the grounds that one party was under some legal restriction. For instance, relying on the New York Convention generally, a Syrian court refused to enforce an award rendered against the Syrian Ministry of Defence because the arbitration agreement had been entered into in breach of a Syrian public policy provision requiring the preliminary advice of the Syrian Council of State for the referral of the dispute to arbitration.615 Conversely, a Russian court confirmed the recognition and enforcement of an award pursuant to the Convention on the ground that no legal restriction prohibited a company’s general director from signing the arbitration agreement and binding the company.616
615. Fougerollem S.A. v. Ministry of Defence of the Syrian Arab Republic, Administrative Tribunal of Damascus, Syria, 31 March 1988, XV Y.B. Com. Arb. 515 (1990). See also Société Arabe des Engrais Phosphates et Azotes— SAEPA and Société Industrielle d’Acide Phosphorique et d’Engrais—SIAPE v. Gemanco srl, Court of Appeal of Bari, Italy, 2 November 1993, XXII Y.B. Com. Arb. 737 (1997).
616. Dana Feed A/S v. OOO Arctic Salmon, Federal Arbitrazh Court, Northwestern District, Russian Federation, 9 December 2004, XXXII Y.B. Com. Arb. 658 (2008).
17. Third, in a few early cases, courts have confirmed that issues of alleged lack of representative power fall under the incapacity defence of article V (1)(a).617 The Spanish Supreme Court, for instance, confirmed that issues of alleged powers conferred by a company’s board of directors and issues of alleged contractual representative powers, such as those given under a power of attorney, fall under the incapacity defence of article V (1)(a). In this case, the court found that the party opposing recognition and enforcement had not proven that the power of attorney was not valid under the applicable law.618 In Dalmine, the Italian Court of Cassation held that the incapacity defence under article V (1)(a) encompasses whether a natural person has the authority to act on behalf of a company pursuant to its constitutional documents, but ultimately rejected the article V (1)(a) defence as individuals that had signed the arbitration agreement had the necessary power to conclude it.619 In another situation, the Austrian Supreme Court held that lack of proper representation could be found where the power of attorney to sign the contract containing the arbitration agreement was invalid. However, in that case, the court found that the party opposing enforcement had failed to show that the party who signed the agreement on its behalf lacked the required authority.620
617. See, e.g., Ltd. “R.L.” v. JSC “Z. Factory”, Supreme Court, Georgia, 2 April 2004, a-204-sh-43-03; Agrimpex S.A. v. J.F. Braun & Sons, Inc., Supreme Court, Greece, 14 January 1977, IV Y.B. Com. Arb. 269 (1979).
618. Unión de Cooperativas Agrícolas Epis-Centre v. La Palentina S.A., Supreme Court, Spain, 17 February 1998, XXXVII Y.B. Com. Arb. 533 (2002).
619. Dalmine S.p.A. v. M.& M. Sheet Metal Forming Machinery A.G., Court of Cassation, Italy, 23 April 1997, XXIV Y.B. Com. Arb. 709 (1999). See also Bundesgerichtshof [BGH], Germany, 23 April 1998, III ZR 194/96.
620. K v. F AG, Oberster Gerichtshof, Austria, 23 October 2007, XXXIII Y.B. Com. Arb. 354 (2008). See also O Limited v. S GmbH, Oberster Gerichtshof, Austria, 24 August 2005, XXXII Y.B. Com. Arb. 254 (2007).
18. Although issues of proper representation and authority differ from that of capacity stricto sensu,621 commentators support the idea that the incapacity defence should extend to situations where legal entities allegedly act ultra vires their constitutional documents, or where the representative power is alleged to be invalid.622
621. Emmanuel Gaillard, Le pouvoir en droit privé 48, para. 64 (Economica 1985).
622. Ignacio Suarez Anzorena, The Incapacity Defence Under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 615, 623-24 (E. Gaillard, D. Di Pietro eds. 2008); Russell on Arbitration 463 (D. Sutton, J. Gill, M. Gearing eds., 2007).
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C. Meaning of the “law applicable to them”
19. Pursuant to article V (1)(a), the incapacity of the parties is to be assessed under “the law applicable to them”.623 It is clear however from the text of article V (1)(a) that the law applicable to the capacity of a party is different from the law governing the validity of an arbitration agreement, as stated in the second part of the provision.624
623. The expression “under the law applicable to them” was deleted from articles 34 and 36 of the UNCITRAL Model Law on International Commercial Arbitration, because, as explained by the UNCITRAL Secretariat, this expression “was viewed as containing [...] potentially misleading conflict-of-law rule”: Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration, para. 54. See also Summary Records of the 317th meeting of the United Nations Commission on International Trade Law for meetings devoted to the preparation of the UNCITRAL Model Law on International Commercial Arbitration, A/CN.9/246, Annex, Yearbook of the United Nations Commission on International Trade Law, 1985, Vol. XVI, 446.
624. See, e.g., Fouchard Gaillard Goldman on International Commercial Arbitration 984, para. 1695 (E. Gaillard, J. Savage eds., 1999); Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 277 (1981).
20. As reflected in the travaux préparatoires to the Convention, the expression “law applicable to them” was meant to be determined “according to the law governing [a party’s] personal status”.625 The Convention is however silent on how to determine the applicable law.
625. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Twenty-fourth Meeting, E/CONF.26/SR.24, p. 7.
