NEW YORK CONVENTION OF 1958
INTRODUCTION
The principal multilateral arbitration Conventions are reported on in Part V – A through V – D of the Yearbook. Part V – A contains the reporting on the 1958 New York Convention. Part V – B reports on the 1961 European (Geneva) Convention, Part V – C reports on the 1965 Washington (ICSID) Convention and Part V – D reports on the Inter-American (Panama) Convention of 1975. Court decisions in which more than one of these Conventions have been applied are included in the reporting on the Convention which has played the principal role in the decision. Thus, court decisions reported in Part V – A on the 1958 New York Convention may also contain references to the 1961 European (Geneva) Convention or the 1975 Inter-American (Panama) Convention. Likewise, court decisions in Part V – B, Part V – C or Part V – D may also contain a reference to the 1958 New York Convention. The list of subject matters will include the relevant Convention. This Volume reports on 86 New York Convention decisions rendered in 25 countries, bringing the total to 1,666 decisions from 62 countries and 2 jurisdictions. According to the Treaty Section of the United Nations, there are, as of 1 November 2009, 145 Contracting States (and 28 extensions) to the New York Convention. As of this Volume, the Summary of each decision, prefaced by a short recap, is published in print; a detailed Excerpt of the decision is available online at
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A Consolidated Commentary on the 1958 New York Convention (Volume XXII (1997) – Volume XXVII (2002)) by Prof. Albert Jan van den Berg was published in Volume XXVIII (2003) of the Yearbook. This Commentary may be read in conjunction with the Consolidated Commentary on the 1958 New York Convention Volume XX (1995) – Volume XXI (1996) published in Volume XXI (1996). An extensive commentary of court decisions applying the 1958 New York Convention will appear in 2012 as the second edition of Prof. van den Berg’s 1981 treatise The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation. The present Volume contains as usual an Index of Cases, which facilitates research by both article and subject matter. A Consolidated Index of Cases reported in Volumes XXII (1997) – XXVIII (2003) was published in Volume XXVIII (2003). An Index of Cases was also provided in Volume XXIX (2004), Volume XXX (2005), Volume XXXI (2006), Volume XXXII (2007), Volume XXXIII (2008) and Volume XXXIV (2009). A Consolidated Index of Cases reported in the Yearbook since 1976 is available online on the ICCA website at
Argentina: Federico Godoy (Buenos Aires) Austria: Martin Platte (Vienna) Brazil: Dr. João Bosco Lee (Curitiba) British Virgin Islands: Dr. Dirk Otto (Frankfurt am Main)
286 Yearbook Comm. Arb’n XXXV (2010) INTRODUCTION
Canada: Michael Marks Cohen (New York) Cayman Islands: Dr. Dirk Otto (Frankfurt am Main) PR China: Xing Xiusong (Beijing) Germany: Dr. Stefan Kröll (Cologne) Hong Kong: Michael Marks Cohen (New York) India: Dr. Dirk Otto (Frankfurt am Main) Israel: Dr. Daphna Kapeliuk (Tel Aviv) Alessandro Ethan Naschitz (Tel Aviv) Italy: Chamber of National and International Arbitration of Milan Benedetta Coppo (Milan) Malaysia: Cecil Abraham (Seremban) Netherlands: Dr. Gerard Meijer (Rotterdam) Russian Federation: Roman Zykov (Moscow) Singapore: Michael Marks Cohen (New York) Spain: José Alejandro Carballo Leyda (Madrid) Maribel Rodriguez (Madrid) Sweden: Jeanette Björk (Stockholm) Dr. Gisela Knuts (Stockholm) Uganda: Dr. Dirk Otto (Frankfurt am Main) United States: Freshfields Bruckhaus Deringer (New York) Judith A. Freedberg (Miami) Michael Marks Cohen (New York) Chris Paparella (New York)
The General Editor would like to call upon readers to assist him by sending copies of relevant court decisions, published or unpublished, for reporting in the forthcoming volumes of the Yearbook. Copies can be sent to either of the following addresses.
ICCA Publications Prof. Dr. Albert Jan van den Berg c/o International Bureau of the c/o Hanotiau & van den Berg Permanent Court of Arbitration IT Tower, 9th Floor Carnegieplein 2 480 Avenue Louise, B.9 2517 KJ The Hague, The Netherlands 1050 Brussels, Belgium E-mail: [email protected] E-mail: [email protected]
Yearbook Comm. Arb’n XXXV (2010) 287 NEW YORK CONVENTION OF 1958 LIST OF CONTRACTING STATES
(as of 1 November 2010)1
State Ratification, Reservation2 Accession (a), Succession (s)
Afghanistan 30 Nov. 2004a 1 - 2 Albania 27 June 2001a – Algeria 7 Feb. 1989a 1 - 2 American Samoa3 3 Nov. 1970 1 - 2 Antigua and Barbuda 2 Feb. 1989a 1 - 2 Argentina4 14 Mar. 1989 1 - 2 Armenia 29 Dec. 1997a 1 - 2 Australia 26 Mar. 1975a – Australian Antartic Territory5 26 Mar. 1975a –
1. This list is compiled by the Editorial Staff of the Yearbook Commercial Arbitration, in consultation with the United Nations Treaty Section. Countries that have acceded to the Convention in the course of the reporting year are indicated in boldface type. Extensions are indicated in italics. 2. Two reservations are contained in Art. I(3). The 1st reservation is the so-called “reciprocity reservation” (at present made by 99 States including extensions). On 25 February 1988, the Government of Austria withdrew its reciprocity reservation; on 23 April 1993, the Government of Switzerland withdrew its reciprocity reservation; and on 31 August 1998, the Government of Germany withdrew its reciprocity reservation. The 2nd is the so-called “commercial reservation” (at present made by 56 States including extensions). On 27 November 1989, the Government of France withdrew its commercial reservation. 3. Extension made by the United States of America upon acceding to the Convention. 4. Argentina declared that the present Convention should be construed in accordance with the principles and rules of the National Constitution in force or with those resulting from reforms mandated by the Constitution. In addition, upon signature, Argentina declared that “If another Contracting Party extends the application of the Convention to territories which fall within the sovereignty of the Argentine Republic, the rights of the Argentine Republic shall in no way be affected by that extension.” 5. Extension made by Australia upon acceding to the Convention.
288 Yearbook Comm. Arb’n XXXV (2010) LIST OF CONTRACTING STATES
Austria 2 May 1961a – Azerbaijan 29 Feb. 2000a – Bahamas 20 Dec. 2006a – Bahrain 6 Apr. 1988a 1 - 2 Bangladesh 6 May 1992a – Barbados 16 Mar. 1993a 1 - 2 Belarus6 15 Nov. 1960 1 Belgium 18 Aug. 1975 1 Belize7 24 Feb. 1981 1 Benin 16 May 1974a – Bermuda7 12 Feb. 1980 1 Bolivia 28 Apr. 1995a – Bosnia and Herzegovina8 1 Sep. 1993s 1 - 2 Botswana 20 Dec. 1971a 1 - 2 Brazil 7 June 2002a – Brunei Darussalam 25 July 1996a 1 Bulgaria6 10 Oct. 1961 1 Burkina Faso 23 Mar. 1987a – Cambodia 5 Jan. 1960a – Cameroon 19 Feb. 1988a – Canada9 12 May 1986a 2 Canton Island3 3 Nov. 1970 1 - 2 Cayman Islands7 24 Feb. 1981 1 Central African Republic 15 Oct. 1962a 1 - 2 Chile 4 Sep. 1975a – China, PR10 22 Jan. 1987a 1 - 2 Christmas Island5 26 Mar. 1975a –
6. With regard to awards made in the territory of non-Contracting States, State will apply the Convention only to the extent to which these States grant reciprocal treatment. 7. Extension made by the United Kingdom on the date indicated in the List. 8. State will apply the Convention only to those arbitral awards which were adopted after the coming of the Convention into effect. 9. The commercial reservation does not apply to the province of Quebec. 10. Upon resuming the exercise of sovereignty over Hong Kong, China gave notice that the Convention with the reservations made by China (“reciprocity” and “commercial”) will also apply to the Hong Kong Special Administrative Region. On 19 July 2005, the Secretary-General received China’s declaration that the Convention shall apply to Macao, with the reservations made by China.
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Cocos (Keeling) Island5 26 Mar. 1975a – Colombia11 25 Sep. 1979a – Comoro Islands12 26 June 1959 1 Cook Islands 12 Jan. 2009a – Costa Rica 26 Oct. 1987 – Côte d’Ivoire 1 Feb. 1991a – Croatia8 26 July 1993s 1 - 2 Cuba6 30 Dec. 1974a 1 - 2 Cyprus 29 Dec. 1980a 1 - 2 Czech Republic13 30 Sep. 1993s 1 Denmark 22 Dec. 1972a 1 - 2 Djibouti 14 June 1983s – Dominica 28 Oct. 1988a – Dominican Republic 11 Apr. 2002a – Ecuador 3 Jan. 1962 1 - 2 Egypt 9 Mar. 1959a – Enderberry Island3 3 Nov. 1970 1 - 2 El Salvador 26 Feb. 1998 – Estonia 30 Aug. 1993a – Faeroe Islands14 10 Feb. 1976 1 - 2 Fiji 27 Sep. 2010 Finland 19 Jan. 1962 – France 26 June 1959 1 French Polynesia12 26 June 1959 1 Gabon 15 Dec. 2006a – Georgia 2 June 1994a –
11. On 20 November 1990, Law no. 39 of 1990 was promulgated implementing the Convention in Colombia. This law filled a lacunae created by the decision of 6 October 1988, by which the Supreme Court declared the unconstitutionality of the Law no. 37 of 1979, implementing the New York Convention in Colombia. 12. Extension made by France on the date indicated in the List. 13. The Convention was signed by the former Czechoslovakia on 3 October 1958 and an instrument of ratification was deposited on 10 July 1959. Czechoslovakia made the 1st reservation and declared that with regard to awards made in the territory of non-contracting States, it will apply the Convention only to the extent to which these States grant reciprocal treatment. On 28 May 1993, Slovakia and, on 30 September 1993, the Czech Republic deposited instruments of succession. 14. Extension made by Denmark on the date indicated in the List.
290 Yearbook Comm. Arb’n XXXV (2010) LIST OF CONTRACTING STATES
Germany15 30 June 1961 – (GDR: 20 Feb. 1975a) Ghana 9 Apr. 1968a – Gibraltar7 24 Sep. 1975 1 Greece 16 July 1962a 1 - 2 Greenland14 10 Feb. 1976 1 - 2 Guam3 3 Nov. 1970 1 - 2 Guatemala 21 Mar. 1984a 1 - 2 Guernsey7 19 Apr. 1985 1 Guinea 23 Jan. 1991a – Haiti 5 Dec. 1983a – Holy See 14 May 1975a 1 - 2 Honduras 3 Oct. 2000a – Hong Kong16 21 Apr. 1977 1 - 2 Hungary 5 Mar. 1962a 1 - 2 Iceland 24 Jan. 2002a India 13 July 1960 1 - 2 Indonesia 7 Oct. 1981a 1 - 2 Iran 15 Oct. 2001a 1 - 2 Ireland 12 May 1981a 1 Isle of Man7 23 May 1979 1 Israel 5 Jan. 1959 – Italy 31 Jan. 1969a – Jamaica 10 July 2002a 1 - 2 Japan 20 June 1961a 1 Jersey7 28 May 2002 1 Jordan 15 Nov. 1979 – Kazakhstan 20 Nov. 1995a – Kenya 10 Feb. 1989a 1 Korea, Republic of 8 Feb. 1973a 1 - 2 Kuwait 28 Apr. 1978a 1 Kyrgyzstan 18 Dec. 1996a – Lao People’s Democratic Republic 17 June 1998a – Latvia 14 Apr. 1992a –
15. Extension made by FR Germany to West Berlin, 30 June 1961. 16. Extension made by PR China with effect from 1 July 1997. See fn. 10.
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Lebanon 11 Aug. 1998a 1 Lesotho 13 June 1989a – Liberia 16 Sep. 2005a – Lithuania6 14 Mar. 1995a 1 Luxembourg 9 Sep. 1983 1 Macao17 12 Nov. 1999 1 - 2 Madagascar 16 July 1962a 1 - 2 Malaysia 5 Nov. 1985a 1 - 2 Mali 8 Sep. 1994a – Malta18 22 Jun. 2000a 1 Marshall Islands 21 Dec. 2006a – Mauritania 30 Jan. 1997a – Mauritius 19 June 1996a 1 Mexico 14 Apr. 1971a – Moldova, Republic of8 18 Sep. 1998a 1 Monaco 2 June 1982 1 - 2 Mongolia 24 Oct. 1994a 1 - 2 Montenegro19 23 Oct. 2006s 1 - 2 Morocco 12 Feb. 1959a 1 Mozambique20 11 June 1998a – Nepal 4 Mar. 1998a 1 - 2 Netherlands 24 Apr. 1964 1 Netherlands Antilles21 24 Apr. 1964 1 New Caledonia12 26 June 1959 1 New Zealand 6 Jan. 1983a 1 Nicaragua 24 Sep. 2003a – Niger 14 Oct. 1964a – Nigeria 17 Mar. 1970a 1 - 2
17. Extension made by PR China with effect from 19 July 2005. See fn. 10. 18. The Convention applies in Malta with respect to arbitration agreements concluded after the date of Malta’s accession to the Convention. 19. On 3 June 2006, Montenegro became independent. In a letter to the Secretary-General dated 10 October 2006, the Government of the Republic of Montenegro notified its succession to, inter alia, the 1958 New York Convention. 20. The Republic of Mozambique reserves the right to enforce the Convention on the basis of reciprocity, where the arbitral awards have been pronounced in the territory of another Contracting State. 21. Extension made by The Netherlands on the date indicated in the List.
292 Yearbook Comm. Arb’n XXXV (2010) LIST OF CONTRACTING STATES
Norfolk Island5 26 Mar. 1975 – Norway22 14 Mar. 1961a 1 Oman 25 Feb. 1999a – Pakistan 14 Jul. 2005 1 Panama 10 Oct. 1984a – Paraguay 8 Oct. 1997a – Peru 7 July 1988a – Philippines 6 July 1967 1 - 2 Poland23 3 Oct. 1961 1 - 2 Portugal 18 Oct. 1994a 1 Qatar 30 Dec. 2002a – Puerto Rico3 3 Nov. 1970 1 - 2 Romania6 13 Sep. 1961a 1 - 2 Russian Federation6,24 24 Aug. 1960 1 Rwanda 31 Oct. 2008a San Marino 17 May 1979a – Saudi Arabia 19 Apr. 1994a 1 Senegal 17 Oct. 1994a – Serbia8,25 12 Mar. 2001 1 - 2 Singapore 21 Aug. 1986a 1 Slovakia13 28 May 1993s 1 Slovenia8 6 July 1992s 1 - 2 South Africa 3 May 1976a – Spain 12 May 1977a – Sri Lanka 9 Apr. 1962 –
22. State will not apply the Convention to differences where the subject matter of the proceedings is immovable property situated in the State, or a right in or to such property. 23. Poland made both reservations when signing the Convention. However, the Document of Ratification does not repeat the reservation and the Polish Government officially recognizes that Poland is bound by the Convention in its entirety. 24. The Russian Federation continues, as from 24 December 1991, the membership of the former Union of Soviet Socialist Republics (USSR) in the United Nations and maintains, as from that date, full responsibility for all the rights and obligations of the USSR under the Charter of the United Nations and multilateral treaties deposited with the Secretary-General. 25. The former Yugoslavia had acceded to the Convention on 26 February 1982. On 12 March 2001, the Secretary-General received from the Government of Yugoslavia a notification of succession, confirming the declaration dated 28 June 1982 by the Socialist Federal Republic of Yugoslavia. On 3 February 2003, Yugoslavia changed its name to Serbia and Montenegro. As of 3 June 2006, upon the declaration of independence of Montenegro, the name was changed to Serbia.
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St. Pierre et Miquelon12 26 June 1959 1 St. Vincent and the Grenadines 12 Sep. 2000a 1 - 2 Sweden 28 Jan. 1972 – Surinam26 24 Apr. 1964 1 Switzerland2 1 June 1965 – Syrian Arab Republic 9 Mar. 1959a – Tanzania, United Republic of 13 Oct. 1964a 1 Thailand 21 Dec. 1959a – The Former Yugoslav Republic of Macedonia8 10 Mar. 1994s 1 - 2 Trinidad and Tobago 14 Feb. 1966a 1 - 2 Tunisia 17 July 1967a 1 - 2 Turkey 2 July 1992a 1 - 2 Uganda 12 Feb. 1992a 1 Ukraine6 10 Oct. 1960 1 United Arab Emirates 21 Aug. 2006a United Kingdom of Great Britain and Northern Ireland 24 Sep. 1975a 1 United States of America 30 Sep. 1970a 1 - 2 Uruguay 30 Mar. 1983a – Uzbekistan 7 Feb. 1996a – Venezuela 8 Feb. 1995a 1 - 2 Viet Nam27 12 Sep. 1995a 1 - 2 Virgin Islands3 3 Nov. 1970 1 - 2 Wake Island3 3 Nov. 1970 1 - 2 Wallis and Futuna Islands12 26 June 1959 1 Zambia 14 Mar. 2002a – Zimbabwe 29 Sep. 1994a –
26. On 25 November 1975, Surinam became independent. By letter of 29 November 1975, of the then Prime Minister, to the Secretary-General of the UN, Surinam has declared that it will remain bound to the Treaties and Conventions which The Netherlands has made applicable. 27. Viet Nam declared that interpretation of the Convention before the Vietnamese Courts or competent Authorities should be made in accordance with the Constitution and law of Viet Nam.
294 Yearbook Comm. Arb’n XXXV (2010) NEW YORK CONVENTION OF 1958 INDEX OF CASES REPORTED IN VOLUME XXXV (2010)
Prof. Albert Jan van den Berg
All 1958 New York Convention cases reported in the Yearbook since Volume I (1976) are indexed according to a list of topics (¶ 001 to ¶ 914, attached below) that facilitates information retrieval.1 Topics also link the court decisions to numbered sections of the (Consolidated) Commentary on the New York Convention, published in the Yearbook in the following years:
– Yearbook Key, accompanying Yearbook XV (1990): Cumulative Indexes of Commentaries and Cases Volumes I (1976) – XV (1990); – Yearbook XVI (1991): Consolidated Commentary Cases Reported in Volumes XV (1990) – XVI (1991); – Yearbook XIX (1994): Consolidated Commentary Cases Reported in Volumes XVII (1992) – XIX (1994); – Yearbook XXI (1996): Consolidated Commentary Cases Reported in Volumes XX (1995) – XXI (1996); – Yearbook XXVIII (2003): Consolidated Commentary Cases Reported in Volumes XXII (1997) – XXVII (2002).
An extensive commentary of court decisions applying the 1958 New York Convention – using the same list of topics – will appear in 2012 as the second edition of Prof. Albert Jan van den Berg’s 1981 treatise The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation.
1. These topics can also be used as a search tool for New York Convention materials in the KluwerArbitration database
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LIST OF TOPICS
¶ 001 INTERPRETATION OF THE CONVENTION
ARTICLE I – FIELD OF APPLICATION (ARBITRAL AWARDS)
¶ 101 AWARD MADE IN THE TERRITORY OF ANOTHER (CONTRACTING) STATE (PARAGRAPHS 1 AND 3 – FIRST RESERVATION OR “RECIPROCITY RESERVATION”) ¶ 102 ARBITRAL AWARD NOT CONSIDERED AS DOMESTIC (PARAGRAPH 1) ¶ 103 NATIONALITY OF THE PARTIES NO CRITERION ¶ 104 CONVENTION’S APPLICABILITY IN OTHER CASES ¶ 105 “PERSONS, WHETHER PHYSICAL OR LEGAL” (PARAGRAPH 1) (including sovereign immunity) ¶ 106 PROBLEMS CONCERNING THE IDENTITY OF A PARTY ¶ 107 SECOND RESERVATION (“COMMERCIAL RESERVATION”) (PARAGRAPH 3) ¶ 108 ARBITRAL AWARD: Arbitrato irrituale (Italy) and other procedures akin to arbitration ¶ 109 ARBITRAL AWARD: “A-national” award ¶ 110 ARBITRAL AWARD: Ty p e s ¶ 111 PERMANENT ARBITRAL BODIES (PARAGRAPH 2) ¶ 112 RETROACTIVITY ¶ 113 IMPLEMENTING LEGISLATION ¶ 114 IRAN-US CLAIMS TRIBUNAL
ARTICLE II(1) AND (2) – ARBITRATION AGREEMENT
PARAGRAPH 1: AGREEMENT IN GENERAL ¶ 201 Scope of arbitration agreement ¶ 202 Contents of arbitration agreement
PARAGRAPHS 1 AND 2: AGREEMENT IN WRITING ¶ 203 Uniform rule ¶ 204 Formal validity and municipal law ¶ 205 Signatures ¶ 206 Exchange of letters or telegrams ¶ 207 Means of communication for achieving the exchange in writing ¶ 208 Sales or purchase confirmation ¶ 209 Incorporation by reference and standard conditions ¶ 210 Articles 1341 and 1342 Italian Civil Code ¶ 211 Bill of lading and charter party ¶ 212 Agent/Broker, etc. ¶ 213 Amendment or Renewal
296 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
ARTICLE II(3) – REFERRAL BY COURT TO ARBITRATION
FIELD OF APPLICATION ¶ 214 Field of application: agreement providing for arbitration in another State ¶ 215 Field of application: agreement providing for arbitration within forum’s State ¶ 216 Field of application: no place of arbitration designated ¶ 216A Analogous applicability of Art. VII(1)
REFERRAL TO ARBITRATION ¶ 217 In general ¶ 218 Referral is mandatory ¶ 219 There must be a dispute ¶ 220 “Null and void”, etc. ¶ 221 Law applicable to “null and void”, etc. ¶ 222 Arbitrator’s competence and separability of the arbitration clause ¶ 223 Arbitrability ¶ 224 DECLARATORY JUDGMENT ON VALIDITY ARBITRATION AGREEMENT
MULTI-PARTY DISPUTES ¶ 225 Related arbitrations (consolidation, etc.) ¶ 226 Third parties ¶ 227 Concurrent court proceedings (“indivisibility”) ¶ 228 PRE-AWARD ATTACHMENT AND OTHER PROVISIONAL MEASURES ¶ 229 MEASURES IN AID OF ARBITRATION
ARTICLE III – PROCEDURE FOR ENFORCEMENT
¶ 301 IN GENERAL ¶ 302 DISCOVERY OF EVIDENCE ¶ 303 ESTOPPEL/WAIVER ¶ 304 SET-OFF/COUNTERCLAIM ¶ 305 ENTRY OF JUDGMENT CLAUSE ¶ 306 PERIOD OF LIMITATION FOR ENFORCEMENT ¶ 307 INTEREST ON AWARD
ARTICLE IV – CONDITIONS TO BE FULFILLED BY THE PETITIONER
¶ 401 IN GENERAL ¶ 402 ORIGINAL OR COPY ARBITRAL AWARD ¶ 403 ORIGINAL OR COPY ARBITRATION AGREEMENT ¶ 404 AUTHENTICATION AND CERTIFICATION ¶ 405 “AT THE TIME OF APPLICATION” ¶ 406 TRANSLATION (PARAGRAPH 2)
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ARTICLE V – GROUNDS FOR REFUSAL OF ENFORCEMENT IN GENERAL
¶ 500 GENERAL ¶ 500A RESIDUAL POWER TO ENFORCE NOTWITHSTANDING THE EXISTENCE OF A GROUND FOR REFUSAL OF ENFORCEMENT ¶ 501 GROUNDS ARE EXHAUSTIVE ¶ 502 NO RE-EXAMINATION OF THE MERITS OF THE ARBITRAL AWARD ¶ 503 BURDEN OF PROOF ON RESPONDENT
ARTICLE V(1) – GROUNDS FOR REFUSAL OF ENFORCEMENT TO BE PROVEN BY THE RESPONDENT
GROUND a: INVALIDITY OF THE ARBITRATION AGREEMENT ¶ 504 Agreement referred to in Article II ¶ 505 Incapacity of party ¶ 506 Law applicable to the arbitration agreement ¶ 507 Miscellaneous cases regarding the arbitration agreement
GROUND b: VIOLATION OF DUE PROCESS ¶ 508 In general ¶ 509 “Proper notice” ¶ 510 Time limits and notice periods ¶ 511 “Otherwise unable to present his case”
GROUND c: EXCESS BY ARBITRATOR OF HIS AUTHORITY ¶ 512 Excess of authority ¶ 512A Partial enforcement (ultra petita) ¶ 513 GROUND d: IRREGULARITY IN THE COMPOSITION OF THE ARBITRAL TRIBUNAL OR ARBITRAL PROCEDURE
GROUND e: AWARD NOT BINDING, SUSPENDED OR SET ASIDE ¶ 514 “Binding” ¶ 515 Merger of award into judgment ¶ 516 “Set aside” ¶ 517 “Suspended”
ARTICLE V(2) – PUBLIC POLICY AS GROUND FOR REFUSAL OF ENFORCEMENT EX OFFICIO
¶ 518 DISTINCTION DOMESTIC/INTERNATIONAL PUBLIC POLICY ¶ 519 GROUND a: ARBITRABILITY
GROUND b: PUBLIC POLICY ¶ 520 Default of a party ¶ 521 Lack of impartiality of arbitrator ¶ 522 Lack of reasons in award
298 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
¶ 523 Irregularities in the arbitral procedure ¶ 524 Other cases
ARTICLE VI
¶ 601 ADJOURNMENT OF DECISION ON ENFORCEMENT
ARTICLE VII(1) – MORE-FAVORABLE-RIGHT PROVISION
¶ 701 MORE-FAVORABLE-RIGHT PROVISION IN GENERAL ¶ 702 DOMESTIC LAW ON ENFORCEMENT OF FOREIGN AWARD ¶ 703 BILATERAL AND MULTILATERAL TREATIES IN GENERAL ¶ 703(A) MULTILATERAL TREATIES ¶ 704 EUROPEAN CONVENTION OF 1961 ¶ 704(A) PANAMA CONVENTION OF 1975 ¶ 704(B) BILATERAL TREATIES ¶ 704(C) EUROPEAN COMMUNITY
ARTICLE VII(2)
¶ 705 RELATIONSHIP WITH GENEVA TREATIES OF 1923 AND 1927
ARTICLE XI
¶ 911 FEDERAL STATE CLAUSE
ARTICLE XIV
¶ 914 GENERAL RECIPROCITY CLAUSE
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INDEX OF CASES
¶ 001 INTERPRETATION OF THE CONVENTION Index Volume XXXV (2010): Spain 65 (sub 6-10)
ARTICLE I
FIELD OF APPLICATION (ARBITRAL AWARDS)
1. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.
2. The term “arbitral awards” shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.
3. When signing, ratifying or acceding to this Convention, or notifying extension under article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.
¶ 101 AWARD MADE IN THE TERRITORY OF ANOTHER (CONTRACTING) STATE (PARAGRAPHS 1 AND 3 – FIRST RESERVATION OR “RECIPROCITY RESERVATION”) Index Volume XXXV (2010): Germany 125 (sub 6-7); Germany 127 (sub 7); Germany 131; India 44; Malaysia 4; Spain 66 (sub 10); US 704 (sub 12-20)
300 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
¶ 102 ARBITRAL AWARD NOT CONSIDERED AS DOMESTIC (PARAGRAPH 1) Index Volume XXXV (2010): US 692; US 696 (sub 1-4); US 704 (sub 12- 16 and 21-22)
¶ 103 NATIONALITY OF THE PARTIES NO CRITERION Index Volume XXXV (2010): US 696 (sub 2-4)
¶ 104 CONVENTION’S APPLICABILITY IN OTHER CASES Index Volume XXXV (2010): US 696 (sub 1-4); US 711; US 712 (sub 20- 52)
¶ 105 “PERSONS, WHETHER PHYSICAL OR LEGAL” (PARAGRAPH 1) (including sovereign immunity) Index Volume XXXV (2010): Hong Kong 24; US 696 (sub 5)
¶ 106 PROBLEMS CONCERNING THE IDENTITY OF A PARTY Index Volume XXXV (2010): US 709
¶ 107 SECOND RESERVATION (“COMMERCIAL RESERVATION”) (PARAGRAPH 3) Index Volume XXXV (2010): Spain 66 (sub 11)
¶ 108 ARBITRAL AWARD: Arbitrato irrituale (Italy) and other procedures akin to arbitration Index Volume XXXV (2010): No new decisions are reported.
