INTRODUCTION

ANALYSIS

• A. The ‘binding’ nature of an award

  • a. When does an award become binding?

    5. The question of when an award becomes binding gave rise to a number of discussions among members of the Working Party in charge of drafting article V (1)(e). Some delegates’ view was that it should mean that the award is no longer open to ordinary, as opposed to extraordinary, means of recourse.⁹³⁶ This distinction, being unknown in a number of legal systems, was eventually not retained. The drafters of the Convention decided not to define the term “binding” in the Convention itself, leaving it to the courts to decide the conditions under which an award should be considered as such.

    936. Travaux préparatoires, Comments on Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, E/CONF.26/SR.11-14, SR17. See also Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards A Uniform Judicial Interpretation 334-36 (1981).

    6. Some courts have assessed the binding nature of the award by reference to the law of the country in which the award was rendered.⁹³⁷ For instance, in a case where a party opposed enforcement on the ground that the award had not been duly delivered to it, and hence was allegedly not binding, a Swiss court decided that “[t]he issue whether an arbitral award has become binding on the parties, for instance by rendition, oral communication, written statement or communication to the parties or by expiry of the time limit for a legal means [of appeal] is governed in first instance by the law applicable to the arbitration”. In that case, the court considered that the party opposing enforcement had not proved that the alleged difficulties in the delivery of the award resulted in it being non-binding under Swiss law, and therefore rejected the party’s request that enforcement be denied.⁹³⁸ In Compagnie de Saint-Gobain-Pont-à-Mousson, where the party opposing enforcement had argued that the award had not become binding on the parties in the country of the seat, the Court of Appeal of Paris noted that the courts of the seat themselves, namely Indian courts, had declared that the award was binding, and on that ground granted the request for enforcement.⁹³⁹ Courts in Germany,⁹⁴⁰ Italy,⁹⁴¹ the United States,⁹⁴² and Switzerland⁹⁴³ have similarly referred to the law of the country where the arbitration took place as being the law applicable to determining the binding nature of the award.

    937. For a description of this approach, see Fouchard Gaillard Goldman on International Commercial Arbitration 974-75, paras. 1681-83 (E. Gaillard, J. Savage eds., 1999); Nadia Darwazeh, Article V (1)(e), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 301, 312-13. (H. Kronke, P. Nacimiento et al. eds., 2010).

    938. Italian Party v. Swiss Company, Court of First Instance, Zurich, Switzerland, 14 February 2003, XXIX Y.B. Com. Arb. (2004).

    939. Compagnie de Saint-Gobain—Pont-à-Mousson v. The Fertilizer Corporation of India Limited, Paris Court of Appeal, France, 10 May 1971.

    940. Oberlandesgericht [OLG] Düsseldorf, Germany, 19 January 2005, I-26 Sch 5/03 (dismissing the request for recognition of an award on the ground that the claims decided in the award had been set-off under Romanian law, the law of the seat of the arbitration); Seller v. Buyer, Oberlandesgericht [OLG] Celle, Germany, 6 October 2005, 8 Sch 06/05 (holding that whether an award is binding is to be determined pursuant to the law of the arbitration, in this case Russian law, and that the Russian law requirement that each party receive a copy of the arbitral award signed by the arbitrators for the award to be binding was met in this case).

    941. Carters (Merchants) Ltd. v. Francesco Ferraro, Corte di Appello di Napoli, Italy, 20 February 1975, IV Y.B. Com. Arb. (1979) (referring to the law applicable at the seat of the arbitration, namely English law, to rule on the binding nature of the award).

    942. Pactrans Air & Sea, Inc. v. China National Chartering Corp., et al., District Court, Northern District of Florida, United States of America, 29 March 2010, 3:06-cv-369/RS-EMT (in a case where the seat of the arbitration was China, holding that the award was binding on the ground that, under Chinese arbitration law, “the legal effects of the award letter begin on the day it is written”).

    943. Denysiana S.A. v. Jassica S.A., Swiss Federal Tribunal, Switzerland, 14 March 1984 (in a case where the seat of the arbitration was Paris, stating that “the party opposing the enforcement must prove that the award has not yet become binding or set aside or suspended, pursuant to the law governing the arbitration”, namely French law).

    7. Under a second approach, sometimes referred to as an “autonomous approach”, courts have relied on their own interpretation of what a binding award under article V (1)(e) should be. In the majority of cases, courts following this approach have ruled that an award shall be considered as binding if it is no longer open to ordinary means of recourse, namely those where the substance of the award is reviewed, even if extraordinary means of recourse are still available, including actions to set aside.⁹⁴⁴ For example, the Swiss Federal Tribunal ruled that foreign arbitral awards are binding on parties under article V (1)(e) when they “can no longer be appealed by ordinary means.”⁹⁴⁵ Likewise, in a case where the place of the arbitration was London, a Dutch court held that because “no ordinary means of recourse [could] be made against the arbitral award in question”, the award had “become binding on the parties within the meaning of the Convention.”⁹⁴⁶ In Hong Kong, courts have ruled that an award is “binding” when it is “no longer open to an appeal on the merits.”⁹⁴⁷

    944. For a description of this second approach, see Fouchard Gaillard Goldman on International Commercial Arbitration 972, para. 1679 (E. Gaillard, J. Savage eds., 1999); Nadia Darwazeh, Article V (1)(e), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 301, 311-312 (H. Kronke, P. Nacimiento et al. eds., 2010); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 360, paras. 361, 364 (R. Wolff ed., 2012).

    945. Company X SA v. State Y, Swiss Federal Tribunal, Switzerland, 9 December 2008, 4A_403/2008. See also Y v. X, Swiss Federal Tribunal, Switzerland, 3 January 2006, 5P.292/2005 (stating that an award can be considered as binding under art. V (1)(e) when “an ordinary appeal against the award is no longer possible”); X v. Y, Swiss Federal Tribunal, Switzerland, 21 February 2005, 5P.353/2004 (stating that the binding nature of an award shall been recognised as soon as the award becomes “res judicata and can no longer be appealed”); X v. Y, Cour de Justice de Genève, 1ère section, Switzerland, 23 September 2004 (ruling that an award is binding as soon as the award has res judicata effect and is not subject to ordinary recourse).