21. Courts applying article V (1)(a) have followed different approaches in choosing the law applicable to determine a party’s capacity, depending on what is being alleged by the party opposing recognition and enforcement: (i) the incapacity of a party stricto sensu, or (ii) the lack of authority of the party to enter into an agreement on behalf of another party.
22. In the few cases addressing the issue of incapacity of a natural or legal person stricto sensu, courts have generally determined the law applicable to that party’s capacity pursuant to their own system of law. For instance, when deciding on a challenge to enforcement under article V (1)(a), the Spanish Supreme Court applied Spanish conflict of laws rule to determine that the capacity of a party should be assessed pursuant to its personal law, i.e., the law of the nationality of that party.626 With respect to the capacity of an individual, commentators have distinguished between civil law jurisdictions, where such capacity is generally governed by the law of the person’s nationality, and common law jurisdictions, where it is generally governed by the law of the person’s domicile or habitual residence.627 As regards the capacity stricto sensu of legal persons, in many jurisdictions, the applicable law will be the law of the place of incorporation or the place of business of the entity at issue.628
626. Unión de Cooperativas Agrícolas Epis-Centre v. La Palentina S.A., Supreme Court, Spain, 17 February 1998, XXVII Y.B. Com. Arb. 533 (2002).
627. Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 276 (1981); Patricia Nacimiento, Article V (1)(a), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 205, 219 (H. Kronke, P. Nacimiento et al. eds., 2010); Stefan Kröll, Recognition and Enforcement of Awards, in Arbitration in Germany: the Model Law in Practice 506, 528-29 (K. H. Böckstiegel, S. Kröll, P. Nacimiento eds., 2007).
628. Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 276 (1981); Patricia Nacimiento, Article V (1)(a), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 205, 220 (H. Kronke, P. Nacimiento et al. eds., 2010); Stefan Kröll, Recognition and Enforcement of Awards, in Arbitration in Germany: The Model Law in Practice 528-29 (K. H. Böckstiegel, S. Kröll, P. Nacimiento eds., 2007) for the position in Germany.
23. In cases that concern challenging the authority of a party to conclude an arbitration agreement on behalf of another party, some courts have assessed the validity of a party’s power to conclude an arbitration agreement on behalf of another party pursuant to the personal law of the party that was purportedly bound by the arbitration agreement.629 For instance, in La Palentina, the Spanish Supreme Court held that when the act of representation is carried out by a company’s organs, the national law of that entity will apply.630 When the authority of a party to conclude an arbitration agreement on behalf of another party is based on a power of attorney, a German court held that its validity should be assessed pursuant to the law of the State where the power of attorney was to be exercised.631
629. See, e.g., Dana Feed A/S v. OOO Artic Salmon, Federal Arbitrazh Court, Northwestern District, Russian Federation, 9 December 2004, XXXIII Y.B. Com. Arb. 658 (2008).
630. Unión de Cooperativas Agrícolas Epis-Centre v. La Palentina S.A., Supreme Court, Spain, 17 February 1998, XXXVII Y.B. Com. Arb. 533 (2002). See also Dalmine S.p.A. v. M.&M. Sheet Metal Forming Machinery A.G., Court of Cassation, Italy, 23 April 1997, XXIV Y.B. Com. Arb. 709 (1999).
631. Oberlandesgericht [OLG] Celle, Germany, 4 September 2003, XXX Y.B. Com. Arb. 528 (2005).
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D. Relevant time for incapacity
24. Article V (1)(a) of the Convention does not specify the point in time at which a party must be under an incapacity. However, the use of the past tense in article V (1)(a) “[...] that the parties were [...] under some incapacity” indicates that incapacity should be assessed at the time of conclusion of [the contract containing] the arbitration agreement.632 The drafters of the New York Convention sought to abandon the approach followed under the 1927 Geneva Convention, which focused on improper representation during the arbitral proceedings.633
632. See Ignacio Suarez Anzorena, The Incapacity Defence Under the New York Convention, in Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice 615, 631 (E. Gaillard, D. Di Pietro eds., 2008); Patricia Nacimiento, Article V (1)(a), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 205, 218 (H. Kronke, P. Nacimiento et al. eds., 2010); Todd J. Fox, Stephan Wilske, Commentary of Article V (1)(a), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 267, 272 (R. Wolff ed., 2012).
633. See Travaux préparatoires: United Nations Conference on International Commercial Arbitration, Summary Records of Seventeenth Meeting, E/CONF.26/SR.17, p. 9.
25. With very few exceptions,634 courts have assessed the capacity of a party at the time of conclusion of the arbitration agreement. For example, the Italian Court of Cassation accepted that the point in time at which representative capacity should be examined under article V (1)(a) was the time of conclusion of the arbitration agreement.635 In more recent decisions, courts in the United States,636 Russian Federation637 and Canada638 have followed the same approach.
634. See James P. Corcoran, Superintendent of Insurance of the State of New York et al. v. Ardra Insurance Co. Ltd., Richard A. and Jeanne S. DiLoreto, Supreme Court of New York County, United States of America, 10 April 1990, XVI Y.B. Com. Arb. 663 (1991).
635. Dalmine S.p.A. v. M.& M. Sheet Metal Forming Machinery A.G., Court of Cassation, Italy, 23 April 1997, XXIV Y.B. Com. Arb. 709 (1999).
636. Seung Woo Lee, as Co-Receiver for Medison Co. Ltd. a Korean corporation and others v. Imaging3, Inc. and others, Court of Appeals, Ninth Circuit, United States of America, 19 June 2008, 06-55993, XXXIII Y.B. Com. Arb. 1180 (2008); China National Building Material Investment Co. Ltd. v. BNK International LLC, District Court, Western District of Texas, Austin Division, United States of America, 3 December 2009, A-09-CA-488-SS.
