The English High Court has refused an application under s.103 of the Arbitration Act 1996 (“AA 1996“) to set-aside an order allowing for the enforcement of an ICC award in England. The decision is the culmination of a long-running dispute in which the award debtor has sought to set-aside the award and prevent enforcement in France, the Seychelles and England. The judgement is the latest illustration of the pro-enforcement approach of the English courts with respect to international arbitral awards, particularly where an award debtor has made efforts in multiple jurisdictions to prevent enforcement against it. While the outcome is not surprising, the level of attention given to the grounds raised by the award debtor, even in the face of issue estoppel, demonstrates the importance placed by the English Court on its New York Convention obligations.
Tag: New York Convention
HONG KONG COURT REFUSES SET ASIDE, REJECTS PUBLIC POLICY CHALLENGE
In Paloma Co. Ltd. v. Capxon Electronic Industrial Co. Ltd [[2018] HKCFI 1147], the Hong Kong Court of First Instance rejected a public policy challenge to a New York Convention Award rendered by a tribunal in Japan. The Respondent applied to set aside leave to enforce the Award, alleging that the tribunal’s conduct was biased, and violated basic concepts of morality, justice and public policy.
Deputy Judge Keith Yeung found that there was no evidence of bias on the part of the tribunal, nor any error or matter which would warrant setting aside the award. Yeung DJ relied on Hebei Import & Export Corp. v Polytek Engineering Co. Ltd. [(1999) 2 HKCFAR 111] to reiterate that, in order to refuse enforcement of an award under the New York Convention, the award must be so fundamentally offensive to the jurisdiction’s notions of morality and justice that this could not reasonably be overlooked. In the absence of such conflict, the Court would not look into the merits, nor review any alleged errors or reasoning of the tribunal.
Join us in Singapore to celebrate 60 years of the NY Convention
Enforcement of arbitration awards in SE Asia
This year marks the 60th anniversary of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, commonly referred to as the “New York Convention”. As one of the most successful international treaties of the 20th century, and a primary tool in the promotion of arbitration worldwide, the Convention established a regime to facilitate international enforcement of arbitration awards in 159 countries.
This event will discuss the impact of the Convention in Southeast Asia, and whether its objectives have been successful in practice. Following a keynote address by Justice Anselmo Reyes of the Singapore International Commercial Court, a series of presentations and panels will discuss the history of the Convention; how it shapes the day-to-day conduct of international arbitration; practical experience of enforcement in ASEAN states (with data from a new survey); and future prospects for similar regimes that aim to support international litigation and mediated settlements.
This event is jointly hosted by Singapore Management University (a premier university, internationally recognised for world-class research in the field of international arbitration); Singapore International Dispute Resolution Academy (a non-profit organization supported by the Ministry of Law, and Asia’s global thought leader for learning and research in negotiation and dispute resolution); and Herbert Smith Freehills (one of the world’s leading law firms, with a global reputation for international arbitration).
The event will be a SILE accredited CPD activity.
For more information on the programme and speakers, please click here.
Date: Tuesday, 12 June 2018
Time: Registration: 4:30pm
Event: 5:00pm to 7:30pm, followed by a cocktail reception
Venue:
NTUC Centre,
1 Marina Boulevard
Level 7, Stephen Riady Auditorium @ NTUC
Singapore 018989
Please click here to view map
RSVP: To respond to this e-invitation, click here
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Please RSVP by Tuesday, 29 May 2018 to secure your seat. Spaces are limited and will be offered on a first come, first served basis.