¶ 109 ARBITRAL AWARD: “A-national” award Index Volume XXXV (2010): No new decisions are reported.
¶ 110 ARBITRAL AWARD: Ty p e s Index Volume XXXV (2010): Germany 135 (sub 8-9)
¶ 111 PERMANENT ARBITRAL BODIES (PARAGRAPH 2) Index Volume XXXV (2010): No new decisions are reported.
¶ 112 RETROACTIVITY Index Volume XXXV (2010): No new decisions are reported.
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¶ 113 IMPLEMENTING LEGISLATION Index Volume XXXV (2010): India 44; Malaysia 4
¶ 114 IRAN-US CLAIMS TRIBUNAL Index Volume XXXV (2010): No new decisions are reported.
ARTICLE II(1) AND (2)
ARBITRATION AGREEMENT
1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.
PARAGRAPH 1: AGREEMENT IN GENERAL
¶ 201 Scope of arbitration agreement Index Volume XXXV (2010): Australia 34 (sub 18-46); Austria 19 (sub 3-4); Canada 29 (sub 6-12); Israel 5 (sub 29-30); Spain 68 (sub 7-9); US 683 (sub 107-108)
¶ 202 Contents of arbitration agreement Index Volume XXXV (2010): No new decisions are reported.
PARAGRAPHS 1 AND 2: AGREEMENT IN WRITING
¶ 203 Uniform rule Index Volume XXXV (2010): No new decisions are reported.
¶ 204 Formal validity and municipal law Index Volume XXXV (2010): No new decisions are reported.
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¶ 205 Signatures Index Volume XXXV (2010): Austria 19 (sub 5-8 and 11)
¶ 206 Exchange of letters or telegrams Index Volume XXXV (2010): UK 90 (sub 1-15)
¶ 207 Telexes and other means of communication for achieving the exchange in writing Index Volume XXXV (2010): No new decisions are reported.
¶ 208 Sales or purchase confirmation Index Volume XXXV (2010): No new decisions are reported.
¶ 209 Incorporation by reference and standard conditions (Exclusive of Arts. 1341 and 1342 Italian Civil Code; see ¶ 210 below) Index Volume XXXV (2010): US 683 (sub 19-20, 45 and 106)
¶ 210 Articles 1341 and 1342 Italian Civil Code Index Volume XXXV (2010): No new decisions are reported.
¶ 211 Bill of lading and charterparty Index Volume XXXV (2010): No new decisions are reported.
¶ 212 Agent/Broker, etc. Index Volume XXXV (2010): No new decisions are reported.
¶ 213 Amendment or renewal Index Volume XXXV (2010): US 702 (sub 30-39)
ARTICLE II(3)
REFERRAL BY COURT TO ARBITRATION
The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
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FIELD OF APPLICATION
¶ 214 Field of application: agreement providing for arbitration in another State Index Volume XXXV (2010): US 680 (sub 1 and 3); US 681 (sub 24-25); US 684; US 705 (sub 3); US 710 (sub 3-19)
¶ 215 Field of application: agreement providing for arbitration within forum’s State Index Volume XXXV (2010): No new decisions are reported.
¶ 216 Field of application: no place of arbitration designated Index Volume XXXV (2010): No new decisions are reported.
¶ 216A Analogous applicability of Art. VII(1) This new topic is introduced in this Volume XXXV (2010). It deals with the application by analogy to the enforcement of the arbitration agreement of the more-favorable-right provision in Art. VII(1) Convention, which applies according to its text to the enforcement of the arbitral award (see ¶¶ 701-702 below). Index Volume XXXV (2010): No new decisions are reported.
REFERRAL TO ARBITRATION
¶ 217 In general Index Volume XXXV (2010): Australia 34 (sub 67-69); Austria 19 (sub 8-10 and 13); Canada 29 (sub 6-12); Cayman Islands 4; Israel 4; Israel 5; UK 88; US 681 (sub 26-31); US 683 (sub 12-18 and 21-44); US 691; US 698; US 700 (sub 1-3 and 11); US 702 (sub 7-29); US 707; US 710 (sub 45-47)
¶ 218 Referral is mandatory Index Volume XXXV (2010): Israel 4
¶ 219 There must be a dispute Index Volume XXXV (2010): Singapore 9
¶ 220 “Null and void”, etc. Index Volume XXXV (2010): Australia 34 (sub 70); Canada 29 (sub 4); India 44; Spain 68 (sub 3, 10 and 18); Uganda 1; UK 88; US 680 (sub 2-7); US 681 (sub 15-23); US 683 (sub 12-18 and 21-44); US 685; US
304 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
691; US 694; US 700 (sub 4-10); US 701; US 705; US 710 (sub 21-31 and 36-44)
¶ 221 Law applicable to “null and void”, etc. (For formal validity and applicable law, see ¶¶ 203-204 above) Index Volume XXXV (2010): Australia 34 (sub 6-17); Austria 19 (sub 2); Spain 68 (sub 3, 5-6 and 11-13)
¶ 222 Arbitrator’s competence and separability of the arbitration clause Index Volume XXXV (2010): Australia 34 (sub 66); Austria 19 (sub 12); Canada 30; India 45 (sub 1-3); Israel 5 (sub 12-28 and 34-36); UK 88; UK 90 (sub 1-2)
¶ 223 Arbitrability (See also Article V(2), sub Ground a. “Arbitrability”, ¶ 519 below) Index Volume XXXV (2010): Australia 34 (sub 47-51); Spain 68 (sub 14- 16); US 680 (sub 8-20); US 681 (sub 1-14); US 684; US 686; US 699; US 710 (sub 32-35)
¶ 224 DECLARATORY JUDGMENT ON VALIDITY ARBITRATION AGREEMENT Index Volume XXXV (2010): No new decisions are reported.
MULTI-PARTY DISPUTES
¶ 225 Related arbitrations (consolidation, etc.) Index Volume XXXV (2010): No new decisions are reported.
¶ 226 Third parties (See also Article I, sub F. “Problems Concerning the Identity of the Respondent”, ¶ 106 above) Index Volume XXXV (2010): No new decisions are reported.
¶ 227 Concurrent court proceedings (“indivisibility”) Index Volume XXXV (2010): No new decisions are reported.
¶ 228 PRE-AWARD ATTACHMENT AND OTHER PROVISIONAL MEASURES Index Volume XXXV (2010): No new decisions are reported.
Yearbook Comm. Arb’n XXXV (2010) 305 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
¶ 229 MEASURES IN AID OF ARBITRATION Index Volume XXXV (2010): Russian Federation 27; UK 89; UK 90 (sub 16-35)
ARTICLE III
PROCEDURE FOR ENFORCEMENT
Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
¶ 301 IN GENERAL Index Volume XXXV (2010): Argentina 3 (sub 10-15); Austria 20 (sub 1-3); Brazil 12; Canada 29 (sub 21-30); France 49 (sub 1-2); Germany 125 (sub 1 and 11); Germany 126 (sub 2 and 16); Germany 127 (sub 1 and 10); Germany 128 (sub 1 and 7-10); Germany 129 (sub 1 and 4); Germany 130 (sub 2 and 25); Germany 132 (sub 1 and 24); Germany 133 (sub 2 and 6); Germany 134 (sub 1 and 26); Germany 135 (sub 2 and 18); Malaysia 4; Netherlands 34; Russian Federation 28 (sub 28); Spain 65 (sub 44-47 and 52); Spain 66; US 682 (sub 4); US 689; US 695 (sub 3-9 and 17-18); US 696 (sub 6-14); US 697 (sub 4); US 706 (sub 1-7); US 712 (sub 8-19)
¶ 302 DISCOVERY OF EVIDENCE Index Volume XXXV (2010): No new decisions are reported.
¶ 303 ESTOPPEL/WAIVER Index Volume XXXV (2010): France 48; Germany 126 (sub 13); Germany 135 (sub 17); US 690 (sub 6-15); US 708
¶ 304 SET-OFF/COUNTERCLAIM Index Volume XXXV (2010): No new decisions are reported.
306 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
¶ 305 ENTRY OF JUDGMENT CLAUSE Index Volume XXXV (2010): No new decisions are reported.
¶ 306 PERIOD OF LIMITATION FOR ENFORCEMENT Index Volume XXXV (2010): Canada 31; Russian Federation 26 (sub 19- 21); Russian Federation 28 (sub 27)
¶ 307 INTEREST ON AWARD Index Volume XXXV (2010): Germany 130 (sub 23-24); India 45 (sub 23); Spain 69; Russian Federation 26 (sub 23-24); US 695 (sub 19-21)
ARTICLE IV
CONDITIONS TO BE FULFILLED BY THE PETITIONER
1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a) The duly authenticated original award or a duly certified copy thereof;
(b) The original agreement referred to in article II or a duly certified copy thereof.
2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.
¶ 401 IN GENERAL Index Volume XXXV (2010): Germany 134 (sub 6)
Yearbook Comm. Arb’n XXXV (2010) 307 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
¶ 402 ORIGINAL OR COPY ARBITRAL AWARD Index Volume XXXV (2010): Germany 125 (sub 3); Germany 127 (sub 3-4); Germany 128 (sub 2-3); Germany 130 (sub 3-5); Germany 133 (sub 3); Germany 134 (sub 2); Germany 135 (sub 4)
¶ 403 ORIGINAL OR COPY ARBITRATION AGREEMENT Index Volume XXXV (2010): Germany 125 (sub 4); Germany 127 (sub 5); Germany 133 (sub 3); Germany 135 (sub 4); Malaysia 4 (sub 33); Spain 65 (sub 26-27); Spain 67 (sub 4-9)
¶ 404 AUTHENTICATION AND CERTIFICATION Index Volume XXXV (2010): Argentina 3 (sub 16-23); Germany 125 (sub 3); Germany 127 (sub 3-4); Germany 134 (sub 2); Italy 182
¶ 405 “AT THE TIME OF APPLICATION” Index Volume XXXV (2010): Italy 182; Spain 66 (sub 13)
¶ 406 TRANSLATION (PARAGRAPH 2) Index Volume XXXV (2010): Argentina 3 (sub 16-23); Germany 125 (sub 5); Germany 127 (sub 6); Germany 128 (sub 2-3); Germany 130 (sub 3-5); Germany 134 (sub 2); Spain 66 (sub 12)
ARTICLE V
GROUNDS FOR REFUSAL OF ENFORCEMENT IN GENERAL
¶ 500 GENERAL Index Volume XXXV (2010): US 695 (sub 10); US 696 (sub 15)
¶ 500A RESIDUAL POWER TO ENFORCE NOTWITHSTANDING THE EXISTENCE OF A GROUND FOR REFUSAL OF ENFORCEMENT This new topic is introduced in this Volume XXXV (2010). It was previously part of ¶ 500. Index Volume XXXV (2010): No new decisions are reported.
308 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
¶ 501 GROUNDS ARE EXHAUSTIVE Index Volume XXXV (2010): Canada 31 (sub 8-27); Germany 128 (sub 6); Italy 180 (sub 12 and 15-17); Italy 181 (sub 8); Russian Federation 25 (sub 9); US 682 (sub 5-6)
¶ 502 NO RE-EXAMINATION OF THE MERITS OF THE ARBITRAL AWARD Index Volume XXXV (2010): Brazil 12 (sub 7-9); France 49 (sub 5); Germany 130 (sub 22); Germany 135 (sub 14); India 45 (sub 9-14 and 21-22); Italy 181 (sub 2-6); Russian Federation 25 (sub 9-10); Spain 65 (sub 38-43)
¶ 503 BURDEN OF PROOF ON RESPONDENT Index Volume XXXV (2010): Germany 125 (sub 8); Germany 127 (sub 8); Germany 134 (sub 6); Italy 181 (sub 10); Spain 65 (sub 34); US 682 (sub 7); US 697 (sub 1)
ARTICLE V(1)
GROUNDS FOR REFUSAL OF ENFORCEMENT TO BE PROVEN BY THE RESPONDENT
Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
Yearbook Comm. Arb’n XXXV (2010) 309 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
GROUND a: INVALIDITY OF THE ARBITRATION AGREEMENT
¶ 504 Agreement referred to in Article II Index Volume XXXV (2010): Germany 126 (sub 3-12); Germany 132 (sub 3-11); Ireland 3 (sub 11-28); Italy 180 (sub 1-6); Russian Federation 26 (sub 6, 11-18, 26-32 and 35)
¶ 505 Incapacity of party Index Volume XXXV (2010): France 49 (sub 3-4); Italy 180 (sub 13-14); Russian Federation 28 (sub 24); US 682 (sub 8-10); US 690 (sub 17- 18); US 708
¶ 506 Law applicable to the arbitration agreement Index Volume XXXV (2010): Germany 132 (sub 3-11)
310 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
¶ 507 Miscellaneous cases regarding the arbitration agreement Index Volume XXXV (2010): Germany 132 [sub 18 (short-form arbitration clause)]; Germany 134 [sub 5-25 (no arbitration agreement)]; Malaysia 4 [sub 29-32 (non-signatory)]
GROUND b: VIOLATION OF DUE PROCESS
¶ 508 In general Index Volume XXXV (2010): No new decisions are reported.
¶ 509 “Proper notice” Index Volume XXXV (2010): France 48; Sweden 7
¶ 510 Time limits and notice periods Index Volume XXXV (2010): British Virgin Islands 2
¶ 511 “Otherwise unable to present his case” Index Volume XXXV (2010): PR China 6 [sub 24-26 (failure to clarify issue of standing)]; France 48 (failure to hold hearing); Germany 130 [sub 12-16 (language of the arbitration)]; Germany 130 [sub 12-16 (failure to hear witness through interpreter)]; Germany 132 [sub 20-22 (failure to consider arguments)]; Germany 132 [sub 20-22 (failure to hold oral hearing)]; Germany 135 [sub 12 (failure to attend hearing)]; Ireland 3 [sub 29-34 (language of arbitration)]; Russian Federation 28 [sub 7-12 (no proof of communication of arbitration documents)]; Spain 65 [sub 28-31 (means of notification)]; Spain 67 [sub 10-11 (letter not received)]; US 690 [sub 19-27 (incapacity to attend hearing)]
GROUND c: EXCESS BY ARBITRATOR OF HIS AUTHORITY
¶ 512 Excess of authority Index Volume XXXV (2010): PR China 6 (sub 18-23); Russian Federation 25 (sub 8)
¶ 512A Partial enforcement (ultra petita) Index Volume XXXV (2010): No new decisions are reported.
Yearbook Comm. Arb’n XXXV (2010) 311 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
¶ 513 GROUND d: IRREGULARITY IN THE COMPOSITION OF THE ARBITRAL TRIBUNAL OR ARBITRAL PROCEDURE Index Volume XXXV (2010): British Virgin Islands 2; PR China 6 (sub 2- 17, 27-29 and 34); Germany 130 (sub 12-16); Germany 132 (sub 19); Germany 135 (sub 5-7 and 13); Italy 180 (sub 10-11); Russian Federation 26 (sub 6, 11-18, 26-32 and 35); Russian Federation 28 (sub 25-26); Spain 65 (sub 32-34); US 690 (sub 28-29); US 697 (sub 5-6)
GROUND e: AWARD NOT BINDING, SUSPENDED OR SET ASIDE
¶ 514 “Binding” Index Volume XXXV (2010): Argentina 3 (sub 1-9); Canada 31 (sub 48); Germany 133 (sub 4); Spain 65 (sub 14-25); US 693; US 697 (sub 3)
¶ 515 Merger of award into judgment Index Volume XXXV (2010): Germany 131
¶ 516 “Set aside” Index Volume XXXV (2010): UK 91 (sub 7-9); US 688 (sub 4-12); US 696 (sub 17)
¶ 517 “Suspended” Index Volume XXXV (2010): UK 91 (sub 7-9); US 696 (sub 17)
ARTICLE V(2)
PUBLIC POLICY AS GROUND FOR REFUSAL OF ENFORCEMENT EX OFFICIO
Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
312 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
¶ 518 DISTINCTION DOMESTIC - INTERNATIONAL PUBLIC POLICY Index Volume XXXV (2010): India 45 (sub 15-17); Italy 181 (sub 9-13); Singapore 10 (sub 12-17); Spain 65 (sub 38); US 682 (sub 26); US 688 (sub 13-17)
¶ 519 GROUND a: ARBITRABILITY (See also Article II(3) “Arbitrability”, ¶ 223 above) Index Volume XXXV (2010): Germany 125 (sub 9)
GROUND b: PUBLIC POLICY
¶ 520 Default of party Index Volume XXXV (2010): No new decisions are reported.
¶ 521 Lack of impartiality of arbitrator Index Volume XXXV (2010): Italy 181; Russian Federation 25 (sub 5-7); US 706 (sub 19-26)
¶ 522 Lack of reasons in award Index Volume XXXV (2010): Germany 135 (sub 14-17); Italy 181 (sub 6-8); Spain 65 (sub 38-43)
¶ 523 Irregularities in the arbitral procedure (See also Article V(1)(b)) Index Volume XXXV (2010): Germany 125 (sub 10); Germany 132 (sub 20-22); Germany 133 (sub 5); Germany 135 (sub 12); Italy 181 (sub 14); Spain 65 (sub 35-36 and 41-42); US 683 (sub 110-122)
¶ 524 Other cases Index Volume XXXV (2010): Austria 20 [sub 4-6 (consumer protection)]; Canada 29 [sub 13-20 (death threats)]; France 48 [sub 9-11 (violation of bankruptcy law)]; France 49 (fraud); Germany 125 [sub 9 (assignment of contract)]; Germany 129 [sub 2-3 (sovereign immunity)]; Germany 130 [sub 6-10 (no third arbitrator’s signature)]; Germany 130 [sub 17-21 (failure to hear witness)]; Germany 130 [sub 22 (contents of award)]; Germany 133 [sub 5 (counsel fees)]; India 45
Yearbook Comm. Arb’n XXXV (2010) 313 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
[sub 18-21 (erroneous decision)]; Italy 181 (evaluation of evidence); Russian Federation 28 [sub 13-23 (sham arbitration)]; Spain 65 [sub 40 (illogical reasons)]; US 682 [sub 11-12 , 14-22 and 27-32 (manifest disregard of the law) and 23-26 (enforcement would violate foreign judgment)]; US 690 [sub 30-31 (incapacity to attend hearing)]; US 703 (disclosure by arbitrator); US 706 [sub 12-18 (manifest disregard of the law), 27-31 (refusal to hear evidence) and 32-34 (award procured through undue means)]; US 711 (manifest disregard of the law)
ARTICLE VI
¶ 601 ADJOURNMENT OF DECISION ON ENFORCEMENT
If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.
Index Volume XXXV (2010): Gibraltar 1; Singapore 10 (sub 1-11 and 19-31); Spain 65 (sub 19-22 and 48-51); UK 91 (sub 13-40); US 687; US 695 (sub 11-16); US 696 (sub 18-28)
ARTICLE VII(1)
MORE-FAVORABLE-RIGHT PROVISION
The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.
314 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
¶ 701 MORE-FAVORABLE-RIGHT PROVISION IN GENERAL Index Volume XXXV (2010): Germany 126 (sub 15); Germany 131 (sub 24); Germany 132 (sub 3-11)
¶ 702 DOMESTIC LAW ON ENFORCEMENT OF FOREIGN AWARD Index Volume XXXV (2010): Germany 125 (sub 4); Germany 127 (sub 2 and 5); Germany 128 (sub 2-3); Germany 130 (sub 3-5); Germany 132 (sub 12-16); Germany 133 (sub 3); Germany 134 (sub 2 and 8); Germany 135 (sub 4)
¶ 703 BILATERAL AND MULTILATERAL TREATIES IN GENERAL [All decisions concerning bilateral and multilateral treaties were listed under ¶ 703 in Volumes I (1976) - XXIII (1998). Individual entries, see below, were introduced in 1999. Decisions reported in Volumes I (1976) - XXIII (1998) have been re-listed under the new entries.] Index Volume XXXV (2010): No new decisions are reported.
¶ 703(A) MULTILATERAL TREATIES Index Volume XXXV (2010): No new decisions are reported.
See also Part V – C of the Yearbook for decisions applying the Washington (ICSID) Convention 1965.
¶ 704 EUROPEAN CONVENTION OF 1961 Index Volume XXXV (2010): Austria 20 (sub 1-3); Germany 126 (sub 15); Germany 127 (sub 2); Germany 128 (sub 2-3); Germany 130 (sub 3-5); Spain 65 (sub 4-5, 17-18 and 49); Spain 66 (sub 4); Spain 68
See also Part V – B of this Yearbook.
¶ 704(A) PANAMA CONVENTION OF 1975 Index Volume XXXV (2010): US 706
See also Part V – D of this Yearbook.
¶ 704(B) BILATERAL TREATIES Index Volume XXXV (2010): No new decisions are reported.
Yearbook Comm. Arb’n XXXV (2010) 315 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
¶ 704(C) EUROPEAN COMMUNITY Index Volume XXXV (2010): Spain 65 (sub 6-13)
ARTICLE VII(2)
¶ 705 RELATIONSHIP WITH GENEVA TREATIES OF 1923 AND 1927
The Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927 shall cease to have effect between Contracting States on their becoming bound and to the extent that they become bound, by this Convention.
Index Volume XXXV (2010): No new decisions are reported.
ARTICLE XI
¶ 911 FEDERAL STATE CLAUSE
In case of a federal or non-unitary State, the following provisions shall apply:
(a) With respect to those articles of this Convention that come within the legislative jurisdiction of the federal authority, the obligations of the federal Government shall to this extent be the same as those of Contracting States which are not federal States;
(b) With respect to those articles of this Convention that come within the legislative jurisdiction of constituent states or provinces which are not, under the constitutional system of the federation, bound to take legislative action, the federal Government shall bring such articles with a favourable recommendation to the notice of the appropriate authorities of constituent states or provinces at the earliest possible moment;
316 Yearbook Comm. Arb’n XXXV (2010) INDEX OF CASES VOLUME XXXV
(c) A federal State Party to this Convention shall, at the request of any other Contracting State transmitted through the Secretary-General of the United Nations, supply a statement of the law and practice of the federation and its constituent units in regard to any particular provision of this Convention, showing the extent to which effect has been given to that provision by legislative or other action.
Index Volume XXXV (2010): No new decisions are reported.
ARTICLE XIV
¶ 914 GENERAL RECIPROCITY CLAUSE
A Contracting State shall not be entitled to avail itself of the present Convention against other Contracting States except to the extent that it is itself bound to apply the Convention.
Index Volume XXXV (2010): No new decisions are reported.
Yearbook Comm. Arb’n XXXV (2010) 317 ARGENTINA
Ratification: 14 March 1989 1st and 2nd Reservation
3. Cámara Federal de Apelaciones [Federal Court of Appeals], City of Mar del Plata, 4 December 2009
Parties: Petitioner/Appellee: Far Eastern Shipping Company (nationality not indicated) Respondent/Appellant: Arhenpez S.A. (nationality not indicated)
Published in: Available online at
Articles: III; IV(2); V(1)(e)
Subject matters: – no requirement of double exequatur – procedural aspects of enforcement under domestic law – certified translation – certified signature of arbitrator
Topics: [1]-[9] = ¶ 514; [10]-[15] = ¶ 301; [16]-[23] = ¶ 404 + ¶ 406
Summary
No prior exequatur is required to seek enforcement of a foreign award under the New York Convention. The appellate court then found that the lower court erred in granting enforcement ex parte and without giving reasons, in application of incorrect provisions of the Argentinean Code of Civil Procedure; by so doing, it violated the respondent’s right to due process. Also, the lower court should have considered that the petitioner failed to submit a duly certified translation of the award and a certification of the signature of the arbitrator who rendered the award.
318 Yearbook Comm. Arb’n XXXV (2010) ARGENTINA NO. 3
On 6 July 2000, Far Eastern Shipping Company (Far Eastern), the owners, and Arhenpez S.A. (Arhenpez), the charterers, entered into a contract for the vessel KRASKINO. The charterparty contained an arbitration clause. A dispute arose between the parties. On 1 October 2003, a sole arbitrator in London rendered an award in favor of Far Eastern, which then sought enforcement of the award in Argentina. The Federal Court of First Instance No. 4 of the City of Mar del Plata granted enforcement ex parte and without giving reasons for its decision; it also issued an order of attachment and sale of certain assets of Arhenpez. The Federal Court of Appeals of Mar del Plata, per Jorge Ferro, with whom Alejandro Osvaldo Tazza concurred, affirmed the lower court’s decision in part but remanded the case for a new decision on enforcement. Arhenpez first argued that the federal court erred in granting enforcement without requiring that Far Eastern obtain exequatur first, as is required under Argentinean procedural law. The Court of Appeals disagreed. It reasoned at the outset that the enforcement of arbitral awards – which was not contemplated originally in the Argentinean National Code of Civil Procedure (CPCCN) – must be equated to the enforcement of foreign decisions, a conclusion that finds support in the judicial nature of awards, the CPCCN itself, jurisprudence and doctrine. Just as is the case with foreign court decisions, the rules applicable to the enforcement of foreign awards differ depending on whether an international treaty applies. Here, enforcement was governed by the 1958 New York Convention, which displaces the provisions on recognition and enforcement contained in the Argentinean national and provincial codes of civil procedure. As a consequence, the federal court correctly held that there was no need for far Eastern to obtain exequatur prior to requesting enforcement of the London award. Arhenpez also argued that the federal court erred in granting enforcement of the award ex parte and without giving reasons for its decision, by applying the provisions in the CPCCN that govern the enforcement of “other executable titles”. The Court of Appeals agreed with Arhenpez’s argument. It reasoned that the provisions on which the lower court relied bore no relation to the case at hand, which concerned the enforcement of a foreign arbitral award; the court was therefore wrong in applying them. By so doing, the lower court violated the principle that courts must give reasons for their decisions and, as a consequence, Arhenpez’s right to due process. Having found that the decision and orders of the federal court were invalid, the Court of Appeals proceeded to consider whether enforcement of the London award should be granted. It concluded that it should not. The Court held that Far
Yearbook Comm. Arb’n XXXV (2010) 319 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
Eastern did not comply with the requirements for requesting enforcement established by Art. IV(2) of the New York Convention, as it failed to supply a duly certified translation of the award. The Court noted that the translation supplied by Far Eastern was made by a private – rather than official or sworn – translator who was also not licensed to act in the Province of Mar del Plata where the present proceeding was held. Also, the signature of the sole arbitrator was neither certified nor legalized by a diplomatic authority. The Court of Appeals therefore affirmed the decision of the federal court to the extent that it denied Arhenpez’s claim that Far Eastern should have obtained exequatur before seeking enforcement of the London award, and referred the case back to the lower court for a decision on enforcement under the 1958 New York Convention, applying the Convention’s provisions in respect of the submission of the necessary documents for requesting enforcement.
