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E/2704 - Report of the Committee on the Enforcement of International Arbitral Awards (Resolution of the Economic and Social Council establishing the Committee, Composition and Organisation of the Committee, General Considerations, Draft Convention)- 28/03/1955
Comments Annex: E/AC.42/4 - Draft Convention on the recognition and enforcement of foreign arbitral awards Date 28/03/1955 Classification (first level) A. Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Comments by Governments and Organizations Classification (second level) A.1. ECOSOC: Report of the Committee on the Enforcement of Foreign Arbitral Awards: 18 March 1955 Country Australia | Belgium | Ecuador | Egypt | India | Sweden | United Kingdom Applicable NYC Provisions I | II | IV | V | V(1)(a) | V(1)(b) | V(1)(c) | V(1)(d) | V(1)(e) | V(2)(a) | V(2)(b) | VII | VIII | IX | X | XI | XII | XIII | XIV | XV | XVI Language(s) English Link to the record https://newyorkconvention1958.org/index.php?lvl=notice_display&id=3295&opac_view=6 Attachment (1)
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Comments Meeting held at Headquarters, New York, on Tuesday, 1 March 1955, at 11.15 a.m Date 23/03/1955 Classification (first level) D. Committee on the Enforcement of International Arbitral Awards Classification (second level) D.1. Summary Records of the Committee on the Enforcement of International Arbitral Awards Applicable NYC Provisions V | V(1)(c) | V(2)(b) Language(s) English Link to the record https://newyorkconvention1958.org/index.php?lvl=notice_display&id=3426&opac_view=6 Attachment (1)
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Comments Annex: Draft Convention on the Recognition and Enforcement of foreign arbitral awards Date 21/03/1955 Classification (first level) D. Committee on the Enforcement of International Arbitral Awards Country Australia | Belgium | Ecuador | Egypt | India | Sweden | United Kingdom Applicable NYC Provisions III | V(1)(a) | V(1)(b) | V(1)(c) | V(1)(d) | V(1)(e) | V(2)(a) | V(2)(b) | VIII Language(s) English Link to the record https://newyorkconvention1958.org/index.php?lvl=notice_display&id=3422&opac_view=6 Attachment (1)
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Comments This document contains Brochure 174, received by the Secretary-General on 17 September 1953 and dated 10 September 1953 Date 28/10/1953 Classification (first level) D. Committee on the Enforcement of International Arbitral Awards Applicable NYC Provisions V | V(1)(a) | V(1)(b) | V(1)(c) | V(1)(d) | V(1)(e) | V(2)(a) | V(2)(b) | III Language(s) English | French Link to the record https://newyorkconvention1958.org/index.php?lvl=notice_display&id=3418&opac_view=6 Attachment (1)
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V(1) / V(1)(c) / 1. INTRODUCTION (V(1)(c)) /
1. Article V(1)(c) of the New York Convention allows the competent authorities in Contracting States to refuse recognition and enforcement of an arbitral award, or part of that award, where the award contains decisions on matters “beyond the scope of the submission to arbitration”.
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10. The United States Court of Appeals for the Second Circuit found that explicit authority in an arbitration agreement to award costs was not necessary under the ICC Rules of Arbitration.14 The United States Court of Appeals for the Ninth Circuit later stated more broadly that “[s]ince we find the arbiters’ authority to reach the main decision was within the scope of the letter agreement, it follows the arbiters also had the authority to award costs and fees for obtaining the arbitral decision.”15
14. Parsons & Whittemore Overseas Co. v. Société Générale de l’Industrie du Papier (RAKTA), Court of Appeals, Second Circuit, United States of America, 23 December 1974, 508 F.2d 969, at 976-977, paras. 11-12.
15. Mgmt. & Tech. Consultants S.A. v. Parsons-Jurden Int’l Corp., Court of Appeals, Ninth Circuit, United States of America, 8 July 1987, 820 F.2d 1531, at 1535.
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11. With respect to the award of interest, the Hamburg Court of Appeal rejected a challenge to enforcement under article V(1)(c), made on the basis that the arbitral tribunal had awarded more interest than had been claimed, considering that an “arbitral tribunal can in its discretion and on its own initiative award interest and compound interest for the time until the rendition of the award and for the time after the rendition of the award.”16
16. Shipowner v. Time Charterer, Oberlandesgericht [OLG] Hamburg, Germany, 30 July 1998, 6 Sch 3/98, XXV Y.B. COM. ARB. 641 (2000), at 715, para. 6.
