Arbitration Award - Enforcement of Arbitration Awards

Enforcement of Arbitration Awards

Arbitration is particularly popular as a means of dispute resolution in the commercial sphere (for a summary of the various arenas in which arbitration is usually chosen, see the specific article on "arbitration"). One of the reasons for doing so is that, in international trade, it is often easier to enforce an arbitration award in a foreign country than it is to enforce a judgment of the court.

Under the New York Convention 1958, an award issued in a contracting state can generally be freely enforced in any other contracting state, only subject to certain, limited defences. Those defences are:

1. a party to the arbitration agreement was, under the law applicable to him, under some incapacity;
2. the arbitration agreement was not valid under its governing law;
3. a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings, or was otherwise unable to present its case;
4. the award deals with an issue not contemplated by or not falling within the terms of the submission to arbitration, or contains matters beyond the scope of the arbitration (subject to the proviso that an award which contains decisions on such matters may be enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those matters not so submitted);
5. the composition of the arbitral authority was not in accordance with the agreement of the parties or, failing such agreement, with the law of the place where the hearing took place (the "lex loci arbitri");
6. the award has not yet become binding upon the parties, or has been set aside or suspended by a competent authority, either in the country where the arbitration took place, or pursuant to the law of the arbitration agreement;
7. the subject matter of the award was not capable of resolution by arbitration; or
8. enforcement would be contrary to "public policy".

Virtually every significant commercial country in the world is a party to the Convention, but relatively few countries have a comprehensive network for cross-border enforcement of judgments of the court. Hence in many countries, particularly in emerging markets, a foreign arbitration award is much easier to enforce than an award of the court. For example, it is very difficult to enforce foreign judgments in the former CIS countries, but it is considerably easier to enforce awards of an arbitration tribunal.

The other characteristic of cross-border enforcement of arbitration awards that makes them appealing to commercial parties is that they are not limited to awards of damages. Whereas in most countries only monetary judgments are enforceable in the cross-border context, no such restrictions are imposed on arbitration awards and so it is theoretically possible (although unusual in practice) to obtain an injunction or an order for specific performance in an arbitration proceeding which could then be enforced in another New York Convention contracting state.

The New York Convention is not actually the only treaty dealing with cross-border enforcement of arbitration awards. The earlier Geneva Convention on the Execution of Foreign Arbitral Awards 1927 remains in force, but the success of the New York Convention means that the Geneva Convention is rarely utilised in practise.