A detailed report of this decision is available online at
320 Yearbook Comm. Arb’n XXXV (2010) AUSTRALIA
Accession: 26 March 1977 No Reservations
34. Federal Court of Australia, New South Wales District Registry, General Division, 16 October 2009, NSD 1738 of 2008
Parties: Applicants: (1) George Nicola (nationality not indicated); (2) Miriam Nicola (nationality not indicated); (3) George & Miriam Nicola Pty Limited (nationality not indicated) Respondents: (1) Ideal Image Development Corporation Incorporated (US); (2) John Pace (nationality not indicated)
Published in: Available online at
Articles: II(1); II(3)
Subject matters: – scope of arbitration clause – arbitrability of Australian Trade Practices Act 1974 claims
Topics: [6]-[17] = ¶ 221; [18]-[46] = ¶ 201; [47]-[51] = ¶ 223; [66] = ¶ 222; [67]-[69] = ¶ 217; [70] = ¶ 220
Summary
The court granted a stay of proceedings, finding that most of the applicants’ claims fell within the scope of the arbitration clause in a franchise agreement. It also stayed proceedings in respect of claims that it found not to be covered by the arbitration clause, since a clause in the agreement provided that the Florida courts had exclusive jurisdiction on non-arbitrable claims.
On 1 September 2004, Dr. George Nicola and his wife Dr. Miriam Nicola (collectively, the Nicolas) entered into a Franchise Agreement with Ideal Image
Yearbook Comm. Arb’n XXXV (2010) 321 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
Development Corporation Incorporated (Ideal), a franchisor of technologically advanced lasers for hair and skin removal and Botox application and injection therapy. Under the Franchise Agreement, the Nicolas were granted the exclusive right to conduct the Ideal franchise in certain parts of Sydney, Australia under the name “Ideal Image”. Clause 31 of the Franchise Agreement referred “any claim, controversy or dispute arising out of or relating to Franchisee’s operation of the Franchised Business under this Agreement ... which cannot be amicably settled” to arbitration in Florida in accordance with the Rules of the American Arbitration Association (AAA). Clause 31 further set out procedural details for the arbitration, established that the provisions in the Franchise Agreement prevailed over any conflicting AAA Rules and provided that the arbitrator had no authority to “extend, modify or suspend any terms” of the Agreement. Clause 40 provided that the Franchise Agreement was governed by and construed in accordance with the laws of the State of Florida and that all claims which, as a matter of law or public policy, could not be submitted to arbitration would be brought exclusively before the Florida courts. A dispute arose between the parties in respect of the franchise. The Nicolas and their company, George & Miriam Nicola Pty Limited, commenced an action in the Australian courts, complaining that they were provided with inadequate assistance, that Ideal did not own the relevant intellectual property in Australia and that prior to entering into the Franchise Agreement they were told that an Ideal franchise would have certain qualities which, as it transpired, it did not. They sought restitution of franchise fees paid to Ideal and damages, both for breach of contract and unconscionable conduct under the Trade Practices Act 1974 (Cth) (TPA) and for violation of the Franchisors Code of Conduct contrary to the requirements of the TPA. They also sought to be relieved from certain restraints on their ability to compete imposed by the Franchise Agreement and applied to vary the Agreement pursuant to the Independent Contractors Act 2006 (Cth) (ICA). Ideal applied to stay court proceedings because of the arbitration clause in the Franchise Agreement. The Federal Court of Australia, New South Wales District Registry, General Division, per Perram J, granted a stay of the proceedings in favor of arbitration (for arbitrable claims) and proceedings in the Florida courts (for claims that could not be referred to arbitration). The court first noted that the Franchise Agreement was governed by Florida law, in respect of which Ideal had submitted an expert opinion that the court found unhelpful as to the issue of the proper construction of clause 31. Ideal had submitted that, if it failed to prove the contents of the law of Florida, then the
322 Yearbook Comm. Arb’n XXXV (2010) AUSTRALIA NO. 34 law of Australia applied. The court accepted this submission and accordingly examined clause 31 under Australian law. The court then considered whether the Nicolas’ claims fell within the scope of clause 31, which provided for arbitration of disputes “arising out of or relating to the Franchisee’s operation of the Franchised Business under this Agreement”. It concluded that most of the claims – for breach of various terms of the Franchise Agreement, repayment of certain franchise fees, misleading representations prior to the conclusion of the Agreement, fees paid under a collateral franchise agreement and unconscionable conduct by Ideal – either arose under or were related to the Franchise Agreement and were therefore covered by the arbitration clause therein. Differently, the claim that the Franchise Agreement contained unlawful post-termination restraints concerned issues arising after the Agreement had come to an end and could not be said to “arise” from the operation of the franchised business. Nor could it be said to “relate to” the Agreement, since the only nexus between the post-termination restraints and the operation of the franchised business was that the parties were the same and that they had concluded the prior contract. The court concluded, “[n]ot without some hesitation” that this nexus was not sufficient to be caught by clause 31. Hence, all of the Nicolas’ claims were amenable in principle to arbitration, save for the claims concerning the post-termination restraints, which were to be referred to the Florida courts as provided for in clause 40 of the Franchise Agreement. The court further found that to the extent that the Nicolas’ claims sought to set aside or vary the terms of the Franchise Agreement, they could not be referred to arbitration under clause 31, which prohibited the arbitrator from extending, modifying or suspending the operation of the Agreement. The court held that in this context “suspend” had to mean “set aside” or “invalidate”, and that the parties had intended to prevent the arbitrator from varying the terms of the Agreement, be it by way of extension, amendment or repeal. The Nicolas argued that their claims concerning unconscionable or misleading conduct in trade and commerce and the violation of industry standards were not arbitrable as they involved competition issues under the TPA and as a consequence issues of public policy. The court disagreed, finding that the claims missed “the element of broad public interest in the outcome to warrant the conclusion that only the local national courts should be involved in their resolution”. The court therefore stayed proceedings awaiting the outcome of arbitration on all claims but for the claims to set aside and vary the Franchise Agreement and
Yearbook Comm. Arb’n XXXV (2010) 323 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 the claims involving the post-termination restraints, which it found were to be brought in the courts of Florida.
A detailed report of this decision is available online at
324 Yearbook Comm. Arb’n XXXV (2010) AUSTRIA
Accession: 2 May 1996 No Reservations
19. Oberster Gerichtshof [Supreme Court], 30 March 2009, 7Ob266/08f
Parties: Claimant: C GmbH (nationality not indicated) Defendant: S Aktiengesellschaft (nationality not indicated)
Published in: Available online at
Articles: II(1); II(2); II(3)
Subject matters: – applicable law to existence, validity of arbitration agreement – nonsignatory to arbitration clause and cession of contract – nonsignatory benefitted third under contract is bound by arbitration clause – separability of arbitration clause
Topics: [2] = ¶ 221; [3]-[4] = ¶ 201; [5]-[8] + [11] = ¶ 205; [8]-[10] + [13] = ¶ 217; [12] = ¶ 222
Summary
A dispute concerning pre-contractual liability arising under a Confidentiality Agreement covering the pre-contractual relationship of the parties should be referred to arbitration. The arbitration clause was binding on non-signatory companies because they had benefitted under the Agreement and, in one case, had replaced the original signatory party in its relationship with the other party.
On 10 January 2005, S Aktiengesellschaft (Defendant) informed the European competition authorities that it was seeking to obtain a 97% participation in V AG
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(Company V). The purchase was later authorized on the condition that Defendant sell Company V’s power generation business. On 15 May 2004, Company C AG, as sole shareholder, had incorporated Company C GmbH (Claimant) with the purpose of participating in the future invitation to tender for the power generation business of Company V. In view of the future bidding procedure for Company V’s business (the Transaction), the directors of Company C AG entered into a Confidentiality Agreement with Company V. The Confidentiality Agreement provided, inter alia, that Company C AG and its related enterprises could receive information from Company V or related enterprises (such as Defendant) in respect of the Transaction, while pledging themselves to confidentiality in return, and that Company C AG took cognizance of and was in agreement with the fact that neither Company V, Defendant or their related enterprises were guaranteeing the correctness and completeness of that information. The Confidentiality Agreement further stated that Company V, Defendant and their related enterprises and representatives were free to carry out the Transaction at their discretion and that they were not obliged under the Confidentiality Agreement to conclude any other agreement with potential buyers. The Confidentiality Agreement was governed by German law. It contained a clause providing that disputes be referred to ICC arbitration in Munich under German procedural law. On 21 October 2005, the bidders consortium A Group (of which Company C AG was a member) made a provisional bid for Company V’s power generation business. The consortium stated that Claimant would henceforth act in the bidding procedure and would ultimately make the purchase. On 19 December 2005, Claimant made a final bid. Company V’s business was ultimately sold to another company. Claimant filed suit in the Vienna Commercial Court, seeking compensation from Defendant of the costs it had occurred for its participation to the invitation to tender. It argued that Defendant violated its pre-contractual obligations, in particular by failing to inform Claimant that it was possible to make a partial purchase of the business; had it been aware of that possibility, Claimant would not have participated in the bidding procedure. Defendant objected that the court lacked jurisdiction because of the arbitration clause in the Confidentiality Agreement. On 29 December 2007, the commercial court granted Defendant’s objection of lack of jurisdiction. On 29 September 2008, the Vienna Court of Appeal reversed the lower court’s decision. By the present decision, the Austrian Supreme Court annulled the appellate decision and reinstated the decision of the first instance court. The Court noted at the outset that although the Confidentiality Agreement expressly provided that
326 Yearbook Comm. Arb’n XXXV (2010) AUSTRIA NO. 19 the arbitration agreement was governed by German law, German law would have applied at any event because the validity of an arbitration agreement (the personal capacity of the parties excluded) is governed by the law of the country where the arbitral award is to be rendered – here, Germany – unless the parties otherwise provide. It made no difference, however, whether the validity of the arbitration agreement was determined under German or Austrian law, as in both legal systems an arbitration agreement pertains to procedural law and its scope is to be ascertained through contractual interpretation. This examination is independent of the law applicable to the underlying contract. The Supreme Court held that the appellate court erred in failing to find that the present claim, which sought damages for breach of pre-contractual obligations, fell under the Confidentiality Agreement, which regulated the parties’ relationship in view of the future invitation to tender. The Confidentiality Agreement provided for arbitration of disputes and therefore the claim could not be heard by the state courts. The Court added that the Confidentiality Agreement containing the arbitration clause had undoubtedly been signed by Company V and Company C AG and was valid between them. The question was then whether the arbitration agreement was also binding on Claimant and Defendant, the parties to the present proceedings, which were not parties to the Confidentiality Agreement. The Court concluded that it was, because both under Austrian and German law (1) a party taking over a contract takes over the arbitration clause therein and (2) the arbitration clause in a contract benefitting a third is binding on that third. Here, Claimant and Defendant were both benefitted parties under the Confidentiality Agreement (which established rights for the signatories and their related companies, such as Claimant and Defendant), and Claimant actually replaced Company C AG in the latter’s relationship with Company V.
A detailed report of this decision is available online at
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20. Oberster Gerichtshof [Supreme Court], 22 July 2009, 3Ob144/09m
Parties: Claimant: L AS (Denmark) Defendants: (1) Jürgen H (nationality not indicated); (2) Judith Elisabeth H (nationality not indicated); (3) L GmbH (Austria)
Published in: Available online at
Articles: III; V(1)(a); V(1)(c); V(2)(b)
Subject matters: – European Convention of 1961 – incorrectness of arbitrators’ decision as to late filing of jurisdiction objection no ground for appeal on a point of law (Revisionsrekurs) – arbitration clause in consumer contract – consumer protection as ground for violation of public policy
Topics: [1]-[3] = ¶ 301 + ¶ 704; [4]-[6] = ¶ 524 (consumer protection)
Summary
The arbitral tribunal deemed that the objection of lack of jurisdiction had not been timely filed. The possible incorrectness of this decision is no ground for an appeal on a point of law (Revisionsrekurs) to the Supreme Court. Arbitration clauses in consumer contracts do not violate public policy, provided there have been concrete negotiations.
On 19 October 2004, L AS (Claimant) concluded a franchise contract with L GmbH (Third Defendant). Jürgen H (First Defendant) and Judith Elisabeth H (Second Defendant) entered into the contract as guarantors. The contract contained a clause referring disputes to arbitration at the Danish Institute of Arbitration (DIA). A dispute arose between the parties. Claimant commenced DIA arbitration proceedings as provided for in the franchise contract. Defendants participated in the proceedings by filing a statement in defense and taking part in an oral hearing on the issue of the applicable law. At the final hearing, which was postponed
328 Yearbook Comm. Arb’n XXXV (2010) AUSTRIA NO. 20 twice at Defendants’ request, counsel for Defendants again sought a postponement on the ground that she had received new instructions from her clients only the day before. The arbitral tribunal denied the request by a procedural order. Counsel for Defendants then raised the objection that the arbitration clause did not apply to First and Second Defendants. The arbitrators stated that there had been no previous mention of this objection to the arbitral tribunal’s jurisdiction in Defendants’ statements in the arbitration, while such objection should have been raised in the first statement submitted by Defendants. The arbitrators added that there was no reason to allow a late filing of the jurisdiction objection. After this decision was announced, counsel for Defendants left the hearing. On 12 June 2008, the arbitrators rendered an award in favor of Claimant, which then sought enforcement in Austria. The district court (Bezirksgerichts) in Wels granted enforcement of the Danish award. On appeal, the Wels court of first instance (Landesgerichts) modified this decision only in respect of the rate of interest applicable to First Defendant. The Austrian Supreme Court affirmed the appellate court’s decision. It noted that the lack of an arbitration agreement must be invoked before the arbitral tribunal; it added that under the 1961 European Convention participation in the arbitration without raising any objection cures the defect of lack of an arbitration agreement. The Danish arbitral tribunal deemed that the objection of lack of jurisdiction was filed too late. Although this conclusion can be subject to review in the enforcement proceedings pursuant to the European Convention, the possible incorrectness of the tribunal’s decision raises no essential question of law to be heard in an appeal on a point of law (Revisionsrekurs). The Court then held that while an infringement of consumer law provisions can violate substantive public policy, arbitration clauses in consumer contracts do not in principle constitute such infringement, provided there have been concrete negotiations. Here, Defendants did not argue that the clause was not fully negotiated, thus failing to prove that there was a violation of public policy.
A detailed report of this decision is online available at
Yearbook Comm. Arb’n XXXV (2010) 329 BRAZIL
Accession: 7 June 2002 No reservations
12. Superior Tribunal de Justiça [Superior Court of Justice], 19 August 2009, SEC no. 3.035 - EX (2008/0044435-0)
Parties: Claimant: Atecs Mannesmann GmbH (nationality not indicated) Defendant: Rodrimar S/A Transportes Equipamentos Industriais e Armazéns Gerais (nationality not indicated)
Published in: Diário da Justiça (DJ) 31 August 2009
Articles: III; V; V(1); V(2)
Subject matters: – formal v. substantive res judicata – new request for enforcement filed after dismissal for lack of compliance with formal prerequisites (lack of standing) – any interested party may request enforcement – review of merits of award (no) – grounds for refusal of enforcement (in general) (no)
Topics: ¶ 301; [7]-[9] = ¶ 502
Summary
An earlier attempt by a different claimant to enforce the award, which had been terminated because of a formal defect, did not prevent a new request for enforcement by the present claimant. Also, although the present claimant was not mentioned in the award, it was affected by the award and could request its enforcement. The court then granted enforcement, refusing to review the merits of the award.
On 5 May 2003, Atecs Mannesmann GmbH (Atecs) obtained an award in its favor against Rodrimar S/A Transportes Equipamentos Industriais e Armazéns
330 Yearbook Comm. Arb’n XXXV (2010) BRAZIL NO. 12
Gerais (Rodrimar) in a dispute concerning the breach of a contract for the sale of a mobile harbor crane. Rodrimar was ordered to pay Atecs € 510,078.90 in damages and interest thereon. Atecs sought enforcement of the award in Brazil. The Superior Court of Justice granted enforcement. It first denied Rodrimar’s objection of res judicata, based on an earlier attempt by another party, Gottwald Port Technology GmbH (Gottwald) to enforce the award. That proceeding was terminated without a decision on the merits because it was found that Gottwald lacked standing. The Court reasoned that a decision terminating proceedings because of a formal defect has force of formal rather than substantive res judicata and does not prevent a claimant from resubmitting its action after curing the defect. The Superior Court also dismissed Rodrimar’s argument that Atecs had no standing because it was not mentioned in the award, holding that any party who can be affected by the award may request its enforcement and recognition. Equally unsuccessful was Rodrimar’s argument that recognition would violate Brazilian public policy because the foreign arbitrators applied “Swiss law rules” rather than Swiss substantive law as provided for in the contract, and because Atecs’s damage was not proven, which meant that the award’s recognition would result in Atecs’s unjust enrichment. The Court reasoned that these issues “pertain to the merits of the arbitral award” and that the enforcement court may not review an award’s merits.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 331 BRITISH VIRGIN ISLANDS1
2. Eastern Caribbean Supreme Court, High Court of Justice, Commercial Division, 11 January 2010, Claim No: BVIHCV 2009/389
Parties: Applicant: Grand Pacific Holdings Limited (Hong Kong) Respondent: Pacific China Holdings Limited (British Virgin Islands)
Published in: Available online at
Articles: V(1)(b); V(1)(d) (both by implication)
Subject matters: – time limit to reply to statements not in accordance with parties’ agreement – due process and time limit to reply to statements – debt under challengeable award and appointment of liquidator(s)
Topics: ¶ 510 + ¶ 513
Summary
A creditor under a Hong Kong award sought appointment of liquidators over a British Virgin Islands company. The debtor opposed this request, relying on New York Convention grounds to argue that the award was challengeable and thus the debt was disputed. The court examined the contentions that the arbitrators did not act in accordance with the agreement of the parties and violated due process and concluded that there were no substantial grounds to hold that enforcement of the award, if requested, would be denied on those grounds.
On 23 May 2001, Grand Pacific Holdings Limited (the Applicant) entered into a Loan Agreement with Pacific China Holdings Limited (the Company), under which the Company would pay to the Applicant the sum of US$ 40 million by 31
1. The British Virgin Islands, which are not included in the list of territories to which the United Kingdom extended the application of the 1958 New York Convention upon its accession thereto in 1975, incorporated the Convention into its Arbitration Ordinance of 6 September 1976.
332 Yearbook Comm. Arb’n XXXV (2010) BRITISH VIRGIN ISLANDS NO. 2
May 2006, together with interest. The Loan Agreement contained a choice-of- law clause providing for the application of the laws of the State of New York. It further referred disputes to arbitration in Hong Kong according to the rules of the International Chamber of Commerce. The Company made some payments under the Loan Agreement up to 31 May 2002, when payments stopped. By 31 May 2006, about US$ 34 million of principal and US$ 14 million of interest remained unpaid. The Applicant commenced ICC arbitration in Hong Kong as provided for under the Loan Agreement. On 24 August 2009, an arbitral tribunal found in favor of the Applicant. On 15 September 2009, the Applicant requested the Company to honor the award. When the Company failed to do so, on 11 November 2009 the Applicant issued an application in the courts of the British Virgin Islands to appoint liquidators over the Company, claiming that the Company failed to pay its debt under the award as it fell due and was therefore insolvent. The High Court of Justice, Commercial Division granted the appointment of liquidators. It noted first that courts may not appoint liquidators on the application of a creditor unless the creditor’s debt is free from substantial challenge or the creditor’s status is undisputed. The Company argued that shortcomings in the way in which the Hong Kong arbitral tribunal conducted the arbitration meant that the award was open to challenge, either directly, in the courts of Hong Kong, or indirectly through defenses raised in enforcement proceedings. Hence, the debt was disputed. The court disagreed, reasoning that awards that have not been set aside continue to exist even if enforcement is refused on any of the grounds of the 1958 New York Convention. So does, as a consequence, the debt under the award. However, if it is shown that there are substantial grounds why the award should not be enforced, that would in the court’s opinion be similar to a dispute about the status of the successful party as a creditor. The court therefore proceeded to examine whether the Hong Kong award was open to challenge, within the limited confines of an action where it was not asked to enforce the award but rather to appoint liquidators. It concluded that the matters relied on by the Company were not sufficiently substantial to raise a real question whether the award was one that should be enforced. The Company argued that the arbitral tribunal did not act in accordance with the agreement of the parties, as set out in their procedural protocol for the arbitration, in respect of certain expert evidence. In particular, the arbitrators allegedly did not give the Company adequate time to prepare. This manner of proceeding also violated the Company’s right to due process.
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The court dismissed this argument, concluding on the record of the case that even if it were established that the arbitral tribunal acted unfairly, made it impossible for the Company to present its best case or was in breach of the parties’ procedural protocol, that could have had no impact on the outcome of the arbitration. The court also denied the Company’s contention that the arbitrators violated due process by failing to require the Applicant to prove that the person who signed the Loan Agreement on the Applicant’s behalf was authorized to do so under Hong Kong law. The arbitrators decided that the question was governed by New York law, as the law of choice, and that on the available materials the Loan Agreement must be deemed to have been duly executed in accordance with the law of New York. The arbitral tribunal added that there was also ample evidence that the Applicant had ratified the agreement. The court again held that if even if the arbitrators had erred in this respect, this issue was immaterial to the outcome of the proceeding, as it appeared that the Company had conceded in the arbitration that any want of authority on the part of the signatory for the Applicant could have been cured by subsequent ratification on the part of the Applicant and there was “overwhelming evidence” that the Applicant had indeed ratified the Loan Agreement. The court therefore concluded that the Company had raised no issue of substance that would be capable of bringing into play any of the grounds for refusal of enforcement under the Arbitration Ordinance of the British Virgin Islands, which reflect Art. V of the New York Convention.
A detailed report of this decision is available online at
334 Yearbook Comm. Arb’n XXXV (2010) CANADA
Accession: 12 May 1986 2nd Reservation (not applicable to Québec)
29. Court of Appeal for Ontario, 23 December 2008, no. C48194 Superior Court of Justice, Ontario, 29 September 2009, no. CV-09-376953 Court of Appeal for Ontario, 22 February 2010, C51225/M38409
Parties: Appellant/Defendant: Donaldson International Livestock Ltd. (Canada) Respondents/Claimants: (1) Znamensky Selekcionno- Gibridny Center LLC (Russian Federation); (2) Nikolay Demin (nationality not indicated)
Published in: All decisions available online at
Articles: II(3); III; V(2)(b)
Subject matters: – arbitration clause “inoperative” because of death threats – stay of court proceedings – scope of arbitration clause and tort claim – public policy and impossibility to participate in arbitration because of death threats – estoppel (issue) – security for costs of enforcement proceedings
Topics: [4] = ¶ 220; [6]-[12] = ¶ 201 + ¶ 217; [13]-[20] = ¶ 524 (death threats); [21]-[30] = ¶ 301
Summary
The first decision affirmed the motion judge’s stay of court proceedings pending arbitration in Moscow. It denied the argument that the stay should be lifted because the relief sought in court (a declaration that the award could not be enforced, and tort-based damages) went beyond the scope of the arbitration
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agreement. The court held that although the first relief fell outside the arbitration agreement, it should be discussed in enforcement proceedings, and that the arbitration clause here was so broad as to encompass all advanced claims. The court also dismissed a request to have the issue of alleged death threats heard in a hearing, holding that this request should have been made before the motion judge. The second decision granted enforcement of two Russian awards, dismissing the only objection that the Canadian parties involved could not participate in the Moscow arbitration because of alleged death threats. The court found that this issue was both issue-estopped by the findings in the decision above and virtually eliminated by the Russian party’s offer of special accommodation for witness testimony that did not require traveling to Moscow or an alternate site for the arbitration. The third decision dismissed the application of the party’s seeking enforcement for security for the costs of the appellate proceedings commenced against the enforcement decision.
In August 2006, Donaldson International Livestock Ltd. (Donaldson) entered into a contract to sell 8,505 pure-bred pigs to Znamensky Selekcionno-Gibridny Center LLC (Znamensky) for US$7,338,496. The contract provided that the pigs should be tested and quarantined prior to export to Russia. The contract was governed by the law of the Russian Federation. It also provided for arbitration of disputes in Moscow at the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC). The pigs were placed into pre-export quarantine in three lots. Canadian Food Inspection Agency (CFIA) veterinarians and veterinarians retained by Donaldson were satisfied that the pigs in Quarantine No. 1 were fit for export; however, veterinarians retained by Znamensky found that those pigs were not healthy. A CFIA swine specialist concluded that the pigs were suitable for export. On 17 November 2006, Mr. James Donaldson, the major shareholder and chief operating officer of Donaldson, received a telephone call from Mr. Nikolay Demin, the chief executive officer of Znamensky. Demin demanded that Donaldson provide new pigs to satisfy the terms of the contract. Mr. Donaldson refused. The conversation became hostile and, according to Mr. Donaldson, Mr. Demin shouted “what happens to people that cross me”, followed twice by “I will kill you”. In the next few months, efforts were made to resolve the dispute. Znamensky continued to refuse to accept the delivery of the pigs from Quarantine No. 1 and demanded that Donaldson return its advanced payment of US$1,666,113. At a meeting in Ottawa on 17 March 2007, Mr. Demin made certain comments that Mr. Donaldson took as a further threat. He subsequently reported the alleged threats to the police. On 20 July 2007, Donaldson was served with a request for arbitration of the dispute before the ICAC pursuant to the arbitration clause in the contract. On 15 August 2007, Donaldson commenced an action in the Superior Court for Ontario. It argued that the individuals involved with the inspection of the pigs in Canada were aware of the death threats made against Mr. Donaldson and
336 Yearbook Comm. Arb’n XXXV (2010) CANADA NO. 29 refused to appear as witnesses in Moscow for the arbitration. It sought (1) a declaration that the arbitration clause in the contract was null and void; (2) a declaration that the recognition of any award would be contrary to public policy; and (3) injunctions prohibiting Znamensky from seeking any remedy against Donaldson in an arbitration or other proceeding conducted in Russia. Prior to the injunction motion proceeding to court, Znamensky informed Donaldson that it was prepared to consent to Mr. Donaldson and his witnesses testifying by telephone, video conference or other means to avoid their having to travel to Moscow or, alternatively, that it was prepared to agree to a mutually acceptable location outside of Russia for the holding of the arbitration, provided that Donaldson pay for any increased costs. Donaldson declined either proposal. Znamensky then brought a cross-motion for a stay of the Canadian court action. On 27 November 2007, the Superior Court of Justice, per Justice A.M. Gans (the motion judge), denied Donaldson’s requests and granted Znamensky’s application for a stay of the action. In the meantime, ICAC arbitration took place in Moscow; Donaldson did not participate. The ICAC arbitral tribunal eventually rendered two awards in favor of Znamensky: the first, of 6 March 2008, awarded Znamensky US$ 1,234,416.65 in damages and US$ 26,205.28 as compensation for the arbitration fee; the second awarded Znamensky US$ 424,732.94 in damages and US$ 9,006.21 as compensation for the arbitration fee. By the first decision reported, rendered on 23 December 2008, the Court of Appeal for Ontario, before Laskin, Armstrong and MacFarland, JJA, in an opinion by Armstrong, JA, dismissed Donaldson’s appeal on three grounds against the 27 November 2007 decision of the motion judge. Donaldson sought (1) to have the issue of the alleged impact of the death threats heard in a hearing. The court of appeal held that this request should have been, but was not, made before the motion judge. Donaldson also again applied (2) for an interim injunction prohibiting any steps to enforce the ICAC awards. The court of appeal held that since the motion judge had made no order in respect of this request, this issue should be dealt with at first instance and not in the appellate court. The court added that should Znamensky take steps to enforce the awards against Donaldson in the Ontario courts, then Donaldson should be free to resist the enforcement of those awards on whatever basis it chose. Finally, Donaldson sought (3) to have the order staying the court proceedings it had commenced against Znamensky set aside. Donaldson argued that the motion judge erred in granting a stay of the action because Donaldson’s statement of claim in the Canadian court proceedings sought relief that went beyond the scope of the arbitration clause in the sale and purchase contract, namely, (i) a
Yearbook Comm. Arb’n XXXV (2010) 337 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 declaration that any award should not be enforced in Ontario due to Znamensky’s misconduct and (ii) damages based on tort, including claims against Demin, who was not a party to the sale and purchase contract. The court of appeal agreed that the request under (i) fell outside the scope of the arbitration clause, but concluded that this issue should more properly be discussed in enforcement proceedings. As to the second argument, the court held that the arbitration clause here was extremely broad, broad enough to include virtually all of the claims advanced in the statement of claim. The fact that one of the claims was against a non-party to the agreement was not sufficient to oust the ICAC’s jurisdiction over these matters, when the entire focus of the action relates to issues arising out of the contractual relations of the principal parties. This is the first decision reported. The second decision reported, rendered on 29 September 2009, dealt with Znamensky’s application to enforce the two ICAC awards in Canada. The Superior Court of Justice for Ontario, per Justice Romain Pitt, granted enforcement. The court noted that Donaldson opposed enforcement on the sole ground that the alleged death threats had vitiated the ICAC arbitration proceedings. However, this issue was both issue-estopped by the court of appeal’s findings in its 23 December 2008 decision and virtually eliminated – as found by the motion judge and endorsed inferentially by the court of appeal – by Znamensky’s offer for special accommodation for witness testimony or an alternate site for the arbitration. This is the second decision reported. By the third decision reported, rendered on 22 February 2010, the Court of Appeal for Ontario, per R.A. Blair JA, dismissed Znamensky’s motion for security for the costs of the appellate proceedings commenced by Donaldson against the 29 September 2009 order enforcing the two ICAC awards. This is the third decision reported.
