Статья 'Правовые проблемы исполнения иностранных арбитражных решений, отмененных по месту их вынесения' - журнал 'Международное право' - NotaBene.ru
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Reference:

Legal Problems of Enforcement of Foreign Arbitral Awards set aside at the Place of Arbitration

Kurochkina Ekaterina Mikhailovna

ORCID: 0000-0003-2641-3818

PhD student, Chair of International Law, St. Petersburg State University

199034, Russia, Saint Petersburg, Universitetskaya Nab., 7-9

kurochkina.e.m@yandex.ru
Other publications by this author
 

 

DOI:

10.25136/2644-5514.2023.1.39941

EDN:

FEPRSC

Received:

09-03-2023


Published:

16-03-2023


Abstract: The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (the 1958 New York Convention) allows recognition and enforcement of arbitral awards in most countries of the world. Court practice of the states has revealed some problems of application of the 1958 New York Convention. One of such problems is recognition and enforcement of the arbitration award cancelled by the state court in the place where it was made. In the process of research of legal consequences of execution of annulled arbitral awards both general scientific methods of knowledge (analysis and synthesis, induction and deduction, generalization) and special scientific methods (formal-logical, formal-legal and method of legal prediction) were used. The scientific novelty of this work is the rationale that the recognition and enforcement of annulled arbitral awards lead to negative consequences. Enforcement of arbitral awards annulled at the place of their rendering undermines the status of such institution as arbitral dispute resolution and the whole system of acts aimed at regulating the activity of arbitration. Execution of such decisions leads to a violation of the principles of legal certainty, lis pendens, res judicata, pacta sunt servanda, and most importantly - violates the rights of participants in arbitral proceedings. It is noted that attempts are being made to amend the mechanism of recognition and enforcement of arbitral awards, established by the 1958 New York Convention, with regard to the enforcement of annulled arbitral awards. It is proposed to make such changes through the adoption of an additional protocol to the 1958 New York Convention or a new international treaty.


Keywords:

international commercial arbitration, foreign arbitral award, annulment of arbitral award, enforcement of arbitral award, New York Convention, European Convention, legal consequences, delocalization of arbitration, res judicata principle, legal regulation

This article is automatically translated. You can find original text of the article here.

International Commercial arbitration (hereinafter referred to as ICA) is a popular tool for settling disputes between participants in cross–border trade relations. The parties choose arbitration due to a number of its advantages. Firstly, arbitration has a less formalized procedure compared to the established state dispute resolution procedure: the parties have the opportunity to choose an arbitration center, rules of arbitration procedure, arbitrators, place of arbitration, language of arbitration proceedings, etc. [16, p. 51]. Secondly, the principles of the arbitration procedure are the independence and impartiality of arbitrators [26, p. 73]. Thirdly, the arbitration proceedings are confidential [21, p. 182]. Fourth, the presence of specialized arbitrations (for example, maritime, sports, commercial, etc.) allows qualified consideration of the dispute. Moreover, there is an effective system of recognition and enforcement of arbitral awards made in a foreign country.

         The effective functioning of arbitration is ensured through coordinated regulation at the international legal and national levels. Firstly, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (hereinafter referred to as the New York Convention of 1958) [1] establishes the international legal framework for the mechanism of recognition and enforcement of foreign arbitral awards. Most of the countries of the world are its participants. According to many experts, the 1958 New York Convention is a successful example of unification in the field of private international law [30, p. 126],[15, p. 104].

         Secondly, the provisions of the European Convention on Foreign Trade Arbitration of April 21, 1961 (hereinafter referred to as the 1961 European Convention) are aimed at regulating a number of issues regarding the arbitration of cross-border disputes [2]. Professor N. Y. Erpyleva notes that the provisions of this convention guarantee the implementation of arbitration proceedings in accordance with generally recognized standards adopted at the international level [17].

         Thirdly, there is a special convention for Latin American States – the Inter-American Convention on International Commercial Arbitration of January 30, 1975 [3].

