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VII / ARTICLE VII(1) / 2. ANALYSIS (ARTICLE VII(1)) / C. Interaction of the Convention with domestic law / d. Domestic law more favourable than article VI / §52
52. For instance, in a 1999 decision, the Luxembourg Court of Appeal considered the argument of the party opposing enforcement that an award rendered in Switzerland had no res judicata effect in light of proceedings to set the award aside at the Swiss Federal Supreme Court and that pursuant to article VI of the New York Convention, enforcement proceedings in Luxembourg should be suspended pending this decision. Rejecting this argument, the Court noted that “the principle of favor arbitrandum (…) permeates the Convention” and in particular article VII(1), which is “aimed at making the enforcement of foreign awards possible in the highest number of cases.” The Court reasoned that “according to the Convention the Luxembourg court can only deny enforcement on one of the grounds provided for in its national law.” Since Article 1028(3) of the Luxembourg Code of Civil Procedure does not include the challenge of the award abroad among its grounds for refusal, it refused to suspend its decision and enforced the award.61
61. Sovereign Participations International S.A. v. Chadmore Developments Ltd., Court of Appeal, Luxembourg, 28 January 1999.
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53. French courts have also refused to suspend enforcement proceedings pending an action to set aside an award. In the 2004 Bargues Agro case, for instance, the Paris Court of Appeal refused to stay the enforcement of an award rendered in Belgium pending the conclusion of setting aside proceedings there, applying the more favourable provisions of French law.62 The Court noted that because the award was rendered in the context of an international arbitration, it was not anchored in the national legal order of Belgium and its potential setting aside could not prevent its recognition and enforcement in another Contracting State. The Court thus held that article VI of the Convention “is of no use in the context of the recognition and enforcement of an award under [the then applicable] Article 1502 of the Code of Civil Procedure.”
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54. German courts have relied on article VII(1) of the New York Convention to apply the domestic law principle of preclusion, which provides that a party that has participated in an arbitration proceeding without objecting to a known defect before the arbitral tribunal will not, in general, be able to rely on that defect as a ground for refusal to recognize or enforce the award.63 German courts have interpreted Section 1044(2)(1) of the former Code of Civil Procedure as requiring the preclusion of objections against the award, for instance based on the invalidity of an arbitration agreement, if that ground could have been asserted in an action to set aside the award in the country where the award was made and a party had not availed itself of that possibility.
63. Oberlandesgericht, Düsseldorf, Germany, 8 November 1971; Bundesgerichtshof, Germany, III ZR 206/82, 10 May 1984. See also Albert Jan van den Berg, The German Arbitration Act 1998 and the New York Convention 1958, in LAW OF INTERNATIONAL BUSINESS AND DISPUTE SETTLEMENT IN THE 21ST CENTURY — LIBER AMICORUM KARL-HEINZ BOCKSTIEGEL 783 (R.G. Briner, Y.L. Fortier, P.K. Berger, J. Bredow eds., 2001).
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55. The German Code of Civil Procedure does not contain specific provisions setting out the grounds for refusal to recognize and enforce an award, but instead provides that “recognition and enforcement of foreign awards shall be granted in accordance with the New York Convention.”64 There is a divergence of opinion among German courts on the question of whether the preclusion principle may be applied on the basis of the New York Convention only. Some courts have held that while the grounds for non-enforcement under article V of the New York Convention do not preclude defences in this manner, a German court may nonetheless apply this principle despite the fact that it finds no explicit expression in the current Civil Code of Procedure.65
64. Germany, Code of Civil Procedure, Section 1061.
65. For instance, Oberlandesgericht, Karlsruhe, Germany, 9 Sch 02/05, 27 March 2006; Oberlandesgericht, Karlsruhe, Germany, 9 Sch 02/09, 4 January 2012. Certain lower courts have deduced from the absence of such an explicit provision that no preclusion of defences may be applied under New York Convention. See e.g. Bayerisches Oberstes Landesgericht, Germany, 4 Z Sch 50/99, 16 March 2000; Oberlandesgericht, Celle, Germany, 8 Sch 11/02, 4 September 2003.
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56. At the date of this Guide, the most recent decision of the German Federal Court of Justice on this issue has affirmed that the preclusion of defences should have limited applicability. According to the Court, it would not necessarily amount to bad faith for a party to raise a defect for the first time at the enforcement stage and such party would be precluded from doing so only where circumstances make the party’s behaviour appear to be contrary to good faith and the principle of consistency with previous conduct (“venire contra factum proprium”).
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57. The New York Convention was conceived as a replacement for the 1923 Geneva Protocol on Arbitration Clauses and the 1927 Geneva Convention (together, the “Geneva Treaties”), which were considered too cumbersome a legal framework for the enforcement of arbitral awards in the context of the growth of international trade after the Second World War.
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58. According to the travaux préparatoires, it was suggested that article VII(2) should expressly provide that the Geneva Treaties shall become extinct (“cease to have effect”) between Contracting States “on their becoming bound by [the New York Convention]”. The addendum, “to the extent they become bound”, was introduced in the text to accommodate the Contracting States that would not become bound by the New York Convention in all their territories simultaneously and not to ensure the continued application of the Geneva Treaties.69 The travaux préparatoires further confirm that the replacement mandated by article VII(2) refers to the entirety of the Geneva Treaties: a proposal to limit their replacement to the degree that they were incompatible with the New York Convention was rejected during the drafting process.70
69. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Text of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards as provisionally approved by the drafting Committee on 6 June 1958, E/CONF.26/L.61 (Available on the Internet at www.uncitral.org), pp. 3-4; Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Twenty-fourth Meeting, E/CONF.26/SR.24 (Available on the Internet at www.uncitral.org), p. 4. See also comments in Oberlandesgericht, Düsseldorf, 8 November 1971.
