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V(1) / V(1)(e) / 2. ANALYSIS (V(1)(e)) / C. Award set aside or suspended / a. Award set aside / §30
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.67 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.68
67. See supra paragraph 12.
68. Ciments Français (France) v. OAO Holding Company Siberian Cement (Russia), OOO Financial Industrial Association Sibconcord (Russia), Istanbul Çimento Yatırımları (Turkey), Federal Arbitrazh Court for the West-Siberian District, Russia, 5 December 2011, A27-781/2011.
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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,69 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.70
69. See for instance 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), at 751-758 (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).
70. Swiss Federal Tribunal, Switzerland, 21 March 2000, 5P.371/1999.
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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.71 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.72 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.73 The same principle led a US 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 Argentinean 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.74
71. ALBERT JAN VAN DEN BERG, THE NEW YORK ARBITRATION CONVENTION OF 1958: TOWARDS A UNIFORM JUDICIAL INTERPRETATION (1981), at 352. See also NADIA DARWAZEH, Article V(1)(e), in RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS: A GLOBAL COMMENTARY ON THE NEW YORK CONVENTION (H. Kronke, P. Nacimiento et al. ed., 2010), at 341-342; FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1999), at 980-981, para. 1690; CHRISTOPH LIEBSCHER, Article V, in NEW YORK CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS – COMMENTARY (R. Wolff ed., 2012), at 372, paras. 395-396.
72. Company X SA v. Y Federation, Swiss Federal Tribunal, Switzerland, 9 December 2008, 4A_403/2008.
73. 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), at 621-626 (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).
74. 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.
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4. Courts from various countries have consistently referred to the abrogation of double exequatur as one of the major innovations of the New York Convention. For example, the English High Court of Justice held that “[i]t is common ground that the intention of the New York Convention was to make enforcement of a Convention award more straightforward, and in particular to remove the previous necessity for a double exequatur – i.e. the need, before a Convention award could be enforced in any other jurisdiction, for it to be shown that it has first been rendered enforceable in the jurisdiction whose law governs the arbitration […].”7 Likewise, the Swiss Federal Tribunal held that “the authors of the Convention wanted to exclude the requirement of exequatur in the award’s country of origin, as well as any other proceedings to confirm that the award is enforceable in that country […].”7 Numerous other courts have similarly confirmed this principle.8
6. Dowans Holding S.A. v. Tanzania Electric Supply Co. Ltd., High Court of Justice, England and Wales, 27 July 2011, 2010 Folio 1539.
7. Y v. X, Swiss Federal Tribunal, Switzerland, 3 January 2006, 5P.292/2005.
8. See, for instance, 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), at 487-489 (stating that “the drafters of the Convention chose the word ‘binding’ in order to abolish the requirement of the double exequatur which was the result of the word ‘final’ in the Geneva Convention of 1927)”; German (F.R.) party v. Dutch party, President of Rechtbank, The Hague, Netherlands, 26 April 1973, Yearbook Commercial Arbitration 1979 – at 305 -306 (stating that “[a]n important improvement of the New York Convention for the Execution of Foreign Arbitral Awards of 1927 is the fact that the double exequatur ‘leave for enforcement’ is abolished”); Joseph Müller AG v. Bergesen und Obergericht (II. Zivilkammer) des Kantons Zürich, Court of First Instance, Switzerland, 26 February 1982 (holding that “the aim of the New York Convention it to avoid the double exequatur”); Company X SA v. Y Federation, Swiss Federal Tribunal, Switzerland, 9 December 2008, 4A_403/2008 (holding that “the New York Convention sought to prevent “double enforcement”). See also Palm and Vegetable Oils SDN. BHD. v. Algemene Oliehandel International B.V., President of Rechtbank, Court of First Instance of Utrecht, Netherlands, 22 November 1984, XI Y. B. COM. ARB. (1986), at 521-522 (ruling that “in view of the legislative history of the Convention, the latter implies that for obtaining a leave for enforcement abroad, i.e. the Netherlands, it is not required that in the country of origin, i.e. England, a definitive leave for enforcement be given”); Court of Appeal of the Republic and Canton of Ticino, Switzerland, 22 August 2012, 14.2012.102; Obergericht des Kantons Zürich, Switzerland, 8 December 1980, II.ZK.Nr. 8 A/80 (stating that “the New York Convention sought to avoid ‘double exequatur’”).
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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.9 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.
9. 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 (1981), at 334-336.
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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.10 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.11 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.12 Courts in Germany,13 Italy,14 the United States,15 and Switzerland16 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.
10. For a description of this approach, see FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1999), at 974-975, paras. 1681-1683; NADIA DARWAZEH, Article V(1)(e), in RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS: A GLOBAL COMMENTARY ON THE NEW YORK CONVENTION (H. Kronke, P. Nacimiento et al. ed., 2010), at 312-313.
11. Italian Party v. Swiss Company, Court of First Instance, Zurich, Switzerland, 14 February 2003, XXIX Y. B. COM. ARB. (2004), at 819-833.
12. Compagnie de Saint-Gobain – Pont-à-Mousson v. The Fertilizer Corporation of India Limited, Paris Court of Appeal, France, 10 May 1971.
13. 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).
14. Carters (Merchants) Ltd. v. Francesco Ferraro, Corte Di Appello Di Napoli, Italy, 20 February 1975, IV Y. B. COM. ARB. (1979), at 275-276 (referring to the law applicable at the seat of the arbitration, namely English law, to rule on the binding nature of the award).
15. 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”).
16. 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).
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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.17 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.”18 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.”19 In Hong Kong, courts have ruled that an award is “binding” when it is “no longer open to an appeal on the merits.”20
17. For a description of this second approach, see FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1999), at 972, para. 1679; NADIA DARWAZEH, Article V(1)(e), in RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS: A GLOBAL COMMENTARY ON THE NEW YORK CONVENTION (H. Kronke, P. Nacimiento et al. ed., 2010), at 311-312; CHRISTOPH LIEBSCHER, Article V, in NEW YORK CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS – COMMENTARY (R. Wolff ed., 2012), at 360, paras. 361, 364.
18. 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).
19. 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), at 487-489 (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”).
20. 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), at 776-783. 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”).
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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.21 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.22 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.23
21. See CHRISTOPH LIEBSCHER, Article V, in NEW YORK CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS – COMMENTARY (R. Wolff ed., 2012), at 362, paras. 364-365; FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1999), at 975, para. 1683.
22. 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), at 776-783.
23. See infra., para 11.
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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.24
24. See FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1999), at 976, para. 1684; CHRISTOPH LIEBSCHER, Article V, in NEW YORK CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS – COMMENTARY (R. Wolff ed., 2012), at 360, para. 360.
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