A detailed report of these decisions is available online at
338 Yearbook Comm. Arb’n XXXV (2010) CANADA NO. 30
30. Supreme Court of British Columbia, Vancouver Registry, 9 October 2009, Docket no. S088532
Parties: Plaintiff: H & H Marine Engine Service Ltd. (Canada) Defendants: (1) Volvo Penta of the Americas, Inc. (US); (2) Volvo Group Canada Inc./Groupe Volvo Canada Inc. d/b/a Volvo Penta Canada (Canada)
Published in: Available online at
Articles: II(3)
Subject matters: – stay of court proceedings – competence-competence regarding existence, validity of arbitration clause
Topics: ¶ 222
Summary
The prima facie analysis test developed by the Supreme Court of Canada in Dell – arbitrators may resolve a challenge to their jurisdiction first unless the challenge is based on a question of law or a question of mixed fact and law where the factual questions require only superficial consideration of the evidence – applies in all cases in which the competence-competence principle forms part of the governing legal framework (including British Columbia in respect of arbitrations outside of British Columbia). Where, however, there is no evidentiary or statutory basis for application of the competence-competence principle, the court must determine whether an arbitration agreement exists before granting a stay. This was the case here, as there was no evidence in the file that the SCC arbitration rules incorporate the competence-competence principle. The court held that there was no valid arbitration agreement between the parties and refused to stay the proceedings.
In early 2006, H & H Marine Engine Service Ltd. (H & H Marine) negotiated with Volvo Penta of the Americas, Inc. (Volvo Penta) a contract for the supply of marine engine parts (the Iron Manifold Project). H & H Marine and Volvo Penta did not execute a formal contract and conducted business instead by way of invoices issued by H & H Marine and purchase orders issued by Volvo Penta. In April 2006, H & H Marine and Volvo Penta also agreed on the supply of aluminum engine parts (the Aluminum Project). In the spring and fall of 2006,
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Volvo Penta issued purchase orders, per fax, to H & H Marine regarding parts and tooling costs under the Iron Manifold Project (the Purchase Orders). Only the front page of the Purchase Orders was faxed. It indicated, inter alia, that by accepting an order the seller (H & H Marine) agreed to the terms and conditions set forth therein; further, “if applicable, this document represents a portion of the Volvo Penta Purchasing Agreement see page two attached for terms and conditions”. No page two (the reverse side) was faxed. In October 2007, a dispute arose between the parties. Volvo Penta wrote to H & H Marine stating that it reserved its right to commence American Arbitration Association (AAA) arbitration as provided for in the Purchase Orders and attaching a copy of the Purchase Order Terms and Conditions. Para. 11 of the Purchase Order Terms and Conditions provided for non-binding mediation followed if necessary by arbitration in Washington, DC, under the AAA commercial arbitration rules. At the relevant time, however, Volvo Penta generally followed a standard procedure for contracting with its marine parts suppliers; that procedure was governed by General Purchasing Conditions that were not the same as the Purchase Order Terms and Conditions. The General Purchasing Conditions provided for the application of Swedish substantive law; they also contained a clause for arbitration of disputes in Sweden in accordance with the rules of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). In December 2008, H & H Marine commenced proceedings against Volvo Penta and Volvo Group Canada Inc. (collectively, the defendants) in the Canadian courts. The defendants applied for an order staying court proceedings on the basis of the arbitration clause for SCC arbitration in the General Purchasing Conditions, arguing that the issue of whether an arbitration agreement existed should be determined in arbitration. The Supreme Court of British Columbia, Vancouver Registry, per Madam Justice Dickson, denied the defendants’ application for a stay. The court noted at the outset that Sect. 8 of the International Commercial Arbitration Act (ICAA), which incorporates the principle of Art. II(3) of the 1958 New York Convention, provides that a party against whom court proceedings are commenced in respect of a matter agreed to be submitted to arbitration may apply to the court to stay the proceedings (Sub-sect. (1)) and that the court must grant a stay unless it determines that the arbitration agreement is null and void, inoperative or incapable of being performed (Sub-sect. (2)). The court also noted that Sect. 16 ICAA embodies the competence- competence principle, which provides that arbitrators should generally be allowed to exercise their authority to rule first on their own jurisdiction.
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However, pursuant to Sect. 1(2) ICAA, Sect. 16, and thus the principle of competence-competence, does not apply if the place of arbitration is outside of British Columbia. The court then examined the “prima facie analysis” test developed by the British Columbia Court of Appeal in 1992 in Gulf Canada Resources Ltd. In that case, the court of appeal held that a court must be satisfied that the requirements of Sect. 8(1) ICAA are met before granting a stay under Sect. 8(2) ICAA, and retains residual discretion to refuse a stay if it is clear that the challenge to the arbitrator’s jurisdiction should succeed. In 2007, the Supreme Court of Canada refined this test in Dell.1 The Dell Court held that, as a general rule, courts should allow the arbitrators to resolve a challenge to their jurisdiction first, unless the jurisdictional challenge is based on a question of law or a question of mixed fact and law where the factual questions require only superficial consideration of the evidence. In its 2009 decision in MacKinnon2 the British Columbia Court of Appeal held that the Dell test applies to arbitrations in British Columbia. The court reasoned that the Supreme Court’s analysis in Dell, however, was rooted in the Quebec Civil Code, which incorporates the competence- competence principle, and that the Dell rule may not apply in other legal contexts. Here, there was no evidence as to whether the governing legal framework – the SCC rules – incorporates the competence-competence principle. Though this was “likely”, it could not be assumed; as held by the Dell Court, consensus on the universal application of the competence-competence principle, though emerging, is not universal. The court concluded that the refined prima facie analysis test in Dell applies in all cases in which the competence-competence principle forms part of the governing legal framework. This is also the case in British Columbia in respect of arbitrations outside of British Columbia, notwithstanding the limitation in Sect. 1(2) ICAA. The court noted that “this deferential approach to arbitral jurisdiction is consistent with the purpose of the ICAA” and “with the trend toward restricting judicial intervention in commercial arbitrations reflected in both domestic and international law”. However, if there is no evidentiary or statutory basis for application of the competence-competence principle, a court should determine whether an arbitration agreement exists before a stay can be sought and granted under Sect. 8 of the ICAA.
1. Reported in Yearbook XXXIII (2008) pp. 446-463 (Canada no. 24). 2. MacKinnon v. National Money Mart Co. 2009 BCCA 103 (CanLII) 2009 BCCA 103.
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The court concluded that in the case at hand it had not been established that a valid arbitration agreement existed between the parties in accordance with Sect. 7 ICAA, which reflects Art. II(1)-(2) of the Convention. Hence, the defendants’ application for a stay should be denied.
A detailed report of this decision is available online at
342 Yearbook Comm. Arb’n XXXV (2010) CANADA NO. 31
31. Supreme Court of Canada, 20 May 2010, Docket no. 32738
Parties: Appellant: Yugraneft Corporation (Russian Federation) Respondent: Rexx Management Corporation (Canada) Interveners: (1) ADR Chambers Inc. (nationality not indicated); (2) Canadian Arbitration Congress (nationality not indicated); (3) Institut de médiation et d’arbitrage du Québec (nationality not indicated); (4) London Court of International Arbitration (nationality not indicated)
Published in: Available online at
Articles: III; V; V(1)(e)
Subject matter: – period of limitation to request enforcement of foreign award
Topics: ¶ 306; [8]-[27] = ¶ 501; [48] = ¶ 514
Summary
The request for enforcement was denied because it was time-barred. The Court held that enforcement of a 1958 New York Convention award may be denied if it is time-barred under a limitation period set by the Contracting State, even if the Convention establishes an exhaustive list of grounds on which enforcement may be refused. In Alberta, enforcement of a foreign arbitral award must be sought within two years after the failure to comply with the award crystalizes, that is, upon expiry of the time-limit to seek annulment of the award in the country of rendition.
The facts of this case are also reported in Yearbook XXXIII (2008) at pp. 433- 435 (Canada no. 23). On 1 October 1998, Rexx Management Corporation (Rexx), as the supplier, entered into an Equipment and Materials Supply Contract with Yugraneft Corporation (Yugraneft). The contract contained a clause referring disputes to
Yearbook Comm. Arb’n XXXV (2010) 343 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 arbitration at the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (ICAC). A dispute arose between the parties when Yugraneft claimed that it had pre- paid invoices in the total amount of US$ 940,382.00 but that Rexx had delivered equipment for US$ 4,652.57 only. Yugraneft commenced ICAC arbitration as provided for in the Agreement. By an award of 6 September 2002, an ICAC arbitral tribunal found in favor of Yugraneft. On 27 January 2006, Yugraneft sought enforcement of the ICAC award in Canada. On 27 June 2007, the Court of Queen’s Bench of Alberta held that Yugraneft’s enforcement action was time-barred under the Alberta Limitations Act of 1999, which provides for a limitation period of ten years for an action upon a judgment and of two years for an action upon a simple contract debt. The court reasoned that an action to enforce a foreign judgment is an action upon a simple contract debt, with a limitation period of two years, and that the same regime applies to foreign awards. The court rejected Rexx’s argument that enforcement should be denied on public policy grounds because Yugraneft had been illegally taken over, through an ordered bankruptcy and by armed seizure of its offices, by Tyumen Oil Company, a Russian company. This decision is reported in Yearbook XXXIII (2008) pp. 433-445 (Canada no. 23). The Supreme Court of Canada, before McLachlin C.J. and Binnie, LeBel, Deschamps, Fish, Abella, Charron, Rothstein and Cromwell JJ, in an opinion by Rothstein, dismissed Yugraneft’s appeal from this decision. The Court first held that Art. III of the 1958 New York Convention allows – though it does not require – Contracting States to impose local time limitations on the recognition and enforcement of foreign arbitral awards; hence, notwithstanding the exhaustive list of grounds for refusal in Art. V Convention, recognition and enforcement may be refused on the basis that the application is time-barred. The Supreme Court then examined to what limitation period, if any, Alberta law subjects the recognition and enforcement of foreign arbitral awards, and concluded that a two-year limitation period applies, subject to a discoverability rule. Only if the conditions for discoverability are met will the limitation period begin to run. Thus, a claim must be brought within two years after the claimant first became aware of the “injury”. In the present case, the injury was Rexx’s failure to comply with the arbitral award, which “crystalize[d]” three months after rendition of the award, that is, when the time limit to commence an annulment action against the award expired. The Supreme Court reasoned that under the UNCITRAL Model Law a party has three months to apply to the local courts to have an award set aside, beginning on the day it receives the award. Until that deadline has passed, “the
344 Yearbook Comm. Arb’n XXXV (2010) CANADA NO. 31 arbitral award may not have the requisite degree of finality to form the basis of an application for recognition and enforcement” under the New York Convention and may be considered “not binding” under its Art. V(1)(e). Thus, if an award is rendered in a Model Law jurisdiction or a jurisdiction having analogous provisions in respect of the setting aside of an award, such as the Russian Federation, the party who has prevailed in the arbitration would not expect recognition and enforcement of the award to be warranted on the date of rendition. As a consequence, the limitation period under the Limitations Act is triggered only when the time limit to seek annulment of the award has expired. In the present case, the award was rendered on 6 September 2002, the three- month period to commence an annulment action expired on 6 December 2002 and the action commenced by Yugraneft in January 2006 was time-barred. In light of this decision, the Supreme Court did not deal with the public policy argument raised by Rexx.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 345 CAYMAN ISLANDS
Accession: 21 February 1981 (Extension by the United Kingdom) 1st Reservation
4. Grand Court, 19 February 2008
Parties: Plaintiff: Unilever Plc (UK) et al. Defendant: ABC International (Cayman Islands) and Plaintiff: Molson Coors Brewing Company (US) et al. Defendant: ABC International (Cayman Islands)
Published in: 2008 Cayman Islands Law Reports (CILR) pp. 87-102
Articles: II(3) (by implication)
Subject matter: – nonsignatory parties not bound to arbitration clause
Topics: ¶ 217
Summary
The court denied ABC International’s application to arbitrate the claims brought against it by the Plaintiffs, finding that none of the Plaintiffs had been parties or privy to the contract containing the arbitration clause: some did not even exist at the time of the contract, nor had they become a party through transfer, assignment, execution or performance of the contract. Further, ACC International’s contradicted itself in relying on the arbitration clause, since it asserted in related ICC arbitration proceedings that another party, which was not a party to the present proceedings, had replaced the original party to the contract by adopting the whole of the original party’s contractual obligations. Also, ABC International actively submitted to the court’s jurisdiction by discussing the merits of the case.
In 1983, Diversey Ltd. (an English company, part of the Diversey division of the Molson Group), seeking to sell its sanitary products in Saudi Arabia, entered into an agency agreement (the 1983 Agreement) with a Prince Bandar, doing business
346 Yearbook Comm. Arb’n XXXV (2010) CAYMAN ISLANDS NO. 4 under the name of Arab Business & Commerce Saudi (ABCS); ABC International (ABCI) was also a party to the 1983 Agreement, under which it undertook to assist and oversee ABCS. In 1988, Diversey Ltd., ABCS and ABCI entered into a new agency agreement (the 1988 Agreement). ABCI again undertook to assist and oversee ABCS in its sponsorship of Diversey Ltd. By that time, ABCS was headed by a Dr. Bouden, to whom Prince Bandar had delegated responsibility. The 1988 Agreement contained an arbitration clause. By 1991, ABCS, and in particular Dr. Bouden, had been failing to perform its obligations for some time, culminating in the dismissal of Dr. Bouden by Prince Bandar. By this time, Diversey Ltd. considered the 1988 Agreement to have been terminated and the Diversey division of the Molson Group confirmed this position in a letter dated 19 July 1992. The Molson Group subsequently sold Diversey Ltd. to the Unilever Group, resulting in the creation of DiverseyLever, which was subsequently bought by the Johnson Group. ABCI sought to commence arbitration against these companies (collectively, the Plaintiffs) in respect of their failure to perform under the 1988 Agreement, which it believed was never terminated. An ICC arbitration, commenced in March 1998 against DiverseyLever Ltd., a company registered in England and Wales that was not a party to the present proceedings, was pending at the time of the present decision. In the Cayman Islands, the Plaintiffs applied for a declaratory order that none of them was bound by the arbitration clause in the 1988 Agreement and for injunctive relief restraining ABCI from further attempts to compel them to arbitrate. Their actions were consolidated by order of 6 June 2007. The Grand Court, per Smellie, CJ, granted the applications. It examined at the outset the position of the Plaintiffs, finding that some of them did not even exist at the time of the 1988 Agreement or even if they were in existence could not be or were not privy to the Agreement. Nor were they party to any transfer, assignment, execution or performance of the 1988 Agreement. The court further noted that in the ICC arbitration pending against DiverseyLever Ltd., ABCI asserted that DiverseyLever Ltd. had replaced the original party to the 1988 Agreement by virtue of it having “substituted itself” into that Agreement and adopted the “whole of the contractual obligations”. Hence, in the court’s opinion, ABCI hopelessly contradicted the basis upon which it asserted that the Plaintiffs became parties to the 1988 Agreement. The court finally dealt with ABCI’s contention that the court lacked jurisdiction to adjudicate in the dispute between the parties because of the arbitration clause in the 1988 Agreement. The court noted that ABCI failed to seek a stay of the court actions against it on the ground of the arbitration clause, as it could do under the Foreign Arbitral Awards Enforcement Law (1999
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Revision), and actively submitted to the court’s jurisdiction by discussing the merits of the case. For these reasons, ABCI’s reliance on the arbitration clause was “misconceived”.
A detailed report of this decision is available online at
348 Yearbook Comm. Arb’n XXXV (2010) CHINA PR
Accession: 22 January 1987 1st and 2nd Reservation
6. Higher People’s Court, Fujian Province, 12 October 2007 Supreme People’s Court, 27 February 20081
Parties: Applicant: First Investment Corp (Marshall Island) Respondent: Not indicated
Published in: Foreign Related Commercial and Maritime Trial Guidance (2009) Vol.1 (both Report and Reply)
Articles: V(1)(b); V(1)(c); V(1)(d)
Subject matters: – truncated tribunal not in accordance with agreement of parties – use of “without-prejudice documents” not in accordance with agreement of parties – excess of authority of arbitrators – due process and failure to clarify issue of standing
Topics: [2]-[17] + [27]-[29] + [34] = ¶ 513; [18]-[23] = ¶ 512; [24]-[26] = ¶ 511 (failure to clarify issue of standing)
Summary
A LMAA London award was refused enforcement because it was rendered by a truncated tribunal, so that its composition was not in accordance with the parties’ agreement. In its Report to the Supreme Court, the Higher People’s Court for the Fujian Province stated that it was inclined to deny enforcement under the 1958 New York Convention because (1) the arbitrators had exceeded their authority by awarding damages to parties which they found had no standing as claimants in the arbitration; (2) the arbitrators violated due process by failing to decide on the issue of standing in the
1. The General Editor wishes to thank Mr. Xing Xiusong, Global Law Office, Beijing, for his invaluable assistance in providing this decision and translating it from the Chinese original.
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early stages of the arbitration and consequently misleading the respondent into presenting its case only in respect of other aspects of the case and (3) the use of “without-prejudice documents” in the arbitration rendered the award invalid. In its Reply, the Supreme People’s Court agreed with this conclusion.
On 15 September 2003, First Investment Corp (FIC) entered into an Option Agreement with the respondent in respect of the building of certain ships. The Option Agreement provided, inter alia, for arbitration of disputes by an ad hoc three-member arbitral tribunal in London. Under the Option Agreement, FIC appointed eight single-vehicle companies incorporated in Marshall Island (the Eight Appointed Companies) which were to sign the shipbuilding agreement with the respondent. A dispute arose between the parties in respect of an alleged breach of contract by the respondent. An arbitral panel was appointed under the rules of the London Maritime Arbitrators Association (LMAA), consisting of Prof. Martin Hunter (chairman), Mr. Bruce Harris and Dr. Wang Shengchang. On 21 January 2006, the chairman distributed a first draft award to his co-arbitrators. On 16 February 2006, Wang presented a draft dissenting opinion; in early March, Harris presented his comments on the draft award. On 20 March 2006, Wang was imprisoned in China on criminal charges. On 25 March 2006, the chairman distributed a second draft of the award. On 31 March 2006, having incorporated some clerical comments from Harris, the chairman finalized the award and sent it to Wang and Harris to be signed. By a letter of 3 May 2006, the chairman informed the parties that the tribunal had substantially completed the deliberation and he and Harris had already signed the award. The two remaining arbitrators subsequently issued Procedural Order no. 8, containing the final version of the arbitral award and the dissenting opinion filed by Wang to the first award. The Order stated that Wang’s participation in the deliberation was limited to the first draft of the award. In a letter of 28 July 2006 to the parties, the chairman explained that he and Harris could not make a decision on costs without the parties’ consent because there had been no contact with Wang after February 2006. FIC sought enforcement of the London award in China. The Xiamen Maritime Court was inclined to refuse enforcement and referred the case to the Higher People’s Court for the Fujian Province. As required by an internal reporting procedure applicable in relation to the recognition and enforcement of foreign arbitral awards, the Higher People’s Court reported the case to the Supreme People’s Court of China. In its Report to the Supreme People’s Court, dated 12 October 2007, the Higher People’s Court for the Fujian Province stated that it too was inclined to
350 Yearbook Comm. Arb’n XXXV (2010) PEOPLE’S REPUBLIC OF CHINA NO. 6 refuse enforcement under the 1958 New York Convention, first, because the composition of the arbitral tribunal was not in accordance with the agreement of the parties. The court noted that Wang did not participate in the final deliberation of the award; it reasoned that the English Arbitration Act 1996, which applied to the arbitration, provides for the situation where an arbitrator refuses or is unable to hold office, so that the parties here had a statutory right under the English Act to remove Wang and appoint a new arbitrator. As a consequence, the two remaining arbitrators could not validly continue the proceedings and render an award. The Fujian court added that the fact that arbitrators are allowed to render a majority award under the LMAA rules cannot cure a defect in the composition of the arbitral tribunal, since the concept of majority opinion is “meaningless” where only some of the arbitrators have participated in the arbitral proceedings. The Fujian court then reasoned that recognition should also be denied under the Convention because the award decided issues outside the arbitration agreement. The final award found that the Eight Appointed Companies had no standing as claimants in the arbitration; nevertheless, it also found that the damages claimed by them fell within the scope of the arbitration clause in the Option Agreement, reasoning that FIC, having made the appointment, would have been free to withdraw it and claim for damages in its own name. The court disagreed, finding that the arbitration clause in the Option Agreement only covered disputes between FIC and the respondent. FIC never withdrew its appointment of the Eight Appointed Companies and it was the Eight Appointed Companies that suffered damages, if any, for the respondent’s alleged breach of contract. Since there was no valid arbitration clause in the Optional Shipbuilding Contract, which had never been signed by the parties, the arbitrators decided issues that were not submitted to arbitration. The Fujian court then reasoned that at the initial stage of the arbitration the respondent raised an objection to the standing of the Eight Appointed Companies as claimants in the arbitration and that the arbitral tribunal failed to clarify this issue. By so doing, it led the respondent to concentrate its defense on the grounds (such as agency, assignment, etc.) raised by FIC in support of its argument that the Eight Appointed Companies had standing as claimants in the arbitration. By deciding only at the final stage of the arbitration that the Eight Appointed Companies lacked standing to be named as claimants in the arbitration, and awarding damages to FIC, the arbitral tribunal prevented the parties from discussing the issue whether the losses of the Eight Appointed Companies could be deemed as FIC’s losses and whether FIC could and in fact
Yearbook Comm. Arb’n XXXV (2010) 351 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 did withdraw its appointment of the Eight Appointed Companies. This deprived the respondent of its opportunity and right to present its case on this issue. Finally, the Fujian court reasoned that the use by FIC in the arbitration of “without-prejudice documents” presented by the parties in the context of their out-of-court negotiations to reach a settlement was a serious violation of procedural justice that rendered the award invalid. It did not suffice that the arbitrators admitted the flaw and declared that those documents were irrelevant and to be disregarded. The opinion of the Fujian court, as expressed in its Report to the Supreme People’s Court, is the first document below. By the Reply below, issued on 27 February 2008, the Supreme People’s Court agreed with the lower court’s Report, finding that the composition of the arbitral tribunal was not in accordance with the provisions of the agreement between the parties because the award had been rendered by only two rather than three arbitrators. The Reply of the Supreme People’s Court is the second document below.
A detailed report of these decisions is available online at
352 Yearbook Comm. Arb’n XXXV (2010) FRANCE
Accession: 26 June 1959 1st Reservation
48. Cour de Cassation [Supreme Court], First Civil Chamber, 6 May 2009, no. 509
Parties: Claimant: Mandataires Judiciaires Associés, in the person of Mrs. X, as liquidators of Jean Lion et Compagnie SA (France) Defendant: International Company for Commercial Exchanges – INCOME (Egypt)
Published in: Available online at
Articles: III; V(1)(b); V(2)(b) (all by implication)
Subject matters: – estoppel from raising due process defense not raised in the arbitration – due process (adversary proceedings) – proper notice of arbitration (through process server) – due process as ground for violation of public policy – scope of proceedings against bankrupt defendant
Topics: ¶ 303 + ¶ 509 + ¶ 511 (failure to hold hearing); [9]- [11] = ¶ 524 (violation of bankruptcy law)
Summary
Enforcement of the award was denied on grounds of public policy, because it violated the principle of French law that individual actions against a creditor are suspended when a receivership procedure is opened and may be resumed only in order to establish the credit and determine its amount. Here, the award directed the losing party to pay a certain amount to the winning party.
Jean Lion et Compagnie (Lion) and International Company for Commercial Exchanges (INCOME) concluded three contracts for the sale of crystallized
Yearbook Comm. Arb’n XXXV (2010) 353 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 sugar. The contracts contained clauses for arbitration of disputes at the Refined Sugar Association in London. A dispute arose between the parties. On 5 October 2001, INCOME filed a request for arbitration at the Refined Sugar Association. By a court judgment of 20 May 2003, while the arbitration was pending, Lion was declared in receivership (redressement judiciaire); Mr. Y was appointed administrator, Mandataires Judiciaires Associés (MJA), in the person of Mrs. X, represented Lion’s creditors. Arbitration was temporarily suspended. INCOME registered its credit with the receivership and arbitration proceedings resumed. By a court judgment of 1 July 2003, Lion was declared in liquidation (liquidation judiciaire); Mrs. X of MJA was appointed liquidator. On 9 February 2004, the arbitral tribunal of the Refined Sugar Association rendered an award directing Lion to pay a certain sum to INCOME. INCOME obtained enforcement of the award in France; the enforcement order was confirmed on 8 November 2007 by the Paris Court of Appeal. Lion appealed. The Supreme Court annulled the lower court’s decision and denied enforcement. It first dismissed Lion’s argument that the court of appeal violated the principle of adversary proceedings (principe de la contradiction) because it relied on estoppel, a ground that had not been invoked by INCOME, to hold that Mrs. X could not object to the procedural regularity of the arbitration as she had not raised any objection on this point before the arbitrators. The Court noted that INCOME did argue before the court of appeal that Mrs. X waived her right to invoke any procedural irregularity by failing to invoke it in the arbitration, and that the scope of estoppel and waiver “can be identical in certain cases”. Mrs. X argued before the court of appeal that there had been violation of due process in the arbitration because (1) she was not properly notified through a process server (huissier) when arbitration resumed following the registration of INCOME’s credit in Lion’s receivership and (2) the arbitrators did not hold an oral hearing attended by both parties. The Supreme Court disagreed, reasoning that Mrs. X was informed of the arbitration’s developments – first as a member of MJA, the creditors’ representatives, and then as liquidator – and that she was also informed of the arbitrators’ decision not to hold an oral hearing to limit the costs of the arbitration; also, an award on written statements and documents only is expressly allowed under the rules of the Refined Sugar Association. The Supreme Court accepted, however, Lion’s argument that enforcement of the award would violate public policy and could not be granted. It held that the court of appeal did not comply with the principle of French law – that also pertains to international public policy – that individual actions against a creditor are suspended when a receivership procedure is opened and may be resumed
354 Yearbook Comm. Arb’n XXXV (2010) FRANCE NO. 48 only in order to establish the credit and determine its amount. Here, the award directed Lion to pay certain sums to INCOME in violation of this international public policy rule and could not be enforced.
