In a recent decision, New York State’s highest court (the New York Court of Appeals) rejected an argument that a tribunal exceeded its authority, as to warrant vacatur, when it reconsidered and corrected an earlier decision rendered in a “partial final award.”  The Court concluded that arbitrators are not functus officio to reconsider an interim or partial decision, unless there is “express, mutual agreement between the parties” that such decision is to “have the effect of a final award.”

Factual Background

The case, American International Specialty Lines Insurance Co. v. Allied Capital Corp. (“AISILC”), involved a dispute between two insureds and their insurance company.  (Am. Int’l Specialty Lines Ins. Co. v. Allied Capital Corp., 35 N.Y.3d 64 (2020).)  The insureds sought indemnification of a settlement amount and reimbursement for related defense costs under two insurance policies.  The insurance company denied coverage and the insureds initiated arbitration with JAMS in New York before a tribunal of three arbitrators.

The insureds and insurance company separately moved for summary disposition in the arbitration.  In their motion, the insureds noted that the exact amount of defense costs to which they were entitled could be determined in a separate evidentiary hearing, if the tribunal decided that the insurance company was liable for such costs.  At oral argument, one arbitrator queried whether “a partial summary disposition [was] in the cards,” to which the insureds stated such suggestion “ma[de] the most sense.”  The insurance company did not comment on the proposal, however, and the tribunal did not state on the record whether it would issue such a partial determination.

Nonetheless, the tribunal issued a decision, identified as a “Partial Final Award,” in which it determined that neither insurance policy covered the settlement amounts but that one policy covered defense costs.  The tribunal further determined that the amount of recoverable defense costs would be resolved after a separate evidentiary hearing.

Before that evidentiary hearing, the insureds asked for reconsideration, arguing that the tribunal erred in denying coverage of the settlement amounts.  The insurance company opposed reconsideration, arguing, among other things, that the tribunal had become functus officio with respect to that issue when it rendered the Partial Final Award.  The tribunal subsequently issued a “Corrected Partial Final Award,” concluding that the settlement amounts were in fact covered and that it had not become functus officio to reconsider the issue.  It later issued a “Final Award,” granting the insureds recovery of both settlement and defense costs.

The insurance company petitioned the New York state courts to vacate both the Corrected Partial Final Award and Final Award on the basis that the tribunal had no authority to reconsider the Partial Final Award under the functus officio doctrine.

The Court of Appeals’ Decision

As a question of first impression, the Court of Appeals considered on appeal whether New York statute and the common law doctrine of functus officio barred the arbitrators from reconsidering their partial ruling, where disputed issues were left open for additional proceedings.¹⁾In particular, the question presented to the Court was the following:  “Did the Appellate Division err in vacating the arbitrators’ final award under CPLR 7511(b)(1)(iii) on the ground that the common-law doctrine of functus officio barred the arbitrators from reconsidering a partial ruling that did not decide all disputed issues and that expressly left disputed issues for further proceedings, where (1) the parties’ written agreement provided for a single “final” decision and award and did not limit the arbitrators’ authority to reconsider partial rulings, and (2) the parties submitted to the arbitrators “all disputes or differences which may arise under or in connection with this policy”?  See Br. for Respondents-Appellants, at 7 (Apr. 26, 2019).  The Court began by affirming the “long and strong” New York public policy favoring arbitration and noting the limited role that courts have in arbitration under New York statutory law.  The limitation, however, includes the authority to vacate an award in “narrow circumstances,” such as where an arbitrator exceeds its powers.

The Court recognized that an arbitrator exceeds its powers where it violates the common law doctrine of functus officio.  As a matter of New York law, functus officio means that “arbitrators relinquish all powers over the parties … upon issuance of a final award and therefore, are precluded from modifying or reconsidering the award.”  (Am. Int’l Specialty Lines Ins. Co., 35 N.Y.3d at 71.)  But, as the Court clarified, the doctrine only applies to “final awards.”

The Court explained that, despite the nomenclature, the “Partial Final Award” was not a “final award” under New York law because a final award is “generally one that resolves the entire arbitration,” which the Partial Final Award did not do.  (Id. at 71-72.)  Looking to federal case law, the Court accepted that a tribunal’s interlocutory decision could, in some cases, be “final.”  For such finality, however, there must be evidence that the parties mutually and expressly agreed that the decision would be treated as “final” on the relevant issue(s) and to therefore have “immediate collateral effects in a judicial proceeding.”  (Id. at 73.)

The Court concluded that no such agreement was present under the facts before it.  Significantly, the Court noted that the insurance company never agreed to bifurcate the proceedings or that any partial decision would be treated as a final award.  The Court also noted that “neither the parties not arbitrators ever discussed or otherwise demonstrated any mutual understanding regarding whether the proposed severance would result in a final partial award.”  (Id.)  As a result, the Court concluded that the functus officio doctrine had not been violated and ordered that the Final Award be confirmed.

Commentary

Although the federal courts in New York have recently provided guidance on application of the functus officio doctrine, little case law from New York state courts address this issue.  One reason for this is that most cases in the United States related to arbitral awards are decided under federal law (the Federal Arbitration Act) rather than under state law.  Additionally, federal courts in the United States have jurisdiction to confirm “foreign” awards, and many cases involving international awards are often therefore removed from state court to federal court for decision.²⁾See A.A. Frischknecht, Y. Lahlou & G.L. Walters, Enforcement of Foreign Arbitral Awards and Judgments in New York, at 199-202, 232-233 (Kluwer 2018).  The AISILC decision provides an interesting clarification as to when a tribunal does or does not exceed its mandate, as to warrant vacatur of an award under New York law.  Yet, despite this additional guidance, the Court of Appeals’ decision leaves several questions open.

For example, the Court provided little guidance as to when parties have given “mutual, express” agreement that a partial decision should be treated as final.  The AISILC decision suggests that such agreement can be reached with respect to specific issues during the course of an ongoing arbitration.  But parties and arbitrators would benefit from additional guidance as to whether such an agreement can be manifested in advance of the arbitration—for example, in an arbitration agreement.  In other words, can parties also satisfy the “mutual, express” agreement requirement by providing in their arbitration agreement that arbitrators generally have the authority to render partial or interim final awards?

A related question is what effect an agreement to arbitrate under certain arbitral rules might have on such an “agreement.”  For example, Article 29(1) of the ICDR Rules provides that “[i]n addition to making a final award, the arbitral tribunal may make interim, interlocutory, or partial awards.…”  Article 30(1) further provides that “[a]wards” generally (without reference to whether it is identified as “final,” “interim,” interlocutory,” or “partial”) “shall be final and binding on the parties.”  Under the AISILC decision, however, it is unclear whether an agreement to arbitrate under rules like those of the ICDR, which expressly provide for partial awards and that “awards” are final and binding, would satisfy the “express, mutual” standard provided by the Court of Appeals.  The answer, at least in part, likely depends on the substance of the “award” in question.  The Court of Appeals affirmed that name alone does not make a decision a “final award.”  (See Am. Int’l Specialty Lines Ins. Co., 35 N.Y.3d at 71.)  This is consistent with U.S. federal case law that has held that an award is a “final award” when it “finally and conclusively disposed of a separate and independent claim, rather than [by] name alone.”  (Metallgesellschaft A.G. v. M/V Capitan Constante, 790 F.2d 280, 283 (2d Cir. 1986); see also M.F. Gusy & J.M. Hosking, A Guide to the ICDR International Arbitration Rules, ch. 29 (2d. ed. 2019).)

Although further guidance will be helpful, the AISILC decision nonetheless is an important decision on New York arbitration law from the state’s highest court.

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Electronic signatures (e-signatures) may affect in some cases arbitration’s most valuable characteristic: the enforceability of the arbitral award.

In most jurisdictions, and in particular pursuant to Article 31(1) of the UNCITRAL Model Law on International Commercial Arbitration, arbitral awards must be rendered in writing and contain the arbitrators’ signatures. The enforceability risks of authenticating an arbitral award with an electronic signature will vary according to the applicable law at the place of enforcement (i.e. the lex fori) or by the laws of the arbitral seat. Such analysis also includes a judicial review of the national and international laws that regulate e-signatures. In some jurisdictions, arbitral awards may need to be signed in handwriting (wet ink) to be considered as valid. Therefore, despite the current need of moving towards remote process, the traditional practice of signing awards in wet ink may still be, in some cases, a reasonable precaution to reduce non-enforceability concerns in cross-border disputes.

Required formalities of the award under the New York Convention

Article IV(1)(a) of the New York Convention (NYC) requires the party applying for recognition and enforcement of an arbitral award to supply to the court, at the time of the application, the “duly authenticated original award or a duly certified copy thereof”. The NYC is silent on the requirements for an authentication or certification to be valid, and the applicable law under which such questions shall be determined.

Authentication refers to the formality by which the signature in the original is attested to be genuine whereas certification is the formality by which the copy is attested to be a true copy of the original (see here and here). Such formalities differ from State to State. The requirements of who may legalize the attestation of the award will also vary under different jurisdictions.

The NYC is also silent on the issue of e-signatures in arbitral awards. This silence should be interpreted in favor of technology when considering the pro-enforcement bias of the NYC. Courts also seem to be liberal in accepting the authentication and certification of an arbitral award when they are satisfied that the award was rendered just as it was supplied (see here, here, and here). Nevertheless, in the case of e-signatures, some jurisdictions may take a different approach according to the applicable law to the authentication and certification of the award. Thus, the local applicable formal requirements that an award may be subjected to will depend on a case-by-case analysis.

Applicable law to the authentication and certification of the award

The task of determining which law shall govern the authentication and certification of the award is uncertain. It is disputed whether the authentication and certification of the award mentioned in Article IV(1)(a) NYC shall be governed by the regulations set out in the lex fori or by the lex arbitri.

Under Article 4 of the 1927 Geneva Convention, authentication or certification of an award had to be done according to the law of the country in which the award was made. The drafters of the NYC opted for a different approach and deliberately omitted to indicate the law that governs authentication or certification “to allow a greater latitude with regard to this question to the tribunal of the country in which the recognition or enforcement was being requested”.

The prevailing, but not uniform, view is that, for matters of efficiency, authentication and certification shall be governed by the applicable lex fori in which recognition and enforcement are sought.

Does the applicable law recognize e-signed foreign arbitral awards?

An electronically signed arbitral award may provide the same level of credibility as an award signed in wet ink in terms of its authenticity and integrity under most jurisdictions.

An e-signature is data in an electronic form, logically associated with a data message, which is used “to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message” (see Article 2(a) of the UNCITRAL Model Law on Electronic Signatures with Guide to Enactment).

In principle, most jurisdictions should permit the arbitral award to be signed with an e-signature. Authorities have held in this regard that “the advanced electronic signature of any arbitrator on an electronic award will be treated as being equivalent to a handwritten signature in Germany” (see here) – as long as it complies with the requirements set out in the EU Regulation No. 910/2014. This example should be valid mutatis mutandis to other EU countries.

Nevertheless, in an international context, further factors need to be carefully assessed concerning e-signature(s) such as, for example: the specific type of electronic signature used, the process by which the signature is generated, and the applicable domestic and international e-signature regulations.

Some Latin American countries may require in some cases the existence of a reciprocity treaty in order to recognize the certification of a foreign document with an e-signature (see Argentina – Article 16 of Law 25.506, Costa Rica – Article 13 of Law 8454). In Dubai, formalities for foreign electronic signatures may also be applicable for arbitral awards (see here).

Considering the above, it is essential that the applicable law that regulates the formal requirements of an arbitral award recognizes electronic signatures and that the e-signature in question meets such legal requirements. In case a local court refuses to recognize and enforce an award because of its signature, the award creditor could still resubmit an enforcement application with improved documentation (see here), but such procedure will delay the enforcement of the arbitral award.

International arbitration practice

Most institutional arbitration rules do not explicitly recommend the practice of signing arbitral awards with an e-signature, but state the award shall be in writing and/or signed by the arbitrators (see Article 35 of the 2018 HKIAC Rules, Article 42 of the 2017 SCC Rules, Article 32.4 of the 2016 SIAC Rules , Article 30 of the 2014 ICDR Rules).

Article 32.6 of the 2012 Swiss Rules specifies that “originals” of the award shall be signed by the arbitrators (see also ICC’s Guidance Note on Possible Measures Aimed at Mitigating the Effects of the COVID-19 Pandemic).

The common practice in some institutions is for the arbitral tribunal to sign the award in wet ink, scan it as a PDF attachment, upload it to the virtual platform (if any) or send it electronically, and send a signed hard-copy original of the award to the parties and/or the institution by courier or registered mail (see, for example, SCC’s Platform Guidelines).

According to CIArb’s Guidance Note on Remote Dispute Resolution Proceedings, “[e]ven though digital technology is rapidly becoming a widely accepted business and legal tool, it is advisable to keep key procedural documents in both soft and hard copies, containing signatures of participants where necessary. The same applies to arbitral award […] as some national courts may reject enforcement if such documents were produced solely via digital means.” (emphasis added) Thus, in an age of digital technology, it seems that there remains a preference for signing arbitral awards in wet ink.

Nevertheless, the recently revised LCIA Rules take a different stance. Article 26.2 of the 2020 LCIA Rules (effective 01 October 2020) sets as the default rule that, unless otherwise agreed by the parties, or if the arbitral tribunal or LCIA Court directs otherwise, “any award may be signed electronically”. The author is not aware of other international arbitration rules with a similar provision on e-signatures in arbitral awards. The draft of the 2021 ICC Rules is silent on e-signatures, but evidences a general shift away from paper filings (see here).

Conclusions

The e-signature of arbitral awards was not contemplated in the drafting of the NYC and under some jurisdictions arbitral awards may still need to be signed in wet ink. Arbitrators should therefore carefully assess the formal legal requirements in any potential enforcement forum before e-signing an arbitral award electronically. Such practice may be welcomed in some cases, depending on the jurisdictions involved.

There are no known cases to date in which the recognition or enforcement of an award has been refused because of the lack of compatibility of an electronic signature in an arbitral award. This issue, however, is likely to arise soon. In case it does, the award creditor may seek to resubmit the award with improved documentation. If the NYC were to be reformed to adapt it with technological change, Article 9 of the United Nations Convention on the Use of Electronic Communications in International Contracts could be seen as a starting drafting point concerning the form requirements of an arbitral award and arbitration agreement (for more on this topic, see here). It is yet to be seen if the LCIA Court or the parties will direct the tribunal to sign the award in wet ink or if the arbitrators will opt out themselves from the default option listed in Article 26.2 of the 2020 LCIA Rules.

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A one paragraph obiter dictum in an annulment decision rendered by the Frankfurt Higher Regional Court (the “Court”) on 16 January 2020 (26 Sch 14/18) reignited an old debate: are dissenting opinions in German arbitration proceedings permissible?

From an international perspective, dissenting opinions in arbitral awards are by no means unusual.  That is why it came as a surprise to many that the Court took a strong stance against written dissenting opinions in arbitral awards in German-seated arbitrations.  According to the Court, issuing a written dissenting opinion undermines the secrecy of the arbitral tribunal’s deliberations.  The principle of secrecy of deliberations is regarded as an important principle of German law because it serves the impartiality and independence of the arbitrators. Thus, the Court indicated that a dissenting opinion may violate the procedural ordre public and expose a majority arbitral award to a risk of annulment.

This obiter dictum is the first time that a German court has taken an express position on the long-debated issue of the admissibility of dissenting opinions in German arbitration proceedings.  Unfortunately, the Court was not definitive in its view and neither annulled or confirmed the award in question based on the issue of the dissenting opinion.   This decision will add to pre-existing uncertainty surrounding this issue.  Unless the Federal Court of Justice (Bundesgerichtshof) clarifies – and ideally rectifies – the position advanced by the Court, the Frankfurt decision has potential to harm Germany’s position as an internationally recognized place of arbitration.

The Decision and Facts of the Dispute

The Court ruled on an annulment application against an award issued by a three-member arbitral tribunal under the 1998 ICC Rules of Arbitration.  The place of arbitration was Frankfurt am Main, Germany.  In its final award, the arbitral tribunal had dismissed all claims by way of a majority decision.  The dismissal was based, in part, on the majority’s confirmation of the company’s valuation prepared by a tribunal-appointed valuation expert.  One arbitrator submitted a dissenting opinion in which he objected to the valuation expert’s opinion and to the arbitral tribunal’s evaluation of that opinion.

The Court annulled the award, finding that one party was denied the right to be heard.    Then, in a single paragraph (almost as an afterthought), the Court discussed, but ultimately left open, the question of whether the award also had to be annulled because one arbitrator filed a dissent:

“However, in the court’s opinion, there is much to be said for the fact that the publication of a dissenting opinion is inadmissible in domestic arbitration proceedings, even taking into account the considerations of the legislature that has refrained from regulating this matter, and violates the secrecy of deliberation which also applies to domestic arbitral tribunals.  The particular importance of the secrecy of deliberation for the protection of the independence and impartiality of the arbitrators may also suggest that the secrecy of deliberation – even after the final deliberation and the issuing of the award – should not be put at the disposal of the parties and/or the arbitrators and should be regarded as part of the procedural ordre public.” (internal citations omitted; emphasis added)

The annulment decision is subject to an appeal before the Federal Court of Justice.

The German Debate

In many jurisdictions, dissenting opinions in judgments are permitted.  By contrast, in Germany, judges are prohibited from rendering dissenting opinions because they are bound to uphold the secrecy of deliberations.  There is an exception in constitutional courts at the federal and state level.

