International Commercial Arbitration – Enforcement of Foreign Arbitral Awards under the New York Convention

The international framework for resolving commercial dispute across state borders is fundamentally shaped by efficient and, more crucially, enforced settlement of differences arising between parties located in different countries. While national forums provide public platforms for adjudication of disputes, the predominant means by which cross border commercial disputes are resolved is through international arbitration. The reason for this outcome can be attributed to a singular, transformative treaty: The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known more familiarly as New York Convention 1958.

The Convention with more than 170 Contracting states, can fairly be regarded as the most successful treaty in international private law having led to uniform and enforceable approach.

It lays down the rules governing international arbitration awards by providing a means whereby an arbitral award rendered in one Contracting State may be recognized and enforced in any of the other Contracting states on terms which should, ideally at least, not be less favourable than that to which they are accorded recognition and enforcement of judgments rendered by courts. We look at the core principles on which this Convention is founded, together with the framework and narrow (exhaustive) list of grounds where the enforcement of foreign arbitral awards can be resisted.

Pro-Enforcement Bias- A Corner stone principle of the New York Convention

The spirit of the Convention, at a foundational level, is one geared towards promoting the recognition and enforcement of arbitral awards. It lays down the principle that when the courts of a Contracting State are requested to enforce foreign arbitral award, they must approach with pro-enforcement bias. This is expressed primarily in two ways: firstly, the Convention lays down an assumption that arbitral awards would, as a matter of right be binding on the parties unless any exception be laid down that would defeat such binding character; and secondly, there must be nothing less than very narrow scrutiny given to award being enforced so that minimum intervention to the substance will be adopted.

It follows the presumption that court should uphold arbitral award until there is a compelling reason to set aside the award at enforcement stage.

When the parties resisting enforcement of the award can successfully invoke and satisfy one of the given conditions listed in Article V of Convention. This ensures, the recognition and enforcement of award without much intervention.

Procedure under Article IV

In order to initiate enforcement proceedings for international arbitral award it must be demonstrated that the party which has won arbitration award (the “award creditor”) will have to submit two documentary proofs to the relevant court or enforcing authority. These are stated at Article IV;

• The document mentioned under paragraph 2(e) of Article VIII [Original Arbitral Award or certified copy]; and
• The Document Mentioned under Article XI (1) of Convention [The original written arbitration agreement or certified copy, as may be referred in Article II].

These must be in accordance with all applicable requirements of law of state where enforcement is sought if same are presented in any language than official Language. Crucially, they are solely the proofs requested to be furnished, no other requirement would be allowed by the Contracting State. After satisfaction of such, award creditor would be required to prove prima facie case of enforcement and hence the burden on prove shifts to award debtor proving conditions contrary to that specified in Article V of the Convention to the law enforcing forum.

Grounds for non-enforcement of foreign arbitral award per Convention Article V

The circumstances under which the recognition and enforcement of foreign arbitral award could be defeated has been exclusively listed at Article V of Convention that clearly enumerates the ground of resistance which a Party might resort in order to overcome an enforceable arbitral award made at a foreign seat. These can either be on the grounds raised by the party resisting the enforcement (a few) or on the grounds raised ex officio (most) by the national judiciary.

1. The grounds raised by the Party resisting enforcement are-
2. Capacity to enter into arbitration agreement: the parties of Arbitration Agreement lacked in a particular legal disability; or the validity of Arbitration agreement is lacking in reference to laws governing the agreement.
3. Lack of fair hearing or due process: Party resisting enforcement should prove that they weren’t properly apprised of any of appointed arbitrator, or proceeding of arbitral dispute;
4. Excess of arbitral power: Award concerned matter beyond what have been referred for arbitration: court could still enforce the award if objectionable part of award is non-enforceable and divisible from the enforceable one;
5. Irregularities in arbitral procedure; arbitral Tribunal appointed by way contravenes party’s expectation or laws governing arbitration Seat, that was nonconforming with what is stipulated by parties and in absence such provisions by provisions of arbitral country.
6. Non-enforceability; Award is yet not binding on parties; has been suspended or set aside by the duly concerned Authority of country in which it was made. This provision gives weight to supervisory jurisdiction of Seat over domestic awards.

2. Grounds for refusal which are required to be considered by court ex officio-
   • Subject matter is not capable to be decided by arbitration process; each country’s law can dictate those cases which are inherently not susceptible to arbitration (e.g. Commercial matter having aspects involving crimes or those that are related to intellectual property right issues that belong exclusively to court; it must fall within the public policy of jurisdiction);
   • Breach of public policy; this implies reference to overriding mandatory rules, that is violations of fundamental national norms governing all human rights. In regard of public policy defense the general tendency amongst most of nations is a more restrictive application against any enforcement, on basis that it ought not to infringe upon the overriding considerations applicable in international commerce and in particular in enforceability of arbitral award of another forum i.e. It should discriminate against awards otherwise valid based on its parochial interests by having over rigid approach than what has been considered as internationally binding. Such interpretation has found to gain favour over traditional approach where ‘public policy of the country’ tended to be identified closely with domestic concepts of national justice etc, and the enforcing courts would intervene where an enforcement would appear to contravene fundamental national morals of enforcing court.

Modern era and a conclusion:

The New York Convention has proved to be extraordinarily resilient and flexible piece of international legislation by providing just enough and that too minimal framework required for efficient and predictable recognition and enforcement of foreign awards with utmost universality. So far, national law of more than 170 Contracting States, which provides not merely a procedural bridge over international differences, has achieved tremendous success in the field that no other field of public international law can hope to achieve the same amount of global success as the convention as “gold Standard of the law on international arbitration” have provided not only commercial comfort to international trade and transactions.