637. Dana Feed A/S v. OOO Arctic Salmon, Federal Arbitrazh Court, Northwestern District, Russian Federation, 9 December 2004, XXXIII Y.B. Com. Arb. 658 (2008).
638. Grow Biz International Inc. v. D.L.T. Holdings Inc., Supreme Court, Province of Prince Edward Island, Canada, 23 March 2001, XXX Y.B. Com. Arb. 450 (2005).
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INVALIDITY OF THE ARBITRATION AGREEMENT
26. The second limb of article V (1)(a) provides that recognition and enforcement may be refused on the ground that the arbitration agreement “is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.”
27. Courts have generally determined the validity of an arbitration agreement within the meaning of article V (1)(a) by following the conflict of laws rule set out in that provision. Certain courts have however considered that the reference to article II in article V (1)(a) requires the validity of the arbitration agreement to be determined pursuant to the form requirements set by article II.
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A. The choice of law rule under article V(1)(a)
28. Article V (1)(a) provides that validity of an arbitration agreement is to be determined “under the law to which the parties have subjected it”, or “failing any indication thereon”, “under the law of the country where the award was made”.
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a. The primacy of the parties’ choice of law
29. Pursuant to article V (1)(a), the invalidity of an arbitration agreement shall, in the first instance, be assessed pursuant to the law chosen by the parties.639 Accordingly, courts have often applied the law chosen by the parties to govern the main agreement, or the law chosen by the parties governing the arbitral procedure, as an implicit choice of law governing the arbitration agreement.
639. See, e.g., Mabofi Holdings Limited v. RosGas A.G., Federal Arbitrazh Court for the Moscow District, Russian Federation, 24 January 2012, A40-65888/11-8/553; Supreme Court, Spain, 10 February 1984, X Y.B. Com. Arb. 493 (1985). See also Patricia Nacimiento, Article V (1)(a), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 205, 227 (H. Kronke, P. Nacimiento et al. eds., 2010); Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 282 (1981); Todd J. Fox, Stephan Wilske, Commentary of Article V (1)(a), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 267, 275 (R. Wolff ed., 2012).
30. In practice, parties seldom expressly choose the law to govern their arbitration agreement. In reported case law, courts have looked to other factors to find that the parties have implicitly chosen the law to govern the arbitration agreement. For instance, a United States court held that the choice of the parties with respect to the law governing the arbitral proceedings amounted to an implicit choice of law regarding the validity of the arbitration agreement.640 In another case, the Egyptian Court of Cassation ruled that the law governing the parties’ main agreement should also govern the validity of the arbitration agreement.641 The Egyptian Court of Cassation found that because the parties chose Swedish law to govern their contract, that law should apply to the arbitration agreement in order to determine its validity within the meaning of article V (1)(a).
641. Egyptian Company for Concrete & Hashem Ali Maher v. STC Finance & Ismail Ibrahim Mahmoud Thabet & Sabishi Trading and Contracting Company, Court of Cassation, Egypt, 27 March 1996, 2660/59. See also Stena RoRo AB v. OAO Baltiysky Zavod, Highest Arbitrazh Court, Russian Federation, 13 September 2011, A56-60007/2008; Ltd. “R.L.” v. JSC “Z. Factory”, Supreme Court, Georgia, 2 April 2004, a-204-sh-43-03.
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b. The applicable law in the absence of the parties’ choice
31. Where the parties have not expressly or implicitly selected a law to govern their arbitration agreement, courts have turned to the subsidiary rule and have assessed the validity of an arbitration agreement under the “law of the country where the award was made” pursuant to article V (1)(a).642
642. See, e.g., Rocco Giuseppe e Figli s.n.c. v. Federal Commerce and Navigation Ltd., Court of Cassation, Italy, 15 December 1982, X Y.B. Com. Arb. 464 (1985); Official Receiver in the bankruptcy of Lanificio Walter Banci S.a.s. v. Bobbie Brooks Inc., Court of Cassation, Italy, 15 April 1980, VI Y.B. Com. Arb. 233 (1981); Supreme Court, Spain, 10 February 1984, X Y.B. Com. Arb. 493 (1985).
32. For instance, the Supreme Court of Austria, in assessing the validity of an arbitration agreement under article V (1)(a) held that, since neither party had contended that the arbitration agreement was governed by a particular law, its validity would be assessed according to the law of the country where the arbitral award was made.643
643. K v. F AG, Oberster Gerichtshof, Austria, 23 October 2007, XXXIII Y.B. Com. Arb. 354 (2008).
33. In a few reported cases, courts have looked directly to the law of the country where the award was made without expressly examining whether the parties had chosen a law applicable to the arbitration agreement.644 In these cases, the challenging parties have not expressly relied on any law chosen by the parties to govern the validity of the arbitration agreement. For example, the Svea Court of Appeal, in assessing the validity of an arbitration agreement, applied the law of the country where the award was made, without first expressly considering whether the parties had explicitly or implicitly selected a governing law for the arbitration agreement.645
644. G. A. Pap-KG Holzgrosshandlung v. Ditta Giovanni G. Pecoraro, Court of Appeal of Naples (Salerno Section), Italy, 13 February 1978, VI Y.B. Com. Arb. 228 (1981). See also where the decision does not make any reference to the parties’ agreement: United States VOEST ALPINE International Trade Company v. Jiangsu Provincial Foreign Trade Corporation, Nanjing Intermediate People’s Court, China, 13 April 2009, (2008) Ning Min Wu Chu Zi No. 43.