Whether arbitrators in German-seated arbitration proceedings are also prohibited from rendering dissenting opinions is subject to an ongoing controversial debate among scholars and practitioners.  While most agree that an arbitral tribunal’s deliberations are secret, (German Federal Court of Justice, 11 December 2014, I ZB 23/14; German Federal Court of Justice, 23 January 1957, V ZR 132/55, NJW 1957, 592) there are diverging views as to whether, and to what extent, this renders dissenting opinions unlawful.  Even among those who oppose dissenting opinions in arbitration proceedings, there is some disagreement as to the consequences of a member of an arbitral tribunal impermissibly filing a dissent. One school of thought is that this is a procedurally inconsequential violation of contractual duties; but another (older) is that it violates the German procedural ordre public, which may be fatal for the arbitral award as a whole. (For a discussion see, e.g.,H.P. Westermann, “Das dissenting vote im Schiedsverfahren” (2009) SchiedsVZ, 102; M. Escher, “Die Dissenting Opinion im deutschen Handelsschiedsverfahren – Fear of the unknown” (2018) SchiedsVZ, 219)

The Court seems to agree with those who believe that the existence of a dissenting opinion can violate the German ordre public.  The Court’s position thus deviates from the position of the German legislature which considered this debate settled when reforming the German arbitration law in 1997:

“The (…) question whether a dissenting opinion can be rendered with the arbitral award did not require any express regulation; under the current regime this is predominantly considered permissible.” (BT-Drs. 13/5274, p. 56)

The traditional view among German scholars and practitioners – in line with the legislature’s position – has been that parties can waive the secrecy of deliberations and thereby allow dissenting opinions.  Some additionally consider the arbitrators’ consent to be necessary for such waiver to be effective. (See R. Schütze, “Das Zustandekommen des Schiedsspruchs” (2008) SchiedsVZ, 10 (14); I. Sänger, Zivilprozessordnung, 8th ed., Münster, Nomos, 2019, § 1052 para. 3; H.P. Westermann, “Das dissenting vote im Schiedsverfahren” (2009) SchiedsVZ, 102 (105)) The Federal Court of Justice, in a 1957 decision, appears to have agreed with the possibility that the parties can waive the secrecy of the deliberations with the consent of the arbitrators, but ultimately left this question open. (German Federal Court of Justice, 23 January 1957, V ZR 132/55, NJW 1957, 592)

In its recent ruling, the Court acknowledged the legislature’s view, but nonetheless disagreed and even considered a dissenting opinion a violation of the procedural ordre public, although it provided no explanation for this determination.  And it did this despite the obvious consequence that every German arbitral award with a dissenting opinion would thus be subject to annulment, irrespective of whether the dissent was relevant to the outcome of the proceeding.

The decision implies that any waiver of secrecy by the parties is insignificant.  The Court, by stating that the secrecy of deliberations is part of German procedural ordre public, deprives the parties and arbitrators of the power to waive the secrecy of deliberations and thus allow for dissenting opinions.  It is inherent in the concept of ordre public that those things which fall within it cannot be waived by the parties since they embody the core values of the rule of law which are enforced ex officio. (S. Wilske, L. Markert, Beck Online Kommentar ZPO, 36. Ed., 1.3.2020, § 1059 para. 56)

The practical implications of the Court’s obiter dictum

Arbitrators conducting German-seated arbitrations are now faced with the difficult question of how to navigate the uncertainties created by the Court.

Any party that is dissatisfied with the outcome of a German-seated arbitration will now seriously consider having the award annulled if a dissenting opinion exists.  To a losing party, the Court’s ruling is appealing – it considers the mere existence of the dissenting opinion a violation of the German ordre public, and this is a fact that a party can easily establish.  Whether an annulment action based on a dissenting opinion will succeed will ultimately be decided by the German Federal Court of Justice.  The Frankfurt decision is currently subject to an appeal, so the Federal Court of Justice may clarify the issue soon.

For now, and until the German Federal Court of Justice has definitively ruled on this issue, arbitrators should refrain from issuing dissenting opinions in German arbitrations.  Parties should agree at the outset that the arbitrators are not permitted to issue dissenting opinions, even if an arbitrator disagrees with a majority view.  With respect to arbitrations already in progress, the parties or the chairperson should proactively raise the issue in order to make all participants aware of this German particularity that international arbitrators may not be familiar with.

Not only the parties, but also the arbitrators, have an interest in avoiding dissenting opinions in German-seated arbitration.  Arbitrators have a fiduciary duty to render an enforceable award that withstands scrutiny in set-aside proceedings.  Issuing a dissenting opinion despite being on notice of the Frankfurt decision could subject the dissenting arbitrator to damages claims for the costs of the arbitration if the award is annulled.

Any party to a German-based arbitration must discuss the Frankfurt decision with their (prospective) arbitrator(s) in order to ensure that the eventual award will not be subject to challenge on this ground.  Having heard the presiding judge during the oral hearing leading up to the Frankfurt decision, we have little doubt that the Court will enforce its obiter dictum and annul an arbitral award accompanied by a dissenting opinion, if and when it is called upon to do so.

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Since its creation, the Common Court of Justice and Arbitration (CCJA) has been at the forefront of promoting international arbitration in Africa, particularly with respect to creating a favourable setting for international and regional arbitration under the Uniform Act on Arbitration adopted by the seventeen OHADA Member States. This momentum continued with the recent adoption of the new Act which entered into force on 15 March 2018 (Uniform Act on Arbitration dated 23 November 2017).¹⁾For a commentary of this new Act, see N. Aka, A. Fénéon and J.-M. Tchakoua, Le nouveau droit de l’arbitrage et de la médiation en Afrique (Ohada), LGDJ, 2018.

Yet, these reforms are not always followed and implemented by the courts. A recent example is a judgment rendered by the CCJA on 27 February 2020 (Judgment n° 068/2020, Republic of Benin v. SGS Société Générale de Surveillance SA). Regrettably, the CCJA’s review of the arbitral award is not only inconsistent with its own case law, but also represents a step back in the development of arbitration in the OHADA jurisdiction, by failing to enforce key principles in support of arbitration, such as kompetenz-kompetenz.

The Facts

The dispute arose out of a contract between the Republic of Benin and SGS Société General de Surveillance SA (SGS), whereby SGS was to provide training and consultation services in relation to a program for the certification of customs value (referred to as PCV). Issues arose with payment for the services and with the alleged conflict with another contract, for a similar program (referred to as PVI). This ultimately led to two parallel legal proceedings: one before the Cotonou Court of First Instance and one before an arbitral tribunal constituted under the ICC rules. As such, despite the arbitration agreement contained in the contract, the Republic of Benin hurried to initiate proceedings in December 2016 before its own administrative courts. In response, SGS brought an ICC arbitration claim a few weeks later, as provided by the arbitration agreement.

In a rather hasty judgment rendered on 13 February 2017, without both parties even having the opportunity to be heard, the Cotonou Court of First Instance annulled the contract between the Republic of Benin and SGS based on what the Court considered to be a conflict with the PVI contract entered into with a third party, as mentioned above. It was revealed that the President of Benin had a stake in this other entity.

Undeterred and unconvinced by the decision of the Beninese court and other procedural claims brought by the Republic of Benin, the arbitral tribunal rendered an award on 6 April 2018, finding that it had jurisdiction.

The seat of arbitration being Ouagadougou, Burkina Faso, the Republic of Benin attempted to set aside this award before the Court of Appeals of Ouagadougou. On 21 September 2018, the Court of Appeals dismissed the challenge, finding notably that the arbitration agreement was valid and that SGS had not waived its right to resort to arbitration. The Court of Appeals also ruled that the award did not contradict the decision of the Beninese judges, as the Cotonou Court of First Instance and the arbitral tribunal had ruled on different issues, the first having considered the validity of the contract and the latter having examined its performance and interpretation. Therefore, according to the Court of Appeals of Ouagadougou, there was no conflict with a decision having the effect of res judicata and no violation of international public policy.

The Republic of Benin appealed to the CCJA, which rendered a surprising decision in finding that the award was in contradiction with the Cotonou judgment.

The CCJA’s disregard of principles of international arbitration and CCJA precedent

In its decision of 27 February 2020, the CCJA decided only on the issue of an alleged violation of international public policy. This issue was framed, before the Supreme Court, in the same terms as before the Court of Appeals of Ouagadougou. The CCJA first recalled that the principle of res judicata – which precludes arbitrators from considering the same claims or issues, opposing the same parties and having the same subject matter – formed part of OHADA international public policy. On that basis and without the nuance of the decision of the Court of Appeals of Ouagadougou, the CCJA held that the award contradicted the Cotonou judgment, as both ruled on an issue arising between the same parties and with respect to the same contract.

By doing so, the CCJA ignored the fact that the first instance decision was under appeal. This highly questionable decision therefore also contradicts CCJA precedent. Indeed, in a landmark decision of 31 January 2011, the CCJA found, having considered the effect of res judicata, that there is a violation of public policy only where an award contradicts a decision that has been finally settled by a state court. This decision implies that all remedies must be exhausted before there can be a violation of public policy, which did not reflect the case between the Republic of Benin and SGS.

In addition, by deciding only on the issue of a purported violation of public policy, the CCJA overlooked critical elements of the case and the positions of the parties.

First, it failed to address the violation of the kompetenz-kompetenz principle. This principle is established by Article 23 of the OHADA Treaty and by Articles 11 and 13 of the OHADA Uniform Act on Arbitration; it had also been reaffirmed in another decision handed down the same day (CCJA, 27 February 2020, judgment n° 064/2020). By failing to address this issue, the CCJA indirectly disregarded the fact that this principle had been violated by the Cotonou Court of First Instance. Though the Cotonou court had not denied the existence of the arbitration agreement, it still decided to retain jurisdiction in spite of it.

Second, and equally unexpectedly, the CCJA refused to address the issue of the alleged waiver by SGS of the arbitration agreement. According to CCJA case law, the waiver of an arbitration agreement must be unequivocal (see CCJA, 23 July 2015, judgment n° 097/2015), though such waiver may also be tacit. A party may tacitly waive an arbitration agreement by failing to object, based on the existence of a valid arbitration agreement, to the jurisdiction of a state court. Invoking this precedent, the Republic of Benin had argued that the failure by SGS to object to the jurisdiction of the Cotonou Court of First Instance amounted to such a waiver. This failure, however, resulted from the fact that SGS was denied the opportunity to argue its case before the Cotonou court. This was expressly noted by the Court of Appeals of Ouagadougou, which stated that SGS was “not placed, in the procedural circumstances described by it and confirmed by the exhibits, in a position to properly develop its own means“. In addition, SGS immediately claimed the benefit of the arbitration agreement by introducing arbitration proceedings in response to the Republic of Benin’s claim, even before the hearing was held before the court in Cotonou.

The CCJA missed a clear opportunity to build upon persuasive and consistent case law on key issues relating to arbitration. Unfortunately, its decision of 27 February 2020 could have the effect of impairing efforts to construct a quality arbitration ecosystem. The hope is that this decision will not undermine the development of arbitration in the region.

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Arbitration has been well-established in Poland already before and throughout the 1920s. It has, however, experienced a downturn between 1945 and 1989 due to the distrust of the Polish state. The winds had changed in the 1990s when arbitration started to flourish again.

Since then, the Polish parliament introduced several reforms previously discussed on this blog, e.g.:

• implementation of the UNCITRAL Model Law in 2005 (in its initial 1985 version, without the amendments adopted in 2006);
• shortening the timeline of post-award proceedings in 2016;
• implementation of the EU law on consumer arbitration in 2017;
• introduction of detailed rules for arbitration of corporate disputes in 2019.

This blog post looks at how the law operates and analyzes the statistics of post-award cases decided by Polish courts in 2020 to determine whether Poland is an arbitration-friendly jurisdiction.

Empirical Survey of 2020 Polish Post-Award Case Law

Polish “law in books” does not differ from lex arbitri of leading arbitration-friendly jurisdictions. We have, however, asked ourselves what the state of the “law in action” is.

While there is some anecdotal evidence on the state of arbitration in Poland, it is not sufficient to draw definitive conclusions. Therefore, to answer our question, we have decided to conduct an empirical survey of 2020 post-award case law originating from 11 Polish Courts of Appeal, i.e. the courts that have jurisdiction at the post-award stage.

Statistics

Following our survey, we have been able to put together the following statistics, i.e. the “hard facts”:

1. New cases

In 2020, parties initiated 299 cases related to the post-award stage. In particular, 35 motions were filed to set aside an arbitral award, 232 motions to enforce or to recognize a domestic arbitral award, and 32 applications to enforce or to recognize a foreign arbitral award.

2. Court decisions

Polish Courts of Appeal issued 283 decisions in 2020 in post-award cases. Out of this number, 70 decisions related to formal issues, e.g., in cases where proceedings were withdrawn. We have therefore excluded these from consideration.

In 2020, the courts ruled on 31 setting-aside applications (approximately 15% of all rendered non-formal decisions), 170 applications for recognition or enforcement of domestic awards, and 12 applications for recognition or enforcement of foreign awards (approximately 85% of non-formal decisions).¹⁾We have assumed these numbers to be correct. However, the courts have informed us that they have recorded a slightly higher volume of decisions in their statistics: 37 setting-aside decisions (compared to the 31 we received), 206 domestic recognition or enforcement decisions (compared to the 170 we received), 22 foreign recognition or enforcement decisions (compared to the 12 we received). The discrepancy may be due to the fact that courts have discontinued a number of cases due to formal reasons, e.g., where a party has withdrawn the application or failed to produce the necessary documents. If the courts have issued more decisions than we received, we believe our 80% sample remains sufficient, i.e. 213 decisions considered of the 265 decisions recorded in court statistics.

Out of the 213 decisions, only in 19 cases (approximately 9%) awards were set aside or refused recognition or enforcement. Successful parties, therefore, defended 194, i.e. more than 91% of awards before Polish courts.

Out of the 31 setting-aside proceedings, awards were set aside only in 6 cases, i.e. the courts refused to set aside awards in approximately 81% of cases.

Out of the 170 recognition or enforcement proceedings for domestic awards, 158 (approximately 93%) were successful.

Out of the 12 recognition or enforcement proceedings for foreign awards, 11 (approximately 93%) applications were granted, and only one was refused.

The Warsaw Court of Appeal heard 30% of all cases considered by Polish courts at the post-award stage and took the longest to conclude a case.

Conclusions and Further Thoughts

First, the fact that there were relatively few setting-aside applications (15% of all post-award cases) is, in our view, due to two reasons. Polish law provides for a narrow standard of review for arbitral awards. The grounds for recourse are limited and based mainly on the UNCITRAL Model Law. Furthermore, the court fee for recognition or enforcement is relatively low (PLN 300 or EUR 65). Conversely, the court fee for a motion to set aside an arbitral award depends on the amount in dispute (5% with a cap of PLN 200,000 or EUR 44,000). The fact that a party needs to pay a significant court fee and usually has a relatively low chance of success may discourage it from filing the motion to set aside an arbitral award.

In turn, the number of successful setting-aside motions (6 out of 31, or 19%) may indicate that where a party decides to file the motion, it appears to have a good reason to do so. The rate of success in setting-aside proceedings is also almost three times higher than the rate of successful defense against an application to recognize or enforce an award (approximately 7%).

Second, awards survived in more than 90% of post-award cases considered by Polish courts. In our view, this is good news for the parties. In most jurisdictions, there are instances where arbitral awards fall at the post-award stage, and there are bound to be some of such cases in Poland as well. In particular, it is great to see that courts enforced or recognized 11 foreign arbitral awards and refused recognition or enforcement only once. This is important as in proceedings for recognition or enforcement of a foreign award the courts typically perform a more detailed review than in recognition or enforcement of a domestic award. In the former case, the review is based on Article V of the New York Convention. In turn, in the latter case, i.e. for domestic awards, the court can refuse enforcement or recognition only for three reasons (non-arbitrability, violation of public policy, and violation of consumer rights). The limited standard of review stems from the fact that setting-aside proceedings, providing a standard of review based on Article 34 of the UNCITRAL Model Law, are the main forum for more precise control of a domestic award under Polish law.

Third, the information that courts provided within our survey was not specific as to the length of proceedings. However, judging by the file reference number, we deduced that ⅔ of cases for recognition or enforcement started and ended in 2020, and ⅓ started in 2019 and ended in 2020. These numbers improve when the caseload of the Warsaw Court of Appeal – which is overloaded by the number of cases on its docket – is excluded from the statistics. Out of the setting-aside proceedings that ended in 2020, 30% started in 2018, 52% in 2019, and 20% in 2020 (the numbers would be 0%, 62%, and 38%, respectively if the statistics from the Warsaw Court of Appeal are excluded). These numbers show that courts consider cases for recognition or enforcement relatively fast.

Fourth, Anna Tujakowska recently presented her study on institutional arbitration in Poland. The research shows that parties initiated approximately 200 cases before Polish arbitral institutions in 2019 and 300 in 2020 (a rise of 36%). There is a similar 33% rise between the number of post-award cases that ended in Poland in 2020 (201 decisions referring to domestic awards out of 213) and the number of cases at the post-award stage that started in Poland in 2020 (267 proceedings referring to domestic awards out of 299). Continuous statistical analysis in the coming years will verify whether there is a correlation between the rise of arbitral and post-award proceedings.

Finally, only six court decisions out of 283 that we obtained referred explicitly to ad hoc arbitration. More cases could potentially relate to ad hoc proceedings, but court decisions are frequently redacted in a way that did not allow us to draw definitive conclusions on this point. However, the information we did see suggests that the vast majority of the arbitral awards subject to setting aside and recognition or enforcement proceedings in Poland appear to have been rendered in proceedings administered by Polish arbitral institutions. The presence of Polish parties before foreign institutions is also significant and often rising. In 2020 Poland ranked second in the CEE region on the number of LCIA cases and third in ICC cases. Therefore, Polish parties seem to prefer institutional arbitration over ad hoc proceedings.

Of course, measuring arbitration-friendliness based on statistics has its limitations. For instance, several cases in which the Warsaw Court for Appeal refused to enforce domestic awards relate to proceedings between the same parties. Thus, more than one award could pertain to one dispute and be potentially tainted with the same irregularity. Also, the reasons for the defectiveness of an award are rarely obvious. Conversely, there might be dozens of simple cases that increase the numbers in the statistics. However, it is a fact that only a few percent of arbitral awards fall at the post-award stage in Poland. This is a sign that Poland indeed is an arbitration-friendly jurisdiction, at least considering the numbers. We will continue our research in the future and try to establish yearly patterns.

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The Paris Court of Appeal has ruled in a Covid-related set aside request that French law does not impose an obligation on arbitrators to sign an award simultaneously on the same page. In a judgment dated 30 November 2021, the international chamber of the Paris Court of Appeal rejected an application to set aside a French domestic arbitral award rendered under the ICC Rules of Arbitration inter alia on the ground that the arbitrators allegedly failed to properly sign and date the award. The tribunal rendered its award on 26 March 2020, at a time when a number of countries, including France, had just entered the first Covid-19 lockdown. This may provide some factual context around the signature process. As the Court of Appeal decision reveals, the co-arbitrators each signed and dated a signature page on 24 and 25 March respectively, while the President signed and dated a third and separate signature page on 26 March 2020. The ICC ultimately collated the 53-page award, which included the three signature pages numbered 51, 51bis and 51ter.