    946. Palm and Vegetable Oils SDN. BHD. v. Algemene Oliehandel International B.V., President of Rechtbank of Utrecht, Netherlands, 22 November 1984. See also SPP (Middle East) Ltd. v. The Arab Republic of Egypt, President of the District Court of Amsterdam, Netherlands, 12 July 1984, X Y.B. Com. Arb. (1985) (ruling that “an arbitral award is not binding if it is open to appeal on the merits before a judge or an appeal arbitral tribunal”).

    947. Société Nationale d’Opérations Pétrolières de la Côte d’Ivoire—Holding v. Keen Lloyd Resources Limited, High Court of the Hong Kong Special Administrative Region, Court of First Instance, Hong Kong, 20 December 2001, 55 of 2011, XXIX Y.B. Com. Arb. (2004). See also Diag Human SE v. Czech Republic, High Court, Queen’s Bench Division, United Kingdom, 22 May 2014 (stating that “if an award is subject to ‘ordinary’ recourse, it will not be binding”).

    8. These approaches to assessing the binding nature of an award are not necessarily mutually exclusive, and in a number of instances, courts have applied them in combination.⁹⁴⁸ For example, in a case where the place of the arbitration was Paris, and after declaring that an award should be considered as binding “if it is no longer open to an appeal on the merits”, the High Court of Hong Kong referred to both the arbitration rules and the provisions of the French arbitration law to determine whether the award could be subject to an appeal on the merits.⁹⁴⁹ In other cases, national courts refrained from applying the requirements of the law of the seat when these requirements would have led to a result contrary to the purpose of the New York Convention, for instance a requirement that the award be granted a national exequatur to become binding.⁹⁵⁰

    948. See Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 362, paras. 364-65 (R. Wolff ed., 2012); Fouchard Gaillard Goldman on International Commercial Arbitration 975, para. 1683 (E. Gaillard, J. Savage eds., 1999).

    949. Société Nationale d’Opérations Pétrolières de la Côte d’Ivoire—Holding v. Keen Lloyd Resources Limited, High Court of the Hong Kong Special Administrative Region, Court of First Instance, Hong Kong, 20 December 2001, 55 of 2011, XXIX Y.B. Com. Arb. (2004).

    950. See chapter of the Guide on article V (1)(e), para. 11.

    9. In line with these decisions, for the purposes of assessing the binding nature of an award under the Convention, some commentators have distinguished between, on the one hand, the principles which were clearly intended to apply under the Convention and, on the other hand, the residual grounds found in the law of the country where the award was rendered which the party opposing enforcement is likely to invoke.⁹⁵¹

    951. See Fouchard Gaillard Goldman on International Commercial Arbitration 976, para. 1684 (E. Gaillard, J. Savage eds., 1999); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 360, para. 360 (R. Wolff ed., 2012).

    10. The first of these principles is that the binding nature of the award does not depend on whether the award is enforceable in the country where it was issued. National courts have repeatedly recalled that this requirement would amount to reinstating the mechanism of double exequatur; and they have systematically rejected arguments that an award would not be binding on the parties on the ground that it had not been enforced at the place of the arbitration. In AB Götaverken v. General National Maritime Transport Company (GMTC), Libya and others, for example, the Swedish Supreme Court expressly stated that, for an award to be binding under article (V) (1)(e), the party relying on the award does not need to “prove that the award is enforceable according to the authorities of the country in which it was rendered.”⁹⁵² A Spanish court likewise expressly stated that “the binding character of the award may not be made to depend on an exequatur by the courts of the State of rendition.”⁹⁵³

    952. AB Götaverken v. General National Maritime Transport Company (GMTC), Libya and others, Supreme Court, Sweden, 13 August 1979, SO 1462. See also German (F.R.) party v. Dutch party, President of Rechtbank, The Hague, Netherlands, 26 April 1973, IV Y.B. Com. Arb. 305 (1979).

    953. Antilles Cement Corporation v. Transficem, Supreme Court, Civil Chamber, First Section, Spain, 20 July 2004, XXXI Y.B. Com. Arb. (2006). For the same solution, see also Joseph Müller AG v. Bergesen und Obergericht (II. Zivilkammer) des Kantons Zürich, Court of First Instance, Switzerland, 26 February 1982 (stating that “[t]he requirement of a declaration of enforcement in the country of the arbitral award’s origin would go squarely against the New York Convention’s aim of avoiding the double exequatur”); Swiss Federal Tribunal, Switzerland, 8 December 2003, 4P.173/2003/ech.; Company X SA v. Y Federation, Swiss Federal Tribunal, Switzerland, 9 December 2008, 4A_403/2008; X v. Y, Swiss Federal Tribunal, Switzerland, 21 February 2005, 5P.353/2004 (stating that “a foreign arbitral award does not have to be enforceable in its country of origin; it merely has to be binding on the parties, and its binding nature must have been recognised as soon as the award becomes res judicata and can no longer be appealed”).

    11. The second principle is that the fact that an action to set aside the award still lies in the jurisdiction of the seat does not lead that award to be non-binding for the purposes of the Convention.⁹⁵⁴ This principle has been continuously affirmed by national courts, for instance in the Netherlands,⁹⁵⁵ Germany,⁹⁵⁶ France,⁹⁵⁷ the United States,⁹⁵⁸ the United Kingdom⁹⁵⁹ and Switzerland.⁹⁶⁰

    954. Fouchard Gaillard Goldman on International Commercial Arbitration 976, para. 1684(E. Gaillard, J. Savage eds., 1999); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 358, para. 357 (R. Wolff ed., 2012); Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 350 (1981).