         Fourth, the UNCITRAL Model Law on International Commercial Arbitration" dated June 21, 1985 (hereinafter referred to as the UNCITRAL Model Law of 1985) [5] allows to harmonize the arbitration legislation of a number of States [29, p. 36]. On the basis of the UNCITRAL Model Law of 1985, national laws on arbitration were adopted in 85 States, and some States, without using the UNCITRAL Model Law of 1985 directly, brought their legislation in accordance with its provisions (for example, Italy [8], Mongolia [10], Portugal [9], etc.).

         Fifth, the UNCITRAL Arbitration Rules of 1976 [4] are an example of procedural rules for many arbitration centers around the world. This regulation is also used in ad hoc arbitrations when the parties include it in the arbitration clause [19, p. 40].

Nevertheless, the current regulation of arbitration does not allow us to conclude that the arbitration of disputes and the enforcement of foreign arbitral awards are settled exhaustively. Today there are a number of problems. One of such problems is the recognition and enforcement of a foreign arbitral award, annulled at the place of its issuance [28],[22].

Ambiguous provisions of the 1958 New York Convention allow such decisions to be executed. In paragraph "e" of paragraph 1 of art. V of the 1958 New York Convention provides that recognition and enforcement of an arbitral award may be refused if the arbitral award has been annulled by the competent authority at the place of its issuance (our italics - E.K.). The wording "may be" causes discussions in scientific circles and allows judges to make directly opposite decisions regarding recognition and enforcement of the cancelled award. During the work on the text of the 1958 New York Convention, the emergence of such problems was not even discussed.

We dare to assume that the developers could not imagine such a situation when an arbitration award annulled at the place of its issuance would be enforced in any State. Moreover, at the time of the adoption of the New York Convention of 1958, law enforcement practice was not aware of cases of recognition and enforcement of canceled arbitral awards. However, later in the practice of States, such cases began to appear [11-13].

The 1958 New York Convention stipulates that recognition and enforcement may be refused if the award is set aside by the competent authority of the country where it was made or the country whose law applies. At the same time, there is no concept of "competent authority" in the text of this convention. In legal science and judicial practice, a position has been developed according to which the competent authority in this case means a court authorized in a particular State to consider petitions for the annulment of an arbitration award.

The cancellation of the arbitral award is actually carried out by the court of the State in which it was made (i.e., the court of the place of arbitration).  An alternative provision – the cancellation of an arbitration award by a court of the State whose law is applied, is rather a theoretical option. Thus, the cancellation of the arbitration award in accordance with paragraph "e" of paragraph 1 of art. V of the 1958 New York Convention must be made by the court of the State that is the place of arbitration.

The provisions of the 1958 New York Convention do not establish the grounds on which a court must annul an arbitral award in order for such annulment to lead to a refusal to recognize and enforce a foreign arbitral award. In the absence of special instructions, it is quite obvious that the court is guided by national legislation when canceling an arbitration award [18, p. 381]. However, legal logic suggests that the grounds for revoking an arbitration award in order to refuse recognition and enforcement of a foreign arbitration award should be the same. Thus, such grounds are contained in the 1961 European Convention and the 1985 UNCITRAL Model Law. The provisions of paragraph 1 of Article IX of the 1961 European Convention establish that in the event of cancellation of an arbitral award on one of the provided grounds, recognition and enforcement of the arbitral award must be refused.

Some arbitration experts suggest focusing on the provisions of the 1961 European Convention, and refusing to recognize and enforce an arbitration award only if it was canceled on the grounds established in this convention [23, p. 248]. However, this approach does not directly correspond to the text of the 1958 New York Convention, according to which an arbitral award may be set aside on any ground established by national legislation at the place of the award. In order to establish a uniform application of the 1958 New York Convention, the grounds for the cancellation of an arbitral award should be formalized in its provisions.

Recognition and enforcement of a foreign arbitral award annulled at the place of issuance is also carried out on the basis of paragraph 1 of Article VII of the New York Convention of 1958, which provides for the application of a more favorable provision of national legislation than the New York Convention of 1958 [24, p. 98]. Such cases are characteristic of the French law and order, as the law and order supporting the theory of the delocalization of arbitration and its decisions.