645. Planavergne S.A., Fontanes v. Kalle Bergander i Stockholm AB, Svea Court of Appeal, Sweden, 7 September 2001, T 4645-99.
34. The Convention is silent on how to determine where the award “was made” Courts have, with the exception of one reported case,646 determined that the seat of arbitration as determined in the arbitration agreement was the place where the award was “made”.647 For example, the English High Court in Dallah noted that the validity of the arbitration agreement was to be assessed according to the law of the country where the award was made, i.e., the law of the country of the seat of arbitration.648 The court concluded that the seat of arbitration being in France, the validity of the arbitration agreement ought to be assessed pursuant to French law. Similarly, a Dutch court reasoned that, given the absence of a determination as to the law governing the arbitration agreement and the fact that the arbitration clause designated England as the seat of arbitration, English law would apply to determine the validity of the arbitration agreement.649
646. Richard Henry Moffit Outhwaite v. Robert Ralph Scrymegeour Hiscox, House of Lord, England and Wales, 24 July 1991, XVII Y.B. Com. Arb. 599 (1992). In this case, the House of Lords determined that the award is “made” at the place where it is signed and not at the seat of arbitration designated by the parties.
647. See, e.g., K v. F AG, Oberster Gerichtshof, Austria, 23 October 2007, XXXIII Y.B. Com. Arb. 354 (2008); Supreme Court, Spain, 10 February 1984, X Y.B. Com. Arb. 493 (1985); Shandong Textiles Import and Export Corporation v. Da Hua Non-ferous Metals Company Limited, Court of First Instance, High Court of the Hong Kong Special Administrative Region, Hong Kong, 6 March 2002, HCCT 80/1997.
648. Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, High Court of Justice, England and Wales, 1 August 2008, [2008] EWHC 1901, upheld by Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Court of Appeal, England and Wales, 20 July 2009, 2008/2613; Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Supreme Court, United Kingdom, 3 November 2010, UKSC 2009/0165.
649. Société d’Etudes et de Commerce SA v. Weyl Beef Products BV, Arrondissementsrechtbank, Court of First Instance of Almelo, Netherlands, 19 July 2000, XXVI Y.B. Com. Arb. 827 (2001).
35. It is well established in arbitral practice, as well as reflected in institutions’ arbitral rules and in arbitration laws, that an award is made at the seat of the arbitration.650
650. See, e.g., Article 31(3) of the ICC Rules (2012) (“The award shall be deemed to be made at the place of the arbitration and on the date stated therein”); Article 31(3) of the UNCITRAL Model Law on International Commercial Arbitration (“The award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award shall be deemed to have been made at that place”); Section 53 of the English Arbitration Act 1996 (“Unless otherwise agreed by the parties, where the seat of the arbitration is in England and Wales, or Northern Ireland, any award in the proceedings shall be treated as made there, regardless of where it was signed, despatched or delivered to any of the parties”).
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B. Meaning of “invalidity”
36. Reported case law shows that parties have seldom been successful in opposing recognition and enforcement of an arbitral award pursuant to article V (1)(a) on the ground that the arbitration agreement was invalid.
37. In a number of cases, the party opposing recognition and enforcement argued that a defect in the main agreement rendered the arbitration agreement invalid. Courts have generally dismissed this argument pursuant to the principle of severability, which holds that an arbitration agreement is legally independent from the underlying contract which contains it, and the nullity of a contract does not imply that the arbitration agreement therein is invalid.651
651. See, e.g., Altain Khuder LLC v. IMC Mining Inc and IMC Mining Solutions Pty Ltd, Supreme Court of Victoria, Australia, 28 January 2011; China Minmetals Materials Import & Export Co. v. Chi Mei Corp., Court of Appeals, Third Circuit, United States of America, 26 June 2003, 02-2897 and 02-3542; International Investor Kcsc v. Sanghi Polyesters Ltd., High Court of Andhra, India, 9 September 2002, Civil Revision Petition Nos 331 and 1441 of 2002; Oberlandesgericht [OLG] Koblenz, Germany, 28 July 2005, 2 Sch 4/05; Oberlandesgericht [OLG] Hamburg, Germany, 12 March 1998, XXIX Y.B. Com. Arb. 663 (2004); Oberlandesgericht [OLG] Saarbrücken, Germany, 30 May 2011, 4 Sch 03/10. For a more detailed analysis on the issue of severability, see the chapter of the Guide on article II, paras. 105-07.
38. In some cases, parties have argued that the arbitration agreement was invalid pursuant to article V (1)(a) on the ground that one of the parties had not signed the arbitration agreement. For instance, in Dallah, the Supreme Court of the United Kingdom denied enforcement of an award on the ground that one party to the award was not validly bound by the arbitration agreement.652 Conversely, the Supreme Court of Victoria in IMC Mining Solutions, in assessing a challenge based on Section 8(5)(a) of the Australian International Arbitration Act of 1974 (implementing article V (1)(a) of the Convention), held that the party which had allegedly not signed the arbitration agreement was validly bound by it in accordance with the law applicable to the arbitration agreement, which was different from the law applicable to the main agreement.653 Similarly, a Swiss court enforced an arbitral award rendered on the basis of an arbitration agreement by reference despite it not being signed by one of the parties.654 In some jurisdictions, courts have ruled that, despite not having signed the arbitration agreement, a party’s behaviour in the arbitral proceedings, including its participation therein, could constitute a valid arbitration agreement within the meaning of article V (1)(a).655
652. Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Supreme Court, United Kingdom, 3 November 2010, UKSC 2009/0165.