The Court of Appeal’s Ruling

The applicant sought to set aside the award on the basis of Article 1492-6° of the French Code of Civil Procedure, which provides that annulment may be sought if the domestic arbitral award, among other things, fails to state the date on which it was made, the names or signatures of the arbitrator(s) having made the award or where the award was not made by majority decision. According to the applicant, the fact that the tribunal members each signed a separate page with a different date did not allow the date of the award to be ascertained. The applicant additionally claimed that the parties had not agreed to the signature method used by the tribunal and even though the terms of reference had been signed through a similar process, this did not imply an agreement of the parties to proceed to this effect for the tribunal members’ signature of the award. Both these circumstances led the applicant to conclude that the arbitrators had not collegially deliberated and that the award should thus be set aside.

The defendant considered that the different dates on the multiple signature pages did not create any doubt as to the date of the award or lawfulness of the deliberations. According to the defendant, it was clear that the award was dated on the day the president, who was the last to sign the award, signed it. The defendant concluded that the consecutive signatures of the Tribunal complied with the applicable rules.

The Court of Appeal dismissed the application on the ground that the award contained all of the required signatures prescribed by Article 1492-6° of the Code of Civil Procedure. The Court recalled that no provision of the Code of Civil Procedure sets out an obligation for arbitrators to simultaneously sign the award on the same page. The Court of Appeal also recalled that where an award is signed by all arbitrators, there is a presumption that they collegially deliberated (Court of cassation, 1^st civil chamber, 1 April 2015, case no. 14-13.202). Additionally, the Court noted that French law does not impose any form as to the organization of deliberations and that the ICC had at the time of signature of the award not yet provided any instructions as to the signature of awards in the context of the applicable health restrictions. The Court observed that a new note covering the topic was issued on 9 April 2020. Applying these legal findings to the facts, the Court held that (i) the fact that the arbitrators had signed three different signature pages did not mean that they had signed three different awards; (ii) there was no doubt as to the collegial character of the deliberations nor as to the fact that the award was decided by majority; (iii) it was manifest that the President had signed the award last on 26 March 2020, i.e. the same date as the one figuring on the first page of the award, which was sufficient to ascertain the exact date of the award.

The Concepts of “Required Signatures” and Certain Date

Through its decision of 30 November 2021, the Paris Court of Appeal clearly signaled that as long as an award contains the “required signatures”, no other formality is prescribed under French law for the signing of an award. In this regard, Article 1480 of the Code of Civil Procedure provides that an arbitral award shall be rendered by at least a majority of the arbitral tribunal and that all arbitrators shall sign the award, or in the event that one of them fails to sign, the award shall state that the signature is absent. The Paris Court of Appeal held that there is also no provision under French law requiring all arbitrators to sign the award simultaneously on the same page. French arbitral jurisprudence had already made clear that the practice of signing an award by correspondence was admissible (Société Paprec Réseau v. SA Interseroh, Paris Court of Appeal (1st Ch. C), 30 May 2006, in Revue de l’Arbitrage, Volume 2007, Issue 4, pp. 837-840). These findings are uncontroversial as in practice, arbitral awards are almost never signed at the same venue or time. This is in line with Article 32(3) of the ICC Rules, which implicitly accepts that the date and location of rendering of the award may be in a way a legal fiction, as it provides that the award “shall be deemed to be made at the place of the arbitration and on the date stated therein” (emphasis added).

Arbitral awards are sometimes not even signed at the seat of the arbitration. Most often, arbitrators will circulate the award amongst themselves by courier and the president will sign and date the award last, with only one date figuring on the signature page. While the couriering procedure seems all the more relevant in the Covid-19 pandemic context, where parties and tribunals may have preferred a contactless procedure, the tribunal’s triple dating of the award is somewhat unusual. The Court nevertheless found that since it was clear that the President signed last on 26 March 2020 and that such date also figured on the first page of the award, the award was dated from the day of the president’s signature. Accordingly, the process of signing the award separately on different dates did not render the date of the award uncertain.

Parties’ Consent to Sign the Award in Counterparts

One of the arguments brought forward by the applicant in support of its application was that the parties had not agreed to the tribunal’s signature method. The Court noted that when the award was rendered in March 2020, the ICC had not yet issued instructions regarding the signing of awards in the Covid-19 circumstances (the ICC only published a guidance note, which expressly submits the signature of an award in counterparts to party consent on 9 April 2020, i.e. after the award was rendered). However, one should note that the ICC Note to Parties and Arbitral Tribunals in its version applicable at the date of the award already provided that an award may be signed in counterparts, subject to parties’ consent and any requirements of mandatory law (§ 164). Notably, this ICC Note was updated on 1 January 2021 and the provision was maintained (§ 199). The Court of Appeal failed to clarify the consequences of the tribunal’s failure to seek party consent, as required by the ICC Note then in force. At the same time, the binding nature of the ICC Note is by no means a given. The Note itself mentions that its objective is to provide “practical guidance”. In other words, the Note provides recommendations, which are generally expected to be followed but do not comprise binding obligations on parties or tribunals.

Is Signing an International Arbitration Award Any Different?

The Court of Appeal’s decision was rendered in the context of domestic arbitration where there is a specific ground for setting aside on the basis of a defective signature and/or date. There exists no similar ground applying to international arbitration under French law (see Article 1520 Code of Civil Procedure). And it is doubtful that the applicant would have succeeded to show that the impugned signature process constituted a violation of the mandate conferred upon the tribunal (1520-3°) or that it constituted a violation of public international order (1520-5°), the three other grounds being excluded for lack of relevance. It may reasonably be expected that the Paris Court of Appeal would equally be as un-formalistic with an international arbitral award, where the Court has shown particular deference to flexibility and party autonomy. In any event, going forward, it is likely that parties will increasingly use e-signature procedures, progressively rendering wet signature issues moot.

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Environmental concerns now play an increasing role in investment disputes. In this regard, this post analyses the interpretation of an environmental carve-out in an investment treaty in the decision on jurisdiction and liability in Eco Oro Minerals Corp. (“Eco Oro”) v. Colombia.

Background and Award

This dispute arose from Colombia’s measures adopted in connection with the páramo ecosystem in the Santurbán highlands. Páramos play a central role in maintaining biodiversity due to their unique capacity to absorb and restore water.

Eco Oro, a Canadian mining company, held mining exploration and exploitation rights in an area that overlapped with the Santurbán páramo. Starting in 1994, Eco Oro invested over US$250 million over two decades in its mining project in Colombia. At the time of Eco Oro’s initial investments, there were no restrictions on mining activities in the páramos, nor were the páramos delimited or protected by law.

In 2012, Colombia adopted several measures to delimit the Santurbán páramo and suspended mining activities therein but granted some exceptions for companies that held mining rights in the area. However, in February 2016, the Colombian Constitutional Court struck down the exception to the ban on mining in the páramo ecosystems that would have permitted Eco Oro to continue its operations. Based on this decision, in August 2016, the National Mining Agency issued a resolution withdrawing Eco Oro’s permits in areas overlapping with the páramo.

Following this, in December 2016, Eco Oro filed a request for arbitration under the Canada-Colombia Free Trade Agreement (“FTA”), invoking Articles 805 (Minimum Standard of Treatment) and 811 (Expropriation). Eco Oro claimed that the measures taken by Colombia had deprived it of its rights under the concession contract and thus destroyed the value of its investment.

The majority of the Tribunal upheld Eco Oro’s claims under Article 805 of the FTA, finding that Colombia had failed to treat Eco Oro in accordance with the minimum standard of treatment. While accepting that a State cannot be bound to the rules and regulations in force at the time the investment is made, the majority held that several of Colombia’s actions had frustrated Eco Oro’s legitimate expectations.

The Tribunal’s Interpretation of the Environmental Carve-out in Eco Oro 

One of the key issues in dispute was the environmental carve-out in Article 2201(3) of the FTA. This provision, modelled after Article XX of the GATT, provides that, as long as measures are not applied in a manner that constitute arbitrary unjustifiable discrimination, or a disguised restriction on international trade or investment, nothing in the agreement shall be construed to prevent a Party from adopting measures necessary:

a.”to protect human, animal or plant life or health, includ[ing] environmental measures necessary to protect human, animal or plant life and health; or (…) c. for the conservation of living or non-living exhaustible natural resources.”

Relying on Article 31(1) of the VCLT, the Tribunal concluded that the “ordinary meaning [of Article 2201(3)] is that it does not prevent the payment of compensation (which payment does not prevent Colombia from adopting or enforcing measures to protect the environment) but only applies when a State is seeking to pass (adopt) or implement (enforce), inter alia, environmental measures” (paragraph 367). According to the Tribunal, had the Contracting Parties intended that a measure could be taken pursuant to Article 2201(3) without any liability for compensation, it would have been drafted in similar terms as Annex 811(2)(b), which makes explicit that the taking of such a measure would not give rise to any right to seek compensation. Therefore, the Tribunal concluded that Colombia’s actions should not have been taken without the payment of compensation, which it deemed to be a fundamental principle of international law.

The Environmental Carve-out and New Generation Treaties

The Tribunal’s finding that Colombia was still liable for compensation, notwithstanding the environmental exception has attracted flak. This interpretation is at odds with the generally accepted interpretation of Article XX of the GATT, after which the carve-out in Article 2201(3) of the Canada-Colombia FTA is modelled. According to this interpretation of Article XX of the GATT, if an exception to a violation is upheld, the State is under no obligation to change the measure or compensate the investor. The Tribunal’s analysis in Eco Oro is even more interesting since Canada, Colombia’s counterparty to the FTA, stated in its non-disputing party submission that no compensation was due to the investor if the measure in question met the requirements of Article 2201(3) since “there is no violation of the Agreement and no State liability” (paragraph  16; paragraph 836).

While the Tribunal relied on Article 31(1) of the VCLT to conclude that the “ordinary meaning” of the provision in question did not prevent the payment of compensation when a State sought to pass or implement inter alia environmental measures, the Tribunal did not accept Canada’s submission that payment of compensation is not required in such circumstances. In doing so, the Tribunal disregarded Articles 31(2)(a) and 31(3) of the VCLT which provide that any agreement between the parties regarding the interpretation of the treaty or the application of its provisions shall be relevant for interpretation. Other than stating that “it cannot accept Canada’s statement” because it did “not comport with the ordinary meaning of the Article [2201(3)] when construed in the context of the FTA as a whole and specifically in the context of Chapter Eight [(the Investment Chapter)]” (paragraph 836), the Tribunal did not explain its decision further. To address specifically the issue of inconsistency in treaty interpretation in investment arbitration, submissions from the governments of Costa Rica, Peru, Israel, Japan, Mexico and Peru during the sessions of UNCITRAL Working Group III have indicated that “the use of binding joint interpretation of treaty provisions by Parties should be encouraged, and it should be ensured that such joint interpretations would be binding on the ISDS tribunals” (paragraph 8).

The majority’s decision to place environmental protection and investment protection on an equal footing has drawn criticism from practitioners and academics alike. The Canada-Colombia FTA forms part of the “new generation” of investment treaties that, among others, provide guidance as to how public policy issues, such as environmental protection and human rights violations, should be addressed in the context of investment protection. These provisions are included in new generation BITs as a response to the criticisms levelled against the investor-State dispute settlement system. Some commentators have, however, questioned the utility of these new generation treaties (which contain considerably lengthier investment chapters), if arbitral tribunals continue to interpret them in the same manner as treaties which do not contain such express and detailed exceptions to investment protection.

The Tribunal’s approach to treaty interpretation raises the question of whether States will be inclined to push for different, and potentially stronger, wording to safeguard environmental protections in treaties going forward. For example, Canada’s 2021 Foreign Investment Promotion and Protection Agreement Model (“FIPA Model Treaty”) does not include the same GATT-style language. Instead, it affirms the Parties’ right to regulate based on “legitimate policy objectives, such as with respect to the protection of the environment and addressing climate change” (Article 3). Likewise, concerning the ability of the treaty parties to adopt binding interpretations of the underlying obligations, Canada appears to be moving in the same direction. Its 2021 FIPA Model Treaty provides that “[i]f serious concerns arise as regards matters of interpretation, the Minister for International Trade of Canada and [the contracting party] may agree to adopt an interpretation of this Agreement[, which] shall be binding on a Tribunal established under this Section.” (Article 32(2)).

The Interpretation of Environmental Carve-outs in Similar Cases

The interpretation of environmental carve-outs has been tested in several investment arbitration proceedings. For example, the decision in Eco Oro is consistent with Infinito Gold v. Costa Rica. There, the tribunal held that the environmental carve-out in the Canada-Costa Rica BIT, which contains similar GATT-style language as that in the Canada-Colombia BIT, did not exempt Costa Rica from liability for breaches of its fair and equitable treatment obligation.

Both Eco Oro and Infinito Gold stand in contrast to the decision in David Aven v. Costa Rica. There, the tribunal held that the rights of investors are subordinate to the right of States to ensure that investments are carried out in a manner sensitive to environmental concerns, according to the carve-out provisions contained in Chapter Seventeen of the Central America-Dominican Republic-United States Free Trade Agreement (“CAFTA-DR”). The tribunal, however, made clear that such subordination is not absolute, but that adoption and enforcement of laws relating to environmental concerns are to be fair and non-discriminatory through due process of law.

Conclusion

Treaty interpretation of environmental carve-outs can vary significantly from case to case depending on the underlying treaty as well as the composition of the arbitral tribunal. The lack of uniformity in treaty interpretation, and thus, the lack of predictability in the outcome of investment proceedings, is currently being addressed by the UNCITRAL WGIII in proposals for ISDS reform. While the impact of Eco Oro on pending investment arbitration proceedings involving environmental carve-outs remains uncertain, this decision evidences crucial questions for debate: Are carve‑outs in new generation investment treaties fit for purpose? Will treaty drafters pull away from including GATT-style carve‑outs in investment treaties?

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There’s a story told of Abraham Lincoln who, during his days as a working lawyer, was riding in a stagecoach from one rural courthouse to another. His companions got to discussing human anatomy, and one of them asked Lincoln, a distinctly tall man himself, how long he thought a man’s legs should be. Long enough, Lincoln replied, to reach the ground.

In the same vein, there is no one prescriptive answer to the question of how long an arbitral award should be. Long enough, Lincoln may have suggested, to do its job. But not as long, surely, as most awards are today.

Even in relatively routine commercial cases, it has become very rare to encounter a final award on the merits that is briefer than 100 pages. Often, awards in such cases are very significantly longer than that. There is next to no objective data on this point – institutions don’t publish information on it, and the various surveys of practitioners and clients that are published from time to time don’t discuss it. But my experience of arbitration practice over the last twenty years has been that, over that time, awards have been getting increasingly lengthy, and that the trend shows no signs of abating.

Why are awards so long?

The easy part of the answer is that technology makes it possible. I began practising law in the late 1980s, before the widespread adoption of word processing software. Legal documents were tapped out on a typewriter, and if substantial amendments were required, the entire document usually needed to be re-typed. That constraint imposed the discipline of brevity, and even relatively complex contracts and pleadings were markedly shorter than their equivalents are today. Contemporary technology neither imposes nor encourages that restraint: on the contrary, it enables lengthy documents to be created with minimal thought, allowing for the wholesale dumping of boilerplate clauses or cut-and-pasted extracts.

So the means to create long documents are now freely available. But to what purpose? There are very few mandatory elements to an award: I am aware of no country whose law sets out an exhaustive list of what an award must contain. The UNCITRAL Model Law, for example, requires only that an award be in writing, signed by the arbitrators; that it state the reasons upon which it is based (unless the parties agree otherwise); and that it state the date on which, and place at which, it was made. Contemporary practice (propounded in such guidelines as the IBA’s Toolkit for Award Writing) has established, however, a template for an award that includes minute detail of the procedural history of the case; extensive lists of the parties’ representatives and arguments; and synopses of the evidence presented. Tribunals load up their awards with this wealth of detail in order, it appears, to demonstrate that the arbitration was procedurally sound, and that each party was afforded an opportunity to put its case. The motivation, in other words, is to protect the award against the risk of a challenge; as the IBA’s Toolkit for Award Writing puts it, all this “information may be relevant in later recognition and enforcement or set-aside or annulment proceedings.”

As an example, on 18 May 2022, an ICSID Tribunal rendered an award in BSG Resources Limited (in administration), BSG Resources (Guinea) Limited and BSG Resources (Guinea) SÀRL v. Republic of Guinea (ICSID Case No. ARB/14/22) (“BSG v Guinea”). I have chosen this award randomly, because it’s public and among the more recent awards published by ICSID. Moreover, the tribunal – Professor Gabrielle Kaufmann-Kohler, Professor Albert Jan van den Berg and Professor Pierre Mayer – possessed unimpeachable credentials, and its work may fairly be taken to represent best current practice. No criticism of that distinguished tribunal is intended. Indeed, by contemporary standards, its award is relatively concise, running to a mere 360 pages and 1132 numbered paragraphs. I also acknowledge that there are good reasons why an award in an investor-State arbitration might be rather longer than an award in a private commercial arbitration: there is a public dimension that justifies a thorough analysis of how the dispute has unfolded, and investment treaty awards (although not binding as precedent) may be treated as sources of guidance on international law.

Nonetheless, the award in BSG v Guinea is worth examining precisely because it is of such a high standard: strongly reasoned and clearly written. Around 204 paragraphs, or about 18% of the award, contain a summary of the procedural history of the case. In contrast, the tribunal’s admirably succinct summary of the critical facts of the case occupies 67 paragraphs. It has been a long-standing practice of counsel to provide submissions to tribunals in soft copy, as an invitation to cut and paste; the unhappy outcome of that practice is that tribunals now routinely cut and paste both sets of submissions: hence, some 220 paragraphs (or nearly 20%) of the BSG v Guinea award summarise the positions advanced by the parties.

In my recent experience of commercial arbitration, those percentages are on the low side: it is now commonplace for awards to recite the procedural history of a case, and the positions put by opposing counsel, at enormous length, while devoting only a handful of paragraphs to the reasoning by which the tribunal reached its result. I have often encountered a long succession of paragraphs setting out the parties’ detailed contentions on an issue, followed by a single paragraph recording the tribunal’s decision on it. My experience is that awards are not only becoming increasingly lengthy, but that they are also cluttered up with information that is incidental, at best, to the tribunal’s reasoning.