A detailed report of this decision is available online at
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49. Cour de Cassation [Supreme Court], First Civil Chamber, 8 July 2009, no. 956
Parties: Claimant: Société d’études et représentations navales et industrielles – Soerni (France) et al. Defendant: Air Sea Broker Limited – ASB (Switzerland)
Published in: Available online at
Articles: III; V; V(1)(a); V(2)(b)
Subject matters: – stay of decision in enforcement proceedings pending criminal investigation (no) – applicable law to (in)capacity of party to arbitration agreement – fraud as ground for violation of public policy – review of merits of award (no)
Topics: [1]-[2] = ¶ 301; [3]-[4] = ¶ 505; [5] = ¶ 502 + ¶ 524 (fraud)
Summary
The issue of the capacity of a signatory is not to be examined by reference to a national law but rather under a material rule based on the common intention of the parties, good faith and on the legitimate belief in the power of the signatory.
Société d’études et représentations navales et industrielles (Soerni) entered into a contract with Air Sea Broker Limited (ASB) for the transport of a boat between two ports in Gabon. The parties signed a Hold Harmless Letter which, inter alia, referred all disputes to arbitration as provided for in the CLS bill of lading. ASB subsequently sent a transport contract to Soerni’s broker; the contract referred to the CONLINEBILL Liner Bill of Lading. A dispute arose between the parties when the boat sank; arbitration proceedings commenced in London. On 27 February 2006, an arbitral tribunal found that it had jurisdiction under the arbitration clause in the CLS bill of
356 Yearbook Comm. Arb’n XXXV (2010) FRANCE NO. 49 lading, which it deemed to apply; on the merits, it directed Soerni to indemnify ASB. ASB sought and obtained an enforcement order for the London award from the President of the Paris Court of Appeal. Soerni, in turn, commenced criminal law proceedings, alleging forgery and use of a forged document and claiming civil law damages (plainte avec constitution de partie civile pour faux et usage de faux); it then appealed the enforcement order before the Paris court of appeal and asked the court to suspend its decision awaiting the outcome of the criminal law action. On 15 May 2008, the court of appeal denied Soerni’s request. Soerni appealed to the Supreme Court on points of law (pourvoi en cassation). The Supreme Court denied the appeal. It first dismissed Soerni’s argument that the court of appeal applied an article of the French Code of Criminal Procedure – providing that the commencement of a criminal law action does not suspend a decision in pending civil law proceedings – that came into force by Law of 5 March 2007, after the present action was filed, and had not been relied on by the parties, and that the court did so without inviting the parties’ comments thereon. As a consequence, it violated due process. The Supreme Court noted however that this procedural provision was immediately applicable to pending actions and that the parties did not explicitly refer to the earlier norm in their final statements on the stay of decision, which were filed after the new Law had come into force. The Court also dismissed Soerni’s allegation that the court of appeal erred in finding that Y, the junior employee who signed the Hold Harmless Letter, had the power to bind Soerni because he had been the only person with whom ASB had been in contact throughout the contract’s negotiations. Soerni argued that the court of appeal should have examined – and denied – Y’s capacity under French law, which applied because Soerni was a French company. The Supreme Court disagreed, reasoning that the issue of capacity is not to be examined by reference to a national law. Rather, a material rule applies that is derived “from the principle of the validity of the arbitration agreement based on the common intention of the parties, on good faith and on the legitimate belief in the power of the clause’s signatory to carry out an act of ordinary administration binding the company”. The court of appeal correctly found that ASB was not warned that Y, the only Soerni employee they had contact with, lacked the capacity to bind Soerni to the arbitration clause. The Supreme Court added that Soerni tacitly ratified Y’s acts by asking ASB for an estimate for a supplementary insurance. Soerni’s intention to arbitrate clearly resulted from the reference to arbitration in the Hold Harmless Letter.
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The Court finally dismissed Soerni’s contention that the fact that ASB sent Soerni’s broker a contract referring to a different bill of lading was per se a violation of public policy, reasoning that Soerni did not prove how enforcement would violate international public policy and merely sought to challenge the final decision of the court of appeal that ASB did not commit fraud.
A detailed report of this decision is available online at
358 Yearbook Comm. Arb’n XXXV (2010) GERMANY
Ratification: 30 June 1961 No Reservations
125. Oberlandesgericht [Court of Appeal], Munich, 17 December 2008
Parties: Claimant: Seller (nationality not indicated) Defendant: Assignee (Germany)
Published in: Available online at
Articles: I(1); III; IV(1)(a); IV(1)(b); IV(2); V(1); V(2)(a); V(2)(b); VII(1)
Subject matters: – copy of non-authenticated arbitral award – more-favorable-right provision – original arbitration agreement or certified copy required (no) (German law) – nonsignatory to arbitration clause and cession of contract – due process as ground for violation of public policy
Topics: [1] + [11] = ¶ 301; [3] = ¶ 402 + ¶ 404; [4] = ¶ 403 + ¶ 702; [5] = ¶ 406; [6]-[7] = ¶ 101; [8] = ¶ 503; [9] = ¶ 519 + ¶ 524 (assignment of contract); [10] = ¶ 523
Summary
The court declared the award enforceable, holding preliminarily that it sufficed under German law, which applied under the more-favorable-right principle, that claimant supplied a certified copy of the non-authenticated award. There were no grounds for refusing enforcement under Art. V(1) of the 1958 New York Convention because defendant failed to raise them, and no grounds in the court’s opinion under Art. V(2): though the award was rendered against an assignee and jurisprudence is divided as to whether assignment of a contract includes the rights and obligations under the arbitration agreement
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therein, here the arbitrators explicitly held that assignment included the arbitration clause. The court abided by this decision.
On 2 December 2005, Seller and German Company X concluded a contract, under which Seller was to supply chanterelles to Company X. The contract was concluded through a telefax exchange. It provided for the application of Lithuanian law and contained a clause referring disputes to arbitration at the Vilnius Court of Commercial Arbitration (VCCA), in Lithuania. A dispute arose between the parties when Company X did not pay for certain deliveries. On 31 December 2006, Company X, Seller and the present defendant (Assignee) entered into a contract under which Company X assigned its existing obligations under the contract to Assignee, with Seller’s permission. On 11 May 2007, Assignee made a partial payment to Seller. When no further payments followed, Seller commenced VCCA arbitration. On 13 May 2008, a VCCA arbitral tribunal found mostly in favor of Seller. Assignee did not participate in the arbitration. The Munich Court of Appeal granted Seller’s request for a declaration of enforceability of the Lithuanian award in Germany. The court held first that the request was admissible, though the Seller supplied only a certified copy of the non-authenticated award, while authentication is required under the 1958 New York Convention. The court of appeal noted, incidentally, that this Convention requirement is not a condition for admissibility but rather a provision concerning evidence. It then shared the prevailing opinion and practice that submission of the certified copy of a non-authenticated award by the party seeking enforcement suffices. Seller also provided only a copy of the telefax containing the contract and the arbitration clause, signed by both the original parties to the contract. The court held that this sufficed under both German law and, according to “the widely prevailing opinion”, also under Art. II(2) Convention. The court added that German law, which applied on the basis of the more-favorable-right provision in the Convention, does not require the party requesting enforcement to supply the arbitration agreement. Seller’s request for a declaration of enforceability was also founded. The court had no doubts that the award at issue was authentic, on the basis of its long experience with the enforcement of awards from neighboring European countries. Further, Assignee failed to raise any grounds under Art. V(1) Convention, nor should enforcement be denied under Art. V(2). In particular, though jurisprudence is divided as to whether the assignment of a contract means that also the arbitration clause therein is assigned, in the present case the
360 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 125 arbitrators held that the object of the assignment was Company X’s debt inclusive of the arbitration clause: their finding should be respected.
A detailed report of this decision is available online at
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126. Oberlandesgericht [Court of Appeal], Munich, 19 January 2009, 34 Sch 04/08
Parties: Claimant: Clothing manufacturer (Ukraine) Defendant: Textiles manufacturer (Germany)
Published in: Available online at
Articles: III; V(1)(a); VII(1)
Subject matters: – European Convention of 1961 – valid arbitration agreement referred to in Art. II 1958 New York Convention (no) – burden of proof establishing existence, validity of arbitration agreement – enforcement court may review arbitrators’ findings as to existence of arbitration agreement – estoppel from raising 1958 New York Convention defense not (timely) raised in annulment action in country of origin
Topics: [2] + [16] = ¶ 301; [3]-[12] = ¶ 504; [13] = ¶ 303; [15] = ¶ 701 + ¶ 704
Summary
The court denied a declaration of enforceability, holding that claimant did not meet its burden to prove the existence of an arbitration agreement, as it failed to provide any evidence to disprove defendant’s contention that it did not validly agree to an addition to the original contract containing the arbitration clause. Defendant was not precluded from raising this defense, since the issue here was whether an arbitration agreement existed at all. No different conclusion would be reached under the 1961 European Convention.
On 4 November 2003, the Ukrainian clothing manufacturer (claimant) and the German textiles manufacturer (defendant) entered into a contract under which claimant would manufacture clothing out of materials provided by defendant. According to Clause no. 10.2 of the contract, modifications of or additions to the contract were valid only if set out in writing and signed by both parties. Clause
362 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 126 no. 10.7 provided that the contract would be in force until 31 December 2004. The contract further provided for the application of Ukrainian law; clause no. 9 provided for arbitration of disputes at the International Commercial Arbitration Court at the Ukrainian Chamber of Commerce and Industry (ICAC). A dispute arose between the parties when defendant allegedly did not pay an invoice of 23 March 2007. On 12 June 2007, claimant commenced ICAC arbitration. It supplied the contract of 4 November 2003 as well as copies of “contractual additions” dated 28 December 2004, 10 January 2006 and 29 December 2006. The addition of 10 January 2006 provided that the original contract would be in force until 31 December 2007. Defendant objected to the jurisdiction of the Ukrainian ICAC – arguing that Mr. P, the employee who signed the original contract, was not authorized to enter into agreements on defendant’s behalf, and that his signatures on the contractual additions were forgeries – and refused to participate in the proceedings. On 28 November 2007, a sole ICAC arbitrator rendered an award in favor of claimant. The Munich Court of Appeal refused to declare the ICAC award enforceable, finding that it was not based on an arbitration agreement in the sense of Art. II(2) of the 1958 New York Convention. The court of appeal reasoned that the party seeking recognition and enforcement of a foreign arbitral award has the burden to prove the existence of a valid arbitration agreement. It then held that in the present case claimant failed to prove that such agreement existed, since it provided no evidence against defendant’s argument that it had not validly entered into the contractual additions. The court noted that it was not bound to the factual and legal determinations of the sole arbitrator in respect of the existence of a (valid) arbitration agreement. In any event, the arbitrator did not hold that defendant had accepted the contractual additions; rather, he divided the burden of proof differently (though deeming that defendant’s behavior disproved its own argument). The court of appeal added that defendant was not precluded [präkludiert] from raising its objection. It noted the jurisprudence holding that the principle of preclusion continues to apply under the 1998 German arbitration law to preclude parties from opposing enforcement on grounds that could have been raised, within a given time limit, in annulment proceedings in the state of rendition of the award. However, the issue here was whether an arbitration agreement was concluded to begin with, “so that there is no question of the grounds for refusal in Art. V Convention”. The court of appeal finally noted that it would reach no different result if it applied the 1961 European Convention under the more-favorable-right provision
Yearbook Comm. Arb’n XXXV (2010) 363 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 of the New York Convention, as defendant raised its objection of lack of jurisdiction timely and it was not claimed that the sole arbitrator had the power to decide a priori on the validity of the arbitration agreement and thus on his own jurisdiction.
A detailed report of this decision is available online at
364 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 127
127. Oberlandesgericht [Court of Appeal], Munich, 27 February 2009, 34 Sch 19/08
Parties: Claimant: Carrier (nationality not indicated) Defendant: Customer (Germany)
Published in: Available online at
Articles: I(1); III; IV(1)(a); IV(1)(b); IV(2); V(1); V(2); VII(1)
Subject matters: – European Convention of 1961 – copy of non-authenticated arbitral award – more-favorable-right provision – original arbitration agreement or certified copy required (no) (German law)
Topics: [1]+[10] = ¶ 301; [2] = ¶ 704; [2]+[5] = ¶ 702; [3]- [4] = ¶ 402 + ¶ 404; [5] = ¶ 403; [6] = ¶ 406; [7] = ¶ 101; [8] = ¶ 503
Summary
The court declared the award enforceable, finding that claimant’s submission of a certified copy of the non-authenticated award complied with the formal requirements of German law, which applies under the more-favorable-right principle in the 1958 New York Convention. The authenticity of the award was undisputed. There were no grounds for refusing recognition under Art. V(1) Convention because defendant failed to raise them, and no grounds in the court’s opinion under Art. V(2).
Defendant made use of the transportation services of claimant but failed to pay for them. On 5 May 2008, defendant issued an acknowledgment of debt in favor of claimant. The acknowledgment provided for the application of Czech law; it also contained a clause referring disputes to arbitration in Brno, Czech Republic. Defendant did not pay under the acknowledgment of debt and claimant commenced arbitration. Defendant did not participate in the proceedings. On 19 August 2008, a sole arbitrator rendered an award in favor of claimant. Claimant sought a declaration of enforceability of the Czech award in Germany. The Munich Court of Appeal granted claimant’s request. It noted at the outset that the 1961 European Convention, which it found to apply primarily to the
Yearbook Comm. Arb’n XXXV (2010) 365 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 recognition of the Czech award, sets no formal requirement for recognition; the 1958 New York Convention does set such requirements. However, to the extent that the New York Convention provisions are more onerous than the requirements of German law, German law prevails in accordance with the more- favorable-right principle provided for in the Convention. The court first held that claimant’s request was admissible. Claimant supplied a copy of the arbitral award certified by a Czech city district council but not authenticated as required by the New York Convention. The court reasoned that this Convention requirement is not a condition for admissibility but rather a provision concerning evidence; it then shared the prevailing opinion that submission of the certified copy of a non-authenticated award suffices. The court then noted that German law does not require the party requesting enforcement to supply the arbitration agreement; hence, the form in which that agreement had been supplied by claimant (a simple copy) was irrelevant. The court of appeal then held that the request was also founded. It noted that the authenticity of the award supplied by claimant was undisputed, nor was it doubtful in the opinion of the court, which was familiar with awards from and arbitration procedures in neighboring European countries. Further, no grounds under Art. V(1) Convention need be examined because defendant failed to raise them. Nor were there any grounds under Art. V(2), which must be examined on the court’s initiative.
A detailed report of this decision is available online at
366 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 128
128. Oberlandesgericht [Court of Appeal], Munich, 11 May 2009, 34 Sch 23/08
Parties: Claimant: Creditor (nationality not indicated) Defendant: Debtor (Germany)
Published in: Available online at
Articles: III; IV(1)(a); IV(2); V (in general); VII(1)
Subject matters: – European Convention of 1961 – more-favorable-right provision – original arbitration agreement or certified copy required (no) (German law) – translation of award may be required (German law) – grounds for refusal of enforcement are exhaustive – currency of award
Topics: [1] + [7]-[10] = ¶ 301; [2]-[3] = ¶ 402 + ¶ 406 + ¶ 702 + ¶ 704; [6] = ¶ 501
Summary
The court declared the award enforceable, finding that by supplying the original award and a translation thereof claimant complied with the less strict formal requirements of German law, which applies under the more-favorable-right principle in the 1958 New York Convention. No grounds for refusing enforcement were raised or appeared to exist. An alleged agreement for payment by installments did not deprive claimant of the right to seek enforcement.
On 11 October 2005, the present defendant (the debtor) made out a bill of exchange for US$ 174,244 in favor of the present claimant (the creditor), due on 15 December 2005. On 17 October 2005, the parties concluded an arbitration agreement referring disputes relating to the bill to arbitration at the Arbitration Court with the Czech Chamber of Commerce and the Czech Agrarian Chamber (the Czech Arbitration Court). The agreement was governed by Czech substantive law. The debtor paid only US$ 50,000 of its debt, whereupon the creditor commenced arbitration for payment of the remaining US$ 124,244. It also
Yearbook Comm. Arb’n XXXV (2010) 367 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 sought to obtain execution under the bill of exchange in the Czech Republic; it was alleged by the debtor – but contested by the creditor – that in the course of those proceedings, the parties concluded an agreement for payment by instalments, according to which the debtor agreed to pay a monthly amount of CZK 10,000 (approximately US$ 500) to the creditor. On 4 April 2007, a sole arbitrator of the Czech Arbitration Court rendered an award in the creditor’s favor. The creditor sought a declaration of enforceability of the Czech award in Germany. The Munich Court of Appeal granted the creditor’s request. The court noted at the outset that the 1961 European Convention, which was primarily applicable here, does not provide for formal conditions for recognition; the 1958 New York Convention, which does, is superseded by German law, which has less stringent formal requirements, on the basis of the more-favorable-right principle in Art. VII New York Convention. In the present case, the creditor supplied the original arbitral award together with a German translation thereof, thereby complying with German law provisions. The court also held that the agreement for payment by installments alleged by the debtor did not deprive the creditor, and his request, of the necessary legitimate interest in the proceeding [Rechtsschutzinteresse], that is, of his right to obtain a declaration of enforceability of the Czech arbitral award. The creditor’s request was founded, as no grounds for refusing recognition appeared to exist or were raised. The court of appeal held in particular that the fact that the agreement for payment by installments alleged by defendant, if indeed it existed, postponed the date on which payment became due did not prevent recognition, “because the date on which the claims awarded in the arbitral award become due is not a condition for the declaration of enforceability”. The court last held that a declaration of enforceability aims at recognizing the dictum of the award as it was rendered by the foreign arbitrators: hence, it would not convert the foreign currency of the award into Euros.
A detailed report of this decision is available online at
368 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 129
129. Kammergericht [Court of Appeal], Berlin, 11 June 2009, 20 Sch 4/07
Parties: Claimant: Construction Company Z (nationality not indicated) Defendant: State X
Published in: Available online at
Articles: III; V(2)(b)
Subject matters: – sovereign immunity – recognition v. enforcement of award
Topics: [1] + [4] = ¶ 301; [2]-[3] = ¶ 524 (sovereign immunity)
Summary
The court declared the award enforceable, holding that the fact that defendant was a foreign State was no obstacle as the claim against it was a private claim and a declaration of enforceability is not a concrete means of enforcement.
On 27 May 1981, Construction Company Z and State X entered into an agreement for the construction of an astronomical observatory in State X. The parties also concluded an arbitration agreement referring disputes to a panel of three arbitrators. A war broke out in State X and the observatory, which was nearing completion, was destroyed. At the end of the war, Construction Company Z decided not to resume work on the observatory. On 12 December 1988, the parties signed an Acknowledgment of Debt setting out the works carried out by Construction Company Z and the sums still owed by State X. State X did not meet its obligations under the Acknowledgment of Debt. On 27 November 2003, Construction Company Z commenced arbitration as provided for in the 1981 agreement. On 26 February 2007, an arbitral tribunal rendered an award in claimant’s favor. Construction Company Z sought a declaration of enforceability of the award in Germany; State X did not participate in the proceedings.
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The Berlin Court of Appeal granted the request, holding that there were no arbitrability or public policy grounds to deny it, which grounds must be examined at the court’s initiative. In particular, the fact that defendant was a foreign State was no obstacle to recognition, since Construction Company Z’s claim was a private law claim that did not affect that State’s sovereignty, and a proceeding for a declaration of enforceability is not a means of execution.
A detailed report of this decision is available online at
370 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 130
130. Oberlandesgericht [Court of Appeal], Munich, 22 June 2009, 34 Sch 26/08
Parties: Claimant: Exclusive distributor (Spain) Defendant: Manufacturer (Germany)
Published in: Available online at
Articles: III; IV(1)(a); IV(2); V(1)(b); V(1)(d); V(2)(b); VII(1)
Subject matters: – original arbitration agreement or certified copy required (no) (German law) – more-favorable-right provision – award not signed by one arbitrator – foreign court decision on validity of award – irregularities in arbitration (language of arbitration) – irregularities in arbitration (failure to hear witness (through interpreter)) – due process and language of arbitration – due process as ground for violation of public policy – calculation of interest
Topics: [2] + [25] = ¶ 301; [3]-[5] = ¶ 402 + ¶ 406 + ¶ 702 + ¶ 704; [6]-[10] = ¶ 524 (no third arbitrator’s signature); [12]-[16] = ¶ 511 (language of the arbitration; failure to hear witness through interpreter) + ¶ 513; [17]-[21] = ¶ 524 (failure to hear witness); [22] = ¶ 502 + ¶ 524 (contents of award); [23]-[24] = ¶ 307
Summary
The court granted a declaration of enforceability of a Madrid Chamber of Commerce award. Claimant complied with the formal conditions for seeking enforcement under German law, which are less strict than those in the 1958 New York Convention and apply pursuant to the Convention’s more-favorable- right provision. Enforcement should also not be denied on grounds of public policy because the award was signed only by two arbitrators and no reasons were given for the missing signature of the third, as this is allowed under the applicable arbitration rules and the award was found valid by a Spanish court in unsuccessful annulment proceedings. There was no procedural defect or violation of due
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process, either, because Spanish was used in the arbitration rather than English (as agreed) – as the Madrid Rules provide for Spanish in the arbitration and it was not proved that Defendant was negatively affected – or because a witness was not heard (through an interpreter) at the final hearing, as that witness had been heard at an earlier hearing. The court determined the starting date and rate of interest of the sums due under the award, which had not been defined in a sufficiently concrete manner.
On 19 February 2001, Claimant and Defendant entered into an exclusive distributorship contract, under which Defendant agreed to purchase medical products manufactured by Claimant and market them in Germany. The contract expired on 31 December 2010 and was governed by Spanish law. It contained a clause referring disputes to arbitration in Madrid before the Arbitration Court of the Madrid Chamber of Commerce (MCC) under the Spanish Law on Arbitration. The language of the arbitration was agreed to be English. A dispute arose between the parties when Defendant did not purchase the contractually agreed quantity of the product in the years 2001-2004. In June 2005, Claimant terminated the exclusive distributorship contract for non- performance. It also commenced arbitration proceedings as provided for in the contract, seeking payment under certain invoices for a total of € 496,064.98. In the arbitration, the parties discussed further mutual compensation and damage claims for alleged breaches of contract and unjustified termination of contract. Defendant sought damages for loss of its regular clientele and sought a set-off. By an award of 1 February 2007, an MCC arbitral tribunal found in favor of Claimant and directed Defendant to pay € 496,064.98 under the unpaid invoices, “as well as interest at the legal interest rate for each individual invoice issued ... that is due after expiry of the 30-day time limit for payment granted for each [invoice]”. The award was signed by only two arbitrators; no reason was given for the missing signature of the third arbitrator. On 4 April 2001, Defendant filed an action in the Madrid Court of Appeal (Audiencia Provincial de Madrid) to have the award set aside on the grounds that the arbitration was held in Spanish rather than English as agreed in the arbitration clause; that the arbitral tribunal refused to hear Defendant’s former general manager Mrs. R through an interpreter, and that the award was signed by only two of the three arbitrators. On 17 June 2008, the Madrid court denied Defendant’s application. On 17 December 2008, Claimant sought to have the Spanish award declared enforceable in Germany. The Munich Court of Appeal granted the declaration of enforceability of the Spanish award. It held at the outset that Claimant complied with the formal conditions for seeking recognition under German law, which applies on the basis
372 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 130 of the more-favorable-right principle in the 1958 New York Convention, as it supplied a copy of the arbitral award, certified by counsel. The court then examined Defendant’s argument that recognition should be denied because the award was signed by only two of the three arbitrators and no reasons were given for the missing signature. It reasoned that it need not decide on this objection as the Madrid court of appeal, when denying Defendant’s request for annulment, held that the award was valid. This decision was binding on the German enforcement court. The Munich court of appeal further held that there were no grounds to deny recognition. In particular, there was no ground under Art. V(1)(d) and Art. V(1)(b) of the 1958 New York Convention. The fact that Spanish was used in the arbitration – rather than English as agreed in the arbitration clause – did not contravene the agreement of the parties, who agreed to Spanish as the language of the arbitration by referring to the MCC Rules, which so provide. Nor did the use of the Spanish language violate Defendant’s right to due process, as Defendant failed to prove that it had not been able to present its case or had been otherwise negatively affected. The court also dismissed Defendant’s argument that the arbitral tribunal’s failure to grant Defendant’s request to hear its general manager at the final hearing of the arbitration with the assistance of an interpreter constituted a procedural defect under Art. V(1)(d) Convention. The court found that the arbitrators acted in accordance with the MCC Rules; the final hearing was scheduled to hear counsel final presentations, while witnesses, including Mrs. R, were heard at an earlier hearing. This manner of proceeding did not stand in such contrast with the basic principles of German procedural law that the award could not be deemed to have been rendered in legally correct proceedings. The court of appeal reached the same conclusion in respect of Defendant’s public policy arguments, holding that the award’s findings were not unacceptable from the point of view of the basic principles of German law. The court last found that the award could not be declared enforceable in its current form as it failed to determine the dates on which interest on each individual sum due under several invoices started running, and the relevant interest rate. It therefore determined those dates and rate.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 373 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
131. Bundesgerichtshof [Federal Supreme Court], 2 July 2009, IX ZR 152/06
Parties: Claimant: Not indicated Defendant: Not indicated
Published in: Available online at
Articles: I(1); VII(1)
Subject matters: – enforcement of court decision confirming award (no) – doctrine of merger of award into confirmation decision – more-favorable-right provision
Topics: ¶ 101 + ¶ 515; [24] = ¶ 701
Summary
The Supreme Court reversed earlier jurisprudence and held that a foreign court decision recognizing an arbitral award cannot be declared enforceable, even under the doctrine of merger. Rather, the party must seek a declaration of enforceability of the award itself.
On 26 November 2002, an arbitral tribunal rendered an award in the present claimant’s favor. On 4 April 2003, the award was confirmed by the Superior Court of California. Claimant then sought a declaration of enforceability of the confirmation decision in Germany. On 16 February 2005, the Berlin Court of First Instance granted claimant’s application. On 13 June 2006, this decision was affirmed by the Berlin Court of Appeal, which reasoned that the confirmation decision adopted the factual findings and legal conclusions of the award and made them its own; hence, it was not a declaration of enforceability of the award but rather an independent order and could be declared enforceable in its own right. The Federal Supreme Court disagreed with this reasoning and reversed the lower court’s decision. The Court noted at the outset that the Berlin court of appeal referred to a 1984 decision in which the Supreme Court held that a New York decision confirming an arbitral award could be declared enforceable in Germany under the provisions for the recognition of foreign judgments. The
374 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 131
Court reasoned in 1984 that the court decision at issue did not merely confirm the arbitral award or declare it enforceable but was an independent order as it separately directed the defendant to pay the sum awarded by the arbitrators; the Court referred to the doctrine of merger in United States law, according to which the arbitral award merges completely with the confirmation decision and as a consequence can no longer be enforced in its own right. The Court, however, did not take this further step in its 1984 decision and held that both the confirmation decision and the award were enforceable under the respectively applicable set of rules. By the present decision, the Federal Supreme Court held that its 1984 decision should be reversed on several grounds. First, the prevailing opinion holds that effects attached to a foreign decision by the legal system of a third State are not taken into account for recognition in Germany. This is also the approach taken in European law, according to which a decision recognizing a court judgment cannot be declared enforceable, on the ground that otherwise the court where recognition of that decision is sought would not be in the position to ascertain the existence of the conditions for a declaration of enforceability. Further, the provisions of European law on the recognition and enforcement of decisions except arbitration from their scope of application. This exception rule is to be interpreted broadly, so that proceedings and decisions on requests for annulment, modification, recognition and enforcement of arbitral awards are also excepted. The Court held that the exception also applies to court decisions incorporating arbitral awards. It was irrelevant that the confirmation decision in the present case was rendered in a non-EU State, as in the Court’s opinion there is no reason to apply less strict conditions for the recognition of decisions from non-EU States. Second, the Supreme Court reasoned that the debtor under the award is protected by the law. This protection demands that the debtor should not have to defend himself in more than one recognition proceeding in the same country. If the creditor could seek a declaration of enforceability for both the confirmation decision and the award, he could commence parallel or successive proceedings until he obtained a favorable decision; as the subject matter of the dispute would be different, res judicata would not be an obstacle. Further, the protection of the debtor under the award also demands that the exequatur decision be reviewed under the same standards as the award; the review that must be carried out when recognizing a foreign award cannot be dispensed with and should be carried out also when recognizing a confirmation decision. That proceedings for the recognition of foreign arbitral awards are filed before the courts of appeal in Germany has the purpose of concentrating the
Yearbook Comm. Arb’n XXXV (2010) 375 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 recognition of awards in a limited number of specialized courts. The recognition of foreign court judgments is the task of local courts and courts of first instance. If recognition of the award “could take place by the detour of the declaration of enforceability of the foreign exequatur decision”, these lower courts would have to carry out a more extensive review of the confirmation decision than the courts of appeal would of the award. Third, the Federal Supreme Court reasoned that even under the doctrine of merger a confirmation decision only aims at making enforcement of the arbitral award possible in its own territory. Whether the award can be recognized in Germany is only to be decided by the German courts. The Court added that the conclusion could be different if the foreign decision were based on a completely independent review of the facts and legal grounds. This, however, was not the case here. Fourth, the Court remarked that accepting such double exequatur of arbitral awards would dispense with the standard of review of the 1958 New York Convention, which applies in principle to the recognition and enforcement of foreign awards (although it may be superseded by a more favorable national law) and would thus “hollow out” the Convention. The Supreme Court concluded that the doctrine of merger, where it exists, is relevant only at a domestic level; outside that level, it is the arbitral award as such that must be declared enforceable.