653. Altain Khuder LLC v. IMC Mining Inc and IMC Mining Solutions Pty Ltd, Supreme Court of Victoria, Australia, 28 January 2011.
654. Camera di esecuzione e fallimenti del Tribunale d’appello, Repubblica e Cantone Ticino, Switzerland, 22 February 2010, 14.2009.104.
655. Comverse Inc. v. American Telecommunications do Brazil Ltda, Superior Court of Justice, Brazil, 14 June 2012, SEC 3.709; China National Building Material Investment Co. Ltd. v. BNK International LLC, District Court, Western District of Texas, Austin Division, United States of America, 3 December 2009, A-09-CA-488-SS. See also the cases referenced in the chapter of the Guide on article II, para. 22.
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C. Formal validity of an arbitration agreement
39. Although article V (1)(a) sets outs the choice of law rules for assessing the validity of the arbitration agreement, parties opposing enforcement have often argued that enforcement should be denied on the basis that the arbitration agreement fails to comply with the form requirements of article II.656
656. For a more detailed discussion on the form requirements in article II (2), see the chapter of the Guide on article II, paras. 36-57.
40. In one reported case, the Italian Court of Cassation held that the requirements of article II do not apply in the context of assessing the validity of the arbitration agreement pursuant to article V (1)(a).657 The court reasoned that an arbitration agreement that fails to comply with the form requirement of article II could be held valid under article V (1)(a), as article V deals with recognition and enforcement of arbitral awards whereas article II deals with recognition and enforcement of arbitration agreements.
657. Official Receiver in the bankruptcy of Lanificio Walter Banci S.a.s. v. Bobbie Brooks Inc., Court of Cassation, Italy, 15 April 1980, VI Y.B. Com. Arb. 233 (1981). See also G. Haight, Convention on the Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of United Nations Conference 51 (1958).
41. In a number of reported cases, however, courts have assessed the validity of the arbitration agreement pursuant to the form requirements of article II.658 As explained by a United States appeals court in China Minmetals, articles II, IV (1)(b) and V (1)(a) of the Convention contemplate as a whole that an enforcing court should enforce only valid agreements to arbitrate and only awards based on those agreements.659
658. See, e.g., Concordia Trading B.V. v. Nantong Gangde Oil Co., Ltd, Supreme People’s Court, China, 3 August 2009, [2009] MinSiTaZi No. 22; Misr Foreign Trade Co. v. R.D Harboties (Mercantile), Court of Cassation, Egypt, 22 January 2008, 2010/64; Oberlandesgericht [OLG] Celle, Germany, 18 September 2003, 8 Scg 12/02; C S.A. v. E. Corporation, Court of Justice of Geneva, Switzerland, 14 April 1983, 187; Agrimpex S.A. v. J.F. Braun & Sons, Inc., Supreme Court, Greece, 14 January 1977, IV Y.B. Com. Arb. 269 (1979); Landgericht [LG] Bremen, Germany, 8 June 1967, 11-OH 11/1966. See also a decision rendered in Russian Federation applying the same reasoning without mentioning article II: Lugana Handelsgesellschaft mbH (Germany) v. OAO Ryazan Metal Ceramics Instrumentation Plant (Russian Federation), Presidium of the Highest Arbitrazh Court, Russian Federation, 2 February 2010, A54-3028/2008-S10. For a more detailed discussion on the forms requirement in article II (2), see the chapter of the Guide on article II, paras. 36-57.
659. China Minmetals Materials Import & Export Co. v. Chi Mei Corp., Court of Appeals, Third Circuit, United States of America, 26 June 2003, 02-2897 and 02-3542.
42. In this context, courts have generally accepted that, if the arbitration agreement fails to comply with the form requirements of article II, enforcement will still be ordered if, on the basis of the more-favourable-right provision at article VII (1), the agreement complies with the more liberal rules of the jurisdiction where enforcement is sought.660 In a series of decisions, German courts have applied the more favourable provisions of the German Code of Civil Procedure at the award enforcement stage to assess the validity of an arbitration agreement under article V (1)(a).661
660. See, e.g., Société Bomar Oil N.V. v. Entreprise tunisienne d’activités pétrolières (ETAP), Court of Appeal of Versailles, France, 23 January 1991, 1994 Rev. Arb. 108; Ste A.B.S. American Bureau of Shipping v. Copropriété Maritime Jules Verne et autres, Court of Appeal of Paris, France, 4 December 2002, 2001/17293, 2006 Rev. Arb. 945.
661. Oberlandesgericht [OLG] Celle, Germany, 14 December 2006, 8 Sch 14/05. See also Oberlandesgericht [OLG] Celle, Germany, 18 September 2003, 8 Sch 12/02; Oberlandesgericht [OLG] Frankfurt, Germany, 18 October 2007, 26 Sch 1/07; Bundesgerichtshof [BGH] Germany, 30 September 2010, III ZB 69/09; Bundesgerichtshof [BGH] Germany, 21 September 2005, XXXI Y.B. Com. Arb. 679 (2006). See contra Oberlandesgericht [OLG] Schleswig, Germany, 30 March 2000, 16 SchH 05/99. For a more detailed discussion on the relationship between article II and article VII, see the chapter of the Guide on article VII, paras. 31-35.