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12. Leading commentators agree that article V(1)(c) does not apply to awards which fail to address all the issues submitted to the arbitral tribunal for resolution.17 Though there are no reported cases addressing whether article V(1)(c) applies to awards rendered infra petita, the view that such awards do not provide grounds for refusal of recognition or enforcement is consistent with the text and spirit of the Convention.
17. JEAN-FRANÇOIS POUDRET, SÉBASTIEN BESSON, COMPARATIVE LAW OF INTERNATIONAL ARBITRATION (2007), at 836-837, para. 914; FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1999), at 987-988, para. 1700; Stefan Michael Kröll, Commentary on the German Arbitration Law (10th Book of the German Code of Civil Procedure), in ARBITRATION IN GERMANY: THE MODEL LAW IN PRACTICE, at 541-542, para. 84 (K. H. Böckstiegel, S. M. Kröll, P. Nacimiento eds., 2007).
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13. First, the pleadings and requests for relief submitted by the parties to the arbitral tribunal do not constitute a “submission to arbitration” within the meaning of article V(1)(c) and therefore cannot provide the basis for a challenge to recognition or enforcement of an award under article V(1)(c), regardless of whether the award extends beyond the pleadings or requests for relief, or fails to address all of the issues raised therein.
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14. Second, the text of article V(1)(c) only provides grounds for refusing to recognize or enforce awards that decide on issues which go “beyond” the parties’ agreement to arbitrate. Nothing in the language of article V(1)(c) grants enforcing authorities the discretion to refuse or otherwise limit the recognition or enforcement of an award which has failed to address all issues submitted by the parties, but which is otherwise enforceable as to the issues addressed.
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15. As recorded in the travaux préparatoires of the New York Convention, the omission of language in the Geneva Convention allowing postponement of recognition or enforcement, or granting enforcement subject to a guarantee, of any award that “has not covered all the questions submitted to the arbitral tribunal”, was a “significant change” from the wording of the Geneva Convention.18 The omission is particularly notable given that article V(1)(c) contains very similar language to article 2(2) of the Geneva Convention.19
18. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Comments by Governments on the Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, E/2822/Add. 4, at 6.
19. ALBERT JAN VAN DEN BERG, THE NEW YORK ARBITRATION CONVENTION OF 1958: TOWARDS A UNIFORM JUDICIAL INTERPRETATION (1981), at 320.
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16. Article V(1)(c) provides grounds for refusing to recognize or enforce awards that decide on “matters” which are outside the scope of the arbitration agreement. “Matters” has broadly been defined in two ways: first, as the subject matter over which the arbitral tribunal has jurisdiction pursuant to the arbitration agreement; and second, in some jurisdictions, as the personal jurisdiction over one of the parties addressed in the award. In relation to the latter interpretation, it is notable that in any event, article V(1)(a) directly addresses consent of the parties .20
20. See infra at paragraphs 34 to 36.
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17. Courts and commentators have consistently considered that “matters” refers to the subject matter that is encompassed by the arbitration agreement and thus subject to the jurisdiction of the arbitral tribunal that issued the award in question.21
21. GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION (2014), at 3544; REDFERN & HUNTER ON INTERNATIONAL ARBITRATION (A. Redfern, J. M. Hunter et al. eds., 2009), at 645-647 ; FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1999), at 986-987, para. 1700; Parsons & Whittemore Overseas Co. v. Société Générale de l’Industrie du Papier (RAKTA), Court of Appeals, Second Circuit, United States of America, 23 December 1974, 508 F.2d 969, at 977, para. 13.
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18. For example, pursuant to article V(1)(c), the Trento Court of Appeal in Italy refused to enforce part of an award which granted damages in connection with “technical” disputes. The arbitration clause provided that the local arbitral tribunal issuing the award only had jurisdiction over “non-technical” disputes, and any “technical” disputes were to be resolved by an international arbitral tribunal under the ICC Arbitration Rules.22
22. General Organization of Commerce and Industrialization of Cereals of the Arab Republic of Syria v. S.p.a. SIMER (Società delle Industrie Meccaniche di Rovereto), Court of Appeal of Trento, Civil Section, Italy, 14 January 1981, VIII Y.B. COM. ARB. 386 (1983), at 387, para. 6.