But does it matter?

I think it does, and for at least three reasons. First, the inclusion of lengthy case histories in awards stokes the widespread belief that large amounts of the initial drafting of awards is now delegated to tribunal secretaries, a practice of which not everyone approves. Secondly, the creation of unnecessarily lengthy documents adds delay to an arbitration, and thirdly, it adds cost. Some institutions, of course, impose time limits on the delivery of awards, but I have never known a request for additional time to be refused. This may be relatively less important in a treaty case, but commercial arbitration is often promoted as a speedy, cost-efficient means of resolving disputes. 500-page awards cluttered up with records of who attended which hearing are not tools by which speedy, cost-efficient solutions are delivered. Several times now, I have needed to wait for more than 12 months after the final hearing to receive an award in a commercial case. The commercial courts of most countries now deliver their judgments with far greater efficiency than that.

It is worth touching upon an important distinction between court judgments and commercial awards. In the common law jurisdictions, it is necessary for courts to canvass every point put to them, and explain how each is answered, partly because their judgments have the binding force of precedent and partly because their judgments are subject to appeal (and so it is important to explain why unsuccessful arguments were rejected). The fact that neither constraint applies to an award ought to (and used to) give tribunals a far greater licence to deal only very briefly with matters that are not directly relevant to the result.

It is also worth observing that the purported rationale behind many very lengthy awards has an obvious flaw. It is commendable that tribunals strive to deliver enforceable awards, and understandable that they seek to demonstrate that they have followed correct processes and afforded the parties procedural fairness. But, on those issues, an award has limited evidentiary value: it is merely the tribunal’s secondary (and potentially self-justifying) account of what occurred, which carries far less weight as evidence than the primary records of those events – transcripts, submissions, correspondence and so on. Most courts, considering the circumstances of an arbitration, are far more likely to look to the primary evidence, which calls into question whether detailed procedural histories add anything much of value to an award. Besides, I refuse to believe that any award, ever, has survived challenge because it troubled to list the paralegals who delivered document trolleys to the second procedural hearing.

On 19 December 1863, Abraham Lincoln attended the dedication of the Soldiers’ National Cemetery at Gettysburg. He wasn’t invited to deliver the main address on that occasion: that honour fell to a celebrated orator named Edward Everett, a politician and sometime President of Harvard University. Everett spoke for over two hours, delivering more than 13,000 words, not one of which is now remembered by anyone. Lincoln, speaking almost as an afterthought, addressed the assembly in the 271 words of the Gettysburg Address. Sometimes, concise is better.

How long should an award be? Long enough to do its job – but that may be much shorter than you might expect.

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Between 17-23 October 2022, the São Paulo Arbitration Week (“SPAW”) was held with multiple events in different parts of the biggest city of Latin America. The SPAW is a collaborative event, organized by Center for Arbitration and Mediation of the Chamber of Commerce Brazil-Canada (“CAM-CCBC”), and is conceived as a calendar for law firms, universities, associations, and institutions to promote events in a productive environment in benefit of the development of ADRs in Brazil.

As a tradition, SPAW was opened by the CAM-CCBC Arbitration Conference (“Conference”). At its IXth edition, this year’s Conference aimed at discussing the today and the tomorrow of arbitration. Addressing some of the most relevant challenges faced by the arbitral community nowadays, the event provided an excellent debate with renowned practitioners, as it is reflected in the Conference program.

The purpose of this post is to bring some highlights about the subject of the 4th Panel of the Conference (“Panel”), which discussed the “Publication of Arbitral Awards: The Future or Utopia?” The Panel was moderated by Professor Sheila C. Neder Cerezetti (Partner, Neder Cerezetti Advocacia), and counted on excellent lectures presented by Ank Santens (Partner, White & Case), Jean-Rémi de Maistre (Co-Funder & CEO, Jus Mundi), and Rose Rameau (Professor of Law and Independent International Arbitrator & Mediator).

Publication of Arbitral Awards: The Future or Utopia?

The Panel began with Professor Cerezetti’s introductory notes calling the audience’s attention to the fact that publication of awards is only one of the many issues when it comes to the duality between confidentiality vs. transparency in arbitral proceedings.  Professor Cerezetti posed some open-ended questions for the panelists to bear in mind during their presentations.

The first lecture was given by Mrs. Santens, who briefly presented an overview on the history and the current state of play of publication of arbitral awards. Before touching the basis on commercial arbitration, she highlighted how publicity has always been the rule in Maritime Law and in Sports Court; then she mentioned the development of publication of awards in the ISDS, highlighting NAFTA cases, the amendment of the ICSID Rules in 2006 and the creation of the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration, which is adopted in over one hundred of investment treaties, from which forty three are already in force.

After this introduction, Mrs. Santens highlighted that the current stage of publication of arbitral awards in commercial arbitration has a much different landscape than in investment arbitration, since it deals with private parties and private interests. Despite these discrepancies, as pointed out by Mrs. Santens, even in commercial arbitrations, we are seeing a movement towards transparency. In this regard, Mrs. Santens briefly analysed some arbitration rules, categorizing them in three groups, namely:

1. institutions with strict rules on confidentiality of awards (for instance, the Swiss Arbitration Rules (2021), the SIAC Arbitration Rules (2016), and the LCIA Rules (2020));
2. institutions in between confidentiality and publication of awards (such as the HKIAC Rules (2018), the ICDR Rules (2021), and the ICC Rules (2021)); and
3. institutions pro publication (such as the ICSID Rules (2022), the CAM-CCBC Rules (2012), and CAMARB Rules (2019)).

Mrs. Santens, then, concluded by saying that, although we are seeing a movement towards transparency in commercial arbitration, there is still room for more publication of awards and a lot to be considered in such regard. Following a question from Professor Cerezetti, Mrs. Santens also explained that there is much less publication of procedural orders, for instance, when compared to awards. This is reflected by the fact that most arbitral institutions do not even mention publication of procedural orders in their arbitration rules, but exclusively the publication of arbitral awards (ICC, ICDR and ICSID would be one of the few examples that provide for publication of POs).  However, Mrs. Santens pointed that we are seeing a trend towards the publication of decisions rendered by arbitral institutions themselves, as the LCIA has been doing since 2006 with decisions on challenge of arbitrators (and also HKIAC, albeit its rules are not ‘pro publication’).

The second presentation was made by Mrs. Rose Rameau, who discussed the main objectives sought with the publication of awards.

First, considering her perspective as a professor, Mrs. Rameau mentioned the importance of publication of awards for academic purposes, which allows us to dive into the multiple juridical issues that may arise in an arbitration. Second, in regard to ISDS, she mentioned the importance of publication of awards for the purpose of: (i) an investor’s decision of where to invest (e.g. an investor may not choose a State wherein his investment is very likely to be expropriated); or (ii) a State’s decision of whether to accept a certain investor in its territory (e.g. the evaluation of an investor’s conduct before granting permission for such investor). Finally, Mrs. Rameau mentioned the importance of publication of awards for the purposes of advising clients or as a helpful source for arbitrators’ decisions. He pointed out, however, that there is an important difference between caselaw in commercial and investment arbitration.

The third presentation was in charge of Jean-Rémi de Maistre, who discussed the use of publication of arbitral awards and how it could be helpful for arbitration practitioners.  He mentioned that, despite foreseeing confidentiality as something theoretically and potentially beneficial, publicity of awards and documents can be very helpful in the creation of a more secure arbitral environment. That is precisely the scope of Jus Mundi, created as a global platform aiming at providing a source of comprehensive and reliable data for each area of international law and arbitration. Professor Cerezetti asked how the arbitral community can reach a balance between transparency and confidentiality. Mr. Maistre said that, although it is certain that some aspects about arbitral procedures must be kept confidential, some degree of transparency is crucial for a better and more predictable arbitral system. Mr. Maistre believes that it is possible to reach “the best of both worlds.”  Depending on how the information is disclosed, transparency may not create any harm, especially because one is not talking about publicizing all the information of an arbitral procedure, but rather only necessary ones, such as the tribunals, counsel, experts, industry, etc.

At the end of the debate, Professor Cerezetti concluded that this rich discussion is extremely important, especially considering the moment the Brazilian arbitration community is facing right now, with the threat of a controversial amendment to modify some dispositions of Brazilian Arbitration Act (“BAA”) (previously covered here).

Conclusion

In light of the excellent Panel, we may conclude that the arbitral community desires a degree of transparency (as recently pointed out by CBAr’s-IPSOS Research). The CBAr’s-IPSOS Research (2021) is a research conducted by the Brazilian Arbitration Committee, along with Ipsos Institute, that aimed at investigating the degree of satisfaction of the multiple players involved in the arbitral proceedings. Seventy-three per cent (73%) of the participants have indicated they are willing to publicize the awards of the proceedings they are involved, as long as some information are kept confidential.  Hence, more discussion is necessary to find the right balance between transparency and confidentiality in the arbitral procedures.

Follow along and see all of Kluwer Arbitration Blog’s coverage of IX CAM-CCBC Arbitration Congress here.

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One of the great advantages of arbitration is that it is a “one-shot” dispute resolution mechanism that does not allow for a series of appeals. Indeed, many users stress the finality of awards and the lack of an appeals mechanism as a valuable characteristic of arbitration. However, there may be situations where the “one shot” misses the mark, leading to a fundamentally unjust award. This may, in particular, be the case if a party is found to have acted fraudulently during the proceedings and to have obtained a favourable award as a result (e.g. when criminal courts subsequently find that a key piece of evidence that influenced the award was forged). More generally, the post-award discovery of a fact which would have impacted on the award always raises the question whether the award should be allowed to stand.

In litigation, the solution to such situations is revision, which is a remedy that has existed in many jurisdictions for a long time. Revision is an extraordinary remedy based on the alleged discovery of new facts and aimed at the amendment of a final and binding decision in light of these new facts, usually by the original adjudicator. In arbitration, the remedy of revision is less developed. With this post, we intend to give an overview of the existing legal framework in national arbitration laws and institutional rules, and to analyse whether it is time for the arbitration community to undertake a renewed effort to regulate the revision of arbitral awards.

The existing framework in national arbitration laws

National arbitration laws take different approaches to the revision of arbitral awards. Jurisdictions that have adopted the UNCITRAL Model Law on International Commercial Arbitration of 1985 (“Model Law“), such as e.g. Germany, Singapore, and Denmark, generally do not have rules on revision. This is due to the fact that the Model Law itself only provides for the setting aside of arbitral awards and does not expressly contemplate revision as an alternative remedy.

Incidentally, the travaux préparatoires of the Model Law show that the lack of a revision mechanism was a deliberate decision. The drafters considered establishing a separate set-aside ground with longer deadlines “for such cases as fraud or false evidence which had materially affected the award” (see here, p. 36, para. 299). However, the drafters ultimately decided against such a regime because of the “need for speedy and final settlement of disputes in international commercial relationships” (see here, p. 36, para. 300).

Given the absence of an express rule under this regime, the revision of an award by the arbitral tribunal is arguably not possible because the tribunal’s mandate is exhausted once the final award is rendered. Moreover, the discovery of a new fact does not necessarily give rise to a ground for setting aside the award either. Nonetheless, this does not necessarily mean that an award will always be enforceable no matter what information is uncovered after the award was rendered. For example, in Germany, if it can be proven that a party obtained an award in a fraudulent way, the award debtor may be entitled to an order prohibiting the award creditor from enforcing the award, or requiring the award creditor to repay what it has already received in satisfaction of the award. In other words, under German law, the award debtor has a substantive right to not be subjected to the enforcement of an award that was obtained in a fraudulent manner.

Conversely, in jurisdictions that expressly provide for the revision of arbitral awards (like Switzerland, the Netherlands, Spain, and France) some broad similarities in the design of the remedy can be observed. Thus, in general, only previously unknown facts which could not have been discovered during the arbitral proceedings can provide grounds for revision (cf. Article 190a(a) Swiss PILA, Article 1068(c) Dutch Code of Civil Procedure, Article 510(i) Spanish Civil Procedure Act (in conjunction with Article 43 of the Spanish Arbitration Act), Sections 1502, 595(2) French Code of Civil Procedure). Moreover, a request for revision can be filed if an award was influenced by criminal acts or by false evidence (cf. Article 190a(b) Swiss PILA, Article 1068(a)-(b) Dutch Code of Civil Procedure, Article 510(ii)-(iv) Spanish Civil Procedure Act (in conjunction with Article 43 of the Spanish Arbitration Act), Sections 1502, 595(1), (3)-(4) French Code of Civil Procedure), a situation which was present e.g. in a 2009 Swiss case that was previously discussed on this blog.

At the same time, however, there are also important differences. Some jurisdictions provide for revision proceedings to be conducted before the original tribunal and only refer the matter to the courts if the original tribunal cannot be reconstituted (cf. Article 1502 of the French Code of Civil Procedure). Other regimes provide for an application to the courts and then allow the courts to remit the award to the original tribunal for reconsideration (or to set the award aside itself) (cf. Section 68(2)(g) and (3)(a) of the English Arbitration Act, in relation to fraud). Conversely, in other jurisdictions, applications are only heard by domestic courts which have the power to revoke the award if the requirements are fulfilled (cf. Article 1068 of the Dutch Code of Civil Procedure, Article 516 Spanish Civil Procedure Act (in conjunction with Article 43 of the Spanish Arbitration Act)).

Also, there are considerable differences insofar as time limits are concerned. While Spanish and Dutch law require an application to be made within three months from the discovery of the ground for revision, French and Swiss law provide for 2‑month and 90‑day time limits, respectively. Moreover, there are also varying absolute time limits. Thus, in Switzerland, a request for revision is generally excluded after 10 years from the date when the award became legally binding, whereas Spain imposes an absolute time limit of 5 years. In yet other jurisdictions, laws are silent on this matter.

The existing framework in arbitration rules

In contrast to domestic law, revision is generally not addressed in the rules of arbitral institutions. Indeed, none of the major institutions for international commercial arbitration (such as the ICC, SIAC, HKIAC, LCIA, SCC or SAC) have included a provision on revision in their rules. That said, one major institution providing for revision in its rules is ICSID. Under Article 51 of the ICSID Convention, an application for the revision of an ICSID award may be brought, “on the ground of discovery of some fact of such a nature as decisively to affect the award, provided that when the award was rendered that fact was unknown to the Tribunal and to the applicant and that the applicant’s ignorance of that fact was not due to negligence“. The applicable time limits are relatively strict, requiring the application to be made within 90 days after the discovery of the fact, and in any event within three years from the date on which the award was rendered. If possible, the decision on revision shall be rendered by the tribunal that rendered the original award.

Should the arbitration community revisit the issue of revision?

The above analysis shows that approaches to revision differ widely. Some jurisdictions do not provide for any set of rules for revision, while others regulate revision in a detailed manner. Where there are no such rules, courts may be required to fill the gap, which can lead to uncertainty (especially if there is not a lot of case law). Furthermore, among those jurisdictions with detailed rules on revision, there are marked differences in approach, such as with regard to the question whether the revision proceedings are to be brought before a court or the original tribunal.

Against this background, one may wonder whether the issue of revision should be revisited in future discussions concerning potential amendments to the Model Law. The drafters’ initial decision to not include a rule on revision so as to favour the finality of arbitral awards certainly made sense at the time. However, experience has shown that there are cases in which new relevant facts are uncovered belatedly. Such cases are exceptional, and cases in which the new evidence could not have been uncovered during the proceedings is even rarer. Nevertheless, rather than leaving it to domestic courts to find a solution for these extraordinary situations, it would ensure greater legal certainty to have a clear set of rules from the outset. Moreover, purposefully formulating these rules in a very narrow fashion would ultimately contribute to the finality of arbitral awards.

Further, one may well wonder whether arbitral institutions should not step in to “fill the gap” by adding express provisions on revision in their rules. However, the general reluctance of (major) arbitral institutions to address revision is understandable if one considers that there is not always a gap to fill because the applicable lex arbitri may indeed provide for a revision regime. And if it does, the domestic rules will often be mandatory, meaning that institutional rules cannot opt out of or modify such rules. Accordingly, the safest option for institutions may indeed be to not address the issue at all.

At the same time, not addressing the issue in institutional rules may leave a lacunae if the lex arbitri provides for revision proceedings before the original tribunal. In particular, this may mean that there are no clear rules on the payment of arbitrator fees for the revision proceedings (e.g. how the fees are calculated, which party pays the advance on fees, etc.). Against this background, institutions should at least consider adding rules that regulate these specific issues in case the lex arbitri allows for the revision of awards by the original tribunal.

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On 11 December 2019, the Advocate General Priit Pikamäe delivered its Opinion recommending the Court of Justice of the European Union (“CJEU”) to declare that it does not have jurisdiction to rule in infringement of European Union (“EU”) law proceedings concerning the long-running border dispute between Slovenia and Croatia, which the CJEU endorsed in the judgement of 31 January 2020.

The main question raised in the case between the two EU member states is whether the CJEU is competent to decide on an action brought by Slovenia under Art. 259 of the Treaty on the Functioning of the European Union (“TFEU”) alleging that Croatia has failed to fulfil its obligations under EU law by refusing to recognise an arbitral award determining the maritime and land boundary between the two states.

Factual Background and Pre-litigation Procedure

The collapse of the Socialist Federal Republic of Yugoslavia (“SFRY”) in the early 1990s uncovered some smouldering issues between its former constituent republics.

Amongst others, the breakup revealed the border dispute between two of the SFRY’s successors –Slovenia and Croatia. After declaring their independence in 1991, between 1992 – 2001 both states unsuccessfully attempted to resolve the dispute regarding the course of their land and maritime boundary.

On 4 November 2009, in the course of Croatia’s accession to the EU, Slovenia and Croatia signed an arbitration agreement (“Arbitration Agreement”) referring their land and maritime border dispute to arbitration. The European Commission and the Swedish EU Council Presidency facilitated the drafting of the Arbitration Agreement, and along with being signed by the parties, the Arbitration Agreement was also signed by the Swedish EU Council Presidency as a witness. During the arbitral proceedings, due to ex parte communication between the arbitrator appointed by Slovenia and one of the Slovenian representatives in the proceedings, in July 2015, Croatia informed Slovenia and the arbitral tribunal of its decision to terminate the Arbitration Agreement claiming a material breach of the Arbitration Agreement by Slovenia under Art. 65, para 1 of the Vienna Convention on the Law of Treaties (discussed on the blog here). After a change in the composition of the arbitral tribunal, the proceedings continued, and on 29 June 2017, the tribunal rendered its final award (“Arbitral Award”) determining the boundary between Slovenia and Croatia. However, Croatia contested the validity of the Arbitral Award and its binding effect.

