This pre-eminence is due to many factors, chief among them globalisation. The New York Convention provides the foundation for modern international arbitration and provides for the recognition and enforcement of arbitration agreements and awards in more than 140 jurisdictions, with enforcement only being denied for ‘due process’ and public policy reasons.
As such, the New York Convention is one of the most widely adhered-to international conventions. Its provisions are reflected or incorporated in legislation ranging from Chapter VIII of the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration, to laws in
The recognition of arbitration agreements
Where a party to a written arbitration agreement seeks to bring a claim in the national courts of a contracting state, Article II of the convention requires the court (at the request of a party) to enforce the arbitration agreement and refer the parties to arbitration unless the arbitration clause is “null and void, inoperative or incapable of being performed” — wording familiar to anyone who has considered section nine of the English Arbitration Act. This allows the arbitration to proceed without parallel court proceedings and with minimal court interference.
Many national legislatures and courts are now applying a liberal interpretation to ‘in writing’, so as to include, for example, agreements reached by email or similar electronic correspondence. Also, the convention does not require the parties to have signed the arbitration agreement — a common misconception.
The enforcement of arbitration awards
Articles III to V of the convention govern the recognition and enforcement of arbitral awards made in a jurisdiction other than the jurisdiction in which enforcement is sought — often referred to as foreign or ‘convention’ awards. These reflect the convention’s policy in favour of finality and enforcement of awards and:
- provide that the conditions and fees attached to the enforcement of convention awards shall not be substantially stricter or higher than those attached to the enforcement of domestic awards;
- require the party seeking enforcement to provide originals or certified copies of the written arbitration agreement and the award;
- provide that enforcement of a convention award may only be refused on a limited number of grounds, essentially a failure to follow due process (for example, if a party is unable to present its case or where there were flaws in the process followed in appointing the tribunal) or an absence of jurisdiction. The burden of proof for refusal of enforcement falls on the party resisting enforcement, so that there is a presumption in favour of enforcement; and
- provide that enforcement may also be refused if the court determines that the subject matter of the dispute is not capable of settlement by arbitration under the law of the country in which enforcement is sought or if it would be contrary to the public policy of that country.
Importantly, the convention does not allow national courts to review convention awards on their merits, for example on the basis of alleged errors of law. Where national courts apply an even more pro-enforcement regime to awards (as they do in
The convention allows contracting states to make a ‘reciprocity’ reservation, so that it applies only to awards made in other contracting states. Although some states have not made this reservation, so that they apply the convention to any award made in another jurisdiction, it is nonetheless important to ensure that the seat, or legal place, of the arbitration is in a contracting state. However, many arbitration laws and rules now permit hearings to be held at any convenient place, without moving the seat. With the widespread nature of the convention this precaution is not a burden. Indeed, where a country is not a party to the New York Convention, that may now be taken as an indication that the country and its courts are hostile to arbitration, or unfamiliar with it, so that it should not be used as the seat for an arbitration.
The convention creates a uniform framework for the enforcement of foreign awards in contracting states.
Voluntary compliance and enforcement
How effective has that framework been in practice? The short answer is that it has been remarkably successful. The ultimate aim of any enforcement mechanism is voluntary compliance, without the need for enforcement proceedings. In a recent study conducted by the
Problems and criticisms
Enforcing an award under the convention is not always straightforward and enforcement remains significantly easier in some contracting states than in others. It is therefore vital to consider at an early stage where you might need to enforce any award and to obtain informed advice (particularly where the enforcement options may be limited to a few jurisdictions).
For example, national courts seeking an excuse not to enforce an award often use the ‘public policy’ exception as justification. Although it is generally accepted that ‘public policy’ should be interpreted narrowly, sometimes being described as ‘international public policy’, the convention leaves scope for a national court to apply a broader, country-specific definition of public policy, for example including exchange-control considerations. Specialised international arbitration counsel keep note of and advise, sometimes drawing on local counsel, on those jurisdictions that take particular approaches to enforcement.
The convention has been criticised for its failure to provide a uniform enforcement procedure, resulting in some variation between national court systems. For example, some jurisdictions require any application for enforcement to be made within a very short time limit following publication of the award, leaving limited time to explore the possibility of securing voluntary compliance. Other jurisdictions require the party seeking enforcement to jump through procedural hoops, whereas others seek to make the enforcement process as easy as possible.
The level of court that has initial jurisdiction over an enforcement application also varies, from local or regional courts to national Supreme Courts. In some jurisdictions, although the higher courts may approach the enforcement of awards in line with international norms, lower, regional courts may take a more parochial approach to enforcement against local individuals or corporations.
While the convention is not perfect (there have been calls recently from at least one prominent commentator for the convention to be reformed and replaced), it has stood the test of time remarkably well and provides an effective enforcement mechanism.
By contrast, there is no comparable multilateral treaty for litigation — the international enforcement of foreign court judgments remains dependent on the existence of bilateral treaties between states, multilateral regional arrangements (such as the arrangements applicable between European Union states pursuant to the Brussels Regulation) or some other principle of law. In light of its track record and broad geographical coverage, the New York Convention therefore remains a powerful incentive to opt for arbitration in cross-border contracts.
David Brynmor Thomas is a partner and Chris Parker an associate at Herbert Smith in
LitigationJuly2008