Critically evaluate the incorporation into the New York Convention of the restriction that only the courts of the seat of an arbitration can annul an award. Are the policies of the Convention served by this limitation, and what would be the consequences if no such limitation existed?
Article V of the New York Convention states that one ground
for an award not being recognised is that “The award has not yet become binding on the parties, or has been set
aside or suspended by a competent authority of the country in which, or under
the law of which, that award was made”. Therefore, an annulment by a court not
of the seat of arbitration would, under this ground, still be valid.
The aim of the
New York Convention is to promote the enforcement of arbitration awards in
different countries to where the arbitration award was made. This is necessary
for international arbitration to work. I will now consider the aforementioned
restriction in
Article V in the light of this aim of the Convention.
Positive aspects to the restriction:
1. The role of foreign courts is to enforce
not to annul:
In order for international arbitration to work, foreign
courts must uphold the arbitration awards made in other jurisdictions. If they
didn’t then the arbitration award would be undermined. However, a foreign court
annulling an arbitration award goes far beyond this and actually results in
foreign arbitration awards being undermined, which is the opposite of what is
intended.
2. It prevents ‘annulment shopping’:
If the restriction was not in place, a party could apply to
different foreign courts for annulment until they found one willing to annul
the award. This would undermine the finality of arbitration awards and thus
international arbitration itself.
3. It respects the parties’ intentions:
It is arguable that the parties impliedly chose to subject
themselves to the law of the country where the arbitration took place, as this is
the law which conferred power on the arbitrators. Thus, the only law which can
annul the award is that law which was chosen.
Negative aspects to the
restriction:
1. A denationalised view of awards:
Some are of the view that the law of the country in which the
arbitration award was made has no special claim to the arbitration agreement,
and it is free for other legal systems to give recognition to such agreements,
and confirm of annul them in their laws as they see fit. It is true that they
can do this, but this is not an argument against why they should be restricted
from doing this by the New York Convention.
2. Fairness:
One could argue that a foreign court should be able to annul
the award if it is manifestly unfair. However, this is a separate issue from the
one at hand, and should be dealt with elsewhere. It should simply be the case
that such annulments are ineffective from the start, and so the question of
subsequent annulment does not even arise.
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