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19. Parties have also successfully challenged enforcement of awards under article V(1)(c) on the grounds that an award was based on an underlying contract which was not within the subject matter of the arbitration agreement. Although an arbitration agreement may extend to contracts which are not explicitly included within its scope, such extension is by no means automatic, and depends on the intention of the parties.23
23. See GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION (2014), at 1369-1372; BERNARD HANOTIAU, COMPLEX ARBITRATIONS: MULTIPARTY, MULTICONTRACT, MULTI-ISSUE AND CLASS ACTIONS (2005), Chapter III. See also: York Airconditioning & Refrigeration Inc. v. Lam Kwai Hung T/A North Sea A/C Elect Eng. Co., High Court, Supreme Court of Hong Kong, Hong Kong, 16 December 1994, [1995] 1 HKC 287, at 13; and Four Seasons Hotels And Resorts B.V. et al. v. Consorcio Barr, S.A., District Court, Southern District of Florida, United States of America, 12 May 2009, Case No. 04-20673-CIV-MOORE/ISIMONTON, at 6-9.
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2. Article V(1)(c) finds its roots in article 2(c) of the Geneva Convention.1 The language at the outset of article V(1)(c), providing a ground for refusal of recognition or enforcement of awards exceeding the scope of the arbitration agreement, is largely unchanged from its counterpart in the Geneva Convention. The New York Convention, however, limits the scope of article V(1)(c) by omitting language found in article 2 of the Geneva Convention which permitted enforcing authorities to delay, or create conditions in relation to, the enforcement of awards, where the award did not cover all the questions submitted to the arbitral tribunal.2
1. Article 2(c) of the 1927 Geneva Convention states: “Even if the conditions laid down in Article 1 hereof are fulfilled, recognition and enforcement of the award shall be refused if the Court is satisfied: […] (c) That the award does not deal with the differences contemplated by or falling within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration.”
2. Article 2 of the 1927 Geneva Convention states in relevant part: “If the award has not covered all the questions submitted to the arbitral tribunal, the competent authority of the country where recognition or enforcement of the award is sought can, if it think fit, postpone such recognition or enforcement or grant it subject to such guarantee as that authority may decide”.
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20. Parties have brought successful challenges to enforcement of arbitral awards under article V(1)(c) in several jurisdictions on the grounds that the arbitral award addressed a party that was not bound by the arbitration agreement. Several courts have therefore considered that ratione personae is also a “matter” within the meaning of article V(1)(c) and can therefore constitute a valid basis for an article V(1)(c) challenge to recognition or enforcement of an award.
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21. For example, some Chinese courts have refused to enforce arbitral awards under article V(1)(c) on the grounds that the awards dealt with parties that were not bound by the arbitration agreement. In one case, the Supreme People’s Court overturned a lower court’s decision denying recognition of an award pursuant to article V(1)(c) and decided to enforce the award.24 A United States District Court denied enforcement of part of an arbitral award under article V(1)(c) on the basis that the arbitral tribunal had “exceeded its authority when it purported to bind a non-signatory who was not expressly covered by the arbitration agreement.”25
24. Aoetker Germany v. Sinotrans Nanjing Co., Ltd., Supreme People’s Court, China, 11 September 2001, [2000] Jiao Ta Zi No. 11.
25. FIAT S.p.A. v. The Ministry of Finance and Planning of the Republic of Suriname, Suriname Rice Export Company N.V. et al. v. Alvaro N. Sardi, District Court, Southern District of New York, United States of America, 12 October 1989, 1989 WL 122891, at 4, para. 5.
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22. In a multiparty context, where disputes under two separate contracts were joined in one arbitration, and where both contracts were not signed by the same parties, the Federal Arbitrazh Court of the Russian Federation refused to enforce an award which determined responsibilities between two parties who were not both signatories to the same arbitration agreement, and as such had not together agreed to arbitrate their disputes.26 Similarly, a Russian Federal Arbitrazh Court refused enforcement under article V(1)(c) on the grounds that no valid arbitration agreement existed, though this decision was ultimately overturned by the Highest Arbitrazh Court based on the facts.27
26. O&Y Investments Ltd. v. OAO Bummash, Federal Arbitrazh Court, Northwestern District, Russia, 12 October 2005, F09-2110/05-S6, XXXIII Y.B. COM. ARB. 687 (2008), at 692-693, para. 21.
27. HiPP GmbH & Co. Export KG v. ZAO SIVMA, Highest Arbitrazh Court, Russia, 14 June 2011, 1787/11 (unofficial translation), at 2-3. See paragraphs 20 to 24 supra.