In accordance with the theory of delocalization, arbitration and, as a consequence, its decisions are not included in the legal system of any state, thereby allowing not to take into account the cancellation of an arbitration award at the place of its issuance when recognizing and enforcing such a decision [27, p. 45],[20, p. 43].

However, in accordance with the current international legal and national regulation, an arbitration award cannot exist and generate rights and obligations for the parties to the dispute outside of connection with one or more legal systems. It is the national legal order that allows the possibility of the functioning of the ICA, the effect of arbitration decisions. The arbitration award is certainly included in the legal system of the State of the place of arbitration. In the State at the place where the arbitral award was made, the participant in the dispute has the right to file a petition for the annulment of the arbitral award.  The arbitration award is also included in the legal system of those States where it will be recognized and enforced. If an arbitration award is submitted for execution, the State court introduces it into the legal system of the State, thereby giving it legal force. Even if it is not presented for execution (executed voluntarily), it is still connected with this right-wing system, because a person on the basis of this decision exercises his rights and obligations in this state.

         Moreover, in the legal doctrine, the concept of arbitration delocalization is still being studied in detail, the possibility of its implementation in practice has not yet been fully established [14, p. 124].

There is another approach (including the practice of law enforcement) with respect to paragraph 1 of Article VII of the 1958 New York Convention, according to which this provision does not apply to the recognition and enforcement of foreign arbitral awards annulled at the place of their issuance [25, p. 287].

We dare to assume that when applying the provisions of the New York Convention of 1958, one should take into account the history of adoption, logic and interrelation of its provisions. In this connection, the recognition and enforcement of a foreign arbitral award annulled at the place of its issuance should be refused. Nevertheless, the absence in the New York Convention of 1958 of an extremely clear regulation of refusal to recognize and enforce an arbitration award annulled at the place of its issuance allows courts to execute such decisions.

At the same time, the recognition and enforcement of a foreign arbitration award, canceled at the place of its issuance, has adverse consequences. First of all, the execution of the annulled arbitration award actually undermines the status of arbitration and the entire system of acts aimed at regulating its activities. Ignoring the decision of a foreign court to cancel an arbitration award, the court at the place of recognition and enforcement of the ICA decision reviews this decision of a foreign court, which is legally granted the authority to make a decision on the arbitration award. It seems that since the State court has been granted the right to overturn the ICA decision, its verdict should be binding on the court considering the application for the enforcement of a foreign arbitral award. In these circumstances, a court of a foreign State, observing the principles of legal certainty, lis pendens, res judicata, pacta sunt servanda, must refuse to recognize and enforce an arbitration award annulled at the place of its issuance.

Moreover, in case of cancellation of the arbitration award, the parties may again apply to arbitration, in which the dispute will be considered and a new decision on the case will be made, including a decision opposite to the original one. Let's assume the case when at this time the original award will be recognized and enforced in any State. When executing the second arbitration award, there will be a situation in which two directly opposite arbitral awards will operate on the same dispute (between the same parties, on the same subject and on the same grounds). However, another situation is also possible when the execution of the second arbitral award will be refused on the basis of the res judicata principle, due to the fact that a court decision on the recognition and enforcement of the original arbitral award, annulled at the place of issuance, is in force in the State. These circumstances lead to a violation of the New York Convention of 1958, which is aimed at ensuring the free cross-border movement of an arbitration award and putting it into effect in States where there is a need to implement it, and, as a consequence, to a violation of the principle of international law pacta sunt servanda.

The analysis carried out above has shown that the recognition and enforcement of cancelled arbitral awards leads to negative consequences. We believe that in order to eliminate these violations, it is necessary to adjust the international legal regulation of recognition and enforcement of foreign arbitral awards.

Attempts to solve this problem have already been made several times. For a long period of time, work on reforming the provisions of the 1958 New York Convention was carried out within the framework of UNCITRAL. The main work was to analyze the interpretation and application of the 1958 New York Convention by the courts of the Contracting States, as well as to identify problems encountered in law enforcement practice. In the course of the study, UNCITRAL identified several priority areas, among which was the issue of recognition and enforcement of foreign arbitral awards annulled at the place of issuance.