A detailed report of this decision is available online at
376 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 132
132. Oberlandesgericht [Court of Appeal], Frankfurt, 27 August 2009, 26 SchH 03/09
Parties: Claimant: Buyer (nationality not indicated) Defendant: Seller (nationality not indicated)
Published in: Available online at
Articles: III; V(1)(a); V(1)(b); V(1)(d); V(2)(b)
Subject matters: – arbitration agreement “in writing” – more-favorable-right provision – applicable law to existence, validity of arbitration agreement – letter of confirmation – short-form arbitration clause – due process as ground for violation of public policy – due process and appointment of arbitrator from list – due process and refusal to hold oral hearing
Topics: [1] + [24] = ¶ 301; [3]-[11] = ¶ 504 + ¶ 506 + ¶ 701; [12]-[16] = ¶ 702; [18] = ¶ 507 (short-form arbitration clause); [19] = ¶ 513; [20]-[22] = ¶ 511 (failure to consider arguments; failure to hold oral hearing) + ¶ 523
Summary
The court declared an appellate award of the International Cotton Association enforceable, holding that while the arbitration agreement was not “in writing” under the 1958 New York Convention, it was valid under German law, which applied pursuant to the more-favorable-right rule in the Convention. This rule applies notwithstanding the provision in Art. V(1)(a) that the law of the country of rendition of the award is the law applicable to the arbitration agreement (lacking a specific agreement thereon by the parties), as the Federal Supreme Court explicitly holds that there is no referral from national law back to the Convention. There was no procedural defect (Art. V(1)(d)) or violation of due process (Art. V(1)(d)) because Defendant had to choose its arbitrator from an ICA list: while parties have the fundamental right to appoint their own arbitrator, the ICA appointment system does not violate this right, and Defendant agreed thereto when accepting ICA arbitration.
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In October 2006, the buyer (Claimant) and the seller (Defendant) entered into a contract for the sale and purchase of a large quantity of cotton. On 16 April 2007, an employee of Company A, agents for Claimant, had a telephone conversation with an employee of Defendant, in which a further delivery of cotton was discussed. It was later disputed between the parties whether an agreement for the sale and purchase of a certain quantity of cotton at a certain price was reached during this conversation; at any event, on the same day Company A sent first a purchase confirmation and then a signed purchase contract to Defendant. The purchase contract remained unsigned by Defendant. The purchase confirmation contained the following clause [English original]: “Rules/Arbitration: International Cotton Association Rules and Arbitration.” According to the Frankfurt Court of Appeal in the decision reported here, the arbitration clause was “explained in more detail” in the purchase contract. The purchase contract further indicated that the contract would be deemed valid if not returned within fifteen days. On 4 July 2007, Defendant informed Claimant that it would not deliver any cotton as no contract had been concluded between the parties. Claimant commenced arbitration at the International Cotton Association (ICA), seeking damages. On 8 February 2008, an ICA arbitral tribunal found in favor of Claimant. By an award of 31 October 2008, the ICA Technical Appeal Committee dismissed Defendant’s appeal. Claimant sought a declaration of enforceability of the appellate award in Germany. The Frankfurt Court of Appeal declared the award enforceable. The court reasoned at the outset that while there was no “agreement in writing” here as requested by the 1958 New York Convention, this was irrelevant as the less strict requirements of German law (Sect. 1031 ZPO) applied based on the more- favorable-right provision in the New York Convention. The court noted that while German authors disagree as to whether Sect. 1031 ZPO applies to arbitration proceedings with a foreign seat (in respect of which German law refers to the New York Convention) the Federal Supreme Court has indicated that the more-favorable-right principle should be given a broad, recognition- friendly reading. The court of appeal shared this broad interpretation, stressing that a different approach would be at odds with the purpose of the New York and other multinational arbitration Conventions, which is to make the recognition of arbitral awards and arbitration agreements easier, and concluding that recognition of an award or arbitration agreement should not be denied under these Conventions if it is allowed under domestic law. Defendant argued that German law, and thus Sect. 1031 ZPO, cannot apply because Art. V(1)(a) of the New York Convention – which provides that, lacking
378 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 132 an agreement by the parties as to the law applicable to the arbitration agreement, the law of the country where the award is rendered applies – prevails over the private international law provisions of German law. The court of appeal dismissed this argument, again noting that the Federal Supreme Court made it clear that the more-favorable-right principle allows for the application of formal requirements of national law that are less strict than the Convention’s provision, “without the national law referring back to the Convention”. The court then held that the parties had entered into an arbitration agreement meeting the requirements of German law. Under Sect. 1031 ZPO, an arbitration agreement can come into existence through a letter of confirmation between merchants, if the recipient remains silent and provided that the parties have negotiated the contract. As these negotiations need not necessarily have led to an oral agreement, Defendant’s objection that its employee who dealt with Claimant’s agent during the telephone call of 16 April 2007 lacked power of attorney was irrelevant. A further requirement under Sect. 1031 ZPO is that the party sending the letter of confirmation must believe in good faith that the letter documents an existing agreement. This was the case here. Although Claimant stated in its purchase confirmation that a stamped and signed contract would follow shortly, as indeed it did on the same day, it appeared from the circumstances of this case (inter alia, from Claimant’s statement in the purchase confirmation that “... we confirm having this day bought from you ...”) that Claimant believed that a contract had already come into existence. The court of appeal then held that there were no grounds to refuse enforcement of the ICA award under the New York Convention. The court first dismissed Defendant’s argument that the arbitration clause in the purchase confirmation was unclear, noting that the clause’s formulation unambiguously allowed to conclude that disputes would be decided by an ICA arbitral tribunal according to the ICA’s arbitration rules. Also, the clause was further specified in the purchase contract. Nor was the arbitral procedure not in accordance with the agreement of the parties because Defendant had to choose its arbitrator from a list provided by the ICA. The court reasoned that while parties have the fundamental right to appoint their own arbitrator, the ICA appointment system does not violate this right. Further, Defendant agreed with this system when agreeing to ICA arbitration. Finally, there had been no violation of due process in the arbitration (which could be relevant under both Art. V(1)(b) and Art. V(2)(b) Convention (public policy)). Due process, reasoned the court, is guaranteed when each party may express its opinion as to the factual and legal aspects of the case and the arbitral
Yearbook Comm. Arb’n XXXV (2010) 379 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 tribunal discusses and considers all relevant arguments of the parties. This latter condition does not mean, however, that the arbitrators must deal with all details of the arguments of the parties in the written reasons for their award, or that silence in respect of one argument necessarily means that it has been ignored, unless that argument is essential for rendering the award. In the present case, it could not be deemed from both these points of view that there had been a violation of due process. It appeared from the first and second instance award that the tribunals took note of Defendant’s arguments as to the conclusion of the contract and the validity of the arbitration agreement, but concluded that they were not founded, and that no essential argument was overlooked. The court also found that the fact that Defendant’s request for an oral hearing had been denied did not lead to a violation of due process. First, Defendant had the opportunity to fully present its arguments in writing and, second, Defendant failed to argue or prove how it could have presented arguments at the oral hearing that could have led the arbitral tribunal to issuing a different decision.
A detailed report of this decision is available online at
380 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 133
133. Oberlandesgericht [Court of Appeal], Munich, 1 September 2009, 34 Sch 14/09
Parties: Claimant: Buyer (nationality not indicated) Defendant: Seller (Germany)
Published in: Available online at
Articles: III; IV(1); V(1)(e); V(2); VII(1)
Subject matters: – original arbitration agreement or certified copy required (no) (German law) – more-favorable-right provision – public policy and counsel fees
Topics: [2] + [6] = ¶ 301; [3] = ¶ 402 + ¶ 403 + ¶ 702; [4] = ¶ 514; [5] = ¶ 523 + ¶ 524 (counsel fees)
Summary
The court declared the award enforceable, holding that by supplying a copy of the arbitral award, certified by counsel, claimant complied with the less strict formal requirements of German law, which applies under the more-favorable-right principle in the 1958 New York Convention. There were no grounds to refuse enforcement; in particular, the award of compensation for legal costs did not violate German public policy.
On 6 October 2006, the parties concluded a sale contract under which the German Seller and a Canadian company undertook to deliver certain solar energy products to Buyer for one year. Clause no. 16 provided that the United Nations Convention on Contracts for the International Sale of Goods (CISG) and the ICC Incoterms 2000 applied to the contract. All issues not regulated by the CISG and the Incoterms would be governed by Canadian law. Clause 17.2 of the contract referred disputes to arbitration at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). A dispute arose between the parties over the contractually agreed composition of the products. Buyer commenced arbitration in Stockholm as provided for in the contract, seeking restitution of the sale price and costs. On 14 August 2008, a sole arbitrator found in favor of Buyer. Buyer then sought enforcement in
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Germany of the part of the award (letter (d) of the dictum) directing Seller to pay a certain sum to Buyer as compensation for Buyer’s legal fees in connection with the arbitration. The Bamberg Court of Appeal forwarded the case to the Munich Court of Appeal, which has jurisdiction over applications for the declaration of enforceability of foreign awards filed in Bamberg’s district. The Munich Court of Appeal granted a declaration of enforceability of the Swedish award. It noted at the outset that claimant supplied a copy of the arbitral award, certified by counsel as is allowed under German law, together with a German translation. This suffices under German law, which applies under the more-favorable-right principle in the 1958 New York Convention as having less strict requirements for enforcement than the Convention. In particular, German law does not require that the party seeking enforcement supply the original arbitration agreement or a copy thereof. The court then held that there were no grounds for refusing enforcement under Art. V(2) Convention. The award of financial compensation for claimant’s reasonable costs in the arbitration (counsel fees and expenses) in letter (d) of the award’s dictum did not violate German public policy. The court of appeal further stated that it was irrelevant whether Canadian law allows for a declaration of enforceability. German procedural law applies to proceedings before the German courts, independent of the application of foreign substantive law and any other foreign connection.
A detailed report of this decision is available online at
382 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 134
134. Oberlandesgericht [Court of Appeal], Munich, 12 October 2009, 34 Sch 20/08
Parties: Claimant: Seller (Sweden) Defendant: Buyer (Germany)
Published in: Available online at
Articles: III; IV(1)(a); IV(2); V(1)(a); VII(1)
Subject matters: – existence of arbitration agreement (no) – confirmation of order differing from order is new offer – burden of proof establishing existence of arbitration agreement – judicial review of arbitrators’ findings as to existence of arbitration agreement – more-favorable-right provision
Topics: [1] + [26] = ¶ 301; [2] = ¶ 402 + ¶ 404 + ¶ 406; [2] + [8] = ¶ 702; [5]-[25] = ¶ 507 (no arbitration agreement); [6] = ¶ 401 + ¶ 503
Summary
The court refused to declare an SCC award enforceable, finding that claimant failed to prove the existence of an arbitration agreement between the parties. The court re-examined the evidence and concluded that no agreement had been concluded, either orally or through the sending of a confirmation of order (which substantially differed from the original order).
On 24 January 2006, the German buyer ordered valve systems with LET-LOK tube fittings from the Swedish seller; the order indicated the price of the systems but not the price of the fittings. It further referred to buyer’s General Conditions of Contract, which provided that disputes be referred to a named court. On 13 February 2006, Mr. G, the general manager of the Swedish seller, and witness A, an employee of the German buyer, had two telephone conversations concerning the order, whose scope and outcome was disputed by the parties. On the same day, Swedish seller sent German buyer a confirmation of order
Yearbook Comm. Arb’n XXXV (2010) 383 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 referring to seller’s General Conditions of Contract, printed on the reverse in English and Swedish – the English version provided for referral of disputes to the Arbitration Institute at the Stockholm Chamber of Commerce (SCC), while the Swedish version only provided for the jurisdiction of a Swedish arbitral tribunal. By an e-mail of 21 February 2006, the German buyer asked that the systems be delivered without LET-LOK tube fittings. On 22 February 2006, the Swedish seller replied that this was not advisable. On 15 March 2006, the German buyer stated that it would not purchase the tube fittings; this position was reaffirmed in a telefax of 25 April 2006. The Swedish seller replied that production had already begun and that it was impossible to deliver the systems without the tube fittings. The German buyer accepted two partial deliveries from the Swedish seller and paid for them in part. On 13 September 2006, it informed the Swedish seller that it would not accept further deliveries and that it would not pay for the two most recent deliveries. On 28 May 2007, the Swedish seller commenced SCC arbitration, seeking damages for breach of contract. The German buyer objected to the jurisdiction of the arbitral tribunal. By an award of 19 June 2008, an SCC arbitral tribunal found in favor of the Swedish seller. The arbitrators held that the parties concluded a valid contract including the arbitration clause in the course of the two telephone conversations of 13 February 2006. The Swedish seller sought enforcement of the Swedish award in Germany. The Munich Court of Appeal denied a declaration of enforceability of the SCC award. It first noted that the Swedish seller (claimant) complied with the formal requirements for seeking recognition by supplying the original arbitral award, certified by counsel, and a translation thereof by a certified translator. This suffices to meet the requirements under German law, which applies pursuant to the more-favorable-right provision in the 1958 New York Convention. The court of appeal found, however, that recognition should be denied. It first noted that recognition can be granted only if the award is based on an arbitration agreement in writing within the meaning of Art. II(2) Convention. Here, claimant had the burden to prove the existence of such agreement, since this was not a case of defendant (German buyer) arguing that the agreement was invalid and having to prove its argument under Art. V(1) Convention. The court then reasoned that a valid agreement under Art. II(2) Convention can be contained in the General Conditions of Contract of one party, to which the main contract or an exchange of letters refers, as long as there is a common intention of the parties. This is also the case under Swedish law, which could be taken into account as a law setting possibly less strict conditions and thus
384 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 134 applicable under the more-favorable-right provision in the New York Convention. In fact, Swedish law allows for oral arbitration agreements but requires proof of the parties’ common intention to refer their contractual disputes to arbitration. This was not the case here. The court remarked that it was not bound to the findings of the arbitral tribunal in respect of the existence and validity of the arbitration agreement. It carried out its own examination of the evidence and concluded that it was not proved that the parties had reached an oral agreement in their telephone conversations of 13 February 2006. Nor did the confirmation of order result in the parties concluding a contract including the General Conditions of Contract containing an arbitration clause, because the confirmation differed substantially from the original offer (inter alia, because it referred to seller’s rather than buyer’s General Condition of Contract). It was irrelevant that German buyer failed to contest it expressly, as under Swedish law, reactions that are not conform to the original offer are deemed to reject the old offer and to make a new one. Nor was the confirmation of order accepted tacitly, because tacit acceptance requires that the parties have already reached an agreement on the essential points. The same conclusion would be reached under German law, if applicable under the more-favorable-right principle. The court of appeal finally held that defendant’s objection was not precluded [präkludiert] because defendant failed to impugn the award in Sweden, reasoning that a party that did not submit to arbitration cannot be expected to commence setting aside proceeding in the country of rendition of the award.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 385 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
135. Oberlandesgericht [Court of Appeal], Düsseldorf, 15 December 2009, I-4 Sch 10/09
Parties: Claimant: Seller (nationality not indicated) Defendant: Buyer (Germany)
Published in: Available online at
Articles: III; IV(1)(a); IV(1)(b); V(1)(b); V(1)(d); V(2)(b); VII(1)
Subject matters: – original arbitration agreement or certified copy required (no) (German law) – formal validity of award – enforcement of parts of award that cannot be forcibly executed – due process as ground for violation of public policy – lack of reasons for award
Topics: [2] + [18] = ¶ 301; [4] = ¶ 402 + ¶ 403 + ¶ 702; [5]- [7] + [13] = ¶ 513; [8]-[9] = ¶ 110; [12] = ¶ 511 (failure to attend hearing) + ¶ 523; [14] = ¶ 502; [14]- [17] = ¶ 522; [17] = ¶ 303
Summary
The court declared an AAA award enforceable. Claimant supplied documents that complied with the less strict formal conditions of German law for seeking recognition (which applied pursuant to the more-favorable-right provision of the Convention); also, Claimant could seek recognition of parts of the award that could not be enforced by means of forced execution. There was no violation of due process or public policy either because Defendant did not attend the oral hearing (since it had expressly informed the sole arbitrator that it would not attend and was fully informed of the proceedings) or because the award lacked reasons, which is allowed under the applicable AAA Rules and does not violate basic principles of German law.
On 1 November 2003, the US parent company of the present Claimant and the present Defendant concluded a contract for the sale of language-teaching software (Claimant was assigned all rights and obligations under the contract on 1 June 2006). The contract contained a clause providing for arbitration of
386 Yearbook Comm. Arb’n XXXV (2010) GERMANY NO. 135 disputes in the United States under the Commercial Arbitration Rules of the American Arbitration Association (AAA). A dispute arose between the parties on 10 June 2008, when Claimant terminated the contract alleging breach of contract by Defendant and claiming damages for UK£ 190,000. On 13 November 2008, Claimant commenced AAA arbitration as provided for in the contract; it now sought US$ 450,000 in damages. Defendant participated in the arbitration, but informed the sole arbitrator that it would not attend the oral hearing because of financial difficulties. On 14 May 2009, the AAA sole arbitrator rendered an award in favor of Claimant, finding that the contract was regularly terminated on 10 June 2008 and that Defendant could no longer exercise the rights it had been granted under the contract and had to return all concerned products (Numbers A.1-3 of the award). He also directed Defendant to pay Claimant damages in the amount of US$ 419,542.69 and interest thereon. Claimant sought a declaration of enforceability of the US award in Germany. The Düsseldorf Court of Appeal granted the declaration of enforceability. It first noted that Claimant complied with the formal conditions for a declaration of enforceability by supplying a copy of the arbitral award, certified by counsel, and a simple copy of the arbitration agreement together with translations thereof. Although the 1958 New York Convention requires that the party seeking enforcement supply the original arbitration agreement or a certified copy thereof, rather than a simple copy, this is unnecessary under the less strict requirements of German law, which applies pursuant to the more-favorable-right provision in the Convention. The court of appeal then held that the award at hand was valid and final under the applicable AAA Commercial Arbitration Rules, also in respect of the fact that it did not contain reasons, as this is allowed under the Rules. The court noted that Claimant had a legal interest to a declaration of enforceability of the arbitral award, also to the extent that the award contained determinations (in Numbers A.1-3) that could not be enforced by means of forced execution (vollstreckungsfähig Inhalt). A declaration of enforceability does indeed make forced execution possible; however, it also protects the award from attacks by means of an annulment action. This is the case in respect of domestic awards, that can no longer be impugned by an annulment action after they have been declared enforceable. Although this rule does not apply to foreign awards, where an action for annulment can be filed abroad, a declaration of enforceability still protects the award from an action for a declaration that it cannot be recognized in Germany.
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The court of appeal held that there were no grounds for denying enforcement. Defendant alleged various grounds under the due process and public policy provisions in the New York Convention, arguing in particular that it did not attend the oral hearing, where evidence was taken, and that the award lacked reasons and did not deal with Defendant’s counterclaim. The court rejected all of Defendant’s arguments, noting that Defendant itself chose not to attend the arbitration hearing and that it was fully informed of the proceedings. Also, the applicable AAA Rules provide that reasons need not be rendered unless the parties so request or the arbitrator deems it appropriate; this was not the case here. A lack of reasons in itself does not violate fundamental principles of German law, in particular since the German legal system provides that the parties may agree that no reasons be given for the arbitral award. The court also dismissed Defendant’s argument that the arbitrator failed to give reasons in respect of his denial of Defendant’s counterclaim. Since a lack of reasons is not in itself a violation of public policy, it could be relevant here only if there were a violation of due process. This was not the case here, as it appeared from the award that the arbitrator acknowledged and dealt with the arguments of the parties, including the (unspecified) counterclaim by Defendant. The court added that since the sum of US$ 86.746.30 mentioned by Defendant in the present proceedings did not appear from any document supplied by Defendant, Defendant would in any case be estopped (präkludiert) from relying on a counterclaim that it had not specified before the arbitrator.
A detailed report of this decision is available online at
388 Yearbook Comm. Arb’n XXXV (2010) GIBRALTAR
Accession: 24 September 1975 (Extension by the United Kingdom) 1st Reservation
1. Supreme Court, 17 November 2003
Parties: Claimant: Chernogorneft Joint Stock Company (Russian Federation) Defendant: Wardour Trading Limited (Gibraltar)
Published in: The Gibraltar Law Reports 2003 no. 4, pp. 294-306
Articles: VI
Subject matters: – stay of enforcement proceedings only when the foreign petition is for setting aside the award – discretion to stay enforcement proceedings
Topics: ¶ 601
Summary
A stay of enforcement of an ICAC award was refused because the petition pending before the Russian courts – as the courts of the country where the award was rendered – was not a petition for annulment of the award but rather an appeal against the decision of the lower courts not to allow a cassation appeal out of time. Only a petition for setting aside triggers the application of the provision in the Gibraltar Arbitration Ordinance that mirrors Art. VI of the 1958 New York Convention.
On 20 April 1993, Chernogorneft Joint Stock Company (Chernogorneft) and Wardour Trading Limited (Wardour) entered into an agreement for the delivery of crude oil. The agreement was governed by Russian law. It also contained a clause providing for arbitration of disputes. A dispute arose between the parties and was referred to arbitration at the International Commercial Arbitration Court (ICAC) at the Chamber of Commerce and Industry of the Russian Federation in Moscow. By an award of
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21 February 1997, the arbitral tribunal found in favour of Chernogorneft. Wardour sought annulment of the award in Russia, while Chernogorneft sought the award’s enforcement in Gibraltar. On 21 July 1997, Wardour commenced proceedings in the Moscow City Court to set aside the award on grounds of bias. On 27 November 1997, the Moscow City Court dismissed the application, adding that the order was not subject to “cassation appeal”. On 14 October 2002, Wardour discovered that the judge’s statement was in fact incorrect and applied to the Moscow City Court to extend time in which to file a cassation appeal. On 16 January 2003, the court rejected the application. On 21 March 2003, the Civil Cases Collegium of the Supreme Court of the Russian Federation dismissed Wardour’s appeal from that decision. On 20 October 2003, Wardour lodged an appeal with the full court of the Supreme Court of the Russian Federation. That appeal was pending at the time of the present decision. In the meantime, on 7 July 1998 Chernogorneft obtained ex parte enforcement of the ICAC award in Gibraltar. By summons of 24 July 1998, Wardour commenced opposition proceedings, arguing that the award had not yet become binding because an appeal was pending in the Russian courts. Proceedings were adjourned on 14 August 1998 on Wardour giving a Mareva- type undertaking. Wardour then filed and withdrew several applications; the only application standing at the time of the present decision was an application filed on 30 October 2003, in which Wardour sought a stay of enforcement pending resolution of its outstanding applications to the courts of the Russian Federation. The Supreme Court of Gibraltar, per Schofield, CJ, dismissed Wardour’s application for a stay of enforcement. It held that it had no power to order an adjournment under Sect. 52(5) of the Gibraltar Arbitration Ordinance, which mirrors the provisions in Art. VI of the 1958 New York Convention, as that Section would only apply if there were an application before the Supreme Court of the Russian Federation to set aside or suspend the ICAC award. The application pending in Russia was instead for a review of the decisions of the Moscow City Court and the Civil Cases Collegium of the Supreme Court refusing leave to appeal out of time, and an order that the case be sent for a new trial. The Court dismissed Wardour’s contention, based on the statement of an expert on Russian law, that the Supreme Court of the Russian Federation could of its own volition set aside the award, holding that at any event the application before the Russian court fell outside the scope of Sect. 52(5) of the Ordinance and did not trigger its application.
390 Yearbook Comm. Arb’n XXXV (2010) GIBRALTAR NO. 1
The Supreme Court added that even if Sect. 52(5) Ordinance applied, it would not exercise its discretion to order a stay. It reasoned that the possibility that Wardour would succeed in having the award set aside by the Russian courts was “remote”, in particular in light of the fact that Wardour argued that the Moscow City Court did not pay sufficient regard to Wardour’s allegations that it did not receive a fair hearing, while it appeared from the Russian court’s 27 November 1997 decision that the court did in fact consider the complaints by Wardour and rejected them. The Gibraltar Supreme Court added that it would refuse a stay even if it was tempting to adjourn enforcement to enable the Supreme Court of the Russian Federation to complete its consideration of the appeal, given the short time limits within which it appeared from the evidence on Russian law that the court has to work. The Court held, however, that to allow any further delay in execution would be unjust to Chernogorneft. The fact that Wardour did not discover the mistake of the Moscow City Court in respect of the possibility for a cassation appeal until after five years from that court’s decision “should not be laid at the door” of Chernogorneft.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 391 HONG KONG
Accession: 24 September 1975* 1st Reservation
24. High Court of the Hong Kong Special Administrative Region, Court of Appeal, 10 February 2010 and 5 May 2010, Civil Appeal No. 373 of 2008 & Amp; No. 43 of 2009
Parties: Appellant/Plaintiff: FG Hemisphere Associates LLC (US) Defendants/Respondents: (1) Democratic Republic of the Congo; (2) China Railway Group (Hong Kong) Limited (nationality not indicated); (3) China Railway Resources Development Limited (nationality not indicated) (4) China Railway Sino-Congo Mining Limited (nationality not indicated); (5) China Railway Group Limited (nationality not indicated) Intervener: Secretary for Justice (Hong Kong SAR)
Published in: Both decisions available online at
Articles: I
Subject matters: – sovereign immunity from jurisdiction – sovereign immunity from execution – implied waiver of sovereign immunity from execution by agreeing to ICC arbitration (no)
* Accession by PR China on 22 January 1987 and extended to Hong Kong with the 1st Reservation, to replace the previous extension by the United Kingdom.
392 Yearbook Comm. Arb’n XXXV (2010) HONG KONG NO. 24
– reference to 1958 New York Convention does not imply waiver of sovereign immunity from execution
Topics: ¶ 105
Summary
The court held that (i) Hong Kong courts have jurisdiction to determine issues of state immunity; (ii) the doctrine of restrictive state immunity continues to apply in Hong Kong after PR China’s resumption of sovereignty; (iii) no waiver of state immunity is implied in a State’s submission to (ICC) arbitration; (iv) no waiver of state immunity is implied under the 1958 New York Convention if a non-Convention State arbitrates in a Convention State. This decision was a final decision that could be appealed.