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PROCEDURAL ISSUES ARISING IN CONNECTION WITH ARTICLE V(1)(A)
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A. Burden of proof
43. Article V (1) provides that the party against whom the award is invoked must furnish proof of the ground for denying recognition and enforcement of an arbitral award.
44. With respect to article V (1)(a), courts have typically ruled that it is for the party opposing recognition and enforcement to prove either that one of the parties was under some legal incapacity at the time of the conclusion of the arbitration agreement or that the arbitration agreement was invalid under the applicable law.662 The party seeking recognition and enforcement only bears the burden of supplying documentary evidence of the arbitration agreement pursuant to article IV (1)(b), which provides that the party applying for recognition and enforcement shall supply the original arbitration agreement or a copy thereof.663
662. See generally: O Limited v. S GmbH, Oberster Gerichtshof, Austria, 24 August 2005, XXXII Y.B. Com. Arb. 254 (2007). For cases concerning the incapacity defence, see, e.g, Dalmine S.p.A. v. M.& M. Sheet Metal Forming Machinery A.G., Court of Cassation, Italy, 23 April 1997, XXIV Y.B. Com. Arb. 709 (1999); Grow Biz International Inc. v. D.L.T. Holdings Inc., Supreme Court, Province of Prince Edward Island, Canada, 23 March 2001, XXX Y.B. Com. Arb. 450 (2005); China National Building Material Investment Co. Ltd. v. BNK International LLC, District Court for the Western District of Texas, Austin Division, United States of America, 3 December 2009, A-09-CA-488-SS. For cases concerning the invalidity of the arbitration agreement, see, e.g., Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Supreme Court, United Kingdom, 3 November 2010, UKSC 2009/0165; Altain Khuder LLC v. IMC mining Inc and IMC Mining Solutions Pty Ltd, Supreme Court of Victoria, Australia, 28 January 2011.
663. For a more detailed analysis on article IV (1)(b), see the chapter of the Guide on article IV, paras. 62-75.
45. For example, the Court of Appeal of England and Wales in Yukos Oil Company v. Dardana Ltd. held that, once the party seeking enforcement has provided prima facie evidence of the existence of the arbitration agreement, the burden shifts to the party opposing enforcement to prove any of the grounds for refusal under article V (1), including that the parties never entered into a valid arbitration agreement under article V (1)(a).664 Courts in other jurisdictions including those in Italy,665 Spain,666 Austria,667 Australia,668 and Bermuda669 have followed the same approach.
664. Yukos Oil Company v. Dardana Ltd, Court of Appeal, England and Wales, 18 April 2002, A3/2001/1029. See also Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Supreme Court, United Kingdom, 3 November 2010, UKSC 2009/0165.
665. Jassica S.A. v. Ditta Gioacchino Polojaz, Court of Cassation, Italy, 12 February 1987, XVII Y.B. Com. Arb. 525 (1992).
666. Union Générale de Cinéma, S.A. (France) v. X Y Z Desarrollos, S.A. (Spain), Supreme Court, Spain, 11 April 2000, 3536 of 1998, XXXII Y.B. Com. Arb. 525 (2007); Strategic Bulk Carriers Inc. (Liberia) v. Sociedad Ibérica de Molturación, S.A. (Spain), Supreme Court, Spain, 26 February 2002, 153 of 2001, XXXII Y.B. Com. Arb. 550 (2007).
667. Seller v. Buyer, Supreme Court, Austria, 22 May 1991, XXI Y.B. Com. Arb. 521 (1996).
668. See also Altain Khuder LLC v. IMC mining Inc and IMC Mining Solutions Pty Ltd, Supreme Court of Victoria, Australia, 28 January 2011.
669. Sojuznefteexport (SNE) v. Joc Oil Ltd., Court of Appeal of Bermuda, Bermuda, 7 July 1989, XV Y.B. COM. ARB. 384 (1990).
46. However, certain courts have required the party seeking enforcement to prove that the arbitration agreement was valid in order to rely on it. Certain German courts, on the basis of the reference in article V (1)(a) to the “agreement referred to in Article II”, have ruled that the party relying on the arbitration agreement has the onus of proving its conformity with the requirements of article II.670
670. Oberlandesgericht [OLG] München, Germany, 12 October 2009, XXXV Y.B. Com. Arb. 383 (2010); Oberlandesgericht [OLG] Celle, Germany, 4 September 2003, XXX Y.B. Com. Arb. 528 (2005). See also with respect to Switzerland: Federal Tribunal, Switzerland, 31 May 2002, 4P.102/2001; C S.A. v. E. Corporation, Court of Justice of Geneva, Switzerland, 14 April 1983, 187.
47. The text and the drafting history of the Convention suggest that the applicant should only prove prima facie the existence of the arbitration agreement while the party opposing recognition and enforcement has the onus of proving its invalidity.671 Commentators have generally favoured this approach.672
671. See Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Record of the Eleventh Meeting, E/CONF.26/SR.11, p. 12.
672. Fouchard Gaillard Goldman on International Commercial Arbitration 968, para. 1673 (E. Gaillard, J. Savage eds., 1999); Todd J. Fox, Stephan Wilske, Commentary of Article V (1)(a), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958— Commentary 267, 278, para. 126 (R. Wolff ed., 2012); Patricia Nacimiento, Article V (1)(a), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 205, 211 (H. Kronke, P. Nacimiento et al. eds., 2010).