    955. SPP (Middle East) Ltd. v. The Arab Republic of Egypt, President of the District Court of Amsterdam, Netherlands, 12 July 1984, X Y.B. Com. Arb. (1985) (ruling that “the mere initiation of an action for setting aside [...] does not have as consequence that the arbitral award must be considered as not binding”).

    956. Film distributor v. Film producer, Bayerisches Oberstes Landesgericht [BayObLG], Germany, 22 November 2002, 4 Z Sch 13/02 (granting a request for enforcement of the award despite annulment proceedings having been commenced by the Respondent at the seat of the arbitration); Seller v. Buyer, Bundesgerichtshof [BGH], III ZB 06/02, Germany, 30 January 2003 (stating that “[t]he mere fact that the defendant states that it filed an ‘appeal’ from the decision of the Russian arbitral tribunal does not mean that there is a ground for refusal pursuant to Art. V (1)(e)”); Supplier v. Carrier, Oberlandesgericht [OLG] Celle, Germany, 20 November 2003, 8 Sch 02/03 (stating that the pending action for annulment in Sweden had no impact on the recognition of the award); Oberlandesgericht [OLG] München, Germany, 23 February 2007, 34 Sch 31/06 (stating that the possibility of having the award annulled at the seat does not hinder the recognition of the arbitral award).

    957. S.A. Recam Sonofadex v. S.N.C. Cantieri Rizzardi de Gianfranco Rizzardi, Court of Appeal of Orleans, France, 5 October 2000 (stating that the recognition and enforcement of an award can only be rejected if the award has been effectively suspended by a competent authority of the country in which the award was rendered; initiating setting aside proceedings is not sufficient).

    958. Fertilizer Corporation of India et al. v. IDI Management, Inc., District Court, Southern District of Ohio, United States of America, 9 June 1981, C-1-79-570.

    959. IPCO (Nigeria) Ltd. v. NNPC (Nigeria), High Court of Justice, England and Wales, 27 April 2005, 2004 1031 (stating that the application of article V (1)(e) is not triggered automatically by a challenge being brought before a court in the country of origin); Continental Transfer Technique Ltd. v. Federal Government of Nigeria, High Court of Justice, England and Wales, 30 March 2010, 2008 Folio 1280 (stating that article V (1)(e) only applies where the award “has been set aside or suspended” and noting that “the fact that there is an application to set aside an award does not mean that the award has been set aside”).

    960. Company X SA v. Y Federation, Swiss Federal Tribunal, 9 December 2008, 4A_403/2008 (ruling that the mere fact that an action for setting aside an award is admissible or has been filed in the country in which the award was made does not make the award any less binding).

    12. Furthermore, regardless of the approach followed, courts assessing the binding nature of an award have often paid particular attention to the parties’ intention resulting from the arbitration agreement or the arbitration rules. The Belgium Cour de cassation, for instance, stated that the binding nature of the award should be determined “by referring, successively and one in the absence of the other, to the arbitration agreement, the law that it designates for such purpose, and last, the law of the country in which the award was rendered.”⁹⁶¹ In Joseph Müller, a Swiss court ruled that whether an award has become binding on the parties is a question to be determined according to “in the first place [...] the agreement of the parties and, failing such agreement, subsidiarily [...] the law of the country where the arbitration takes place.”⁹⁶² In the same vein, a Spanish court ruled that “the binding nature of the award must be examined under the rules governing the arbitration [...] rather than under the norms of the State where the arbitration took place of the award was rendered.” The court went on to state that “pursuant to [the ICC] Rules, the binding character of the award ensues from the submission to ICC arbitration and the valid waiver of any means of recourse implied in the submission to [ICC] institutional arbitration,” and on that basis, decided that the award was binding.⁹⁶³

    961. Inter-Arab Investment Guarantee Corporation v. Banque Arabe et Internationale d’Investissements, Cour de cassation, Belgium, 5 June 1998, XXIV Y.B. Com. Arb. (1999).

    962. Joseph Müller AG v. Bergesen und Obergericht (II. Zivilkammer) des Kantons Zürich, Court of First Instance, Switzerland, 26 February 1982. See also X v.Y, Swiss Federal Tribunal, Switzerland, 21 February 2005, 5P.353/2004 (stating that the binding nature of an award “must have been recognised as soon as the award becomes res judicata and can no longer be appealed” and ruling that, in the case at hand, the award was final and binding pursuant to the provisions of the contract entered into between the parties); X v. Y, Cour de Justice de Genève, 1ère section, Switzerland, 23 September 2004 (ruling that an award is binding as soon as the award has res judicata effect and is not subject to ordinary recourse, and that in this case the award was binding pursuant to the provisions of the agreement entered into between the parties).

    963. Antilles Cement Corporation v. Transficem, Supreme Court, Civil Chamber, First Section, Spain, 20 July 2004, XXXI Y.B. Com. Arb. (2006). See also AB Götaverken v. General National Maritime Transport Company (GMTC), Libya and others, Supreme Court, Sweden, 13 August 1979, SO 1462 (after noting that “[a] case in which a foreign award is not binding is when its merits are open to appeal to a higher jurisdiction”, decided that the award was binding because the arbitration clause provided that the award would be “finally binding and enforceable,” and because the ICC Rules applicable in this case provided that the arbitral award shall be final); Dowans Holding S.A. v. Tanzania Electric Supply Co. Ltd., High Court of Justice, England and Wales, 27 July 2011, 2010 Folio 1539 (after holding that “the binding effect of an award depends upon whether it is or remains subject to ordinary recourse”, referred to the arbitration agreement and the ICC Rules, which stated that “[t]he decision of the arbitration shall be final and binding upon the Parties, and shall not be subject to appeal”, to conclude that the award was binding on the parties); International Trading and Industrial Investment Company v. Dyncorp Aerospace Technology, District Court for the District of Columbia, United States of America, 21 January 2011, Civil Action No. 09-791 (RBW) (referring to the ICC Rules to conclude that the award was binding on the parties).