The border as determined by the arbitral tribunal in the Arbitral Award, page 347

Infringement Proceedings Filed by Slovenia

On 16 March 2018, Slovenia initiated infringement proceedings under Art. 259 TFEU referring the dispute to the European Commission. Since the Commission did not issue a reasoned opinion on the matter within the required three month period, on 13 July 2018, Slovenia brought an action before the CJEU.

In support of its action, firstly, Slovenia claimed that by breaching its unilateral commitment undertaken during the EU accession process to adhere to the Arbitral Award and the boundary determined by that award, Croatia refused to respect the rule of law and the principles of sincere cooperation and res judicata. Secondly, Slovenia maintained that by refusing to comply with the Arbitral Award, Croatia prevents it from exercising its full sovereignty over its land and maritime territory breaching its duty of sincere cooperation and jeopardizing the attainment of the EU’s objectives. Lastly, Slovenia argued that Croatia was preventing it from fulfilling its obligation to implement a number of EU secondary law acts related to the common fishery policy, the border control and the maritime spatial planning.

On 21 December 2018, Croatia submitted a motion arguing that the action brought by Slovenia is inadmissible as the CJEU had no jurisdiction to rule on a dispute concerning the Arbitration Agreement and the Arbitral Award which did not require the application or interpretation of EU law.

Findings of the Advocate General

In his opinion, The Advocate General began his analysis by examining the relationship of the Arbitration Agreement and the Arbitral Award with EU law and determining whether they bound the EU. He found that:

1. The cases where the EU is bound by international law are well-established. Namely, the EU is bound by international conventions concluded by the EU itself or where the EU assumes powers previously exercised by the member states, and by rules of customary international law. Therefore, international agreements which do not fall within the situations listed above, are not EU acts and, therefore, do not bind the EU (§ 104).
2. The territorial scope of the Treaties is an objective fact determined by the member states. As a consequence, the delimitation of national territory does not fall within the jurisdiction of the CJEU (§§ 110-112).
3. The Arbitration Agreement and the Arbitral Award did not fall within any of the hypothesis in which the EU is bound by international law (§ 122).
4. The issues concerning the alleged infringements of the rule of law and the principle of sincere cooperation are ancillary to the issue of determination of the land and maritime boundary between the two member states and therefore, the CJEU does not have jurisdiction to decide on those matters (§ 130, 134, 135).
5. Slovenia’s claims in relation to non-compliance with the EU secondary legislation were based on the assumption that the border between the two member states had been determined by the Arbitral Award. However, the Arbitral Award has not been implemented, and the boundary between the two member states remained undetermined (§ 149).

The Advocate General expressed his view that Slovenia was seeking implementation of the Arbitral Award, which fell outside the competence of the EU and the CJEU’s jurisdiction. He then concluded that the infringements of EU law alleged by Slovenia are ancillary to the issue of the determination of its border with Croatia which is a matter of public international law and therefore falls outside of the jurisdiction of the CJEU (§ 164).

The Judgment of the CJEU

In the judgment of 31 January 2020, examining the issue of whether it has jurisdiction to hear the case, the CJEU noted that it is not within its sphere of competence to interpret an international agreement concluded by member states whose subject is not a matter of EU law. Relying on previous case-law, the CJEU further explained that it lacks jurisdiction to decide on an action under Art. 259 TFEU for failure to fulfil obligations, when the infringement of EU law pleaded in support of the action is ancillary to the obligations stemming from the international agreement at issue (§§ 91-92).

In light of the above, the CJEU found that the infringements of EU law claimed by Slovenia resulted from the alleged failure by Croatia to comply with the obligations under the Arbitration Agreement and the Arbitral Award rendered on its basis or from the false premise that the border between the two member states has been determined by the Arbitral Award (§ 101).

The CJEU clarified that the Arbitral Award was rendered by an international tribunal established under a bilateral arbitration agreement governed by international law the subject matter of which did not fall within the sphere of competence of the EU and the EU was not a party to the Arbitration Agreement, notwithstanding its facilitating role. It further stated that despite the links between the conclusion of the arbitration agreement and the arbitral proceedings conducted on its basis on the one hand and the accession of Croatia to the EU on the other, the Arbitration Agreement and the Arbitral Award could not be considered an integral part of EU law. In this context, the CJEU clarified that the neutral reference made to the Arbitral Award in the Act of Accession of Croatia to the EU did not mean that the commitments made by Slovenia and Croatia under the arbitration agreement were incorporated into EU law (§§ 102-103).

In that regard, the CJEU concluded that the infringements pleaded by Slovenia were ancillary to the alleged failure by Croatia to comply with its obligations under the Arbitration Agreement. As the action for failure to fulfil obligations under Art. 259 TFEU can only apply in case of non-compliance with obligations arising out of EU law, the CJEU found that it lacked jurisdiction to decide on the alleged failure to comply with the obligations stemming from the Arbitration Agreement and the Arbitral Award (§ 104).

The CJEU noted that it is within the competence of each member state to determine its borders in accordance with international law. Therefore, it was beyond its jurisdiction to examine the extent and the limits of the respective territories of Slovenia and Croatia by applying directly the boundary as determined by the Arbitral Award in order to verify the existence of the pleaded infringements of EU law. The CJEU nevertheless reminded Slovenia and Croatia of their obligation to “strive sincerely to bring about a definitive legal solution consistent with international law, as suggested in the Act of Accession” of Croatia to the EU which ensures the application of EU law. One such option could be a submission “to the Court under a special agreement pursuant to Article 273 TFEU” (§§ 107, 109).

The Way Ahead

The Judgment in the case between Slovenia and Croatia is one of the very few where the CJEU had to decide on a dispute between two member states.

Indeed, it is the first case under Art. 259 TFEU where the territorial application of EU law was at stake, and the CJEU had to decide on whether an arbitral award rendered on the basis of an arbitration agreement concluded between two member states has a connection with EU law and thus falls within the sphere of competence of the CJEU.

While the CJEU said its last word and its Judgement is final and cannot be appealed, the boundary between Slovenia and Croatia remained undetermined.

Looking ahead, it is likely that Croatia will call for a mutually acceptable agreement. Slovenia, on the other hand, will more likely demand the implementation of the Arbitral Award. Although the CJEU decided that it had no jurisdiction to rule on the border dispute between the two member states, Slovenia can count on the fact that the Arbitral Award is a binding settlement instrument under public international law.

An important factor which will likely play a key role in finding a definitive solution of the border dispute between the two member states is Croatia’s attempt to join the Euro and the Schengen Area. To become a member, Croatia needs the unanimous consent of all Euro and Schengen Area member states, among which is Slovenia. It is probable that Slovenia will seek a favourable solution of the dispute using its power to cease Croatia’s accession, as it did during the negotiations for Croatia’s accession to the EU.

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The COVID-19 pandemic catapulted discussions on online dispute resolution methods like no other phenomenon. With this, determining the proper seat for online arbitration has become the center of conversation. As the world adapted to the challenges presented by the pandemic, so too did international arbitration. Suddenly, there was a wave of virtual hearings, webinars and video calls and even moot court competitions. Practitioners who were otherwise skeptical or doubtful of online dispute resolution’s benefits were suddenly advocating its usefulness and advantages. This proved that it might be a good time to revisit online dispute resolution procedures, particularly online arbitration.

The benefits of virtual proceedings are obvious. Online dispute resolution management, and for that matter virtual hearings, increase overall efficiency in an arbitration. Arbitrations are often document intensive exercises involving large volumes of trial bundles and sifting of documents. Managing the documents through electronic bundles and subsequently referring to these during a virtual hearing save time and cost. Cost is also saved as parties; tribunal members and lawyers do not have to travel from different parts of the globe to attend the hearing. At first blush, it sounds like an all-round winner, albeit with a proviso-the seat.

The ever-important seat

Despite its benefits, the question remains what, if anything, happens to the seat of arbitration in a virtual hearing. The seat of arbitration is crucial as it affects arbitrability, determination of the governing law, whether substantive or procedural and determination of the place for the annulment proceedings of the arbitral award. It is generally accepted that the venue of the arbitration, that is, where the hearing and deliberations take place, may be different to the seat of arbitration. This often happens because of sheer convenience when deciding where to hold the hearings. This arises from accepting the seat only as a legal concept; simply as the lex arbitri. It allows parties to select a seat and submit to the procedural law of a specific jurisdiction without being physically tied to that place.

The caveat to this position is that, depending on the seat of arbitration chosen by the parties, some national laws may require that the proceedings or at least part of it take place in the State which is the chosen seat. Failing a sufficient connection of the proceedings with the State, the arbitration law at the seat may not apply or may only partially apply and the host State may not accept an award from such proceedings. This will cause difficulty for a party seeking to enforce a successful award. In common law jurisdictions such as England and Wales, an argument for an arbitration without a seat may not gain traction; but the situation may be different in civil law jurisdictions.

For example, in the ICC Arbitration No. 10’623, Decision of 7 December 2001, the Tribunal consisting of prominent practitioners Emmanuel Gaillard, Piero Bernardini and Nael Bunni found that the decision to hold the arbitration hearing in Paris and not at the seat of the arbitration was made for practical reasons and was without prejudice to the venue of future hearings. It would be interesting to know if this award was successfully enforced.

Therefore, before getting caught up in the wind of virtual hearings, parties should consider if there are any peculiarities that they need to consider in the national laws of the seat which may affect virtual hearings. Where an issue does appear to arise under the national laws of the relevant seat, the parties may consider changing their lex arbitri to a more arbitration friendly State. However, changing the place of arbitration often comes with challenges, particularly where the claimant faces a recalcitrant respondent. In such cases, the arbitral tribunal will find itself in a precarious position of considering changing the seat, whilst keeping within its jurisdiction and considering relevant institutional rules and arbitration laws.

What happens if there is no seat?

The question of the seat in online arbitration is not any different than the discussion on delocalized arbitration. There will be no issue, where the parties respecting due process agree the jurisdiction that is to be the seat of online arbitration.

The problem arises where the parties did not agree the seat in their arbitration agreement. There has been a long-standing debate between those who argue that the seat of arbitration is mandatory and those that argue that the seat of arbitration need not be determined, that is, the arbitration is floating/decentralized. When it comes to online arbitration, the issue becomes even more controversial as there is no geographical location in cyberspace. The internet does not fall within the borders of any sovereign jurisdiction. Online arbitration, because of its nature, will not have a seat, rather it will be ruled by the parties’ convenience. Therefore, adoption of delocalized arbitration in cyberspace becomes the sensible option. Yet, jurisdictions may have different views on delocalized arbitration. For instance, France may be open to not having a seat, given its history of enforcing annulled awards. In contrast, majority of courts in England do not recognize floating arbitrations. However, there seems to be hope for delocalized arbitration in England as the English Arbitration Act 1996 is based on UNCITRAL Model Law, which in fact provides for the delocalized system. For example, Section 3 of the Act allows the seat to not be directly related to a forum.

Even if online arbitration is allowed to continue without being tied to a lex arbitri, some argue that it may not survive under the current international arbitration regime as it could be inconsistent with the framework drawn by the New York Convention, particularly with Article  V(1)(e) that allows the court of the seat to reject enforcement.

With this in mind, there are various ways to determine the seat of an online arbitration. These include the following:

1. The place where the website of the case in question is. This web site would be established by determining where all case files and submissions by the parties are
2. The place where the servers are
3. The place where the computer is based or where the emails of the arbitrator are sent and collected.
4. The place where the e-arbitration provider is located.
5. The place where the e-platform used for the conduct of the e-arbitral proceedings is located.

It is also suggested that the arbitral tribunal or the e-arbitration provider should determine the seat of arbitration. Domicile or place of business of the parties, nationality of the parties and the location of the e-arbitration provider are listed as the connecting factors while establishing the seat.

Some ahead-of-their-time institutions have online arbitration rules that may provide guidance on how to take on this issue. Although some of them such as Russian Arbitration Center or Shenzhen Court of International Arbitration (SCIA) have a set of rules for online arbitration, they do not have a specific rule on the seat of online arbitration. On the other hand, China International Economic and Trade Arbitration Commission (CIETAC) Online Arbitration Rules give precedence to the parties’ agreement. If the parties fail to reach an agreement, the seat of online arbitration is considered to be the location of the CIETAC. Russian Arbitration Association (RAA) Online Arbitration Rules provide the seat of arbitration to be in Moscow, Russia unless parties agree otherwise. The Georgia Dispute Resolution Center (DRC) Online Arbitration Rules also do not address the seat of arbitration but recommend an online arbitration agreement which states the place of arbitration as Tbilisi.

Parties entering into arbitration agreements post COVID-19 should take into account lessons learnt from this crisis and perhaps should consider expressly providing for online dispute resolution (either as the main arbitration agreement or an ancillary provision) and choose an appropriate seat which will accommodate this. Institutions could also take this time to renovate their approach towards dispute resolution as it is anticipated that the ADR providers will be the winner of the outbreak since it is likely that the parties will go for the alternatives to litigation. Going forward, the institutions providing ODR services that minimize the handicaps with their rules could be favored more, since it seems like online arbitration is here to stay.

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The COVID-19 outbreak as of now affects 183 states and a number of territories. Out of 164 State signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”) only Marshall Islands, Tonga, Palau are not affected by the pandemic; all 153 state members to the ICSID Convention have been impacted by the pandemic. Most of these states have taken lockdown or health-related precautionary measures inevitably affecting the conduct of court proceedings all over the world.

Much has already been done by arbitral institutions to adapt to the current situation, but unfortunately, state courts have been slow to catch up primarily because of the increasing pressure to deal with urgent cases such as criminal actions. While, according to Remote Courts Online, a substantial number of state courts such as Australia, Norway, New York, Mexico, Uganda have switched to virtual hearings, others such as Armenia and Iran have chosen to postpone hearings or to allow only essential litigation.

The partial closure and reduced capacity of courts due to this unprecedented situation is affecting and could continue to affect enforcement of arbitral awards under the New York Convention. In examining the possible effect of the pandemic on enforcement of arbitral awards we must acknowledge that delays in every procedural aspect are inevitable. However, the effect might be greater in state courts that have shut down enforcement proceedings.

Justice delayed = justice denied?

The ultimate aim of a party in arbitration is quick enforcement of a successful arbitral award. Being unable to timely enforce an award will likely increase parties’ expenses and is counterintuitive to arbitration.

A significant impact of the pandemic on enforcement proceedings are the likely delays. For example, arbitration proceedings that were nearing closure may be left open indefinitely, especially where formalities such as requiring original copy of final award cannot be completed, especially, where parties fail to agree to an electronic award.

Enforcement becomes a bigger issue with flights being canceled and postal communication being interrupted or delayed. Filing enforcement applications online is not always possible and the disruption of postal services could result in situations where parties have difficulties or the least experience delay with filing the enforcement application with the court in question.

Additional obstacles could arise where some courts will insist on the hard copy of the award and supporting documentation. They may require the parties to provide a duly authenticated hardcopy of the award or proof that the award has become binding on the parties. This would need to be acquired at the seat of arbitration which in turn would likely impact the time it takes to enforce the award.

It is not possible to predict the end of the pandemic. Parties should therefore be cognizant of any time limits in recognizing and enforcing an award in some jurisdictions. For instance, if a State requires arbitral awards to be enforced within a year, a party should be mindful of this limitation in order to avoid being time barred.

Non-enforceability of an award due to procedural irregularities

While considering online arbitrations, the parties and the tribunal need to consider how best to ensure that in the end the final award is enforceable.

Article V(1)b of the New York Convention allows a party to challenge an award where it was unable to present its case. During the drafting of this article, drafters may have considered a scenario where one of the parties was unable to appear before the arbitral tribunal due to visa refusal, or when a party might not have sufficient opportunity to present the case before the tribunal.

The pandemic and lockdown caused numerous restrictions and travel bans. If interpreted narrowly, arguably the cancelation of flights and, thus, inability of the party or the witness to participate in the proceedings or the hearing could be considered as a ground for not enforcing the award under Article V(1)b of the New York Convention. Some courts have granted this provision a wider interpretation. For example, in the Italian case Bauer & Grobmann OHG v. Fratelli Cerrone Alfredo e Raffaele, the Court considered a recent earthquake a circumstance preventing the parties from presenting their case in the required period of time. However, parties wishing to object under Article V(1)b need to present that adequate actions have been taken to remedy their defaults.

When invoking Article V(1)b, the parties need to prove that the inability to present their case could have resulted in a different outcome than what was achieved by the tribunal.

The strength of such an argument is questionable as parties can agree to hold virtual hearings (VHs) to solve the problem. However, it is debatable whether having a VH will provide the party with the same opportunity as in the case of physical hearings. When referring to a “hearing” did the New York Convention envisage VHs?

Interestingly, in the 2001 case Tongyuan International trading Group v. Uni-Clam Limited, while referring to Article V(1)d the English High Court stated that “a different location did not affect the fairness of the proceedings or prejudice to that party”. The Court further reasoned that in the mentioned case, the wording of the arbitration agreement did not consider the venue as an important factor. According to practitioners such as Pieter Sanders, the role of the venue of arbitration was considered of secondary nature while drafting the convention as well.

As discussed above, in light of the current situation and restrictions, many courts have delayed in-person hearings or cut down the hearings only to essential matters, and many arbitral tribunals transitioned to online hearings or are considering it. VHs may give rise to a serious concern regarding the validity of the rendered award, in its turn creating room for parties to attempt objecting to enforcement of award because of VHs. Article 19 of the LCIA rules straightforwardly grants the arbitral tribunal the power to decide upon the form of the hearing: “… a hearing may take place by video or telephone conference or in person (or a combination of all three).” Accordingly, it may be difficult for parties having chosen LCIA rules to attempt to object to enforcement of an award where a tribunal exercises its discretion under the Rules and orders an online hearing regardless of parties’ consent.

