Enforcing awards under the New York Convention – tips and traps

For any party contemplating arbitration, the ability to successfully enforce an award is key. The growth of arbitration worldwide can, to a large extent, be attributed to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention)¹ which, among other things, allows the enforcement of an award made in one signatory country against assets located in another signatory country.

In our latest briefing, Rob Palmer and Michael Weatherley outline a number of tips and traps that parties should be aware of when considering enforcement of awards under the New York Convention.

Basic provisions

For all its significance, the New York Convention is a short document of some four pages in length, and its provisions concerning enforcement of awards are relatively straightforward. Article III stipulates that the courts of each Contracting State must enforce awards rendered in other Contracting States in accordance with their own rules of procedure but without imposing substantially more onerous conditions or higher fees than would be the case for enforcing domestic arbitral awards.

The party seeking enforcement must produce to the enforcing court a duly authenticated original award or duly certified copy, the original arbitration agreement or a duly certified copy, and a certified translation of both in the official language of the country in which enforcement is sought (Article IV).

Enforcement of a foreign award can be refused only in the limited circumstances listed in Article V, which go mainly to procedural defects rather than the substance of the decision.

Traps

It is important to remember that the New York Convention is merely a promise on behalf of the Contracting States to enact legislation that complies with the minimum standards set out in the Convention.

This has a number of consequences:

• Although a country may have signed or acceded to the New York Convention, it may not have enacted domestic legislation giving effect to these obligations. Myanmar, for example, acceded in July 2013, but has not yet implemented the necessary legislation – meaning that any award obtained outside Myanmar cannot be enforced in Myanmar under the New York Convention.²
• Where national legislation is enacted, such legislation can differ from country to country. India, for example, has not officially recognised all the signatories to the New York Convention. Indian courts will only enforce foreign awards if they have been issued by a New York Convention country that has also been notified in India's Official Gazette as being a country to which the New York Convention applies. The Government of India has so far notified less than one-third of the New York Convention signatory states in the Official Gazette. This means that, when dealing with an Indian counterparty, it is important to choose a seat of arbitration that is not only a New York Convention country but also one which has been notified in the Official Gazette.
• Similarly, a country may have its own distinct procedure for the enforcement of foreign awards. An enforcing party should be aware at the outset of the particular procedural requirements of the country in which they are seeking enforcement. For example, in Indonesia, it is the arbitral tribunal or its proxy, not the successful party, that is required to register the foreign award in the Indonesian courts. Parties, therefore, must obtain a power of attorney from the arbitral tribunal prior to the award being delivered, in order to effect registration.
• Like most international conventions, the provisions of the New York Convention are expressed as broad, general propositions and do not contain definitions of key terms. This means that in interpreting obligations under the New York Convention, national courts in different countries have reached differing conclusions about what the same terms mean. This is particularly pronounced in respect of the grounds for refusing enforcement of foreign awards, especially the "public policy" ground. The Indian courts, for example, have in the past interpreted public policy in a wide fashion, refusing to enforce awards deemed contrary to the fundamental policy of Indian law, the interests of India, or justice and morality. At one stage, the Supreme Court took the position that the "public policy" ground would apply where a tribunal made an error in applying Indian law.³ This effectively meant that parties could appeal arbitral awards to the Indian courts on any occasion where the governing law of the contract was Indian law (the Indian Supreme Court has since clarified that this interpretation only applies to domestic arbitral awards).⁴ Similarly, Vietnamese courts will refuse awards that are contrary to the "fundamental principles" of the laws of Vietnam, giving rise to a tendency by courts to take the position that a breach of any Vietnamese statutory provision is grounds for refusing to enforce an award.
• Finally, it is important to be conscious that enforcement under the New York Convention is only as good as the court system where the enforcement is taking place. It is common for the enforcement process to begin in the lower-level regional courts of a country and, in some cases, this means that the judges concerned may not have sufficient training in arbitration or the workings of the New York Convention, or potentially may be subject to undue influence. While there will usually be appeal rights to the higher national courts, the entire process can be long and expensive.

Tips

As the above analysis shows, the key to successful enforcement of awards is being aware of the peculiarities and risks that arise in each particular country.

Ideally, you should undertake this assessment at the time of contracting: in which country are your counterparty's assets located? What is the enforcement regime like in that country? What are the potential barriers to enforcement there? Equally, this assessment needs to be made when you have an award in your hands: does the defendant have assets in more than one country? If so, which country has the most favourable enforcement regime?

Ultimately, these questions can only be answered by someone with practical experience in enforcing awards in the jurisdiction in question. The presence of mind to seek that advice, however, can mean the difference between success and failure when it comes to getting paid.

_{Notes
¹ The New York Convention entered into force on 7 June 1959 and, to date, 154 States have signed up to it.
² Myanmar is expected to enact the necessary legislation sometime this year. Indeed, on 25 May 2014, the Myanmar Parliament published a draft Arbitration Bill which includes the necessary provisions on enforcement of awards.
³ Oil & National Gas Corporation Ltd -v- Saw Pipes (2003) 5 SCC 705 and Phulchand Exports Ltd -v- OOO Patriot, 2012(2) ALD 133 (SC).
⁴ Shri Lal Mahal Ltd -v- Progeto Grano Spa, Civil Appeal No. 5085 2013.}