  • b. Burden of proving that an award has become binding

    13. One of the main innovations of the New York Convention was to transfer the burden of proof from the party seeking enforcement to the party opposing it.⁹⁶⁴ As with the other grounds for refusing recognition and enforcement listed under article V, this principle applies to article V (1)(e).

    964. See the introduction to the chapter of the Guide on article V.

    14. A party seeking to enforce an arbitral award is not required to establish that the award is binding; rather, it falls on the party opposing enforcement to establish that the award is not binding. This principle has been repeatedly affirmed by national courts. A Swiss court stated for instance that “[i]t is [...] the party opposing enforcement that must prove, pursuant to article V (l)(e) of the Convention, that the arbitral award is not yet binding or has been set aside.”⁹⁶⁵ Likewise, an Italian court ruled that “[the party seeking enforcement] has not to prove that the award is binding, but [the party opposing enforcement] has to prove that the binding force is lacking [...].”⁹⁶⁶ Commentators of the Convention also confirm this interpretation.⁹⁶⁷

    965. Italian Party v. Swiss Company, Court of First Instance, Zurich, Switzerland, 14 February 2003, XXIX Y.B. Com. Arb. (2004). See also Denysiana S.A. v. Jassica S.A., Swiss Federal Tribunal, Switzerland, 14 March 1984 (stating that “the party opposing the enforcement must prove that the award has not yet become binding or set aside or suspended”).

    966. Carters (Merchants) Ltd. v. Francesco Ferraro, Corte di Appello di Napoli, Italy, 20 February 1975, IV Y.B. Com. Arb. (1979). See also C.C.M. Sulzer v. Société Maghrébienne de Génie Civil (SOMAGEC) et al., Court of Appeal of Paris, France, 17 February 1987, 864787 (stating that pursuant to article V (1)(e), it is for the party opposing the enforcement to demonstrate that the award has not yet become binding on the parties); Antilles Cement Corporation v. Transficem, Supreme Court, Civil Chamber, First Section, Spain, 20 July 2004, XXXI Y.B. Com. Arb. (2006); Diag Human SE v. Czech Republic, High Court, Queen’s Bench Division, United Kingdom, 22 May 2014 (stating that the burden of proof is “firmly” on the party resisting opposing enforcement).

    967. Nadia Darwazeh, Article V (1)(e), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 301, 305, 310 (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 338 (1981); Fouchard Gaillard Goldman on International Commercial Arbitration 968, para. 1673 (E. Gaillard, J. Savage eds., 1999); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, paras. 353-56 (R. Wolff ed., 2012).

  • c. Binding nature of partial and interim awards

    15. In a number of reported cases, parties have relied on article V (1)(e) to challenge the binding nature of partial or interim arbitral awards. While some national courts have upheld such challenges and refused to enforce interim or partial awards under this provision,⁹⁶⁸ others have considered that, in certain circumstances, interim and partial awards could be considered binding within the meaning of article V (1)(e).⁹⁶⁹

    968. Merck & Co. Inc. v. Merck Frosst Canada Inc., Frosst Laboratories Inc. v. Tecnoquímicas S.A., Supreme Court of Justice, Colombia, 24 March 1999, XXVI Y.B. Com. Arb. (2001); Living Consulting Group AB (Sweden) v. OOO Sokotel (Russian Federation), Presidium of the Highest Arbitrazh Court, Russian Federation, 5 October 2010, A56-63115/2009; Hall Steel Company (United States) v. Metalloyd Ltd. (United Kingdom), District Court, Eastern District of Michigan, Southern Division, United States of America, 7 June 2007, 05-70743, XXXIII Y.B. Com. Arb. (2008). For further developments on the conditions under which procedural orders and interim and partial awards are enforceable under the Convention, see the chapter of the Guide on article I.

    969. Resort Condominiums International Inc. v. Ray Bolwell and Resort Condominiums, Pty. Ltd., Supreme Court of Queensland, Australia, 29 October 1993, XX Y.B. Com. Arb. (1995). See also Misr Foreign Trade Co. v. R.D. Harboties (Mercantile), Court of Cassation, Egypt, 22 January 2008, 2010/64.

    16. In some cases, courts have distinguished between awards relating to jurisdictional and procedural issues, and awards relating to the merits of a dispute, and have excluded that the former category of awards be considered as binding. For instance, the Colombian Supreme Court of Justice refused to enforce an interim award on jurisdiction on the ground that it was “clear that according to the Convention, ‘arbitral awards’ are those which materially end the arbitration by defining the disputes submitted in the request for arbitration, not those which arise out of the arbitration itself”, such as an interim award on the jurisdiction of the arbitral tribunal.⁹⁷⁰ A Russian court similarly stated that article V (l)(e) was not applicable to “interlocutory awards, including decisions of arbitrators on procedural matters (collection of arbitration costs, determination of jurisdiction, and security measures)” but only to “arbitral awards related to the procedural examination of the dispute on the merits and rendered at the end of the arbitral proceedings.”⁹⁷¹

    970. Merck & Co. Inc. v. Merck Frosst Canada Inc., Frosst Laboratories Inc. v. Tecnoquímicas S.A., Supreme Court of Justice, Colombia, 24 March 1999, XXVI Y.B. Com. Arb. (2001).

    971. Living Consulting Group AB (Sweden) v. OOO Sokotel (Russian Federation), Presidium of the Highest Arbitrazh Court, Russian Federation, 5 October 2010, A56-63115/2009 (denying enforcement of an interim award ordering one of the parties to reimburse the advance on arbitration costs to the other party).