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B. Relevance of the findings of arbitral tribunals or courts
48. Article V (1)(a) is silent with respect to the standard of judicial review by enforcing courts.
49. In assessing challenges to recognition and enforcement under article V (1)(a), certain courts have decided matters related to the jurisdiction of the arbitral tribunal and the validity of the arbitration agreement de novo. For instance, in China Minmetals, a United States appeals court held that it “must make an independent determination of the agreement’s validity [...] at least in the absence of a waiver precluding the defence.”673 In Dallah, the Supreme Court of the United Kingdom referred to China Minmetals and noted that article V (1)(a) does not restrict the nature of the review to be carried out by the court asked to enforce the award.674 Similarly, in Germany, some courts have found that they were not bound by the arbitral tribunal’s findings on jurisdiction, including issues relating to the incapacity of a party and the invalidity of the arbitration agreement.675
673. China Minmetals Materials Import & Export Co. v. Chi Mei Corp., Court of Appeals, Third Circuit, United States of America, 26 June 2003, 02-2897 and 02-3542.
674. Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Supreme Court, United Kingdom, 3 November 2010, UKSC 2009/0165.
675. Oberlandesgericht [OLG] Schleswig, Germany, 30 March 2000, 16 SchH 5/99; Oberlandesgericht [OLG] Celle, Germany, 18 September 2003, 8 Sch 12/02. See also Oberlandesgericht [OLG] Celle, Germany, 4 September 2003, 8 Sch 11/02, XXX Y.B. Com. Arb. 528 (2005) (although the Court did not relied on article V (1)(a) of the Convention), and with respect to the second limb of article V (1)(a), see Oberlandesgericht [OLG] Celle, Germany, 14 December 2006, 8 Sch 14/05.
50. In the United States, certain courts have held that, under article V (1)(a), a court could not or should not review de novo the findings of the arbitral tribunal with respect to its own jurisdiction.676 Other courts on the contrary have considered that they have jurisdiction to review factual and legal questions to determine jurisdiction unless there is “clear and unmistakable evidence” that the parties intended to submit this issue to the arbitrators.677 They have been lenient in finding such “clear and unmistakable evidence” and have accepted that evidence of the parties’ consent to submit the issue of jurisdiction to the arbitral tribunal may be found in the arbitral rules selected by the parties. For instance, in the context of an award rendered on the basis of a bilateral investment treaty, a United States Court of Appeals held that the parties’ choice of the UNCITRAL Arbitration Rules (providing that the tribunal has the power to rule on objections that it has no jurisdiction) constituted “clear and unmistakable evidence” of their intent to arbitrate issues going to the jurisdiction of the arbitral tribunal.678
676. Thai-Lao Lignite Co. Ltd. et al. v. Government of the Lao People’s Democratic Republic, District Court, Southern District of New York, United States of America, 3 August 2011, 10 Civ. 5256 (KMW); Joseph Walker and Company, LLC. v. Oceanic Fats and Oil(s) Pte, Ltd., District Court, District of Columbia, United States of America, 11 September 2002, 01-2693.
677. Sarhank Group v. Oracle Corporation, Court of Appeals, Second Circuit, United States of America, 14 April 2005, 02-9383.
678. Werner Schneider, acting in his capacity as insolvency administrator of Walter Bau AG (In Liquidation) v. the Kingdom of Thailand, Court of Appeals, Second Circuit, United States of America, 8 August 2012, 11-1458-cv. See also Republic of Ecuador v. Chevron Corp., Court of Appeals, Second Circuit, United States of America, 17 March 2011, 10-1020-cv (L), 10-1026 (Con).
51. Other courts have directly relied on the findings of the arbitral tribunal in assessing its jurisdiction under an arbitration agreement.679 For example, the Svea Court of Appeal relied on the findings of the arbitral tribunal to hold the arbitration agreement valid within the meaning of article V (1)(a). In so ruling, it reviewed neither the legal nor the factual arguments presented by the party opposing recognition and enforcement.680
679. See, e.g., Four Seasons Hotels and Resorts, B.V., et al. v. Consorcio Barr, S.A., United States District Court, Southern District of Florida, Miami Division, United States of America, 4 June 2003, 02-23249.
680. Planavergne S.A., Fontanes v. Kalle Bergander i Stockholm AB, Svea Court of Appeal, Sweden, 7 September 2001, T 4645-99.
52. Going one step further, certain courts have refrained from examining factual or legal issues as they are prohibited from reviewing the merits of an award. For example, the Highest Arbitrazh Court in Russian Federation ruled that under article V (1) of the Convention, it “[did] not have the right to re-examine a foreign arbitral award on the merits”. It therefore relied on the findings of the arbitral tribunal regarding the issue whether the party applying for recognition and enforcement was properly bound by the arbitration agreement pursuant to the applicable law.681 Similarly, the High Court of Singapore, relying on Section 31(2)(a) and (b) of the Singapore International Arbitration Act (implementing article V (1)(a) of the Convention), held that a court could not review the arbitral tribunal’s findings with respect to jurisdiction unless extraordinary circumstances exist. Therefore, the court found that the party opposing recognition and enforcement had not brought new evidence and rejected the challenge.682
681. Stena RoRo AB v. OAO Baltiysky Zavod, Highest Arbitrazh Court, Russian Federation, 13 September 2011, A56-60007/2008.
682. Aloe Vera of America, Inc v. Asianic Food (S) Pte Ltd. and another, High Court, Singapore, 10 May 2006, [2006] SGHC 78.