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23. The Court of Appeal of England and Wales considered a challenge to enforcement under article V(1)(c) on the basis that the award addressed parties who were not bound by the arbitration agreement. The court ultimately rejected this challenge because the arbitral award, though mentioning other parties who were not bound by the arbitration agreement, did not make any award in their favour or any determination with respect to the rights of those parties.28
28. Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v. R’as al-Khaimah National Oil Co., Court of Appeal, England and Wales, 24 March 1987, 3 W.L.R. [1986 D No. 2196] [1987 R No. 273], at 1031.
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24. Though some courts have considered that challenges to personal jurisdiction may fall under article V(1)(c), these challenges may alternatively be deemed to constitute disputes in relation to consent and the existence of a valid arbitration agreement, which fall more squarely under article V(1)(a). Indeed, some commentators consider that only the subject matter jurisdiction of the arbitral tribunal is a “matter” within the meaning of article V(1)(c), as opposed to the arbitral tribunal’s jurisdiction over a particular party.29
29. GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION (2014), at 3544-3545; REDFERN & HUNTER ON INTERNATIONAL ARBITRATION (A. Redfern, J. M. Hunter et al. eds., 2009), at 645, para. 11.76 (referring to, as an example, The Arab Republic of Egypt v. Southern Pacific Properties, Court of Appeal of Paris, France, 12 July 1984, 23 ILM (1984)); Paolo Michele Patocchi & Cesare Jermini, Article 194, in INTERNATIONAL ARBITRATION IN SWITZERLAND: AN INTRODUCTION TO AND A COMMENTARY ON ARTICLES 176-194 OF THE SWISS PRIVATE INTERNATIONAL LAW STATUTE, at 660-661, para. 94 (S. V. Berti et al. eds., 2000); Stefan Michael Kröll, Commentary on the German Arbitration Law (10th Book of the German Code of Civil Procedure), in ARBITRATION IN GERMANY: THE MODEL LAW IN PRACTICE, at 541, para. 83 (Heinz Böckstiegel, Stefan Michael Kröll et al. eds., 2007); Mercédeh Azeredo da Silveira & Laurent Levy, Transgression of the Arbitrators’ Authority: Article V(1)(c) of the New York Convention, in ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YORK CONVENTION IN PRACTICE, at 639-640 (E. Gaillard, D. di Pietro eds., 2008). But see JEAN FRANÇOIS POUDRET, SEBASTIEN BESSON ET AL., COMPARATIVE LAW OF INTERNATIONAL ARBITRATION (2007), at 836-837, para. 913.
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25. The language of article V(1)(c) is clear that recognition or enforcement of an award may be refused if it addresses issues which exceed the scope of the parties’ agreement to arbitrate. Following a narrow interpretation of article V(1)(c), courts have consistently distinguished between examining the scope of the arbitration agreement itself and the scope of the underlying contract.
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26. Courts have thus rejected challenges under article V(1)(c) brought by parties on the basis that an award has somehow exceeded limits imposed by the scope of the underlying contract, rather than the arbitration agreement. As stated in an often-cited decision by the United States Court of Appeals for the Second Circuit, “[a]lthough the Convention recognizes that an award may not be enforced where predicated on a subject matter outside the arbitrator’s jurisdiction, it does not sanction second-guessing the arbitrator’s construction of the parties’ agreement”.30
30. Parsons & Whittemore Overseas Co. v. Société Générale de l’Industrie du Papier (RAKTA), Court of Appeals, Second Circuit, United States of America, 23 December 1974, 508 F.2d 969, at 977, para. 13.
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27. One United States District Court found that an award for consequential damages was within the submission to arbitrate even though consequential damages were explicitly precluded by the terms of the underlying contract, in circumstances where consequential damages were included in the terms of reference and a reasoned award by the arbitral tribunal justified their application.31
31. Fertilizer Corp. of India v IDI Mgmt. Inc., District Court, Southern District of Ohio, United States of America, 9 June 1981, 517 F. Supp. 948, at 958-961, paras. 4-6.