    17. Other courts looked to whether the partial or interim award finally settled a discrete claim on the merits, or could still be revised by the arbitral tribunal at a later stage of the arbitration, and excluded that the latter category of awards be considered as binding. For example, in a case where a party sought to enforce an “Interim Arbitration Order and Award”, the Supreme Court of Queensland held that the award referred to under Article V (l)(e) is a type of award which “has determined some or all of the issues submitted to the arbitrator for determination rather than an interlocutory order of an arbitrator.” The court further held that “[a]n interlocutory order which may be rescinded, suspended, varied or reopened by the tribunal which pronounced it” was not enforceable under the Convention.⁹⁷² Likewise, a United States District Court held that notwithstanding the absence of an award that finally disposes of all the claims that were submitted to arbitration, an award that “finally and definitely disposes of a separate independent claim” could be considered as binding. As a result, the court upheld the enforcement of an interim award directing the parties to continue performing under the contract until the arbitrator had decided the underlying contractual issue.⁹⁷³

    972. Resort Condominiums International Inc. v. Ray Bolwell and Resort Condominiums, Pty. Ltd., Supreme Court of Queensland, Australia, 29 October 1993, XX Y.B. Com. Arb. (1995).

    973. Island Creek Coal Sales Company v. City of Gainesville, Florida, Court of Appeals, Sixth Circuit, United States of America, March 15, 1984, 729 F.2d 1046.

  • d. Doctrine of merger

    18. While the practice of courts leaves no doubt that obtaining a leave of enforcement at the place of the arbitration is not necessary for an award to be enforced under the Convention,⁹⁷⁴ some parties have argued that, a contrario, if a leave of enforcement has been issued by the courts at the seat of arbitration and the award has been merged into a judgment, such an award could no longer be considered as binding under article V (1)(e).

    974. See the chapter of the Guide on article V (1)(e), para. 11.

    19. This interpretation has been rejected by courts, in line with the opinion of a commentator of the Convention, who pointed that it would run contrary to the Convention’s purpose of facilitating enforcement.⁹⁷⁵ For example, in a case where the party opposing enforcement argued that the award had been merged into a judgment in the United Kingdom, and therefore could no longer be enforced under the Convention, an Australian court held that, even if a judgment had been entered into in the United Kingdom, the award would not be considered as having merged in this judgment for the purpose of enforcement in Australia.⁹⁷⁶ Similarly, a German court held that, although an award had been merged into the judgment of an English court, this merger did not imply that the award should be considered as having been absorbed by the judgment in Germany, the purpose of the Convention being to facilitate enforcement of foreign arbitral awards.⁹⁷⁷ German courts have however specified that, while the merger of an award into a judgment does not deprive the award of its binding nature under article V (1)(e) for the purposes of enforcement abroad, only the award itself, not the judgment absorbing the award, can be enforced under the Convention.⁹⁷⁸

    975. Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 346-48 (1981). See also Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958— Commentary 356, 378, paras. 413-14 (R. Wolff ed., 2012).

    976. Brali v. Hyundai Corp., Supreme Court of New South Wales, Commercial Division, Australia, 17 October 1988.

    977. German (F. R.) buyer v. English seller, Hanseatisches Oberlandesgericht [OLG] Hamburg, Germany, 27 July 1978, IV Y.B. Com. Arb. (1979). See also COSID Inc. Steel Authority of India Ltd., High Court of Delhi, India, 12 July 1985, XI Y.B. Com. Arb. (1986) (holding that the merger of an award into a judgment under Section 26 of the English Arbitration Act is no bar to the enforcement of the award in India).

    978. Bundesgerichtshof [BGH], Germany, 1 September 2009, XXXV Y.B. Com. Arb. (2010).

• B. What is a “competent authority” of the country “in which, or under the law of which”, the award was made?

  20. Under article V (1)(e), a court may refuse recognition or enforcement of an award if the party opposing enforcement proves that the award has been set aside or suspended by a “competent authority” in “the country in which” the award was made or “under the law of which” the award was made.

  • a. Meaning of “competent authority”

    21. While article V (l)(e) does not define the terms “competent authority”, there is little doubt that these terms refer to the court or courts having jurisdiction to suspend and/or set aside awards in each country.⁹⁷⁹ A court from the Cayman Islands also envisaged that in a certain country, this power could be entrusted to a special tribunal or a “special executive arm of government.”⁹⁸⁰

    979. Resort Condominiums International Inc. v. Ray Bolwell and Resort Condominiums, Pty. Ltd., Supreme Court of Queensland, Australia, 29 October 1993, XX Y.B. Com. Arb. (1995) (stating that the reference to “competent authority” in article V (1)(e) “means a Court and not the arbitrator”). See also the developments and references cited in the chapter of the Guide on article VI.

    980. The Republic of Gabon v. Swiss Oil Corporation, Grand Court, Cayman Islands, 17 June 1988, XIV Y.B. Com. Arb. (1989).

  • b. The country “in which” or “under the law of which” the award was made

    22. The terms “in which [...] that award was made” are understood to refer to the country of the place of the arbitration.⁹⁸¹ In a case where the place of the arbitration was Singapore, for instance, a United States District Court stated, by reference to article V (1)(e), that “clearly, Singapore was the country in which the award was made.”⁹⁸²

    981. Nadia Darwazeh, Article V (1)(e), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on The New York Convention 301, 319 (H. Kronke, P. Nacimiento et al. eds., 2010); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 374, para. 404 (R. Wolff ed., 2012).

    982. Steel Corporation of the Philippines v. International Steel Services, Inc., District Court for the Western District of Pennsylvania, United States of America, 31 July 2006, Civil Action No. 06-386. See also International Trading and Industrial Investment Company v. Dyncorp Aerospace Technology, District Court for the District of Columbia, United States of America, 21 January 2011, Civil Action No. 09-791 (RBW).