Sudan becomes 159th contracting state to the New York Convention
Sudan has become the 159th Contracting State to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. On 26 March 2018, Sudan deposited its instrument of accession to the Convention with the UN Secretary General. In accordance with its article XII (2), the Convention will enter into force in Sudan on 24 June 2018. Continue reading
UK Supreme Court rules that no security may be ordered when challenging enforcement of arbitration awards
The UK Supreme Court has overturned a Court of Appeal decision requiring Nigerian National Petroleum Corporation ("NNPC") to provide US$ 100m in security while the case was remitted to the Commercial Court to decide on IPCO (Nigeria) Limited's ("IPCO") challenges to enforcement of an award. The Supreme Court held that while the English courts had the express power to make such orders for security under section 103(5) of the Arbitration Act 1996 (the "Act") in the context of an adjournment pending a challenge to the award in the jurisdiction where it was made, the present proceedings rather concerned a challenge to the enforcement of the award under section 103(3) of the Act. As such, no power to order security was available under the Act or the scheme of the New York Convention 1958 (the "Convention").: IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation [2017] UKSC 16.
The Supreme Court also provided guidance on the relationship between the Act and the New York Convention (the "Convention"), on which the relevant sections of the Act are based.
English Court refuses to allow challenge to arbitral award to be discontinued
The English Court has recently held that a party will not be able to discontinue appeal proceedings challenging an arbitral award in circumstances where to allow it do so would: (i) circumvent the jurisdiction of the supervisory court; and/or (ii) rely on the same appeal grounds at the recognition and enforcement stage.
In National Iranian Oil Company (NIOC) v Crescent Petroleum Company International Ltd (CP) & Crescent Gas Corporation Ltd (CG), NIOC had sought to discontinue its appeal and provided an undertaking stating that it would not resist recognition or enforcement of the arbitral award by relying on arguments based on the grounds of the appeal. The Court found that CP and CG (together Crescent) were justified in rejecting the undertaking as the terms allowed NIOC to make the same allegations in another forum. The Court also found that even if a sufficient undertaking was provided, it would not preclude the risk that NIOC could resist enforcement in a New York Convention court.
The Court set aside the notice of discontinuance and considered the grounds of appeal on the merits, even though NIOC did not attend the hearing. The grounds were dismissed and costs were awarded on an indemnity basis.
This decision makes clear that the English Court will not permit grounds of appeal to be preserved as a basis for resisting further enforcement or recognition proceedings. The Court will carefully consider any undertaking to court to ensure this is not the case. This is in line with the English Court's pro-enforcement bias and the view that the court of the seat is the appropriate forum in which to challenge the award.
Angola becomes 157th Contracting State to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Angola has ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Its ratification was endorsed domestically via resolution No. 38/2016, published in the Official Gazette of Angola on 12 August 2016. Under Article XII(2) of the New York Convention, the ratification will take effect on the 90th day after deposit by Angola of its instrument of ratification with the Secretary-General of the United Nations.
Angola has one of the world’s fastest growing economies and in 2015 was reported by the US State Department to be sub-Saharan Africa’s second largest oil exporter. Ratification of the New York Convention represents a further step by Angola in fostering and promoting a stable investment climate. It follows the ratification of the Private Investment Law in August 2015, the main purpose of which was to simplify the procedure for national and foreign investment and to provide tax and other incentives.
The Angolan Arbitration Law (Law 16/2003 of 25 July) (the Arbitration Law) is largely based on the old Portuguese Arbitration Law (Law 31/1986 of 29 August) and bears considerable similarity to the UNCITRAL Model Law. The Arbitration Law provides for domestic and international arbitration.
The ratification of the New York Convention will provide reassurance for parties investing or intending to invest in Angola that they can resolve their Angola-related disputes by means of arbitration seated outside Angola, and that arbitral awards made in relation to such disputes should be recognised and enforced in Angola. Precisely how the Convention obligations will be implemented of course remains to be seen over the coming months, including in the context of the application of the Arbitration Law to those obligations, and the practical commercial and judicial acceptance of arbitration as a method of resolving disputes going forward.
Foreign investors should also continue to consider the application of the Private Investment Law in relation to arbitration. The Private Investment Law permits the arbitration of disputes that arise from investment contracts between the Angolan state (represented by the direct or indirect administration body to which authority is delegated) and the private investor (Article 46(3)). However, if arbitration is chosen as the form of dispute resolution for such investment contracts, it must take place in Angola, and the law applicable to the substance of the contract and the proceedings must be Angolan (Article 46(4)).