As a result of the work done, UNCITRAL adopted the Guidelines for the 1958 New York Convention [7]. A similar manual has also been developed by the MSCA – the 2012 MSCA Manual [6]. However, these recommendations failed to provide a uniform interpretation of the provisions of the 1958 New York Convention on the Enforcement of Arbitral Awards, which were annulled at the place of their issuance. It seems that this result is explained, firstly, by the status of these documents - they are a reference guide for judges, not being legally binding, and secondly, they allow the possibility of recognition and enforcement of foreign arbitral awards canceled at the place of their issuance.

We dare to assume that the development and adoption of a legally binding document will help to eliminate the contradictory interpretation of the provisions of the New York Convention of 1958. Thus, Professor A. van den Berg prepared a Miami Project designed to replace the current New York Convention of 1958 [31]. The draft, among other things, establishes that recognition and enforcement of a foreign arbitral award annulled at the place of its issuance should be refused in any State in which this decision is submitted for execution. Moreover, the Miami Draft provides that the arbitration award in this case should be annulled on certain grounds. Thus, the Miami Draft provides for a clear regulation of the recognition and enforcement of cancelled arbitral awards. The Miami project was presented by A. van den Berg in 2008, but today it is still being discussed among arbitration specialists.

We believe that clarification of the status of cancelled arbitral awards can be carried out at the international legal level, for example, by adopting an additional protocol to the 1958 New York Convention or concluding a new international treaty on the recognition and enforcement of a foreign arbitral award instead of the 1958 New York Convention. Such work can be done by individual groups of States (for example, within the framework of integration entities) and serve as a model for others. The improvement of the arbitration procedure with respect to the recognition and enforcement of a foreign arbitral award annulled at the place of its issuance will be a progressive development of the international legal regulation of the ICA.

 

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Peer reviewers' evaluations remain confidential and are not disclosed to the public. Only external reviews, authorized for publication by the article's author(s), are made public. Typically, these final reviews are conducted after the manuscript's revision. Adhering to our double-blind review policy, the reviewer's identity is kept confidential.
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A scientific article submitted for review on the topic: "Legal problems of enforcement of foreign arbitral awards annulled at the place of their issuance" has been prepared on an urgent topic. It is obvious that international commercial arbitration acts as a comprehensive, in-demand tool for resolving certain issues that cause controversial objections between various participants in cross-border relations, and the author reasonably identified the subject of scientific research, and also pointed out the formulation of the problem associated with the recognition and enforcement of a foreign arbitral award, canceled at the place of its issuance. The effective functioning of arbitration is ensured through coordinated regulation at the international legal and national levels, and this area requires careful research. The author's research is based on a sufficiently representative methodological basis. The author's judgments on some methodological positions coincide with the opinions of leading Russian and foreign scientists. At the same time, there are proposals in the work aimed at improving Russian and international legislation governing the execution of foreign arbitral awards annulled at the place of their issuance. The scientific article examines the provisions of international legal acts, among which the author identifies a terminological apparatus that requires clarification. Thus, one can agree with the researcher that the term "competent authority" used in international regulatory legal documents is not disclosed in these sources. However, law enforcement practice has developed a position in which the term in question refers to a judicial authority authorized in a particular State to consider petitions for the annulment of an arbitral award. Thus, the author, argumentatively from the standpoint of a theoretical analysis of legal sources and law enforcement practice, points to the need to improve international legislation on the enforcement of foreign arbitral awards annulled at the place of their issuance, and one can agree with his opinion. The style, structure and content of the work indicate the in-depth analysis carried out by the researcher when writing a scientific article. The appeal to the opponents is presented, if not fully, then sufficiently to substantiate the author's position on the chosen topic. The scientific style of writing the work can be traced, the structure of the work is complete. Conclusions on the problem under study and the justification of the author's position take place. The bibliographic list is based on the normative legal acts of foreign countries and individual publications on the studied issues. The scientific article is undoubtedly of particular interest to the readership and will be interesting when studying the direction of the arbitration process concerning the execution of foreign arbitral awards annulled at the place of their issuance. As a disadvantage, it can be noted that the bibliographic list needs to be reworked and brought into line with the design requirements. The article is recommended for publication.
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