    23. Although the Convention does not provide guidance as to the meaning of the expression “under the law of which”, with very few exceptions, courts have generally rejected arguments that these terms referred to the law applicable to the merits. Courts have decided that it referred instead to the procedural law governing the arbitration, in the rare situation where the parties have selected a law to govern the arbitration that is different from the law of the place of arbitration. In Steel Corporation of the Philippines v. International Steel Services, a United States District Court held that this expression “refers to the theoretical case that on the basis of an agreement of the parties the award is governed by an arbitration law which is different from the arbitration law of the country in which the award was made”. In this case the place of the arbitration was Singapore, but the arbitration clause specified that “[t]he validity, performance and enforcement of this contract shall be governed by Philippine law”. The respondent contended that the award had been made under the law of the Philippines and that, because it had filed a petition to vacate the award in the Philippines courts, the award should not be recognized under article V (1)(e). The court held that “while it would be rare for the parties to choose a procedural law different from the arbitral situs, if they do, the selection must be clear”, which it considered was not the case here.⁹⁸³ In Karaha Bodas, the High Court of Hong Kong similarly stated that the reference to the law under which the award was made “undoubtedly refers to the law which governed the procedural law of the arbitration, not the substantive law of the contract.”⁹⁸⁴

    983. Steel Corporation of the Philippines v. International Steel Services, Inc., District Court for the Western District of Pennsylvania, United States of America, 31 July 2006, Civil Action No. 06-386, affirmed by Steel Corporation of the Philippines v. International Steel Services, Inc., Court of Appeals for the Third Circuit, United States of America, 19 November 2009, Nos. 08-1853 and 08-2568. See also Coutinho Caro & Co. USA, Inc. v. Marcus Trading, Inc. and others, District Court, District of Connecticut, United States of America, 14 March 2000, Civil Action Nos. 3:95cv2362, 3:96cv2218, 3:96cv2219 (ruling that “the phrase ‘under the law of which’ the award was made refers to the theoretical case that on the basis of an agreement of the parties the award is governed by an arbitration law which is different from the arbitration law of the country in which the award was made”); International Standard Electric Corp. v. Bridas Sociedad Anonima Petrolera, Industrial y Comercial, District Court, Southern District of New York, United States of America, 24 August 1990, 90 Civ. 0720 (KC); Belize Social Development Ltd. (Belize) v. Government of Belize, Court of Appeals, D.C. Circuit, United States of America, 13 January 2012, 10-7167 (stating that the phrase “under the law of which” refers to “the procedural law governing the arbitration, not the substantive law governing the Agreement”); M&C Corp. v. Erwin Behr GmbH & co., Court of Appeals, Sixth Circuit, United States of America, 3 July 1996, 95-1390; International Trading and Industrial Investment Company v. Dyncorp Aerospace Technology et al., 21 January 2011, District Court, District of Columbia, United States of America, 09-791 (RBW); Four Seasons Hotels and Resorts, B.V., et al. v. Consorcio Barr, S.A., District Court, Southern District of Florida Miami Division, United States of America, 4 June 2003, 02-23249 (stating that a competent authority is “a court of the country that supplied the procedural law used in the arbitration” and not the substantive law); The Commercial Company for Investment v. Bell Rover Shipping Limited, Court of Appeal of Cairo, Egypt, 19 March 1997, 68/113.

    984. Karaha Bodas Company LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara - Pertamina, Court of First Instance, High Court of the Hong Kong Special Administrative Region, Hong Kong, 27 March 2003, [2003] HKCU 288.

    24. In contrast with the solution stated above, in previous decisions the Indian Supreme Court considered that the expression “under the law of which” could designate the law applicable to the arbitration agreement or to the merits of the case. In most recent decisions, however, the Indian Supreme Court revised this case law. In the Balco case, the Indian Supreme Court ruled that the expression “under the law of which” referred to the procedural law of the arbitration in the case that it was different from the law of the seat of the arbitration, and not to the substantive law governing the underlying contract.⁹⁸⁵

    985. Bharat Aluminum Co. v. Kaiser Aluminum Technical Service, Inc., Supreme Court, India, 6 September 2012, Civil Appeal No. 7019 of 2005. The Supreme Court added that the position adopted by Indian courts in the past, on the basis of which awards were set aside by Indian courts even when the seat of the arbitration was located abroad, amounted to ignoring “the spirit underlying the New York Convention which embodies a consensus evolved to encourage consensual resolution of complicated, intricate and in many cases very sensitive International Commercial Disputes”.

    25. The same interpretation is shared by the commentators of the Convention.⁹⁸⁶

    986. Nadia Darwazeh, Article V (1)(e), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 301, 320-23 (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 350 (1981); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement Of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 376, para. 409 (R. Wolff ed., 2012).

    26. As a result, an award can in practice only be denied enforcement under the Convention if it has been set aside or suspended by the competent courts of the place of the arbitration, or as the case may be, competent courts in the country of the law chosen by the parties to govern the arbitration. If the award has been set aside or suspended in any other country, this does not constitute a valid ground for denying enforcement. For example, a United States court refused to dismiss the enforcement of an award on the ground that the Belize courts had ordered that its enforcement be suspended “in any jurisdiction outside of Belize”, while the place of the arbitration was England and the applicable procedural law was English law.⁹⁸⁷ A number of courts have held that, in practice, this provision amounts to granting the courts of the place of the arbitration exclusive jurisdiction to rule on requests for the setting aside or suspension of an arbitral award.⁹⁸⁸

    987. Belize Social Development Ltd. (Belize) v. Government of Belize, Court of Appeals, D.C. Circuit, United States of America, 13 January 2012, 10-7167. See also Continental Transfert Technique Limited v. Federal Government of Nigeria, District Court for the District of Columbia, United States of America, 23 March 2010, Civil Action No. 08-2026 (PLF) (in a case where the seat of the arbitration was in the United Kingdom, ruling that an ex parte order issued by the courts of Nigeria and temporarily barring the Claimant “from seeking or continuing to [seek] the recognition and enforcement of the Final Award [...] pending the hearing and determination” does not constitute a valid ground for refusing the enforcement of the award under article V (1)(e)).