The facts of this case are also reported in Yearbook XXXIV (2009) at pp. 596- 598 (Hong Kong no. 23). In the 1980s, Energoinvest, a Yugoslav company, provided financing to the Democratic Republic of the Congo (DRC). The agreement between the parties contained an ICC arbitration clause. Following a dispute in respect of this relationship, on 30 April 2003 two ICC arbitral tribunals with seat in France and Switzerland, respectively, rendered two awards in favor of Energoinvest. By an assignment of 16 November 2004, Energoinvest’s interest in the awards was transferred to FG Hemisphere (FG). FG sought enforcement of the awards in the Hong Kong Special Administrative Region against China Railway Group (Hong Kong) Limited, China Railway Resources Development Limited and China Railway Sino-Congo Mining Limited (the 2nd to 4th Defendants), companies of the China Railway Group Limited (the 5th Defendant), which allegedly owed monies to the DRC under certain joint venture agreements. As far as relevant to the present case, the DRC and the People’s Republic of China entered into two Cooperation Agreements in 2001; in implementation of those agreements, on 17 September 2007 the DRC and a consortium of Chinese enterprises, including China Railway and Sinohydro, concluded a Memorandum of Agreement (MOA) setting out the terms for the creation of a Chinese- Congolese Joint Venture Company (JVC) that was to develop the DRC’s infrastructure in consideration of the right to exploit certain mineral resources of the DRC. Pursuant to further agreements, a second Chinese consortium (comprising the 2nd to 4th Defendants and two Sinohydro subsidiaries) and Congolese investors comprising Gecamines (the DRC state mining company, also known as Congo Mining) and Mr. Gilbert Kalamba Banika, a representative of Gecamines, entered into a Joint Venture Agreement to establish the JVC; Mr.
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Banika’s place was later taken by Congo Simco (a DRC state company). The MOA provided that the 2nd to 4th Defendants make an up-front payment to the DRC (the Entry Fees) for the grant of a licence to exploit the DRC’s mineral rights. FG’s application to enforce the ICC awards in Hong Kong was targeted at these Entry Fees. On 15 May 2008, the Hong Kong High Court, per Saw J, granted FG’s ex parte application to enforce the two awards, as well as an order restraining the 2nd to 4th Defendants from paying the Entry Fees to the DRC. The DRC resisted enforcement of the awards alleging sovereign immunity. The Hong Kong Secretary of State submitted evidence in the proceeding in the form of a letter dated 20 November 2008 from the Office of the Commissioner of the Ministry of Foreign Affairs of the People’s Republic of China in Hong Kong to the Constitutional and Mainland Affairs Bureau of the Hong Kong Government. The Letter stated that PR China takes the stance that sovereign states enjoy absolute (as opposed to restrictive) immunity before foreign courts. On 12 December 2008, the High Court, Court of First Instance, per A.T. Reyes J held that the DRC enjoyed sovereign immunity because the transaction underlying the awards was not of a commercial nature. FG appealed. By the first decision reported, rendered on 10 February 2010, the Hong Kong Court of Appeal, before Frank Stock VP, Wally Yeung JA and Maria Yuen JA, in an opinion by Stock, dismissed FG’s appeal by a majority decision (Yuen JA dissenting). The separate opinions of the Judges are reproduced. Jurisdiction to determine issues of state immunity. The court first dismissed the argument that the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China (the Basic Law) – which provides that the courts of the Hong Kong SAR have no jurisdiction over acts of state such as defence and foreign affairs – deprives the Hong Kong courts of jurisdiction to determine issues of state immunity. The court reasoned that the act of state doctrine applies (i) to preclude the courts of a State from questioning the validity of executive and legislative acts of foreign States and (ii) to preclude the courts from investigating the legitimacy of sovereign acts of the forum State. This was not the case here, where the court of appeal was asked to determine whether the DRC was immune. Hence, the court had jurisdiction to determine the issue of the DRC’s alleged state immunity from jurisdiction and execution. Restrictive v. absolute immunity. The court of appeal then considered the issue whether absolute or relative state immunity presently applies in Hong Kong, relative immunity meaning that a State is not immune from the jurisdiction of foreign courts, inter alia, in respect of proceedings to which it has submitted or proceedings relating to a commercial transaction.
394 Yearbook Comm. Arb’n XXXV (2010) HONG KONG NO. 24
The court noted that before the UK State Immunity Act 1978 (SIA) was extended to Hong Kong, state immunity in Hong Kong was regulated by common law. The SIA – which recognized the principle of restrictive state immunity – remained in force in Hong Kong between 1978 and 30 June 1997; on 1 July 1997, PR China resumed sovereignty and the SIA ceased to have effect. No legislation having been enacted to replace the SIA, the issue of state immunity is now again regulated by common law. The court then examined what that common law is. In 1977, shortly before the SIA came into force in Hong Kong, the Privy Council rendered a decision in the Philippine Admiral case,1 in which it held that while absolute immunity applied to actions in personam, the commercial activity exception applied in actions in rem. The DRC argued that this common law was reinstated after the SIA ceased to have effect; as the present proceeding was undisputedly in personam, the DRC was entitled to sovereign immunity. Conversely, the FG argued that the common law of Hong Kong immediately before the entry into force of the SIA reflected the common law prevailing in England at that date, which was defined by the 1977 decision of the UK Court of Appeal in the Trendtex case,2 holding that the commercial activity exception also applied to actions in personam; this law was confirmed by the House of Lords in I CONGRESO3 in 1983. The court of appeal reasoned that the common law of England shifted from the absolute to the restrictive doctrine of state immunity in the second half of the twentieth century on the premise of a change in customary international law. The court noted that in common law jurisdictions, customary international law becomes part of the common law by incorporation, that is, the courts acknowledge the existence of a body of rules which nations generally accept, save to the extent that the new customary international law conflicts with domestic law. While convinced that most States subscribe to the doctrine of restrictive immunity, the court could not find that this doctrine has accrued such widespread acceptance as to constitute a rule of customary international law. However, in Hong Kong’s case it was “idle” to suppose that the doctrine of restrictive immunity was not part of the common law in Hong Kong just before the SIA came into force and “unrealistic” to conclude that the courts of Hong Kong (or the Privy Council on an appeal from Hong Kong) would have taken, post-1978, a course different from that embraced by the Court of Appeal in Trendtex and by the House of Lords in I CONGRESO.
1. Philippine Admiral v. Wallem Shipping (Hong Kong) Ltd ([1977] AC 373). 2. Trendtex Trading Corporation Ltd v. Central Bank of Nigeria ([1977] 1 QB 529). 3. Playa Larga v. I CONGRESO DEL PARTIDO ([1983] 1 AC 244).
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The court, therefore, concluded that the common law of Hong Kong immediately before the entry into force of the SIA recognized the doctrine of restrictive immunity. After the resumption of the exercise of sovereignty by PR China, the common law was constitutionally prescribed to continue in force save to the extent that it was inconsistent with the Basic Law and with local legislation enacted on and after 1 July 1997. This was not the case here. As a consequence, restrictive immunity still applies in Hong Kong. The court noted the contrast between Hong Kong’s position and the rejection of the doctrine of restrictive immunity by PR China (the Secretary of Justice submitted a second letter to this purpose, stating that PR China applies absolute sovereign immunity and taking the stance that the common law of Hong Kong should now reflect the position taken by the Chinese Central Government). The court deemed, however, that the success of the present application did not constitute or threaten an infringement of the sovereignty of the PRC. Implied waiver. FG submitted that the DRC’s submission to the arbitration process constituted waiver of any claim for immunity from that process, including its final stage, leave for enforcement. Also, by agreeing to the application of the ICC Rules, which provide that parties undertake to carry out any award without delay, the DRC waived its immunity from execution. The court of appeal first noted that it is generally accepted that an agreement to arbitrate constitutes a waiver of immunity from the arbitration proceedings themselves, that a State may waive its immunity from jurisdiction and from execution, and that at common law, a waiver of immunity from jurisdiction does not imply waiver in respect of execution; rather, a separate waiver is required. FG argued that the increased participation of States in commercial activities, and the consequent increase of arbitration clauses between States and private entities, has brought about a recognition that unless commitment to arbitration is firm and enforceable, arbitration agreements with States are pointless; hence, States ought to be prevented from raising pleas of jurisdictional immunity in foreign enforcement proceedings. FG argued that Hong Kong law reflects that demand for, and the desirability of, equal treatment, and that implied waiver in the context of arbitrations between States and private persons is a policy now so generally applied that it can be deemed to be a rule of international law. The court disagreed, finding that there is no consensus in this respect among the authors, and that jurisdictions which have followed this approach have done so against the backdrop of specific legislation which finds no echo in Hong Kong. Nor could implied waiver be found under the 1958 New York Convention. Here, as in the decision of the United States Court of Appeals, District of
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Columbia, in Creighton,4 the ICC awards were rendered in an arbitration held in a Convention State (France and Switzerland) against a non-Convention State (the DRC), and the enforcement State was a Convention State (Hong Kong). The court of appeal agreed with the reasoning in Creighton that while when a country becomes a signatory to the Convention it must have contemplated enforcement actions in other signatory states, by agreeing to ICC arbitration in a Convention State a non-Convention State cannot be said to be “making a representation to each Convention State that it consents to the enforcement against it in the Convention State of such arbitral award as may be made”. Enforcement as part of the arbitration process. FG complained that Reyes J took the execution, rather than the enforcement, stage into account. As, it argued, an application for leave to enforce a foreign award against a foreign State is a purely ministerial act, the tail end of the arbitration itself, the DRC should have been deemed to have waived its immunity from jurisdiction in respect of enforcement as it did in respect of the arbitration process. The court disagreed, finding that the grant of leave is not a ministerial act; rather, it requires the court to embark upon an adjudicative function, so that the question of immunity from that jurisdiction must be raised and addressed at that stage. The submission of a foreign State to arbitration operates solely to remove state immunity from the first stage of arbitration; it does not constitute waiver to the enforcement jurisdiction or a waiver of state immunity in respect of execution. Immunity from execution. The court finally held that Reyes J failed to consider the use to which the Entry Fees were to be put, which determined whether they were immune from execution. This was an issue of fact which had not been determined in the proceedings below. Thus, the Court of Appeal referred the case back to the court of first instance for a determination on this point. This is the first decision reported. By the second decision reported, rendered on 10 May 2010, the Hong Kong Court of Appeal, again in an opinion by Stock, granted the parties leave to appeal on listed questions, finding that the court’s decision on the issue of the DRC’s immunity from suit was a final judgement from which appeal was allowed.
A detailed report of these decisions is available online at
4. US Court of Appeals, District of Columbia, 2 July 1999, reported in Yearbook XXV (2000) pp. 1001-1013 (US no. 320).
Yearbook Comm. Arb’n XXXV (2010 ) 397 INDIA
Ratification: 13 July 1960 1st and 2nd Reservation
44. High Court, Gujarat, 7 February 2005
Parties: Claimant: Swiss Singapore Overseas Enterprises Pvt. Ltd. (nationality not indicated) Defendant: M/V AFRICAN TRADER (nationality not indicated)
Published in: Available on line at
Articles: I(3); II(3)
Subject matters: – status of State party to 1958 New York Convention (“Durban, South Africa”) – reciprocity reservation – arbitration agreement “incapable of being performed” because contradictory
Topics: ¶ 101 + ¶ 113 + ¶ 220
Summary
The court refused an application to refer the dispute relating to a charterparty to arbitration in Durban, South Africa, because the Indian Central Government has not issued a notification that Durban, South Africa is a Contracting State to the 1958 New York Convention. Hence, an award rendered there cannot be enforced in India, which has made the reciprocity reservation in Art. I(3) Convention. As a consequence there was “no justification in driving the parties to such an arbitration”. Further, there was no clear and unambiguous arbitration agreement in this case, since the Fixture Note for the charterparty referred to arbitration in Durban while under the GENCON Charter Party to which the Note referred arbitration should have been held in London.
398 Yearbook Comm. Arb’n XXXV (2010) INDIA NO. 44
By a Fixture Note dated 26 March 2004, Swiss Singapore Overseas Enterprises Pte Ltd. (Swiss Singapore) chartered the M/V AFRICAN TRADER (the Defendant) for carrying Gabonese hard wood from Gabon to India. The Fixture Note enumerated certain terms of the charter and then stated: “Others as per GENCON Charter Party Revised 1994.” Clause 19 of the GENCON Charter Party deals with the governing law and arbitration: clause 19(a) provides that the charterparty shall be governed by and construed in accordance with English law and refers disputes to arbitration in London; clause 19(c) states that if a place is indicated in Box 25, arbitration shall be held in that place and the substantive and procedural law of that place shall apply; clause 19(d) states that if Box 25 is not filled in, then clause 19(a) applies. The Fixture Note itself provided for “Durban Arbitration and English Law to apply”. On 23 November 2004, Swiss Singapore commenced an action in India, seeking certain payments and the arrest of the M/V AFRICAN TRADER. Arrest was granted and subsequently lifted upon the posting of security. The High Court of Gujarat, per K. Puj, J, rejected the Defendant’s application to refer the dispute to arbitration in Durban. It first dismissed Swiss Singapore’s claim that the Defendant accepted the jurisdiction of the court by furnishing security to have the arrest lifted, holding that the mere furnishing of security does not amount to submission to court jurisdiction. The court then held that any award rendered in Durban between the parties could not be recognized in India under Sect. 44 of the Indian Arbitration Act 1996, which mirrors Art. I of the 1958 New York Convention. Although all other conditions were satisfied (the award concerned a commercial legal relationship, it was made on or after 11 October 1960 and in pursuance of an arbitration agreement in writing), “Durban, South Africa” was not a reciprocating Contracting State to the New York Convention because the Indian Central Government did not issue any notification in this regard. As an award made in Durban could not be recognized in India, “there is no justification in driving the parties to such an arbitration”. The Gujarat court also held that referral to arbitration should be denied in any event, deeming the arbitration agreement to be “absolutely vague, uncertain, ambiguous and self contradictory”. The court noted that the Fixture Note referred to arbitration in Durban. However, clause 19(d) of the GENCON Charter Party – which provides for arbitration at the place indicated in Box 25 of the standard form – also provides that if Box 25 is not filled in, then clause 19(a) applies, which provides for arbitration in London. In the present case, Box 25 of the standard form was not filled in. This contradiction showed that there
Yearbook Comm. Arb’n XXXV (2010) 399 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 was no agreement of the parties as to the place of arbitration, “which is one of the most essential pre-requisites of a valid arbitration agreement”.
A detailed report of this decision is available online at
400 Yearbook Comm. Arb’n XXXV (2010) INDIA NO. 45
45. High Court, Delhi, 11 May 2010, CS(OS) 2447/2000 & I.A. 12332/2008
Parties: Plaintiff: Fittydent International GmbH (nationality not indicated) Defendant: Brawn Laboratories Ltd (nationality not indicated)
Published in: Available online at
Articles: II(3); III; V; V(2)(b)
Subject matters: – separability of arbitration clause – review of merits of award (no) – narrow concept of public policy – public policy and erroneous assessment of facts by arbitrator – interest rate modified
Topics: [1]-[3] = ¶ 222; [9]-[14] + [21]-[22] = ¶ 502; [15]- [17] = ¶ 518; [18]-[21] = ¶ 524 (erroneous decision); [23] = ¶ 307
Summary
The court granted enforcement of an ICC award, refusing to review its merits. It also dismissed defendant’s public policy objections, holding that public policy only includes the fundamental principles of Indian law and cannot serve as a vehicle for individual beliefs about the “justice of the case”. The court accepted the argument that a yearly interest rate of 8.5 percent was excessive and reduced it to 2 percent. (The court also quoted an earlier decision where an injunction to stay arbitration on the ground that the main contract was invalid was denied, under reference to the principle of separability of the arbitration clause.)
On 20 May 1994, Fittydent International GmbH (Fittydent) and Brawn Laboratories Ltd (Brawn) entered into a License Agreement to manufacture and market Fittydent’s denture cleansing tablets and adhesive powder in India. The License Agreement was governed by Austrian law. It also contained an ICC arbitration clause.
Yearbook Comm. Arb’n XXXV (2010) 401 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
On 25 April 1996, Fittydent terminated the License Agreement, arguing that Brawn had failed to start commercial production and to increase the sale of the products in India. It then commenced ICC proceedings, claiming the license fee under the License Agreement, US$ 175,000, together with interest and costs. On 18 February 1998, the ICC appointed a sole arbitrator. On 27 July 1998, Brawn filed a suit in the Delhi High Court, seeking an injunction to stay arbitration on the ground that no valid arbitration agreement existed between Brawn and Fittydent because the main contract that contained it was null and void. On 23 July 1999, the court dismissed the application, holding that an arbitral tribunal has the power to rule on its own jurisdiction and that for that purpose an arbitration clause in a contract is to be treated as an independent agreement. On 3 November 1999, the Division Bench affirmed the Single Judge’s decision. On 24 March 2000, the sole arbitrator rendered an award in favor of Fittydent. By the present decision, the Delhi High Court, per Mr. Justice Manmohan, granted enforcement of the ICC award. Brawn first alleged, as it had done in its injunction application, that the License Agreement was null and void as it provided that it was subject to the “approval of the Government of India and/or Reserve Bank of India, as the case may be” and that approval had never been granted. The court noted that the License Agreement also required Brawn to “secure all necessary governmental permits, licenses and registrations required in connection with the manufacture and marketing of the Product in the Territory”. The court agreed with the sole arbitrator’s conclusion from the evidence before her – in particular from a letter sent by Brawn to the Secretariat for Industrial Assistance (SIA), requesting the SIA to suspend rendering a decision on the approval – that Brawn did not pursue the application. As a result, in the court’s words, Brawn could not “claim benefit of its own wrong”. Brawn further argued that the sole arbitrator violated “justice and morality” by directing payment of the entire license fee under the License Agreement while acknowledging that Fittydent did not transfer technical know-how in respect of the adhesive powder. The court reasoned that the concept of public policy only includes the fundamental principles of Indian law and cannot serve as a vehicle for a party’s (or the court’s) individual beliefs about the “justice of the case”: such broad construction would be at odds with the 1958 New York Convention’s “basic intent of removing obstacles to enforcement”. Here, the arbitrator did consider the argument that the technical know-how at issue was not transferred; her conclusion was not, in the court’s opinion, in violation of public policy. The court added that no review of the factual findings of the arbitration is possible in enforcement proceedings. This was also true in respect of Brawn’s
402 Yearbook Comm. Arb’n XXXV (2010) INDIA NO. 45 allegation that the arbitrator erred in directing payment of the license fee because the fee was payable under the License Agreement after two weeks from the date of commercial production and Brawn never started commercial production. The court held that this ground was “clearly outside the scope of the limited grounds available in enforcement proceedings” as it concerned the merits of the case. The court did accept Brawn’s argument that the interest rate of 8.5 percent awarded by the sole arbitrator was excessive. The court referred to certain cases where the Supreme Court reduced the rate of interest and, taking in view the rate of interest prevalent internationally at the relevant time, reduced the rate in the present case to 2 percent per annum.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 403 IRELAND
Accession: 12 May 1981 First Reservation
3. High Court of Ireland, 13 November 2009, 2009 169 MCA
Parties: Applicant: Kastrup Trae-Aluvinduet A/S (Denmark) Respondent: Aluwood Concepts Ltd. (Ireland)
Published in: Available online at
Articles: V(1)(a); V(1)(b)
Subject matters: – incorporation of arbitration clause by general reference to standard conditions – enforcement court may review arbitrators’ findings as to existence of arbitration agreement – due process and language of arbitration
Topics: [11]-[28] = ¶ 504; [29]-[34] = ¶ 511 (language of arbitration)
Summary
Enforcement of a Danish award was granted. The court was not bound by the arbitrators’ finding as to the existence of a valid arbitration agreement but reached the same conclusion that an arbitration agreement had been validly incorporated into the contract between the parties by reference to standard conditions. Also, there had been no violation of due process because Danish was used in the arbitration: all documents had been duly communicated, Danish was the language of the arbitration and the Irish defendant could have had the documents translated.
By a letter of 18 August 2006 (the initial quotation letter), Kastrup Trae-Aluvinduet A/S (Kastrup) entered into an ongoing business relationship with Aluwood Concepts Ltd. (Aluwood) for the supply from Kastrup to Aluwood of Scandinavian doors and windows to be used in Aluwood’s developments in Ireland. The relationship between the parties operated on the
404 Yearbook Comm. Arb’n XXXV (2010) IRELAND NO. 3 basis of individual contracts for individual jobs being undertaken by Aluwood. The relationship was governed by Kastrup’s Common Terms and Conditions of Sale (the Terms), as evidenced by a reference thereto both in the initial quotation letter and in a confirmation of order of 24 August 2006. The initial quotation letter further indicated that the relationship would be in accordance with the “common sales and delivery conditions of VI”, VI (VinduesIndustrien) being the organization of Danish window producers. Clause 11 of the Terms provided for arbitration of disputes at the Danish Building and Construction Arbitration Court (DCA, operating jointly with the Danish Institute of Arbitration). In 2008, Kastrup sought payment of certain invoices from Aluwood. On 9 July 2008, Aluwood objected that the account of unpaid invoices furnished by Kastrup did not take into account a number of “contra-charges” based on alleged defects of the product. Kastrup replied that it would inquire into the matter but reiterated its request for payment. On 15 August 2008, Kastrup’s Danish solicitors wrote to Aluwood outlining the level of unpaid invoices which were owing at that time and requesting payment. These invoices totalled DKK 945,372.06. Aluwood did not reply, whereupon Kastrup initiated DCA arbitration proceedings in Denmark on 3 September 2008. Aluwood objected on various occasions, both to Kastrup and to the DCA, to the fact that the documents of the arbitration, including Kastrup’s statement of claim, were provided in Danish. Alleging financial reasons, Aluwood did not hire an interpreter, nor did it retain a Danish solicitor, as suggested by the DCA. The DCA extended the time for Aluwood to submit a statement of response several times. The day before the hearing, which was fixed for 7 April 2009, counsel for Aluwood raised, inter alia, the point of the lack of a valid arbitration agreement between the parties in an e-mail to the DCA. The DCA did not accept this and the other late submissions. On 20 April 2009, the arbitral tribunal rendered an award in favor of Kastrup. Kastrup sought enforcement of the Danish award in Ireland. The High Court of Ireland, per Mr. Justice John Mac Menamin J., granted enforcement. It first dismissed Aluwood’s argument that there was no valid arbitration agreement between the parties because Kastrup failed to draw Aluwood’s attention specifically to the arbitration clause in the Terms. The court noted that it was not bound by the arbitrators’ decision as to the existence of a valid arbitration agreement and that it had to reach its own conclusion on this point. In the present case, it found that the evidence showed that the Terms were validly incorporated into the contract. The court referred in support of its
Yearbook Comm. Arb’n XXXV (2010) 405 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 conclusion to the Credit Suisse case,1 where the English Court of Appeal held that it was irrelevant that the other party did not have a copy of the conditions to which the contract expressly referred. The court added that in the case at hand Aluwood had performed for eighteen months in accordance with the Terms prior to raising the objection that there was no valid agreement. The court also dismissed Aluwood’s objections that there had been violations of due process in the arbitration, holding that it appeared undisputedly that all necessary documents were communicated to Aluwood in time, and that Aluwood could have had the documents, which were not voluminous, translated if it had wished.
A detailed report of this decision is available online at
1. Credit Suisse Financial Products v. Societe Generale d’Enterprises [1997] I.L.P.T. 165 C A.
406 Yearbook Comm. Arb’n XXXV (2010) ISRAEL
Ratification: 5 January 1959 No Reservations
4. Beit ha-Mishpat ha-Elyon [Supreme Court], 24 January 2010, FH 8511/091
Parties: Petitioner: Teva Pharmaceutical Industries Ltd (Israel) Respondents: (1) Proneuron Biotechnologies, Inc. (nationality not indicated); (2) Proneuron Biotechnologies (Israel) Ltd (nationality not indicated); (3) Yeda Research and Development Company Ltd (nationality not indicated)
Published in: No information available at time of publication
Articles: II(3)
Subject matters: – discretion to refuse stay of proceedings outside New York Convention’s exceptions – public policy and discretion not to stay court proceedings
Topics: ¶ 217 + ¶ 218
Summary
Israeli courts have discretion not to stay court proceedings when there is a valid arbitration agreement, even when that agreement is not “null and void, inoperative or incapable of being performed”, on grounds of public policy.
1. The General Editor wishes to thank Dr. Daphna Kapeliuk, Radzyner School of Law, Interdisciplinary Center, Herzliya, for her invaluable assistance in translating this decision from the Hebrew original and summarizing its content.
Yearbook Comm. Arb’n XXXV (2010) 407 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
In 2005, Teva Pharmaceutical Industries Ltd (Teva) and Proneuron Biotechnologies (Israel) Ltd (Proneuron) entered into an agreement for the development and commercialization of the Glatiramer acetate molecule. The agreement provided for arbitration in London pursuant to the rules of arbitration of the London Court of International Arbitration (LCIA). A dispute arose between the parties. Proneuron filed a suit in the District Court of Tel Aviv for breach of contract, claiming that while Teva undertook in the agreement to carry out clinical tests to examine the effectiveness of the Glatiramer molecule, it did so negligently with low medical standards which threatened the participants in the tests. Teva petitioned for a stay of proceedings. On 27 January 2008, the Tel Aviv court denied Teva’s motion for a stay, holding that while generally it would be inclined to stay proceedings pursuant to Art. II(3) of the 1958 New York Convention, there are exceptional cases that may justify denial of a stay, even if these cases do not fall within the exception set out in Art. II(3) that “the agreement is null and void, inoperative or incapable of being performed”. The district court held that there was a public interest in this case that the matter be tried in court and denied the motion for a stay. On 11 October 2009, the Israeli Supreme Court affirmed the lower court’s decision by a majority vote of two (Justice Rubinstein, with Justice Procaccia concurring) to one (Justice Danziger). The Court found that although none of the exceptions in Art. II(3) applied, a stay can be denied on grounds of public policy. While the parties’ agreement to have their disputes settled by arbitration must be honored, public policy is an interest which may (or may not) coincide with the interest to respect the parties’ agreement. The weight to be given to public policy must be examined in each case. Justice Danziger argued in his dissent that courts cannot add exceptions to those specified in Art. II(3) of the Convention. By the present decision, the Supreme Court, per Chief Justice Beinish, dismissed Teva’s petition for a further hearing, holding that by its earlier decision the Court found that it had discretion not to order a stay on grounds of public policy: the exercise of discretion by the Court is not a ground for a further hearing. Also, the disagreement between the majority and the minority Justices focused mainly on the question whether the case at hand fell among those “rare and exceptional cases” in which a court will deny a stay.
A detailed report of this decision is available online at
408 Yearbook Comm. Arb’n XXXV (2010) ISRAEL NO. 5
5. Beit ha-Mishpat ha-Eliyon [Supreme Court], 12 April 2010, Civil Motion for Leave to Appeal 4986/081
Parties: Plaintiff: Tyco Building Services (Singapore) Respondents: (1) Elbex Video, Ltd. (Israel); (2) Megason Electronics & Control Ltd. (Israel)
Published in: Available online at
Articles: II(3) (by implication)
Subject matters: – stay of court proceedings – separability of arbitration clause in conditional contract
Topics: ¶ 217; [12]-[28] + [34]-[36] = ¶ 222; [29]-[30] = ¶ 201
Summary
The arbitration clause in a conditional contract remains valid even if the contract does not come into existence because the condition is not met, by virtue of the separability principle and the parties’ freedom to agree to have arbitrators decide on the validity of the contract. Here, the parties agreed to refer to arbitration any dispute under the contract “including any question regarding its existence, validity or termination”.