53. Some courts have even considered themselves to be bound by the arbitrator’s findings on their jurisdiction and the validity of the arbitration agreement.683
683. Oberlandesgericht [OLG] Schleswig, Germany, 24 June 1999, 16 SchH 01/99.
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C. Preclusion
54. The Convention is silent on whether a party’s actions or inactions during the course of arbitration or court-related proceedings may preclude it from later raising a defence under article V in general, and more specifically under article V (1)(a).
55. Certain courts have held that a party is precluded from relying on any defence it failed to raise during the course of arbitration proceedings, including on the grounds that a party was under some incapacity or that the arbitration agreement was invalid. For instance, the Greek Supreme Court ruled that a party opposing enforcement is precluded from relying on any defects of the arbitration agreement if it failed to raise those during the course of the arbitral proceedings.684 The same principle has been applied in many other jurisdictions, including Germany,685 Australia,686 and the United States.687 In France, the Arbitration Act expressly provides that a party who fails to object to an irregularity before the arbitral tribunal shall be deemed to have waived the right to invoke it before the enforcing court.688
684. Agrimpex S.A. v. J.F. Braun & Sons, Inc., Supreme Court, Greece, 14 January 1977, IV Y.B. Com. Arb. 269 (1979).
685. Oberlandesgericht [OLG] München, Germany, 11 July 2011, 34 Sch 15/10; Oberlandesgericht [OLG] Frankfurt, Germany, 18 October 2007, 26 Sch 1/07; Oberlandesgericht [OLG] Hamm, Germany, 27 September 2005, 29 Sch 01/05; Oberlandesgericht [OLG] Koblenz, Germany, 28 July 2005, 2 Sch 4/05; Oberlandesgericht [OLG] Schleswig, Germany, 30 March 2000, 16 SchH 05/99.
686. Altain Khuder LLC v. IMC mining Inc. and IMC Mining Solutions Pty Ltd, Supreme Court of Victoria, Australia, 28 January 2011.
687. China National Building Material Investment Co. Ltd. v. BNK International LLC, District Court, Western District of Texas, Austin Division, United States of America, 3 December 2009, A-09-CA-488-SS; China Minmetals Materials Import & Export Co. v. Chi Mei Corp., Court of Appeals, Third Circuit, United States of America, 26 June 2003, 02-2897 and 02-3542; Joseph Walker and Company LLC v. Oceanic Fats and Oil(s) Ptd, Ltd., District Court, District of Columbia, United States of America, 11 September 2002, 01-2693.
688. Article 1466 of the French Code of Civil Procedure, applicable to international arbitration as per article 1506 of the French Code of Civil Procedure.
56. On the other hand, certain courts have held that a party would not be precluded from raising a defence under article V (1)(a) on the ground that it had not participated in the arbitral proceedings689 or had not raised those grounds in setting aside proceedings.690
689. Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan, Supreme Court, United Kingdom, 3 November 2010, UKSC 2009/0165
690. See, e.g., Bundesgerichtshof, [BGH], Germany, 16 December 2010, III ZB 100/09.
57. In a different context, certain courts have upheld arbitration agreements that, although initially defective, had been cured during the course of an arbitration. For instance, an Italian court held that the signature of the Terms of Reference in an arbitration proceeding under the auspices of the ICC International Court of Arbitration cured the otherwise defective arbitration agreement.691 In the same vein, courts have relied on the procedural behaviour of the parties to infer the existence of a valid arbitration agreement within the meaning of article V (1)(a).692 For example, the Presidium of the Highest Arbitrazh Court in Russian Federation held that the participation of the parties in the arbitral proceedings was deemed to be a confirmation of the written arbitration agreement pursuant to article V (1)(a) of the Convention, notwithstanding the lack of a proper arbitration agreement between the parties.693
691. Société Arabe des Engrais Phosphates et Azotes—SAEPA and Société Industrielle d’Acide Phosphorique et d’Engrais—SIAPE v. Gemanco srl, Court of Appeal of Bari, Italy, 2 November 1993, XXII Y.B. Com. Arb. 737 (1997). The Italian Court of Cassation has subsequently reversed the decision of the Court of Appeal of Bari on grounds unrelated to the New York Convention. See also Commonwealth Development Corp v. Montague, Supreme Court of Queensland, Australia, 27 June 2000, Appeal No 8159 of 1999; DC No 29 of 1999.
692. CTA Lind & Co. Scandinavia AB in Liquidation’s bankruptcy Estate v. Erik Lind, District Court, Middle District of Florida, Tampa Division, United States of America, 7 April 2009, 8:08-cv-1380-T-30TGW; China Nanhai Oil Joint Service Corporation Shenzhen Branch v. Gee Tai Holdings Co. Ltd, High Court, Supreme Court of Hong Kong, Hong Kong, 13 July 1994, 1992 No. MP 2411; Oberlandesgericht [OLG] Schleswig, Germany, 30 March 2000, 16 SchH 05/99; Landgericht [LG] Bremen, Germany, 8 June 1967, 11-OH 11/1966; Oberlandesgericht [OLG] Hamburg, Germany, 30 July 1998, XXV Y.B. Com. Arb. 641 (2000); L’Aiglon S/A v. Têxtil União S/A, Superior Court of Justice, Brazil, 18 May 2005, SEC 856 (relying on the practice of international contracts in the matter of cotton-trade to assess to validity of the arbitration agreement).
693. Lugana Handelsgesellschaft mbH v. OAO Ryazan Metal Ceramics Instrumentation Plant, Presidium of the Highest Arbitrazh Court, Russian Federation, 2 February 2010, A54-3028/2008-S10.
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