70. Travaux préparatoires, United Nations Conference on International Commercial Arbitration, Summary Records of the Eighteenth Meeting, E/CONF.26/SR.18 (Available on the Internet at www.uncitral.org), p. 7.
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59. The rules for recognition and enforcement under the New York Convention introduced a number of improvements to the regime provided by the Geneva Treaties.
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6. Article VII(1) provides that, in addition to the New York Convention, any “interested party” shall not be deprived of the right to rely on a more favourable domestic law or treaty.
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60. First, the 1927 Geneva Convention, which applied to awards based on agreements covered by the 1923 Geneva Protocol, provided for the execution of a foreign award only if the party seeking to rely on it could demonstrate that the award was “final” in its country of origin.71 An interested party thus had to seek an exequatur (or leave for enforcement) in the country where the award was made before seeking enforcement in another country, thus giving rise to a requirement of “double exequatur”. The more liberal regime under the New York Convention does not require an award to be final, but only requires it to be “binding”.
71. This notion was defined in Article 1(d) of the 1927 Geneva Convention as an award that was not (i) open to any form of recourse or (ii) the subject of pending proceedings contesting its validity.
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61. Second, in order for the 1923 Geneva Protocol and 1927 Geneva Convention to be applicable, the parties to the arbitration both had to be subject to the jurisdiction of the States parties to the respective treaties. The New York Convention, by contrast, only requires that the award be made in the territory of another Contracting State or in the enforcing State if the award is considered as non-domestic in the State where recognition and enforcement is sought.
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62. Third, the burden of proof under the New York Convention is less onerous on the party seeking enforcement. Pursuant to article I of the 1927 Geneva Convention, an interested party was required to demonstrate the existence of a valid arbitration agreement, concerning an arbitral subject matter, that the arbitral proceedings had been conducted in accordance with the parties’ agreement and also that the award had become final in the place of arbitration and was not contrary to the public policy of the recognizing State. Under the New York Convention, a party seeking enforcement need only supply to a court the original award (or a duly certified copy thereof) along with the original arbitration agreement (or a duly certified copy thereof), and a translation of those documents where they are not in the official language of the country where recognition and enforcement is sought. Under the New York Convention, it is up to the party opposing enforcement to prove the existence of one of the grounds for refusal enumerated in article V of the New York Convention.
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63. Reported case law on article VII(2) confirms the principle that the Geneva Treaties shall cease to apply to the recognition and enforcement of foreign arbitral awards in Contracting States that have become bound by the New York Convention.72
72. For instance, S.p.A. Nosegno e Morando v. Bohne Friedrich und Co-Import-Export, Corte Di Cassazione, Italy, 20 January 1977; Jassica S.A. v. Ditta Polojaz, Corte di Appello, Trieste, Italy, 2 July 1982; Supreme Court, Austria, 21 February 1978; Oberlandesgericht, Düsseldorf, 8 November 1971; Trefileries & Ateliers de Commercy (T.A.C.) v. Société Philipp Brothers France et Société Derby & Co. Limited, Court of Appeal, Nancy, France, 5 December 1980; Minister of Public Works of the Government of the State of Kuwait v. Sir Frederick Snow & Partners, House of Lords, England, 1 March 1984, [1984] A.C. 426.
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64. With very few exceptions, all States which had adhered to the Geneva Treaties have now become Parties to the New York Convention.73 Article VII(2) is therefore of limited practical relevance today.
73. The status of former colonies that were Contracting States to the Geneva Treaties is not clear, as some of them have not made formal announcements regarding their status. See Dirk Otto, Article IV, in RECOGNITION AND ENFORCEMENT OF ARBITRAL AWARDS: A GLOBAL COMMENTARY ON THE NEW YORK CONVENTION 143 (H. Kronke, P. Nascimiento et al. eds, 2010).
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7. A Swiss court has confirmed that the term “interested party” refers only to the party seeking enforcement of an award, and not to the party opposing enforcement.6 In a case where an Italian party sought enforcement of an arbitral award against a Swiss party, the Zurich Court of First Instance rejected the argument of the Swiss party that it was, in application of article VII(1), entitled to rely on the more stringent conditions of the Swiss-Italian bilateral treaty on the Recognition and Enforcement of Judgments of 1933 to resist enforcement of the award. In the words of the Court, “the more-favourable-right principle does not provide the party opposing enforcement with further grounds for refusal than are listed in the Convention.”
6. Italian party v. Swiss company, Bezirksgericht, Zurich, Switzerland, 14 February 2003.
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8. As leading commentators have noted, allowing a respondent to assert the more stringent conditions of another law or treaty would run counter to the pro-enforcement basis of the New York Convention.7
7. ALBERT JAN VAN DEN BERG, THE NEW YORK ARBITRATION CONVENTION OF 1958: TOWARDS A UNIFORM JUDICIAL INTERPRETATION (1981), at 333-34; Emmanuel Gaillard, The Relationship of the New York Convention with other Treaties and with Domestic Law, in ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YORK CONVENTION IN PRACTICE (E. Gaillard, D. Di Pietro eds., 2008), at 74-75.
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9. According to the travaux préparatoires to the New York Convention, an “interested party” may also be a Contracting State. During the negotiation of the Convention, the State delegates considered that to expressly stipulate this eventuality would be superfluous, as it was self-evident from the text of article VII(1).8 At the date of this Guide, there is, however, no publicly available case law where a State has sought to rely on article VII(1).
8. Travaux préparatoires, Report of the Committee on the Enforcement of International Arbitral Awards, E/AC.42/4/Rev.1 (Available on the Internet at www.uncitral.org), p. 15.
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