In contrast, the ICC rules do not grant the tribunal the authority to decide on a VH; if the parties agreed to have a hearing it should not be remote. This can be inferred from Article 26(1) of the ICC Rules:

“When a hearing is to be held, the arbitral tribunal, giving reasonable notice, shall summon the parties to appear before it on the day and at the place fixed by it.” (ICC Rule 26.1)

That said, in the event the parties agreed to ICC rules, and if no agreement is reached to replace the hearing with a virtual one, enforcement of the award might become problematic due to failure to have the arbitral procedure agreed by the parties. (Article V(1)d)

Final thoughts

Under the New York Convention the enforcement of the award is not hindered by any aspect unless a member state may find it contrary to its public policy to enforce the award (Article V(2)b), which is worth considering as COVID-19 has already had its devastating effects on the many developed states, one of the most vivid examples being Italy. The courts could also be non-cooperative in cases where the awards negatively impact their interests (investment awards), and could potentially delay enforcement of the award. The states may also misuse the process and time limits of court procedure in the same way.

There is a general consensus that there is likely to be an increase in international arbitration disputes in the wake of the pandemic, the extent to which these cases will be successful procedurally remains to be seen.

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This post addresses the recognition and enforcement of foreign awards in Colombia and summarizes two important cases decided in 2022 by the Civil Chamber of the Colombian Supreme Court of Justice (“Court”) on the matter. These cases illustrate the process of analysis undertaken by the Court to decide requests for recognition and enforcement of foreign awards, namely the review of grounds that can be autonomously addressed by the Court.

Applicable legal framework

Before delving into the specific cases discussed, a brief overview of the applicable legal framework for recognition and enforcement of foreign awards in Colombia is undertaken below.

Colombia’s Arbitration Statute – Law n. 1563 of 2012– (“Law 1563” or the “Arbitration Statute”) establishes that domestic awards – i.e. those issued in domestic arbitrations- and awards resulting from international arbitrations seated in Colombia can be enforced in Colombia without the need for prior recognition. However, Law 1563 provides that, (i) foreign awards – i.e. those issued in a country other than Colombia, as defined in Article 111 (3) of Law 1563 – or (ii) awards resulting from international arbitrations seated in Colombia in which the parties have waived their right to seek annulment (in those cases permitted by Law 1563) shall undergo a recognition process before Colombian competent court prior to their enforcement before its domestic courts.

Proceedings for recognition of awards are governed exclusively by: (i) articles 111 to 116 of Law 1563, and (ii) provisions of international treaties and conventions ratified by Colombia. Thus, provisions of domestic procedural law that govern recognition and enforcement of judgements issued by foreign courts are not applicable to these proceedings.

Recognition and enforcement of foreign awards can only be denied on the grounds stated in Article V of the New York Convention, which can either be invoked by the parties (Article 112 (a) of Law 1563) or be autonomously reviewed by the judge. As per Article 112 (b) of Law 1563, only two specific grounds can be autonomously reviewed by judges: (i) when the dispute was not arbitrable according to Colombian law (also known as objective arbitrability) and (ii) when recognition and enforcement of the award would be contrary to Colombian international public policy.

Proceedings for recognition and enforcement are specifically regulated by Law 1563. No appeal or recourse is available against the final decision on the recognition of awards.

One particularity of these proceedings is that two different courts, pertaining to different subject matter jurisdictions, are competent to decide on recognition requests as per Article 68 of Law 1563: (i) the Council of State, in case of recognition of foreign awards that have as a party either a Colombian public entity or an entity that performs administrative functions in Colombia; and (ii) the Civil Chamber of the Supreme Court of Justice, in all other cases. The cases referred to in this post were decided by the Civil Chamber of the Supreme Court of Justice.

• Tricon Dry Chemicals LLC v Agroindustrias El Molino de la Costa SAS, Case No. 11001-02-03-000-2022-02145-00, Decision No. SC3462-2022, November 15, 2022, M.P. Luis Alonso Rico Puerta (“Tricon v Agroindustrias”)

In Tricon v Agroindustrias, the Court recognized an award issued on November 30, 2021 in an arbitration administrated under the rules of the Society of Maritime Arbitrators of the State of New York’s expedited procedure. The arbitration was seated in New York City. The sole arbitrator concluded that Agroindustrias – respondent in the arbitration – had breached its contract and therefore was under an obligation to pay damages plus interest and the costs of the arbitration to Tricon. Respondent was served with process but did not partake of the proceedings of recognition and enforcement.

The Supreme Court of Justice considered that the requirements for recognition had been satisfied and recognized the award, because of the following reasons:

• First, claimant had provided a copy of the award with an official translation into Spanish.
• Second, as respondent had not participated in the proceedings nor raised any ground to deny claimant’s recognition request, the Court analyzed the only two grounds that can be autonomously reviewed. Turning onto these two grounds the Court found that the dispute related to patrimonial consequences of a contract for the sale of goods, and thus was arbitrable under Colombian law. In addition, the Court concluded that there were no reasons to suggest that recognizing the award could threaten or affect Colombian international public policy. To do so, the Court recalled the concept of international public policy as enshrined in a Court’s decision of 2016, i.e. “…the basic or fundamental principles and values in which the legal institutions of the national system are founded on.”

• Zurgroup SA v Importaciones y Exportaciones Fenix SAS, Case No. 11001-02-03-000-2021-04294-00, Decision No. SC3650-2022, November 15, 2022, M.P. Aroldo Wilson Quiroz (“Zurgroup v Fenix”)

In Zurgroup v Fenix, the Court granted recognition of an award issued in an arbitral proceedings administrated under the rules of the Centro Nacional de Arbitrajes de Chile on November 15, 2022. The award found that Fenix – respondent in the arbitration – had breached an international sales contract and was thus obligated to make payment of the pending invoices plus interest. Considering its nonappearance in the arbitral proceedings and the fact that claimant had prevailed in the case, respondent had also to bear the costs of the arbitration.

Although respondent failed to participate in the arbitral proceedings, it did participate in the recognition proceedings. Before the Court, respondent acknowledged the existence of the debt in the benefit of claimant but alleged that the default was due to its grave financial situation, which had in turn led respondent to a restructuring process before Colombia’s Superintendence of Corporations. Accordingly, respondent requested the suspension of the recognition proceedings.

The Court based its ruling on the Arbitration Statute, the New York Convention and the Panama Convention, to which Colombia and Chile are parties. However, the Court restated the pro-recognition principle, according to which requirements in the law that are less strict vis-a-vis those in said conventions should be applicable. Based on this principle, the Court observed that it was not necessary to provide the duly authenticated original award, or a duly certified copy thereof, and the original arbitration agreement, or a duly certified copy thereof, under Article IV of the New York Convention, since the provisions of Law 1563 were more favorable towards recognition. Indeed, Article 111 of Law 1563 allows claimant to present an original version or a copy of the award and does not require the submission of the arbitration agreement.

The Court then noted that the requirements to grant recognition and enforcement were fulfilled. Once again, because respondent had not raised any grounds for annulment in these proceedings, the Court limited its analysis to the two grounds that can be autonomously reviewed:

• First, the Court concluded that the matter referred to arbitration fell under the concept of objective arbitrability because it arose from a specific legal relationship and was related to disposable rights.
• Second, the Court analyzed whether recognition of the award was contrary to Colombia’s international public policy. The Court reaffirmed the concept of international public policy and noted that the award under recognition did not violate Colombian international public policy. On the contrary, the Court found that the decision of the Tribunal was grounded on principles and rules regarding compliance with contractual commitments that were consistent with rules under Colombian law on the matter.
• Finally, regarding the decision on payment of interests, the Court observed that recognition was possible, provided that Colombian thresholds for payments in foreign currencies were not trespassed. The Court, however, did not address respondent’s request for suspension or its hardship allegations.

Conclusion

These decisions illustrate the process of analysis undertaken by the Court when assessing requests for recognition of foreign awards. First, the Court reviews the formal requirements provided in Law 1563, bearing in mind the pro-recognition principle. Second, and in the absence of allegations by the Parties on grounds to deny recognition, the Court autonomously reviews whether the award fulfills objective arbitrability requirement and is compatible with Colombia’s international public policy. In doing so, the Court’s analysis seeks to be consistent with the criteria set forth in prior decisions on the matter. For a comprehensive review of the Court’s recent jurisprudence on international arbitration, please see the compendium published by the Court in 2022.

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Despite the good results obtained for several years in its defense from investment arbitration claims, the Republic of Peru has become one of the countries with the highest number of arbitration claims filed against it. To date, nineteen cases have concluded, and twenty-three cases are pending resolution.

In December 2022, an award was issued in the Gramercy vs Peru case (Award) declaring that Peru has breached the Minimum Standard of Treatment (MST) required by customary international law, including the Fair and Equitable Treatment (FET) standard, guaranteed in Art. 10.5 of the Free Trade Agreement between the United States of America and Peru (Treaty).

The Award analyses in detail whether the measures taken by Peru to update the value of the “Bonos Agrarios” (Bonds) were contrary to the Treaty. To resolve this claim, the Tribunal first had to, among others, determine whether Grammercy was a protected investor, whether the Agrarian Bonds acquired by Gramercy are considered an investment under the Treaty and whether their acquisition by Gramercy constituted an abuse of rights.

We will first explain the origin of the Agrarian Bonds and the measures taken by Peru that gave rise to the claim, and then will describe how the Award substantially rejected Peru’s jurisdictional defences and decided that there was a breach of Treaty guarantees that justified compensation to the investor.

Background

In 2016, two American companies, Gramercy Funds Management LLC and Gramercy Peru Holdings LLC (Gramercy), both incorporated under the laws of Delaware, filed a claim under the Treaty, which entered into force on February 1, 2009.

The story of the case goes back to 2006 and 2008 when Gramercy acquired Bonds from their legitimate holders (local Peruvian individuals). All of these transactions took place in Peru, and the money Gramercy invested in the Land Bonds amounted to US$ 33.2. million. The Bonds were endorsed in favor of Gramercy and a notarized contract was executed with each bondholder.

The Bonds were issued by Peru in the 1970’s as a deferred payment to landowners for the land expropriation by the Peruvian Government, through the “Decreto Ley 17716 “Ley de Reforma Agraria 1969.”  This was part of several measures of a de facto government in power from 1968 until 1980.

Due to the effects of accumulated inflation, the Bonds practically lost all value. Although the government of President Fujimori issued a law (the Legislative Decree 653) at the beginning of the 90s, declaring that the value of the expropriated land should be paid in cash at market value, this law was repealed by Congress through Law 26597, which established that any outstanding bonds would be paid according to their face value (which, as indicated above, was practically worthless), even without applying indexation.

Several years before the acquisition by Gramercy, the Peruvian Association of Engineers filed a lawsuit before the Peruvian Constitutional Court (Court) to have the Law 26597 declared unconstitutional. In 2001, the Court through Judgment TC 2001 declared the Law 26597 unconstitutional, considering it had confiscatory effects. The Court concluded that the Law 26597 violated the principle of property and ruled that “principio valorista” should be applied for the Bonds readjustment. In sum, the “principio valorista” is a general principle of Peruvian law that seeks to preserve the value of a debt, protecting it against fluctuations caused by inflation (or deflation) that might affect the original balance of the parties’ rights and obligations. Despite the fact that this ruling applied the “principio valorista“, the Court did not give any further guidance on how revaluation of the Bonds was to be made.

After two years, in 2013 the Court issued an enforcement order. The general thrust of this resolution was that the Bonds should be revaluated and the correct methodology for such revaluation was the dollarization of the historic debt using the parity exchange rate.  The Resolución TC Julio 2013 required the Government to issue a Decreto Supremo (Supreme Decree) setting forth the procedure for identification and registry of bondholders, for the quantification of the outstanding debt, and the methodology for payment.

Allegedly aiming at giving an appropriate solution to the Bonds readjustment, between 2014 and 2017 Peru issued several Supreme Decrees, the last of them DS 242/2017, establishing the methodology and formulas to update the value of the bonds. Gramercy based its claim against Peru on the allegation that the various Supreme Decrees did not fulfil the alleged purpose; far from that, they constituted arbitrary measures in violation of the MST of aliens under Article 10.5 of the Treaty (Award, para. 683).

The Tribunal in a majority Award (with dissent of arbitrator Stern) dismissed Peru’s jurisdictional and admissibility objections detailed below. On the merits, the Tribunal declared that Peru breached Article 10.5 of the Treaty through issuance of DS 242/2017, by imposing an arbitrary method for revaluation and payment of the Bonds. As a consequence, the Tribunal ordered Peru to pay Claimants US$ 33,222,630, plus interest.

Peru’s jurisdictional objections

An important part of the Award was dedicated to analyzing and rejecting the various jurisdictional objections raised by Peru. Peru responded to Gramercy’s claims with an impressive list of objections of all kinds, and the Tribunal carefully resolved each of them. Particularly, whether:

1. the Bonds constituted a protected investment in terms of the Treaty;
2. Claimants were seeking the retroactive application of the Treaty or incurring in abuse of rights;
3. Claimants met the Treaty’s waiver requirement;
4. the claims were time barred;
5. Gramercy was an investor;
6. Peru could deny the benefit of the Treaty; and
7. Lack of authentication of the Bonds (a requirement to obtain payment under DS 242/2017).

Peru’s procedural objections were aimed at disqualifying Gramercy’s claim as not covered under the Treaty. Although Peru’s attack was made on many fronts, the strongest arguments were that the Bonds were not an investment due to their characteristics, and the acquisition made by Gramercy could not be subject to protection, because it was made through an abuse of rights.

Of relevance, on the first issue, the Award emphasized that the Bonds did qualify as an investment under the criteria of the Treaty and case law. It also stated that what was at issue in the claim were neither the measures taken in the 70s and 80s, nor the measures issued in the 1990 s, which were later declared unconstitutional in 2001. What Gramercy was challenging were the Supreme Decrees issued after it acquired the Bonds, and through which the State impacted the value that Gramercy would have recovered. The Award further distinguished the measures that were subject of the claim from its historical background and concluded that there was no dispute as to when the Bonds were acquired, and that the challenged measures could not have been foreseen by Gramercy. The Tribunal rejected that Gramercy had made its investment to accede to the Treaty, noting that it had even initiated regular proceedings before domestic judges to obtain the payment of the Bonds.

On the second issue, the Tribunal emphasized that abuse of rights is a principle recognized by civilized nations but concluded that the threshold for finding an abusive initiation of the investment is high and has not been proven in this case.

Peru’s substantive claims

In its analysis of the merits, the Tribunal concluded that the Supreme Decrees constituted measures against the MST provided under article 10.5.2 of the Treaty. The arbitrators highlighted that: (i) there was no explanation for the various changes to the Bonds payment that occurred in a short time between the four decrees; (ii) there was no documentation in the file explaining the amendments to the formulas introduced by Peru modifying the payment formulas; and (iii) neither Peru nor the experts had been able to explain the justification for these changes. In short, the Tribunal found that the measures adopted by Peru constituted a breach of the MST. In their words:

“these measures do not properly transpose the mandate received by the Constitutional Court but rather create an unjust regime, the sole purpose appears to be to minimize the amounts payable by the Republic to the holders of the Land Bonds, including (in particular) Gramercy” (Award, para. 986)

Finally, regarding the amount of compensation to be granted to Gramercy, the Tribunal indicated that:

“Claimants who have invested a total of US$ 32.2 million in the purchase of the Bonds are seeking compensation in a range between US$ 550 million and US$ 1.8 billion while the Republic says that any compensation must be based on the original amount invested, US$ 32.2 million, brought forward to present date or alternatively, on the amounts claimants would have collected under Supreme Decree 242/2017, US$ 33.57 million.” (Award, para. 1287).

However, the Tribunal did not agree with Claimants’ methodologies for the calculation of compensation. It rather adopted Respondent’s proposal stating that:

“In situations where the breach does not lead to the total loss of the investment, the purpose of compensation must be full reparation, i.e., to place the investor in the same pecuniary position in which it would have been if the State had not violated its obligations under the BIT” (Award, para. 1302).

In the present case, the investor bought the Bonds in 2006-2008 and paid a total of USD 33,222,630 at a time when the Judgment TC 2001 had established that the principal of the securities had to be revalued to compensate for inflation, but the methodology to be applied was still unsettled.

Claimants presented five different alternatives of compensation. The first of them was based in the allegation that the current value of their Bonds, applying CPI indexation plus interest accruing at a compounded rate of 7.22%, summed USD 1.8 billion. The other four alternatives proposed different valorisations and the lowest of them proposed a compensation of around USD 550 million.

The Tribunal found that compensation should respect the full reparation criteria, through payment of a sum of money which, delivered to the investor, produces the equivalent economic value which, in all probability, the investor would benefit, “but for” the State’s breach. Accordingly, the Tribunal rejected each of the Claimants’ proposals.

The Dissenting Opinion

In arbitrator Brigitte Stern’s dissenting opinion, she qualified the Award issued by the majority as utterly wrong in law and justice and considered it an abuse of process. For Stern, the Tribunal was wrong when they rejected Peru’s defense of abuse of rights as not being sufficiently proven, since she considered it is clear from the record that Gramercy acquired its investment when the dispute had already arisen and did so in order to take illegitimate advantage of the Treaty.

Conclusion

 The Gramercy v. Peru award confirms a change in the positive trend shown by Peru in previous years, as Peru has now been held responsible for the breach of an important investment treaty.

We have seen that although the Tribunal did not consider that all the guarantees mentioned by Gramercy had been violated, it did consider that the measures adopted by Peru, constituted a relevant breach of the MST, including the FET standard. However, it should be mentioned that the amount ordered by the Tribunal to compensate was far below from the amount requested by Gramercy and the Respondent’s defences were accepted, particularly on this issue.

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This two-part article provides an empirical analysis of hundreds of cases concerning the recognition and enforcement of foreign arbitral awards in Mainland China between 2012 and 2022. In summary, the results show that, (1) on average, the courts of the People’s Republic of China (“PRC”) handled more than 20 applications per year and rendered rulings on nearly half of the applications within 180 days, and (2) more than 90% of the foreign awards submitted to PRC courts were fully recognized and enforced. The findings of this case study highlight China’s commitment to upholding the New York Convention and building an arbitration-friendly judicial environment.