    988. This has been repeatedly stated by the Court of Appeal of Cairo, for instance in Brothers for Import, Export and Supply Company (Egypt) v. Hano Acorporish (Republic of Korea), Court of Appeal of Cairo, Egypt, 2 July 2008, 23/125 (stating that only the Courts of the country where the award was issued have jurisdiction to rule on requests for setting aside); The Commercial Company for Investment v. Bell Rover Shipping Limited, Court of Appeal of Cairo, Egypt, 19 March 1997, 68/113 (stating that only the Courts of the country where the award was issued have jurisdiction to rule on requests for the suspension of the enforcement of the arbitral award or its setting aside); Cairo for Real Estate Company v. Abdel Rahman Hassan Sharbatly, Court of Appeal of Cairo, Egypt, 26 February 2003, 23/119 (stating that only the Courts of the place of the arbitration have jurisdiction to rule on requests for setting aside). See also Karaha Bodas Co. (Cayman Islands) v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Indonesia), Court of Appeals, Fifth Circuit, United States of America, 23 March 2004, 02-20042, 03-20602. See also ICCA’s Guide To the Interpretation of the 1958 New York Convention: A Handbook for Judges102 (P. Sanders ed., 2011).

• C. Award set aside or suspended

  27. Article V (1)(e) allows national courts to refuse recognition or enforcement if it is established that, in the courts of the country in which, or under the law of which, the award was made, the award has been set aside or suspended.

  28. As pointed out in the commentary on the chapeau of article V, the use of the term “may” in the chapeau of article V (1) indicates that national courts have the possibility to refuse enforcement of an award on the grounds listed in this article, but they are not obliged to do so.⁹⁸⁹ Furthermore, as discussed in the chapter of the Guide on article VII, a court will not breach the Convention by enforcing an arbitral award pursuant to more favourable provisions found in its domestic laws, in accordance with article VII (1). Accordingly, a number of courts have accepted to enforce awards suspended or set aside at the seat of the arbitration, either on the basis of the use of the term “may” in article V (1), or on the basis of a more favourable provision in the domestic law than article V (1)(e) in accordance with article VII (1).⁹⁹⁰

  989. See the introduction to the chapter of the Guide on article V (1). See also Nadia Darwazeh, Article V (1)(e), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 301, 307-09 (H. Kronke, P. Nacimiento et al. eds., 2010); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 356, para. 351 (R. Wolff ed., 2012). Some authors have however questioned this interpretation, relying on the French version of the text of the Convention. See, on this debate, Philippe Fouchard, La portée internationale de l’annulation de la sentence arbitrale dans son pays d’origine, 1997 Rev Arb 344; Jan Paulsson, Enforcing Arbitral Awards Notwithstanding a Local Standard Annulment (LSA), 9(1) ICC Bull. 17 (1998).

  990. See, e.g., Société Bargues Agro Industrie SA v. Société Young Pecan Company, Court of Appeal of Paris, France, 10 June 2004, 2003/09894; Chromalloy Aeroservices v. Arab Republic of Egypt, District Court, District of Columbia, United States of America, 31 July 1996, 94-2339; Nigerian National Petroleum Corporation v. IPCO (Nigeria) Ltd., Court of Appeal, England and Wales, 21 October 2008, A3/2008/1037.PTA+(A); Buyer (Poland) v. Seller (Poland), Hanseatisches Oberlandesgericht [OLG] Hamburg, Germany, 24 January 2003, 11 Sch 06/01 and see the decisions cited in the chapter of the Guide on article VII (1).

  • a. Award set aside

    29. According to a commentator, this ground for refusal “seldom occurs and is almost never successful”,⁹⁹¹ in a number of instances, national courts have rejected this ground for denying enforcement by applying national laws more favourable to enforcement than article V (1)(e) of the Convention.⁹⁹² On the other hand, the Convention does not obligate courts to enforce awards that have been set aside at the place of arbitration, and in some cases, courts have denied enforcement pursuant to article V (1)(e) on this ground.⁹⁹³

    991. Albert Jan van den Berg, The New York Arbitration Convention Of 1958: Towards A Uniform Judicial Interpretation 332 (1981).

    992. See in particular the practice of the courts of France: Société Pabalk Ticaret Sirketi v. Société Anonyme Norsolor, Court of Cassation, France, 83-11.355, 9 October 1984, 1985 Rev. Arb. 431, with English translation in 24 ILM 360 (1985); Bargues Agro Industrie S.A. v. Young Pecan Company, Court of Appeal of Paris, France, 10 June 2004, 2006 Rev. Arb.; Société PT Putrabali Adyamulia v. Société Rena Holding et Société Moguntia Est Epices, Court of Appeal of Paris, France, 31 March 2005, 2006 Rev. Arb. 665, affirmed by Société PT Putrabali Adyamulia v. Rena Holding Société Moguntia Est Epices, Court of Cassation, France, 05-18053, 29 June 2007, 2007 Rev. Arb.; Direction Générale de l’Aviation Civile de l’Emirat de Dubaï v. Société International Bechtel Co., Court of Appeal of Paris, France, 29 September 2005, 2006 Rev. Arb.; Société S.A. Lesbats et Fils v. Volker le Docteur Grub, Court of Appeal of Paris, France, 18 January 2007, 05/10887.

    993. See in particular the practice of the courts of the United States and Germany: Baker Marine Ltd. v. Chevron Limited, Chevron Corp., Inc. and others v. Danos and Curole Marine Contractors, Inc., Court of Appeals, Second Circuit, United States of America, 12 August 1999, 97-9615 and 97-9617 (refusing to enforce an award on the ground that it was annulled by the Nigerian courts of the seat); TermoRio S.A. E.S.P. (Colombia) v. Electranta S.P. (Colombia), Court of Appeals, D.C. Circuit, United States of America, 25 May 2007, 06-7058 (refusing to enforce an award annulled by the courts of the seat, namely Colombian courts); Oberlandesgericht [OLG] Rostock, Germany, 28 October 1999, 1 Sch 03/99 (denying enforcement of an award set aside at the seat of the arbitration, namely Moscow).