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28. In another example, a party challenged enforcement of an arbitral award before the Svea Court of Appeal (Sweden), claiming that the award determined disputes relating to a particular product that was not in existence at the time the underlying contract was entered into, and thus could not be within the scope of the arbitration agreement contained within the contract. Considering the challenge to enforcement pursuant to Section 54(3) of the Swedish Arbitration Act, which mirrors article V(1)(c), the court found that the issue of whether the product was included in the subject matter of the relevant contract could not be resolved without an interpretation of the contract, which would go to the merits of the arbitral award, and therefore could not be considered by the court.32
32. American Pacific Corp. v. Sydsvensk Produktutveckling AB, Svea Court of Appeal, Sweden, 21 March 2001, Ö 4859-00, XXVII Y.B. COM. ARB. 551 (2002), at 552.
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29. In keeping with the pro-enforcement bias of the New York Convention, article V(1)(c) provides “that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced”, provided that matters properly within the scope of the arbitration agreement “can be separated from those not so submitted.”
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3. The drafters of the New York Convention further built on the 1927 Geneva Convention by explicitly allowing for severability of the part of the award dealing with a difference not contemplated by or not falling within the terms of the submission to arbitration, or containing decisions on matters beyond the scope of the submission to arbitration, in order to permit recognition and enforcement of the part of the award containing decisions on matters submitted to arbitration. Although there is generally little discussion of article V(1)(c) in the travaux préparatoires, the inclusion of the provision allowing for partial recognition and enforcement was the subject of some debate. The travaux préparatoires show that various concerns were raised over the form and substance of this principle, including concerns that severability of arbitral awards would in practice “open the door to a review as to substance”,3 which the drafters of the New York Convention sought to prevent. Courts have since uncompromisingly asserted that article V(1)(c) does not permit an enforcing authority to reconsider the merits of a dispute.4
3. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Report by the Secretary-General - Recognition and Enforcement of Foreign Arbitral Awards, E/2822, at 23.
4. See infra at paragraphs 43 to 45.
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30. The limited discussion in the travaux préparatoires on this issue could be understood as suggesting that severability would be appropriate in cases where the matters in the award going beyond the scope of the agreement were “secondary” in nature or which constituted, as one delegate put it, “a small detail” in the context of the rest of the award.33 In practice, its application is much broader.34
33. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Seventeenth Meeting, E/CONF.26/SR.17, at 9. See also Albert Jan van den Berg, The New York Convention of 1958: An Overview, in ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YORK CONVENTION IN PRACTICE, at 59-60 (E. Gaillard, D. di Pietro eds., 2008).
34. Mercédeh Azeredo da Silveira & Laurent Levy, Transgression of the Arbitrators’ Authority: Article V(1)(c) of the New York Convention, in ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YORK CONVENTION IN PRACTICE, at 676 (E. Gaillard, D. di Pietro eds., 2008).
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31. A United States District Court partially enforced an award that covered multiple contracts, after finding that one of the contracts was not within the scope of the arbitration agreement. The court enforced the part of the award dealing with the contracts that were covered by the arbitration agreement.35
35. Four Seasons Hotels And Resorts B.V. et al. v. Consorcio Barr, S.A., District Court, Southern District of Florida, United States of America, 12 May 2009, Case No. 04-20673-CIV-MOORE/ISIMONTON, at 8-9.
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32. Courts have also applied article V(1)(c) in the context of multiparty arbitrations to exclude from enforcement portions of an award which address a party not bound by the arbitration agreement, but enforce the award with respect to the remaining parties. This was the case in a challenge to enforcement brought under article V(1)(c) before the Supreme People’s Court of China, which found that one of the respondents named in the award was not a party to the arbitration agreement. The court recognized only the portion of the award that dealt specifically and exclusively with the liability of the other respondent, who was a party to the arbitration agreement.36 Similarly, following a challenge brought under article V(1)(c), a United States District Court declined to enforce part of an arbitral award which was made against a non-signatory to the arbitration agreement, but enforced the remainder of the award against another respondent who was a party to the arbitration agreement.37
36. Gerald Metals Inc. v. Wuhu Smelter & Refinery Co., Ltd and Wuhu Hengxin Copper (Group) Inc., Supreme People’s Court, China, 12 November 2003 33. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Seventeenth Meeting, E/CONF.26/SR.17, at 9. See also Albert Jan van den Berg, The New York Convention of 1958: An Overview, in ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YOR, [2003] Min Si Ta Zi No. 12.
37. FIAT S.p.A. v. The Ministry of Finance and Planning of the Republic of Suriname, Suriname Rice Export Company N.V. et al. v. Alvaro N. Sardi, District Court, Southern District of New York, United States of America, 12 October 1989, 1989 WL 122891, at 4, para. 5.
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