Part I presents statistics for recognition and enforcement rates, the geographical distribution of applicants, the amount claimed, the time taken for rulings, respondents’ participation, and information on the arbitral awards. Part II reviews the grounds for the refusal of recognition and enforcement by PRC courts and evaluates the PRC judicial practice.

Methodology

This study examines 203 rulings made by PRC courts concerning the recognition and enforcement of foreign arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”). It does not include any arbitral awards made in the Hong Kong Special Administration Region (“Hong Kong SAR”), the Macao Special Administration Region (“Macao SAR”), or Taiwan, as these arbitral awards are not considered foreign awards in the legal system of the PRC. Their recognition and enforcement are governed by the mutual arrangements between Mainland China and these regions rather than the New York Convention.

To identify relevant cases, the authors collected PRC court decisions published by PKULAW and Wolters Kluwer China which mention the Chinese translations of the New York Convention.¹⁾“承认和执行外国仲裁裁决公约”, “承认与执行外国仲裁裁决公约”, “承认及执行外国仲裁裁决公约” The search was limited to the cases whose dates of ruling were within the period between 1 January 2012 and 3 January 2023. The authors then compared and combined the results of the two databases, conducting an individual review of each court decision, and identifying 203 cases in relation to the New York Convention. Some cases had partial information unavailable, such as the filing date. To ensure objectivity, the cases with relevant missing information were excluded from the corresponding analysis requiring such information.²⁾Due to differences in sample sizes, screening criteria, and perspectives of analysis, there is a possibility that the number of cases identified by other studies may differ from the findings presented in this article. The contents and conclusions of this article are for reference only.

Statistical Results

Rate of Recognition and Enforcement

Out of 203 cases, 193 were taken into account for calculating recognition and enforcement rates. Among the ten applications that were excluded from this analysis, six applications were dismissed by PRC courts for reasons such as lack of jurisdiction, one application was transferred to a different court due to jurisdictional issues but no decision by the second court could be found, one case was terminated after the court found that it did not pertain to the recognition and enforcement of a foreign arbitral award, and in two cases, the exact dates of rulings were not disclosed.³⁾While the exact dates of ruling were not disclosed, it can be inferred from the official case numbers that these two cases were ruled between 2012 and 2022. Therefore, these two cases, while included in this case study in general, were excluded from this section. Based on the 193 cases, the rate of full recognition and enforcement is approximately 91%, and the rate of partial recognition and enforcement is approximately 2%. Only 7% of the applications were denied in full.

When reviewed by year, the number of applications for recognition and enforcement increased substantially in 2014 and reached its peak in 2016 and 2017. From 2018 onwards, the number of applications declined, with a rather steep decline in 2021 and 2022. However, the rate of successful recognition and enforcement remained consistently high, showing no significant variation from year to year.

Regarding the venue of the courts, 20 provinces and municipalities have received one or more applications for recognition and enforcement. Among them, Shandong Province received the largest number of applications (38), followed by Jiangsu Province (22), Shanghai Municipality (20), Zhejiang Province (20), and Guangdong Province (18). In the 11 provinces or municipalities with five or more cases, the rates of successful recognition and enforcement mostly span from 77% to 95%, with the rates in three regions reaching 100%, the rate in one region being 67%, and the average rate being 87%.⁴⁾In the other nine provinces and municipalities, the rates for successful recognition and enforcement were 100% in eight and 0% in one. Considering the small caseloads, these extremely high and low values present relatively small statistical significance in the calculation of the successful rates by region. However, it is important to note that the recognition and enforcement of an award primarily depends on the procedural regularity of the award, and a higher enforcement rate in a particular region does not necessarily indicate a stronger inclination of the local courts to recognize and enforce foreign arbitral awards. The following figure presents detailed regional statistics about recognition and enforcement in all 20 regions.

Geographical Distribution of Applicants

Applicants in the 203 recognition and enforcement instances came from 38 different countries and regions (including Mainland China and Hong Kong SAR). The three largest sources of applicants were Singapore, the United States, and the Republic of Korea.

Time Taken for Court Rulings and Amounts Claimed

After excluding 34 cases where the starting or closing dates were not disclosed, a total of 169 cases remained, allowing for the calculation of the time taken for PRC courts to rule on recognition and enforcement. The calculation included the period from the date of the submission or registration of the application at the court to the date when the court made the final decision. Among the 169 cases, 46% were concluded within 180 days, about 22% were concluded within 181-360 days, and approximately 24% were concluded within 361-720 days. Only about 8% of all cases underwent periods longer than 720 days.

In 79% of the 203 cases, respondents appeared in court, while 17% of cases were decided by default due to the non-appearance of the respondents after proper notice.

Out of the 203 applications, 202 were filed for execution against property. Among the 191 cases where the amounts of principal claimed were disclosed, approximately 42% had principal amounts claimed under CNY 5 million (USD 0.7 million). The other most frequent ranges in amount were CNY 10-20 million (USD 1.5-3.0 million) (17%), CNY 5-10 million (USD 0.7-1.5 million) (15%), and over CNY 100 million (over USD 14.9 million) (12%).

Based on a sample of 163 cases where both the duration and the principal amount claimed were disclosed, this study sought to explore the relationship between the two factors. Overall, there is no apparent correlation between the length of the enforcement process and the principal amount claimed. Regardless of the principal amount claimed, most cases were concluded within 360 days. As the period of case conclusion lengthens, the number of cases for all ranges of the principal amount claimed showed a declining trend.

Sources of Arbitral Awards

The 203 cases involved 148 (73%) institutional awards, 52 (26%) ad hoc awards and 3 (1%) arbitral awards with the relevant information undisclosed. The administering institution of one institutional award was not disclosed.

Among the 147 institutional awards where the institutions were disclosed, the arbitration institutions with the five largest numbers of awards were: the Singapore International Arbitration Centre (SIAC), International Cotton Association (ICA), International Chamber of Commerce (ICC), Korean Commercial Arbitration Board (KCAB), and International Commercial Arbitration Court at the Chamber of Commerce and Industry of Russian Federation (ICAC at the RF CCI). It is noteworthy that this study did not include awards from the Hong Kong International Arbitration Centre (HKIAC) because those arbitrations are typically seated in Hong Kong and enforced by PRC courts pursuant to the Supreme People’s Court’s Mutual Arrangement rather than the New York Convention. The following figure sets out all the arbitral institutions identified in the case study.

After excluding eight cases where the seats of arbitration were not disclosed and one case where the parties disputed the seat, resulting in the termination of the proceedings by the court, the seats of arbitration in 194 cases were analyzed. Among these cases, London (with 86 arbitral awards) and Singapore (with 43 arbitral awards) were the most frequently selected seats of arbitration. The following figure sets out the nationalities of the arbitral awards submitted to PRC courts for recognition and enforcement.

In addition, considering that London was the most commonly observed seat of arbitration in these awards submitted to PRC courts for recognition and enforcement, this study further examined the arbitration rules and administering institutions of the 86 arbitrations seated in London, finding that 43 (50%) were ad hoc arbitrations, 28 of which were conducted in accordance with the arbitration rules of the London Maritime Arbitrators Association (LMAA). The other 43 were institutional arbitrations, with the majority (30) being administered by the International Cotton Association (ICA).

Concluding Remarks

In the past eleven years, applicants from more than 30 different countries and regions have applied to PRC courts for recognizing and enforcing arbitral awards rendered in 18 jurisdictions. PRC courts have handled, on average, more than 20 cases each year. Although the number of applications decreased in 2021 and 2022, likely due to the COVID-19 pandemic and relevant restrictions, this article estimates that the number of applications will gradually recover as the pandemic comes to an end and the policy environment becomes more stable.

In general, the rate for successful recognition and enforcement from 2012 to 2022 reached 91%, which is a notably high proportion. Part II will explore the reasons for non-recognition and enforcement in the remaining cases.

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This post provides an analysis of 203 cases concerning the recognition and enforcement of foreign arbitral awards in Mainland China between 2012 and 2022. Part I presented statistics on recognition and enforcement rates, the geographical distribution of applicants, the amount claimed, the time taken for rulings, respondents’ participation, and the sources of arbitral awards. It revealed that, in the last 11 years, the courts of the People’s Republic of China (“PRC”) fully recognized and enforced over 90% of the foreign awards submitted, and they rendered rulings on nearly half of the applications within six months. Part II reviews the grounds for the refusal of recognition and enforcement by PRC courts and evaluates the PRC judicial practice.

The Report and Verification Mechanism for Non-Recognition and Enforcement

Since 1995, PRC courts have established and continually improved its report and verification mechanism for the non-recognition and enforcement of foreign arbitral awards.¹⁾See Notice of the Supreme People’s Court on Relevant Issues concerning Foreign-Related and Foreign Arbitration Addressed by the People’s Courts (1995), Relevant Provisions of the Supreme People’s Court on Issues concerning Report and Verification of Arbitration Cases under Judicial Review (2017), and Decision of the Supreme People’s Court to Amend the Relevant Provisions of the Supreme People’s Court on Issues Concerning Report and Verification of Arbitration Cases under Judicial Review (2021). Under this mechanism, if a lower court (which, in respect of the recognition and enforcement of foreign arbitral awards, should be an intermediate people’s court or a specialized people’s court) intended not to recognize or enforce a foreign arbitral award, it is required to report the case and its proposed grounds for non-enforcement to the high people’s court of its jurisdiction for review and approval. If the high people’s court agrees to the proposed non-enforcement, it must report the case to the Supreme People’s Court for further review and approval. The Supreme People’s Court generally renders opinions regarding the proposed non-enforcement in the form of a letter of reply. The final decision of the lower court shall align with the opinions provided by the Supreme People’s Court.

The case study reveals that out of the 17 decisions where applications for recognition and enforcement were fully (14 cases) or partially (3 cases) denied, the Supreme People’s Court issued public opinions for 12. For the remaining five decisions, no publicly available opinions from the Supreme People’s Court were found, possibly because they were communicated internally between courts.

In general, the report and verification mechanism allows the higher courts, especially the Supreme People’s Court, to guide the lower courts to properly apply the grounds for non-recognition and enforcement. It ensures consistent judicial practices that uphold the New York Convention and foster a more arbitration-friendly judicial environment for recognizing and enforcing foreign arbitral awards in China.

Reasons for Non-Recognition and Enforcement

Figure 11 below presents the grounds for non-recognition and enforcement in the 17 cases where recognition and enforcement were wholly or partially refused.

Out of the 14 decisions where the application for recognition and enforcement was denied in its entirety, nine were based on Article V(1)(a) of the New York Convention. The circumstances identified by PRC courts included (1) the incapacity of the parties to the arbitration agreement, (2) the lack of an arbitration agreement between the parties, and (3) the invalidity of an executed arbitration agreement. There are eight cases concerning the absence of an arbitration agreement due to parties’ incapacities or other scenarios, including that (1) a signatory of the arbitration agreement lacked the power to represent the party, (2) a party did not sign the version of the contract that contained the arbitration agreement, (3) the parties’ agreement on arbitration was later replaced by a different agreement on dispute resolution, (4) the applicant failed to prove the existence of an arbitration agreement (despite the contrary determination of the arbitral tribunal), and (5) the applicant failed to prove that the respondent was the same party as the signatory of the arbitration agreement. In the one case where the arbitration agreement was declared invalid by the court, the dispute was between two domestic parties concerning a matter without any foreign connection, but the parties had submitted the dispute to foreign arbitration. The PRC court ruled that the arbitration agreement referring a purely domestic dispute to foreign arbitration should be deemed invalid.

Article V(1)(c) ranks as the second most common ground for non-recognition and enforcement. The specific circumstance was that the awards contained decisions beyond the matters submitted to arbitration. It was the basis for PRC courts’ denial of the recognition and enforcement for three awards in part and of one award in whole in view that the matters decided were inseparable.

The other grounds for non-recognition and enforcement included the composition of the tribunal or the arbitral procedures violating the parties’ agreement or the law of the seat (Article V(1)(d)), the awards being not binding or already annulled or suspended (Article V(1)(e)), and a violation of public policy (Article V(2)(b)).

In respect of enforcing foreign arbitral awards, courts in each jurisdiction are generally cautious about applying the public policy exception so as to avoid potential abuse through extensive interpretation of public policy. In the 203 cases analyzed, only one award was denied recognition and enforcement based on public policy, accounting for less than 1% of all applications. This reflects the cautious approach of PRC courts in applying the public policy ground in these 11 years. In that particular case, the contents of the award conflicted with the findings of a PRC court decision that had already taken effect. The court decided that the recognition and enforcement of the award would lead to contradictory judicial judgments based on the same legal facts, which would violate the public policy of maintaining the consistency and unification of national legal concepts and judicial judgments.

Concluding Remarks

Based on the case study, the number of foreign awards not recognized and enforced in China is quite low. The primary ground for non-recognition and enforcement is a lack of a valid arbitration agreement, accounting for more than half of all non-enforcement decisions. Non-enforcement on the other grounds set out in Article V of the New York Convention is rare. Overall, the results reflect the fundamental judicial idea of PRC courts of supporting arbitration and actively enforcing foreign arbitral awards.

With the opening-up of the arbitration industry in China accelerating in recent years, more efforts have been focused on building an arbitration-friendly judicial environment. From the perspective of the recognition and enforcement of foreign arbitral awards, the statistics demonstrate progress in that regard. In addition to the low rate of non-recognition and enforcement, other results of the case study also indicate the improvement of the judicial environment. Here are two features presented in Part I of the article that are worth mentioning again.

First, approximately half (46%) of the recognition and enforcement cases were concluded within 180 days and only a small number (8%) exceeded 720 days, which indicates conscious efforts made by PRC courts to guarantee and improve the efficiency of recognition and enforcement. Second, PRC courts with experience in recognizing and enforcing foreign arbitral awards are becoming geographically diverse. While the courts in the eastern coastal area (such as Shandong, Jiangsu and Shanghai) and Guangdong-Hong Kong-Macau Greater Bay Area have recognized and enforced a larger number of foreign arbitral awards, the courts in inland middle and northeastern China have also begun to accumulate relevant experience. The geographical diversity signifies PRC courts’ growing awareness of the New York Convention and the readiness for the recognition and enforcement of foreign arbitration awards.

In general, the statistics reflect the effective implementation of the New York Convention by PRC courts and demonstrate China’s efforts in building an arbitration-friendly judicial environment.²⁾With special thanks to Kurtis Lee for assistance in preparing the initial English version of this article. A similar version of this article in Chinese was published on the official website of Zhong Lun Law Firm, see <https://www.zhonglun.com/Content/2023/05-29/1412503823.html>.

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The Vienna International Arbitral Centre of the Austrian Federal Economic Chamber (VIAC)’s Selected Arbitral Awards are intended to provide a unique and valuable insight into a diverse range of important and challenging procedural and substantive issues, which have arisen in international arbitration under the auspices of the Vienna Rules since its inception in 1975. The first volume of selected arbitral awards was published in 2015 on the occasion of VIAC’s 40th anniversary and consisted of 60 awards. It was first published in hard copy and has since also been made available on the Kluwer Arbitration database. It served as VIAC’s response to the increasing call of parties, counsel and arbitrators alike for greater transparency in arbitration through enhanced access to arbitral awards and their reasoning.

Given the great success of the first publication, VIAC is honoured to continue its valuable collaboration with Kluwer Arbitration. The second set of arbitral awards will be made available online through a special edition of the ITA Arbitration Report and the Kluwer Arbitration database. This second edition builds on the first volume and is intended to provide a modest but concrete step towards fostering greater familiarity, predictability and confidence in relation to the international arbitral process, including the award as its end result.

It is essential to note that VIAC has, as a fundamental element of this initiative, ensured the privacy and confidentiality of the parties to the respective arbitrations by publishing summarised abstracts of awards with party names and other identifying factors redacted accordingly.

Structure and Content

The second volume will contain 25 anonymised summaries of VIAC arbitral awards rendered after 2015, the cut-off date for the first volume of this publication. The case numbers follow on from the case numbers in Volume 1, i.e. the first case in Volume 2 is referred to as “C 61”.

As with the first volume, when selecting arbitral awards VIAC filtered the most interesting procedural and often substantive issues under the VIAC Rules of Arbitration and Mediation (the Vienna Rules). We adhered to the original labeling of the award e.g. as interim or partial award as assigned by the arbitral tribunal and also as much as possible to the original wording of the awards. Quotes and references in the abstracts are taken directly from the awards, i.e. reflect the exact wording of  the respective sole arbitrator or arbitral tribunal. Accordingly, VIAC does not assume any liability for the correctness of any such quotes or references.

The structure of the publication follows a uniform structure comparable to the structure in the first volume.

The cases refer to different versions of the Vienna Rules. Reference to “Vienna Rules” indicates the relevant Article of the Vienna Rules 2021, while references to previous versions are indicated as such. The abstracts include endnotes stating the corresponding provision of the Vienna Rules 2021 as a comparison.

All abstracts were prepared in the original language of the award, i.e. either English or German. The German abstracts were translated into English by the VIAC Secretariat.

Volume 1 included 36 annotations drafted by renowned arbitration experts on particularly important and recurring arbitration issues. Insofar as the cases in Volume 2 relate to these annotations, references are contained at the end of the respective case summary. VIAC intends to organise updated / additional annotations based on the awards contained in Volume 2, these annotations will be published on a rolling basis.

VIAC

VIAC was established in 1975. In the Preface of Volume 1, DDr. Werner Melis, the then Honorary President of VIAC describes the history and evolution of VIAC.

VIAC continues to grow and evolve, always building on its solid foundation.

Since the publication of the first volume in 2015, VIAC has extended its scope to now include the administration of purely domestic disputes. Based on the amendment to Section 139 (2) WKG (BGBl I No 103/1998 as amended by BGBl I No 73/2017), the administration of all domestic arbitrations has been bundled at VIAC, i.e. the old arbitration courts of the Regional Economic Chambers have been dissolved and their competences transferred to VIAC, with transitional provisions included in the Vienna Rules. VIAC is now eager to expand the number of purely domestic arbitration cases under its rules.

The Vienna Rules have undergone two amendments. The first amendment came into force in 2018 to reflect VIAC’s ability to, amongst others, administer purely national disputes as mentioned above. The second amendment of the Vienna Rules entered into force on 1 July 2021. The latter revision was triggered by the drafting of the new VIAC Rules of Investment Arbitration and Mediation, which also entered into force on 1 July 2021.