    30. In cases where this ground for denying enforcement has been applied, courts have held that the award must have been effectively set aside for it to be denied enforcement, and that the mere initiation of setting aside proceedings does not constitute a valid ground.⁹⁹⁴ A Russian court decided that if the award had effectively been set aside, however, this would constitute a sufficient ground for denying enforcement; whether or not the decision setting aside the award is subject to appeal is irrelevant.⁹⁹⁵

    994. See the chapter of the Guide on article V (1)(e), para. 12.

    995. Ciments Français (France) v. OAO Holding Company Siberian Cement (Russian Federation), OOO Financial Industrial Association Sibconcord (Russian Federation), Istanbul Çimento Yatırımları (Turkey), Federal Arbitrazh Court for the West-Siberian District, Russian Federation, 5 December 2011, A27-781/2011.

  • b. Award suspended

    31. Article V (1)(e) of the Convention also allows parties to challenge the enforcement of an award if the award has been “suspended”. The Convention does not provide guidance as to the definition of the term “suspended”; nevertheless, with very few exceptions,⁹⁹⁶ the majority of courts agree that this refers to a formal suspension resulting from a court decision. The Swiss Federal Tribunal, for instance, held that this rule covers a situation in which a court, “noticing that a fault is likely to impact the award, prevents its enforcement until such time as the issue is settled substantively by the court examining the action to set aside the award”. In that case, a court decision dismissing the claimant’s request to wind up the respondent was found not to call into question the validity of the award or to formally suspend its enforcement.⁹⁹⁷

    996. See, e.g., Creighton Limited v. The Government of the State of Qatar (Ministry of Public Works), District Court, District of Columbia, United States of America, 22 March 1995, 94-1035 RMU, XXI Y.B. Com. Arb. (1996) (refusing to enforce an award on the ground that the initiation of annulment proceedings in France had, at the time, the effect of automatically suspending it).

    997. Swiss Federal Tribunal, Switzerland, 21 March 2000, 5P.371/1999.

    32. Likewise, it is understood that the automatic suspension resulting from the initiation of an action to set aside the award in the court of the originating jurisdiction does not meet the requirement of article V (1)(e). As noted by some commentators, if the term “suspension” were to refer to the automatic suspension of an award in the originating jurisdiction pending an action to set aside, this would defeat the whole system of the Convention, as it would suffice that the party opposing enforcement could initiate an application to set aside the award at the place of arbitration so that the award be refused enforcement everywhere.⁹⁹⁸ In Switzerland, for instance, a party challenged the enforcement pursuant to article V (1)(e) on grounds that the initiation of setting aside proceedings at the courts of the place of arbitration in France automatically suspended the effects of the award. The Swiss Federal Tribunal held that the correct interpretation of the Convention should be that the suspension of the award in the originating jurisdiction would only constitute a ground for challenge if it were granted by a judicial decision, but not when it simply arises from an action brought against the award.⁹⁹⁹ In AB Götaverken, the Swedish Supreme Court confirmed that the reference to a “suspended” award under article V (1)(e) refers to “a situation where, after specific consideration of the matter, the foreign authority orders the setting aside of a binding and enforceable award or the suspension of its enforcement”. As a result, the court rejected the respondent’s contention that enforcement should be denied on the ground that a recourse to set aside had been initiated in France, the country where the award was issued.¹⁰⁰⁰ The same principle led a United States court to deny the enforcement of an award. After confirming that “article V (1)(e) of the Convention require[s] a ‘competent authority’ to suspend the award, not just a statutory stay”, the court held that, in that case, the stay ordered by the Argentinian courts was not merely an “automatic” stay resulting from the initiation of setting aside proceedings or a “pre-ordered” formality, and on that basis dismissed the request to enforce the award.¹⁰⁰¹

    998. Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation 352 (1981). See also Nadia Darwazeh, Article V (1)(e), in Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention 301, 341-42 (H. Kronke, P. Nacimiento et al. eds., 2010); Fouchard Gaillard Goldman on International Commercial Arbitration 980-81, para. 1690 (E. Gaillard, J. Savage eds., 1999); Christoph Liebscher, Article V (1)(e), in New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958—Commentary 356, 372, paras. 395-96 (R. Wolff ed., 2012).

    999. Company X S.A. v. Y Federation, Swiss Federal Tribunal, Switzerland, 9 December 2008, 4A_403/2008.

    1000. AB Götaverken v. General National Maritime Transport Company (GMTC), Libya and others, Supreme Court, Sweden, 13 August 1979, SO 1462. See also The Republic of Gabon v. Swiss Oil Corporation, Grand Court, Cayman Islands, 17 June 1988, XIV Y.B. Com. Arb. (1989) (ruling that the automatic suspension of the effect of the award due to the initiation of a recourse to set aside the award under French law does not amount to “a competent authority [acting] consciously to stay the [award]” and therefore is not a ground to refuse enforcement under art. V (1)(e)); S.A. Recam Sonofadex v. S.N.C. Cantieri Rizzardi de Gianfranco Rizzardi, Court of Appeal of Orleans, France, 5 October 2000 (stating that the suspensive effect of setting aside proceedings initiated at the seat of the arbitration, namely Italy, does not amount to an effective suspension required by article V (1)(e) and cannot serve as a valid ground to reject the recognition and enforcement of the Award).

    1001. EDF International S.A. v. YPF S.A., District Court for the District of Delaware, United States of America, 20 November 2008, Civil Action No. 08-167-JJF.