Herbert Smith Freehills launches the second edition of its ground-breaking Guide to Dispute Resolution in Africa in September 2016. The Guide covers all 54 of Africa's diverse jurisdictions.
For further information, please contact Peter Leon, Partner, Andrew Cannon, Partner, or Hannah Ambrose, Professional Support Consultant or your usual Herbert Smith Freehills contact.
Peter Leon
Partner
+27 11 282 0833
Andrew Cannon
Partner
+ 33 1 5357 6552
Hannah Ambrose
Professional Support Consultant
+44 20 7466 7585
US Court of Appeals for the Second Circuit upholds decision of Southern District Court and confirms arbitral award against Pemex that was set aside at its seat
The US Court of Appeals for the Second Circuit (the Court of Appeals) has upheld the decision of District Judge Hellerstein in Corporación Mexicana de Mantenimiento Integral, S. De R.L de C.V v. Pemex-Exploración y Producción, No. 10 Civ. 206 (AKH), 2013 WL 4517225, (S.D.N.Y. Aug. 27, 2013), confirming an arbitration award in favour of COMISSA and against PEMEX. The award was affirmed and enforced even though it had been set aside by a court at the seat of arbitration in Mexico. In the opinion of the US Court of Appeals, Judge Dennis Jacobs, joined by Judge Raggi, found that to hold otherwise would be contrary to US public policy and "repugnant to fundamental notions of what is decent and just in this country."
The opinion is interesting for the Court of Appeals' careful consideration of the case's "truly unusual procedural history" and its relevance when considering the grounds for refusing to enforce an arbitral award under the Panama Convention (textually identical to Article V of the New York Convention). It is also interesting to consider this decision in light of the reasoning and rationale being adopted by other national courts which have also grappled with applications to enforce awards set aside at their seat.
Round 2 to Russia: the battle continues as the largest arbitration awards in history are set aside by the Hague District Court
In a long-awaited decision published yesterday, the Hague District Court ("Court") has set aside the US$ 50 billion awards in favour of the former majority shareholders of Yukos on the basis that the Tribunals lacked jurisdiction to hear the disputes.
The Court accepted the Russian Federation's contention that, pursuant to Article 45 of the Energy Charter Treaty ("ECT"), its decision not to ratify the ECT meant that it was only bound by provisions which were compatible with Russian law. The dispute in question, which concerned relations of a public-law nature, could not be referred to international arbitration under Russian law.
This high-profile decision may have implications on the enforcement proceedings against Russia's assets currently pending in at least seven jurisdictions and also raises questions about the effectiveness of the ECT for investors in Russia.
English Court enforces arbitral award including a contractual penalty
The English High Court has enforced a Swiss-seated arbitral award (the Award) issued by the Court of Arbitration for Sport (CAS), notwithstanding that the Award ordered a payment representing enforcement of a contractual penalty. The decision is significant because clauses which are considered penal under English law are not enforceable. The test for whether a clause represents a penalty was recently considered and clarified by the English Supreme Court in the case of Makdessi, covered on our Litigation Notes blog here.
The Court in this case did not consider that enforcement of the element of the Award representing the penalty would be contrary to public policy for the purposes of Article V(II) of the New York Convention 1958, finding that:
- there "is a strong leaning towards enforcement of foreign arbitral awards" and, given that the English law rule against penalties did not protect a "universal principle of morality", without more enforcement would not be refused; and
- the penalty was enforceable under the governing law as applied by the Tribunal and therefore, on application of "domestic principles", there was no reason why enforcement should be refused.
The decision is a welcome one in the context of international transactions, in which the parties may choose a governing law of a particular jurisdiction for their contractual obligations but may look to another jurisdiction for enforcement. It is particularly important given that penalty clauses are a relatively regular feature in transactions in many sectors and jurisdictions.