As of the date of publication VIAC boasts its highest case load to-date. Currently, there are 79 pending cases with an aggregated amount in dispute of EUR 1.9 billion being administered by VIAC. The vast majority of cases are international arbitration cases (85 %), followed by domestic arbitration cases (13 %) and investment and mediation cases. Compared to November 2022, the number of new cases filed at VIAC have increased by 53 %.

Acknowledgments

This publication has been realised by the tremendous effort of past and current team members of the VIAC Secretariat. A project of this size is quite an undertaking for such a small team and VIAC recognises and appreciates the efforts of each individual that brought this project to fruition.

The project was initiated by VIAC’s former Secretary General Alice Fremuth-Wolf and pursued by VIAC’s current Secretary General, Niamh Leinwather, both of whom recognised the necessity for more transparency in international arbitration and answered the call of the arbitration community.

The Austrian Arbitration Association (ArbAUT) provided immense support in breathing life into this initiative. This close cooperation with VIAC for the benefit of Vienna as a place of arbitration is very much appreciated.

Several team members of the VIAC Secretariat namely Jessica Puhr, Klaudia Sood, Ema Potocnik, Veronika Macha, and former team members Stephan Karall and Silvia Freisehner were responsible for annonymising and summarising the respective arbitral awards alongside their daily work load. Heartfelt thanks goes to each of them.

Johanna Kathan-Spath deserves a special mention for reading and analyzing the awards, preparing and organizing the draft abstracts, as well as editing several parts of the publication.

Sincere thanks go to VIAC’s Deputy Secretaries-General. The project was first supervised by Elisabeth Vanas-Metzler who passed it on to Anna Förstel-Cherng upon her appointment. Anna has shown extraordinary commitment in the last six months in reviewing and revising the final version of the abstracts and simply getting this project over the finishline.

Finally, we are extremely grateful to Crina Baltag and Vincent Verschoor on behalf of Wolters Kluwer / ITA, for fostering this project, providing VIAC with the requisite support and for their patience. It has been a pleasure to collaborate with you.

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The pro-enforcement presumption is now well-established in Pakistan, where the doctrine continues to be regularly tested before the Pakistani courts. This blog post analyzes the latest developments under the 1958 New York Convention (“Convention”), including international precedents, and relevant Pakistani law on the recognition and enforcement of interim, foreign arbitral awards in Pakistan.

The Convention

The Convention does not define the term “award.” The travaux preparatories of the Convention titled “Report by the Secretary General” dated 31 January 1956 indicate that whilst the contracting states considered including a definition of the term ‘arbitral award’ but, later, each Contracting State was given the flexibility to define its respective parameters.

The UNCITRAL Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“Guide”) supports the above position and provides that “it is up to the courts of the Contracting States where recognition and enforcement is sought to determine when a decision can be characterized as an ‘arbitral award’ under the New York Convention.” As per the Guide, “in order for a decision to be considered an ‘arbitral award’ under the New York Convention it needs to (i) be made by arbitrators; (ii) resolve a dispute or part thereof in a final manner, and (iii) be binding.” Thus, as per the Guide, both the finality of an award and its binding nature are the guiding principles for enforcing awards, which, as discussed below, includes interim awards.

International Precedents

Internationally, there are two types of precedents pertaining to the enforcement of interim awards.

The first type involves judgments that have declined enforcement of interim awards due to their interlocutory nature and lack of finality. In Anand Prakash v. Assistant Registrar AIR 1968 All 22 and Raffles Design International v. Educomp Professional Education IA25949/2015, the Allahabad and Delhi High Courts separately held that interim injunctions and emergency awards were interlocutory in nature and not enforceable as interim awards. In Resort Condominiums International Inc. v. Ray Bolwell, Mot No.389 of 1993, the Supreme Court of Queensland, Australia held that interlocutory orders could not be enforced as interim awards because the issues had not been adjudged with finality. This position is consistent with Western Technology Services International Inc. (Westech) v. Cauchos Industriales SA (Cainsa) (Supreme Court of Chile), Living Consulting Group AB (Sweden) v. OOO Sokotel (Russian Federation) (Presidium of the Highest Arbitrazh Court, Russian Federation), Hall Steel Company v. Metaloyd Ltd. (District Court, Eastern District of Michigan), Drummond Ltd. v. Instituto Nacional de Concesiones (Supreme Court of Justice, Colombia) and Alcatel Space, S. A. v. Alcatel Space Industries (District Court, Southern Division of New York).

Conversely, the second set of jurisprudence demonstrates that interim awards can be enforced on the basis of finality. In CE Int’l Res. Holdings LLC v. SA Minerals Ltd, 12-CV-8087(CM) (SN), 2013 WL 2661037 (S.D.N.Y. June 12, 2013), a U.S. District Court enforced an award of temporary equitable relief as it was separable from the merits of the arbitration. This is consistent with Sperry Intern. Trade Inc., v. Gov’t of Israel, 532 F. Supp. 901 (S.D.N.Y. 1982) and Sharp Corp. v. Hisense USA Corp., 292 F. Supp. 3d 157 (D.D.C. 2017), in which injunctions (including emergency restraining orders) issued in arbitrations were enforced as interim awards. The same approach is noted in Jkx Oil & Gas Plc v. Ukraine by the Kyiv City Court of Appeal, Ukraine and in Doosan Heavy Industries and Construction v. Damietta International by the Cairo Court of Appeal (as discussed in a prior blog post). The judgment of Ecopetrol S.A. v. Offshore Expl. & Prod. LLC, 46 F. Supp. 3d 327 (S.D.N.Y 2014) enforced a supplemental award restraining the respondent to satisfy an interim award with escrowed funds. Another example concerning the deposit of security amount being enforceable as an interim award is Banco de Seguros del Estado v. Mutual Marine Offices, Inc., 230 F. Supp. 2d 362 (S.D.N.Y. 2002).

Thus, consistent with the Guide, the test applied by courts in various jurisdictions pertains to the “finality” of interim awards.

The Pakistani Law Approach

Pakistan ratified the Convention through the Recognition and Enforcement (Arbitration Agreements and Foreign Arbitral Awards) Act, 2011 (“2011 Act”). Section 2(e) of the 2011 Act defines “foreign arbitral award” to mean an “award made in a Contracting State and such other State as may be notified by the Federal Government, in the official Gazette.” The legislature obviously did not give much thought to the definition except that the award has been made in a Contracting State. The parameters of a foreign arbitral award are thus open to judicial interpretation including whether such definition can extend to an interim award.

The issue of enforceability of interim awards was recently adjudged by Mr. Justice Hassan Aurangzeb of the Islamabad High Court in China Water & Electric Corporation v. NHA 2023 CLD 1365. This is an important judgment because it does not rely on “finality”, as envisaged in the Guide or the international precedents. Rather, it explores the concept of the “binding” nature of the award. This is a fresh approach to enforcing interim awards.

The matter pertained to a construction dispute in which CWE sought enforcement of an interim award passed by Mr. Peter H. J. Chapman. The arbitrator held that NHA was in breach of the contract by not complying with the Dispute Adjudication Board’s (“DAB”) decision and was obliged to pay to CWE an amount of PKR 406,068,695 plus 6% interest per annum on any unpaid amounts. In the judgment, Aurangzeb J first held that DAB’s decision had a binding effect. Aurangzeb J next held that the Convention does not differentiate between interim or final awards and in the particular case, as per Article 2(v) of the ICC Rules, an award includes interim, partial or final awards. He further held that the finality of the award is not a requirement in the 2011 Act or the Convention. Rather, under Article V(1)(e) of the Convention, enforcement may be refused if the award has not yet become “binding.” Therefore, as long as the interim award is binding, it is enforceable in Pakistan. An interim award can be modified at a later stage in the final award but until such a time, the interim award remains binding on the parties. Judge Aurangzeb relied on PT Perusahaan Gas v. CRW Joint Operation 2015 SGCA 30 which was factually similar and did not accept the reasoning in Resort Condominiums’ case.

This new approach is an important development towards establishing Pakistan’s pro-enforcement bias. It establishes that interim awards are equally binding as final awards. Since interim awards are binding, an award creditor has the right to enforcement under the Convention. It also establishes that the enforcement of interim awards can only be refused under Article V of the Convention. In fact, in Pakistan, the enforcement of such an award cannot be refused under Section 7 of the 2011 Act unless any grounds of Article V of the Convention are met.

Conclusion

To conclude, both international precedents and Pakistan courts appear to be moving in the right direction as they are establishing pro-enforcement bias. However, the step taken in Pakistan to enforce interim awards based on their binding nature is pragmatic, and also supported by the Convention. It reinforces the doctrine of least intervention. The threshold to challenge an interim award on the basis of its finality is lower in comparison to establishing whether such an interim award is binding or not. As seen from the precedents above, international courts may have a larger room to intervene and decline enforcement of an interim award on the basis of finality. However, in the author’s opinion, it would be difficult for international courts (and award debtors) to decline enforcement of interim awards on the pretext that such awards are not binding. It is therefore important that international courts reconsider the concept of finality and explore whether interim awards are enforceable if such awards are binding in nature.

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Large arbitral awards have generally given rise to multi-jurisdictional post-award litigation (see Yukos). The Deutsche Telekom v India saga is a similar instance, with the Republic of India (“India”) having challenged the arbitral awards before the Swiss Federal Supreme Court (“seat court”) and the courts in Germany, Singapore, and the United States (“US”) (“enforcement courts”). The saga, which has run for more than 10 years, has generated considerable jurisprudence on the interplay between awards that are under consideration by courts at both the arbitral seat and potential enforcement jurisdictions, as well as the preclusive effect of prior proceedings before enforcement courts.

Procedural History

In 2017, Deutsche Telekom AG (“DT”) successfully obtained an interim award on jurisdiction and liability (“Interim Award”) against India in a Geneva-seated UNCITRAL arbitration under the Germany-India Bilateral Investment Treaty (“BIT”). India applied to set aside the Interim Award before the seat court, but was unsuccessful (“First Swiss Proceedings”).

In 2020, DT was successful in the final award on quantum (“Final Award”) and the tribunal ordered India to pay USD 93.3 million to DT. In 2021, DT sought to enforce its award in Germany, Singapore, and the US (i.e., the District of Columbia and New York).

In May 2022, India applied to the seat court for a revision of the Interim Award and Final Award based on its discovery of subsequent “material facts or conclusive evidence” (“Second Swiss Proceedings”). India further requested that the “two arbitral awards be set aside and that the dispute be referred back to the arbitral tribunal in Geneva for a new assessment” (Swiss decision, p. 4) (see prior Blog post for the substance of some of the arguments from these proceedings).

India sought to stay the proceedings before the enforcement courts, while awaiting the outcome of the Second Swiss Proceedings. This marked the start of divergent approaches as set out below.

Grant of Stay of Proceedings by US Courts

The US District Court for the District of Columbia (“DC Court”) granted a stay of proceedings on the basis that (i) a stay would avoid expensive and duplicative litigation to “unwind the award”; and (ii) the Second Swiss Proceedings would conclude soon (in six to 10 months) (DC Court decision).

Before the US District Court for the Southern District of New York (“NY Court”), DT (together with other Plaintiffs who had won a separate arbitration award against India arising under the Mauritius-India BIT) sought to enforce their awards against Air India, arguing that the latter was an alter ego of India. The NY Court ordered a stay of proceedings pending the DC Court’s ruling, noting that the two US proceedings were duplicative although there were different respondents in each action (i.e., Air India versus India) (NY Court decision).

Enforcement of Award in Germany and Singapore

In contrast to the US proceedings, the Higher Regional Court of Berlin (“Berlin Court”) and the Singapore International Commercial Court (“SICC”) declined to stay proceedings and held that the award could be enforced. Both courts looked beyond the mere existence of ongoing set-aside proceedings at the seat court, and instead examined the substance of the arguments raised in the Second Swiss Proceedings. Both courts considered that India was repeating, in the Second Swiss Proceedings, the arguments raised in the First Swiss Proceedings (Berlin Court decision, p. 13 and SICC decision, para. 177).

In balancing the interests of the award creditor (DT) against those of the award debtor (India), the Berlin Court considered the low likelihood of India succeeding in the Second Swiss Proceedings (p. 13). The SICC shared a similar view, finding that (i) the arguments decided in the First Swiss Proceedings were subject to res judicata as a matter of Swiss law; and (ii) there was no new material evidence to support India’s request to revise the award in Switzerland (SICC decision, paras. 150-52, 174-80). Accordingly, the SICC concluded that there was no real risk of inconsistent judgments rendered in Singapore (by the enforcement court) and Switzerland (by the seat court).

However, the Berlin Court and the SICC differed when considering the effect of the seat court’s decision on enforcement proceedings. The Berlin Court did not accord preclusive effect to the First Swiss Proceedings, finding that the seat court’s decision “does not release the court in the enforceability declaration proceedings from its own examination of the facts.” Conversely, the SICC found that as a matter of Singapore law, issue estoppel would apply, leading to a form of negative res judicata, thereby precluding India from raising arguments that were rejected by the seat court (SICC decision, para. 153).

Unsuccessful Second Swiss Proceedings and Appeals in Germany and Singapore

On 8 March 2023, India’s application in the Second Swiss Proceedings was rejected. India further appealed the decisions of the Berlin Court and the SICC to the respective apex courts.

In September 2023, the German Federal Court of Justice (“FCJ”) rejected India’s appeal, which was based on a new argument that the arbitration agreement in the Germany-India BIT violated the Court of Justice of the European Union’s decision in Achmea. The FCJ declined to apply the Achmea rule to BITs concluded between an EU Member State and a third country, and rejected India’s challenge  (Beschluss des Bundesgerichtshofs I ZB 12/23, and a discussion here).

In December 2023, the Singapore Court of Appeal (“SGCA”) likewise rejected India’s appeal and upheld the enforcement of the award (SGCA decision), as examined below.

The SGCA Further Elucidates the Preclusive Effect of Prior Proceedings

The SGCA decision sheds light on the effect of prior set-aside and enforcement proceedings on the enforcement of international arbitral awards in Singapore. Its reasoning is noteworthy in two aspects: (i) transnational issue estoppel; and (ii) the “primacy” principle.

(i) Transnational Issue Estoppel

Before the SGCA, DT’s primary argument was that transnational issue estoppel precluded India from raising the same arguments that were determined by the seat court (SGCA decision, para. 50). The SGCA agreed.

As set out above, the lower court (the SICC) had recognised that issue estoppel applied to preclude India from raising, in the Singapore enforcement proceedings, arguments that had been raised before the seat court. However, the SICC did not clarify the exact doctrinal basis for its analysis. It appeared to have been relying on Merck Sharp & Dohme Corp v Merck KGaA [2021] 1 SLR 1102 (“Merck”), which was a case on the enforcement of foreign court judgments, i.e., not in the international arbitration context (SICC decision, para. 138).

In its decision, the SGCA expressly confirmed that transnational issue estoppel and the Merck doctrine extends also to the international arbitration context. This is therefore the first instance in which a Singapore court has made this extension explicit.

The SGCA upheld the test in Merck, finding that transnational issue estoppel applies to prior set-aside proceedings where there is (i) a final and conclusive decision on the merits by a competent court (i.e., the arbitral seat) that has jurisdiction over the award debtor; (ii) an identity of parties; and (iii) an identity of subject matter. Where all three elements are met, parties would be estopped “from re-litigating points that were previously raised and determined.” As all elements were satisfied in this case, the SGCA held that India was precluded from re-litigating grounds that had been rejected by the seat court.

The SGCA’s decision brings Singapore law in further alignment with English law, by recognising that issue estoppel could arise out of the seat court’s decision (as required by the facts that arose in this case). However, as noted by the SGCA, English law goes further as it recognises that issue estoppel could also arise in the context of two enforcement courts (Diag Human SE v The Czech Republic [2014] EWHC 1639 (Comm); SGCA decision, para. 81). The SGCA then chose to leave open the question of whether issue estoppel would apply between two enforcement courts (SGCA decision, para. 92).

(ii) Primacy

DT’s secondary argument was that even if issue estoppel did not apply, the SGCA should nonetheless accord “primacy” to the decision of the seat court (SGCA decision, para 50). The SGCA’s discussion of the “primacy” principle was strictly obiter as it had already decided that transnational issue estoppel applied in this case (SGCA decision, paras. 4, 120).

The SGCA suggested that under the “primacy” principle, a seat court’s decision on matters relating to the validity of an award would be “presumptively determinative” before an enforcement court. It offered four reasons for applying the “primacy” principle in Singapore: the principle (i) recognises the seat court’s unique role in supervising the arbitral award and aligns with the “territorialist view” of arbitration (which Singapore subscribes to); (ii) advances judicial comity; (iii) gives weight to the parties’ choice of the arbitral seat; and (iv) promotes the finality of awards (SGCA decision, para. 121). On this point, International Judge Lord Mance disagreed on the need to have a separate “primacy” principle, considering the existence and flexibility of the estoppel doctrine (SGCA decision, paras. 199-202).

The SGCA also outlined three exceptions to the application of the “primacy” principle, two of which are based on due process concerns and public policy considerations of the enforcement court, and are therefore broadly aligned with Article V(1)(b) and Article V(2)(b) of the New York Convention. The last exception allows the enforcement court to disapply the “primacy” principle if the seat court’s decision appears to be “plainly wrong”. This could allow an enforcement court to re-examine the legal reasoning of the seat court and undermine the finality of the arbitral award. However, as the SGCA noted, where the line should be drawn is subject to future jurisprudential development (SGCA decision, para. 130).

Concluding Remarks

The multi-jurisdictional litigation in the DT v India case illustrates the difficulties for courts to maintain consistent approaches in parallel set-aside and enforcement proceedings. Enforcement courts have been shown to balance the interests of award creditors against those of award debtors differently when deciding whether to stay proceedings. The SGCA’s jurisprudential framework on transnational issue estoppel and the “primacy” principle helpfully offers greater certainty for award creditors looking to enforce arbitral awards in Singapore where award debtors have challenged arbitral awards at the seat. However, as the court noted, the exact contours of these doctrines would need to be refined over time.

The post only reflects the views of the author, and not of her firm or the firm’s clients. The author further discloses that while her firm (Freshfields) represented Deutsche Telekom AG in the Geneva-seated arbitration, she has had no personal involvement in the arbitration nor the post-award litigation. She is not privy to any confidential information and has relied only on public sources for her analysis.

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