Georgia / 02 April 2004 / Georgia, საქართველოს უზენაესი სასამართლო (Supreme Court of Georgia) / Ltd. “R.L.” v. JSC “Z. Factory” / a-204-sh-43-03
| Country | Georgia |
| Court | Georgia, საქართველოს უზენაესი სასამართლო (Supreme Court of Georgia) |
| Date | 02 April 2004 |
| Parties | Ltd. “R.L.” v. JSC “Z. Factory” |
| Case number | a-204-sh-43-03 |
| Applicable NYC Provisions | III | V | V(1)(a) | V(1)(d) |
| Source |
http://prg.supremecourt.ge (website of the Supreme Court of Georgia) |
| Languages | English |
| Summary | On 24 May 2002, Ltd. “R.L.” (“RL”) entered into a contract with JSC “Z. Factory” (“Factory”) for the delivery of silicon manganese. The contract was governed by English law and provided for the resolution of disputes by arbitration in London. A dispute arose and RL initiated arbitration in London, claiming non-performance of contractual obligations by Factory. On 25 April 2003, the arbitral tribunal issued an award in favor of RL, which it sought to have recognized and enforced in Georgia before the Supreme Court of Georgia. Factory opposed recognition and enforcement based on Articles V(1)(a) and (V)(1)(d) NYC. It argued that as per Georgian law, an enterprise in which the State had a controlling stake or a shareholding of more than 50 percent, required the approval of the Ministry of Justice of Georgia (“the Ministry) to enter into contracts which provided for arbitration. It stated that since the State owned a controlling stake in Factory, and Factory had not obtained approval of the Ministry to enter into the contract, the arbitration agreement was void under Georgian law as Factory was under an “incapacity” pursuant to Article V(1)(a) NYC. Factory also argued that the arbitral proceedings had not been conducted in accordance with the parties’ agreement, as the agreement called for a tribunal of three arbitrators, but in fact, the dispute had been decided by a sole arbitrator. The Supreme Court of Georgia granted recognition and enforcement of the arbitral award, holding that it was not authorized to examine the legality of an award of a foreign arbitral tribunal, or the reasoning behind its decision, and that foreign arbitral awards were binding and enforceable in Georgia pursuant to Article III NYC. After listing the grounds for refusal of enforcement under Article V(1) NYC, the Supreme Court held that for an award to be refused enforcement under Article V(1)(a) NYC, a party had to demonstrate that the arbitration agreement was not valid under the law to which the parties had subjected it (in the present case, English law), concluding that Factory had failed to show that the arbitration agreement was invalid, or that Factory had lacked legal capacity to conclude the contract, under English law. The Supreme Court also held that the agreement was valid under Georgian law. With respect to the challenge under Article V(1)(d) NYC, the Supreme Court held that pursuant to the parties’ agreement, the arbitration proceedings were governed by the UK Arbitration Act 1996, which, under Article 17, allowed a party appointed arbitrator to become a sole arbitrator if the other party failed to appoint an arbitrator of its own. It observed that Factory, despite being asked to appoint an arbitrator, had failed to do so, and thus, the arbitrator appointed by RL had rendered an award as a sole arbitrator in accordance with the agreement of the parties and the law of seat. |
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Attachment (2)
 Original Language Adobe Acrobat PDF |
Unofficial Translation Adobe Acrobat PDF |