In 2001, the Public Works Department and the Prisons Authority of Singapore published an international tender for the provision and installation of closed circuit television systems for use in the prisons in Singapore. Among the terms of the tender, the proposers were required to establish a joint initiative with a local company. Elbex Video, Ltd. (Elbex) agreed to establish a connection between Tyco Building Services (Tyco), a Singaporean company, and Megason Electronics & Control Ltd. (Megason), an Israeli company, in order for the two
1. The General Editor wishes to thank Mr. Alessandro Ethan Naschitz, Naschitz Brandes & Co., Tel Aviv, for his invaluable assistance in providing this decision and translating it from the Hebrew original.
Yearbook Comm. Arb’n XXXV (2010) 409 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 to cooperate in the tender processes. In exchange, Tyco would propose only Elbex’s systems in the tender and use those systems exclusively if it was awarded the tender. After Elbex made the connection between Tyco and Megason, the two established a joint initiative and were eventually awarded the tender. On 18 January 2001, Elbex sent Megason a price proposal for the systems. On 13 August 2002, Megason sent Elbex a Purchase Order. The Purchase Order stated that it was “subject to (A) complete client approval of [Elbex’s] CDR submission and (B) in accordance with the enclosed sub-contract agreement”. It further provided for the application of the law of Singapore. The Sub-Contract Agreement that was attached to the Purchase Order equally provided for the application of the law of Singapore; it also contained a clause referring “[a]ny dispute arising out of or in connection with this Sub-Contract, including any question regarding its existence, validity or termination” to arbitration in Singapore at the Singapore International Arbitration Centre (SIAC). On 10 August 2003, Elbex commenced an action in Israel against Tyco and Megason, seeking 10,000,000 New Israeli Shekels for various breaches of contract. Elbex alleged, inter alia, that Tyco and Megason charged excessive prices for certain Elbex products, did not promptly reply to the requests of the Singaporean authorities and used non-Elbex products. Tyco and Megason sought a stay of proceedings and referral of the dispute to SIAC arbitration. On 27 April 2008, the District Court in Tel Aviv-Jaffa denied the application, holding that there was no arbitration agreement between the parties since the Purchase Order had not entered into effect because the condition precedent under (A) – approval of Elbex’s final planning by the Singaporean authorities – had not been met. The Supreme Court, before E. Hayut, Y. Danziger and Y. Amit, JJ in an opinion by Danziger, held that the court action should be stayed. The Court decided the case under Sect. 5 of the Israeli Arbitration Law, according to which a court has discretion to stay proceedings in favor of arbitration where (1) there is an arbitration agreement between the parties and (2) that agreement covers the dispute before the court, if a party to the arbitration agreement so requests before arguing the merits of the case. The Court noted that Sect. 6 of the Arbitration Law was also relevant in this respect. Sect. 6 provides for a stay of proceedings in favor of arbitration where an international treaty applies and contains provisions on a stay of proceedings. It was argued in the present case that the 1958 New York Convention applied. However, the district court did not consider the Convention’s provisions and the parties did not rely thereon before the Supreme Court. The Court, therefore, did not apply Sect. 6 of the Arbitration Law.
410 Yearbook Comm. Arb’n XXXV (2010) ISRAEL NO. 5
The Supreme Court saw no reason to interfere with the district court’s finding of fact that an arbitration agreement existed because the Purchase Order and the Sub-Contract Agreement in which the arbitration clause was contained, though unsigned by Elbex, were in writing and Elbex’s behavior – specifically its continued reliance on the Sub-Contract Agreement and the Purchase Order, on which its claims in the Israeli court were actually based – testified to its intention to enter into those agreements. The Supreme Court disagreed, however, with the lower court’s conclusion that the arbitration agreement was void because the Purchase Order was conditional on the approval of Elbex’s final plan by the Singaporean authorities, which had never been given (condition A). The Court examined the cases in which an arbitration agreement can be deemed separable from the main contract so that the main contract’s termination or invalidity does not affect it and concluded that the case of an arbitration clause in a conditional contract is the same as the case of an arbitration clause in a contract that is alleged to be illegal or contrary to the public interest. In either case, the arbitration clause survives the nullity of the main contract “by virtue of the combination of two principles: firstly, the ability of separation between the clauses of the agreement; secondly, the consent of the parties – whether at the outset or retroactively – that the arbitrator indeed has jurisdiction to consider the question of the validity of the contract”. In the present case, the parties authorized the arbitrators to decide on disputes “arising out of or in connection with this Sub-Contract, including any question regarding its existence, validity or termination”. The Supreme Court further held that the second condition for staying proceedings was met, namely, that the dispute before the court fell within the scope of the arbitration agreement, noting that that dispute concerned the parties’ agreements and Elbex’s claim that Tyco and Megason breached those agreements. Justice Y. Amit filed a concurring opinion that is also reproduced below.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 411 ITALY
Accession: 31 January 1969 No Reservations
180. Corte di Appello [Court of Appeal], Florence, 11 March 2004 Corte di Cassazione [Supreme Court], First Chamber, 23 July 2009, no. 17312
Parties: Appellant: Nigi Agricoltura srl (Italy) Respondent: Inter Eltra Kommerz und Produktion GmbH (Germany)
Published in: Both decisions available online at
Articles: III; V(1)(a); V(1)(c)
Subject matters: – incorporation of arbitration clause by reference to standard conditions – appointment of arbitrator by arbitral institution – award rendered by even number of arbitrators – grounds for refusal of enforcement are exhaustive
Topics: [1]-[6] = ¶ 504; [10]-[11] = ¶ 513; [12] + [15]-[17] = ¶ 501; [13]-[14] = ¶ 505
Summary
The specific reference in a confirmation of order to FOSFA standard contract no. 11 validly incorporated the arbitration clause therein into the contract. Enforcement could not be denied on the ground that the award had been rendered by an even number of arbitrators, because this is not one of the grounds exhaustively listed in the New York Convention. It is irrelevant that the Italian law requires an uneven number of arbitrators in the context of domestic arbitration.
Inter Eltra Kommerz und Produktion GmbH (Inter Eltra), the seller, and Nigi Agricoltura srl (Nigi), the buyer, entered into a contract for the sale and purchase
412 Yearbook Comm. Arb’n XXXV (2010) ITALY NO. 180 of oil seeds through a confirmation of order signed by Nigi’s broker and sent to Inter Eltra’s broker. The confirmation of order referred to standard contract no. 11 of FOSFA (Federation of Oils, Seeds and Fats Associations), which contains an arbitration clause. A dispute arose between the parties. Inter Eltra commenced FOSFA arbitration in London as provided for in the sale and purchase contract, and appointed an arbitrator. Nigi did not react to FOSFA’s letter requesting it to appoint an arbitrator, whereupon FOSFA appointed the second arbitrator. The two arbitrators eventually rendered an award in favor of Inter Eltra. Inter Eltra then obtained an ex parte order of enforcement of the FOSFA award from the President of the Florence Court of Appeal. On 29 April 2002, Nigi commenced opposition proceedings. By the first decision reported, rendered on 11 March 2004, the Florence court of appeal dismissed Nigi’s opposition. The court reasoned that the sale and purchase contract was concluded through the confirmation of order signed by Nigi’s broker and sent to Inter Eltra’s broker, which contained a specific reference to the arbitration clause in the FOSFA standard contract no. 11. This constituted a relatio perfecta, though – the court added – “the distinction between relatio perfecta and relatio imperfecta is less relevant” in light of Art. II(2) of the 1958 New York Convention, which gives so broad a definition of arbitration agreement to encompass incorporation by generic reference. The court then dismissed Nigi’s argument that the composition of the arbitral tribunal was not in accordance with the parties’ agreement. This was an administered arbitration, and the arbitral institution had simply carried out one of its tasks by appointing an arbitrator when Nigi failed to appoint one. Nigi further argued that the award could not be enforced because under Art. 809 of the Italian Code of Civil Procedure the number of arbitrators must be uneven. The court noted that this provision concerns domestic arbitration and is irrelevant in the context of the enforcement of a foreign award. This is the first decision reported. By the second decision reported, rendered on 23 July 2009, the Italian Supreme Court affirmed the lower court’s decision. It dismissed as being inadmissible Nigi’s contention that no contract was concluded between the parties because the alleged contract was signed by a broker rather than Nigi itself, holding that this argument was based on the interpretation of a document whose relevance could not be examined in the context of a proceeding on issues of law such as the present proceeding before the Supreme Court. As to the applicability of Art. 809 CCP, the Supreme Court agreed with the finding of the lower court
Yearbook Comm. Arb’n XXXV (2010) 413 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 that this was not a ground for refusal of enforcement under the 1958 New York Convention.
A detailed report of these decisions is available online at
414 Yearbook Comm. Arb’n XXXV (2010) ITALY NO. 181
181. Corte di Appello [Court of Appeal], Milan, 29 April 2009
Parties: Claimant/Appellant: C.G. Impianti SpA (Italy) Defendant/Appellee: B.M.A.A.B. and Sons International Contracting Company WLL (Kuwait)
Published in: Available online at
Articles: V; V(2)(b)
Subject matters: – public policy and lack of impartiality by arbitrator – public policy and evaluation of evidence by arbitrator – review of merits of award (no) – review of evaluation of evidence (no) – grounds for refusal of enforcement are exhaustive and strict – international public policy – due process as ground for violation of public policy
Topics: ¶ 521 + ¶ 524 (evaluation of evidence); [2]-[6] = ¶ 502; [6]-[8] = ¶ 522; [8] = ¶ 501; [9]-[13] = ¶ 518; [10] = ¶ 503; [14] = ¶ 523
Summary
The Milan Court of Appeal denied claimant’s opposition. It held that the allegation that the award violated public policy because of the “evident” partiality of the arbitrators was both inadmissible – as it amounted in fact to an attempt of having the court review the arbitrators’ evaluation of the evidence and thus the merits of the award – and factually unfounded, as claimant failed to prove that the arbitrators were biased. Nor should enforcement be denied because the reasons for the award allegedly contradicted the evidence. Contradiction within the dictum can be a reason for annulling a domestic award but is not a ground for refusing enforcement of a foreign award. Nor was there such contradiction here. The court further held that claimant failed to prove that enforcement would violate international public policy, that is, the fundamental principles and values of the Italian legal system, or that there had been a violation of procedural public policy.
On 7 September 2000, B.M.A.A.B. & Sons International Contracting Company WLL (BMAAB) subcontracted the installation of electrical wiring on oil drilling
Yearbook Comm. Arb’n XXXV (2010) 415 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 platforms in the Persian Gulf to C.G. Impianti SpA (Impianti). The contract contained a clause referring disputes between the parties to arbitration by three arbitrators in Kuwait. A dispute arose between the parties when Impianti’s undisputed delays in performance allegedly caused main contractor KJO, a Kuwaiti-Saudi entity, to terminate the main construction contract. BMAAB commenced arbitration in Kuwait, seeking termination of the subcontract for breach of contract by Impianti, and damages. On 20 March 2005, an arbitral tribunal found that the delays were due mostly to Impianti’s failure to perform under the subcontract, while BMAAB was responsible for 17 percent of the damages. They awarded BMAAB Saudi Ryals 4,341,813.09 in compensation. Impianti sought annulment of the award before a Kuwaiti court of first instance; its request was denied on 25 March 2006. On 24 September 2006, the Kuwaiti court of appeal affirmed the denial decision. BMAAB in turn sought enforcement of the award in Italy. On 2 May 2006, the Milan Court of Appeal granted enforcement by decree. Impianti commenced opposition proceedings. The Milan Court of Appeal denied the opposition. Impianti first argued that the arbitrators evaluated the evidence of the case “in an abnormal manner” because they were biased in favor of BMAAB. In particular, Impianti maintained that the arbitrators wrongly found that Impianti was liable for the delays, as the delays were rather imputable to BMAAB’s failure to supply transport vessels and to bad weather at sea. The court of appeal reasoned that Impianti’s opposition to enforcement was, first of all, inadmissible as it would require a review of the merits of the award that is precluded to the enforcement court. Impianti actually recognized this in its statement in opposition, but then proceeded nevertheless to base its argument on all the issues discussed in the arbitration and settled in the award: the contents of the contract; its claim that the delays were due to seasonal bad weather; BMAAB’s failure to provide for sufficient transport vessels, etc. The court of appeal also dismissed Impianti’s argument that enforcement should be denied because the reasons for the award were illogical in respect of the evidence. Italian law provides that domestic awards may be annulled if they contain contradictory provisions; however, the contradiction must be among the various elements of the dictum of the decision, while it is irrelevant that there is contradiction among different parts of the arbitral tribunal’s reasons or between the reasons and the dictum. An internal contradiction of the reasons is to be taken into account, for the annulment of domestic awards, only “when it is totally impossible to track the logical and juridical development of the decision” because no reason at all is given. This was not the case here, and in any event
416 Yearbook Comm. Arb’n XXXV (2010) ITALY NO. 181 defects in the arbitral tribunal’s reasoning are not listed among the grounds for refusing enforcement of a foreign award. The court added that grounds relating to the reasons given by the arbitrators for their decision fall outside the scope of international public policy, which only concerns the fundamental principles and values of the forum’s legal system. Impianti failed to prove that it was discriminated against and even derided in the arbitration, as it claimed, and that the arbitrators decided against the evidence. The sole fact that the arbitrators decided against Impianti was by itself neither a violation of public policy nor a defect in the reasons that could amount to a violation of public policy. Nor did Impianti prove that there was a violation of procedural public policy, such as a violation of due process. It appeared on the contrary that Impianti had been represented by counsel in the arbitration and that it even appointed one of the three arbitrators on the panel. The court further noted that the arbitrators, including the arbitrator appointed by Impianti, had rendered a unanimous decision.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 417 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
182. Corte di Cassazione [Supreme Court], First Civil Chamber, 23 July 2009, no. 17291
Parties: Appellant: Microware s.r.l. in liquidation (Italy) Appellee: Indicia Diagnostics S.A. (nationality not indicated)
Published in: Giustizia Civile Massimario (2009) pp. 7-8; available online at
Articles: IV(1)(b)
Subject matters: – original arbitration agreement not submitted “at the time of application” – certified copy of arbitration agreement invalid because signature illegible
Topics: ¶ 404 + ¶ 405
Summary
The Supreme Court confirmed its jurisprudence that the original arbitration agreement or a certified copy thereof must be supplied at the time of filing the request for enforcement of an award; if not, the request is not admissible. A finding that this prerequisite is lacking does not preclude a new application for enforcement.
On 12 January 1999, an arbitral tribunal of the International Chamber of Commerce (ICC) rendered an award in favor of Indicia Diagnostics S.A. in a dispute with Microware s.r.l. (Microware). On 11 April/4 June 2003, Indicia Biotechnology S.A. (Indicia), Indicia Diagnostics S.A.’s successor, obtained enforcement of the ICC award in Italy by an ex parte order of the President of the Venice Court of Appeal. On 4 July 2003, Microware filed opposition proceedings against the enforcement order, arguing, inter alia, that enforcement should be denied because Indicia failed to supply the original arbitration agreement or a certified copy thereof when filing its application for enforcement. The Venice court noted that Indicia supplied a certified copy of the contract containing the arbitration clause; however, the signature of the person issuing the certification of
418 Yearbook Comm. Arb’n XXXV (2010) ITALY NO. 182 authenticity was illegible and his or her capacity not indicated. The court therefore granted Indicia a time limit in which to provide the original arbitration agreement or a duly certified copy thereof. Indicia complied with the court’s request. On 17 August 2005, the Venice court of appeal partially confirmed the enforcement order, granting Microware’s counterclaims in part. The Supreme Court annulled the lower court’s decision and denied enforcement, confirming its consistent jurisprudence that the requirement in Art. IV of the 1958 New York Convention (mirrored in Art. 839(2) of the Italian Code of Civil Procedure) that the original arbitration agreement or a certified copy thereof be supplied at the time of filing the request for enforcement concerns the admissibility of the enforcement proceedings rather than the evidence-collecting phase. As a consequence, it is “not a mere condition for the action whose lack can be cured in the course of the proceeding”. The Court also confirmed its earlier jurisprudence that a finding that this essential prerequisite is lacking does not preclude a new application to enforce the same award.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 419 MALAYSIA
Accession: 5 November 1985 1st and 2nd Reservation
4. Federal Court of Malaysia, 3 November 2009, Civil Appeal no: 02(f)-37-2008(W)
Parties: Appellant: Lombard Commodities Limited (nationality not indicated) Respondent: Alami Vegetable Oil Products SDN BHD (Malaysia)
Published in: 2 The Malayan Law Journal (2010) p. 23
Articles: I(1); III; IV(1)(b); V(1)(a)
Subject matters: – status of State party to 1958 New York Convention (United Kingdom) – applicability of 1958 New York Convention to enforcement of non-contracting State award
Topics: ¶ 101 + ¶ 113 + ¶ 301; [29]-[32] = ¶ 507 (non- signatory); [33] = ¶ 403
Summary
The provision in the 1985 Act implementing the 1958 New York Convention that notification in the Gazette is conclusive evidence that a State is a party to the Convention does not mean that enforcement must be denied if the State of rendition of the award has not been gazetted. That provision is evidentiary in nature and does not impose a further condition for the enforcement of Convention awards. Evidence of the status of a Contracting State may be obtained by other means.
The facts of this case are also reported in Yearbook XXXIV (2009) at pp. 688- 690 (Malaysia no. 3). On 22 September 2000, Alami Group Sdn Bhd, as the charterer, entered into a Tanker Voyage Charterparty for the M/T LISBOA with Lombard Commodities Limited (Lombard), as agents of the owners of the vessel.
420 Yearbook Comm. Arb’n XXXV (2010) MALAYSIA NO. 4
The charterparty was on a VEGOILVOY standard form, which provides for the application of English law and contains a clause for arbitration of disputes in London. A dispute arose between the parties and Lombard commenced arbitration against Alami Group Sdn Bhd, seeking demurrage in the amount of US$135,623.96 together with interest and costs. On 10 July 2002, a sole arbitrator in London rendered an award in Lombard’s favor. Lombard sought enforcement of the London award against Alami Vegetable Oil Products Sdn Bhd (Alami) in Malaysia. The High Court granted enforcement, denying Alami’s argument that it was not a party to the charter and the arbitration clause therein. Alami appealed. In the appellate proceedings, Alami raised a new objection, namely, that the award was unenforceable because the King (Yang di-Pertuan Agong) had not declared, by way of an order in the Malaysian Gazette, that the United Kingdom is a party to the 1958 New York Convention, as required under the 1985 Act implementing the 1958 New York Convention in Malaysia (the Implementing Act). On 26 February 2009, the Court of Appeal in Putrajaya granted Alami’s objection and reversed the lower court’s decision. The court also held that it did not appear from the evidence of the case that Alami was a party to the arbitration agreement between Lombard and Alami Group Sdn Bhd, and faulted the lower court for failing to consider that Lombard did not supply the original arbitration agreement or a duly certified copy thereof. The Federal Supreme Court, before Arifin Bin Zakaria, CJ (Malaya), Hashim Bin Dato’ Hj Yusoff, FCJ, Gopal Sri Ram, FCJ, in an opinion by Arifin Zakaria, reversed the appellate decision, holding that a declaration in the Gazette by the Yang di-Pertuan Agong is not a condition precedent before an award made in a State Party to the New York Convention can be deemed a Convention Award. The relevant provision in the Implementing Act merely provides that if the King has issued a Gazette Notification declaring a particular state as a Contracting State, the Gazette Notification can be relied upon by the parties as forming conclusive evidence of the fact that the State is a Contracting State under the New York Convention. This provision is thus evidentiary in nature, and the fact that a State is a party to the New York Convention can be proved by other means (such as a request for information to the United Nations Treaty Collection). In the present case, it was never in dispute that the United Kingdom is a Contracting State to the New York Convention. The Supreme Court added that a different conclusion – such as the one reached by the Putrajaya court both in
Yearbook Comm. Arb’n XXXV (2010) 421 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 this case and the 2006 Sri Lanka Cricket case1 – would have the effect of imposing an additional condition before a Convention Award could be enforced in Malaysia; such condition would be “wholly repugnant to Art. III of the New York Convention”. The Court finally held that Alami’s contention that it was never a party to the arbitration agreement should be raised in an annulment action before the English courts rather than in the enforcement proceedings. As to the argument that Lombard failed to supply the arbitration agreement, the court of appeal should not have dealt with it as it was never discussed before the High Court; further, it was contradicted by the file of the case, which showed that Lombard did in fact supply a certified true copy of the charterparty containing the arbitration clause.
A detailed report of this decision is available online at
1. Sri Lanka Cricket v. World Sport Nimbus Pte Ltd [[2006] 3 MLJ 117], reported in Yearbook XXXIII (2008) pp. 607-612 (Malaysia no. 2).
422 Yearbook Comm. Arb’n XXXV (2010) NETHERLANDS
Ratification: 24 April 1964 1st Reservation
34. Hoge Raad [Supreme Court ], First Chamber, 25 June 2010, no. 09/02565 EE1
Parties: Appellant: OAO Rosneft (Russian Federation) Respondent: Yukos Capital s.a.r.l. (Luxembourg)
Published in: Available online at
Articles: III
Subject matters: – decision granting enforcement appealable (no) – enforcement of 1958 New York Convention awards no more onerous than enforcement of domestic awards – Art. 6 European Convention on Human Rights
Topics: ¶ 301
Summary
Since no appeal is available against a decision granting enforcement of a Dutch domestic award, no such appeal is available also in respect of a Convention award pursuant to the prohibition of more onerous procedures for foreign awards in Art. III Convention. This “asymmetry” does not violate the European Convention on Human Rights in respect of both types of award.
The facts of this case are also reported in Yearbook XXXIV (2009) at pp. 703- 705 (Netherlands no. 31). In July and August 2004, Yukos Capital s.a.r.l. (Yukos Capital) and the Russian company OJSC Yuganskneftegaz (Yuganskneftegaz),
1. The General Editor wishes to thank Dr. Gerard Meijer, NautaDutilh, Rotterdam, for his invaluable assistance in translating this decision from the Dutch original.
Yearbook Comm. Arb’n XXXV (2010) 423 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 both companies of the Russian Yukos Group, entered into four loan agreements under which Yukos Capital lent certain amounts to Yuganskneftegaz. Yuganskneftegaz was wholly owned by Yukos Oil Company, also a Russian company of the Yukos Group. The loan agreements contained a clause providing for arbitration of disputes at the International Commercial Arbitration Court (ICAC) at the Chamber of Trade and Industry of the Russian Federation. On 19 December 2004, all ordinary shares in Yuganskneftegaz – 76.79 percent of the issued share capital – were sold for about € 7 billion at an enforced auction following the tax assessments imposed on Yukos Oil Company by the Russian State. The buyer was a Russian company that had been incorporated only a few weeks before, Baikal Finance Group (Baikal). On 23 December 2004, Rosneft, an oil and gas company largely owned by the Russian State, bought the Yuganskneftegaz shares from Baikal. On 27 December 2005, Yukos Capital commenced four arbitration proceedings against Yuganskneftegaz at the ICAC in Moscow. On 19 September 2006, the ICAC arbitrators issued four arbitral awards directing Yuganskneftegaz to pay Yukos Capital about 13 billion ruble. On 1 October 2006, Yuganskneftegaz merged with Rosneft and ceased to exist. Rosneft sought annulment of the ICAC awards in Russia. On 18 and 23 May 2007, the Arbitrazh (Commercial) Court of the City of Moscow granted Rosneft’s request to set aside the awards. This decision was affirmed by the Federal Arbitrazh Court for the Moscow District on 13 August 2007; on 10 December 2007, the Supreme Arbitrazh Court of the Russian Federation affirmed the appellate decision. In turn, Yukos Capital sought enforcement of the awards in the Netherlands. On 20 December 2006, it obtained attachment of Rosneft’s assets held by a third party in the Netherlands. On 28 February 2008, the President of the Amsterdam Court of First Instance (Voorzieningenrechter)2 denied enforcement of the ICAC awards under the 1958 New York Convention because the awards had been set aside in Russia. On 28 April 2009, the Amsterdam Court of Appeal reversed the lower court’s decision and granted enforcement, holding that the 1958 New York Convention does not require enforcement courts to recognize decisions setting aside the award in the country of rendition automatically. Rather, the enforcement court
2. Note General Editor. The President of the District Court is now called the “Voorzieningenrechter” which may be translated literally as “interim measures judge” or “provisional measures judge”. Since it is still customary in the context of international arbitration in the Netherlands to use the term “President of the District Court”, this terminology has been retained.
424 Yearbook Comm. Arb’n XXXV (2010) NETHERLANDS NO. 34 must ascertain that the setting-aside decision meets the private international law requirements of the enforcement country. On the basis of press articles and reports of international organizations, as well as court decisions in England, Lithuania, Switzerland and the Netherlands, that reported on the lack of impartiality and independence of the Russian courts in cases concerning interests of the Russian State, the Amsterdam Court of Appeal held that the Russian decisions setting aside the ICAC awards did not meet those requirements. The court noted that Rosneft and the Russian State were closely interconnected and the awards affected interests that the Russian State expressly considered to be its own. Rosneft appealed. By the present decision, the Supreme Court of the Netherlands, before Vice- President D.H. Beukenhorst, chairman, and Justices E.J. Numann, W.A.M. van Schendel, F.B. Bakels and C.A. Streefkerk, granted Yukos Capital’s argument that Rosneft’s appeal was inadmissible. Yukos argued that under Dutch law no appeal or appeal in cassation is available from court decisions granting enforcement of a domestic award (while decisions denying enforcement can be appealed). Allowing such appeal – with the accompanying extra costs and delay – from decisions rendered in respect of foreign awards falling under the 1958 New York Convention would result in a more onerous condition for enforcement within the meaning of Art. III of the Convention. The Supreme Court noted at the outset that no guidance can be obtained either from the wording of Art. III itself or from the Convention’s travaux préparatoires as to the precise meaning of “substantially more onerous conditions or higher fees or charges”. The Court assumed that the intention of the Convention’s drafters was simply to ensure that Convention awards can be enforced through a simple and expedited procedure that cannot be more onerous than the enforcement procedure for domestic awards. The Court stressed the point that Art. III concerns procedural rules for enforcement, as the substantive conditions for enforcement are exclusively governed by the Convention itself. The Supreme Court agreed with Yukos’s contention that if an appeal were allowed in the Netherlands against a decision granting leave to enforce a Convention award, this would result in a more onerous condition in comparison to domestic awards. The Court added that this exclusion of the legal means of appeal and appeal in cassation can be overridden “on grounds accepted in the case law of the Dutch Supreme Court”. However, Rosneft did not assert such grounds. The Court dismissed Rosneft’s argument that a domestic award can be attacked through a request for annulment or revocation even after enforcement
Yearbook Comm. Arb’n XXXV (2010) 425 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 is granted, and that if that request is successful the leave for enforcement is set aside as a consequence, whereas no such means are available against a foreign award. The Court agreed that foreign arbitral awards falling under the New York Convention may not be set aside or revoked in the Netherlands; however, it found that there is no reason to compensate for this lack by making appeal and appeal in cassation available against a decision granting enforcement even though such means are not available in respect of domestic awards. Rosneft also argued that the application of the “asymmetric” system of Dutch law – under which appeals are possible against decisions denying enforcement but not against decisions granting it – to foreign awards is a breach of due process of law and in particular of the principle of “equality of arms” enshrined in the European Convention on Human Rights. The Supreme Court disagreed. It referred to the reasoning in the Advisory Opinion of the Advocate-General of the European Court of Justice to hold that the asymmetric system in respect of Dutch domestic awards is not per se a violation of the European Convention on Human Rights, as it does not put one party at a substantial disadvantage with respect to the other party: if enforcement is granted, the means of revocation and annulment are still available. Extending this system to awards falling under the New York Convention – which is required under Art. III Convention and favors enforcement – is not a violation of due process of law or the principle of “equality of arms”.
A detailed report of this decision is available online at
426 Yearbook Comm. Arb’n XXXV (2010) RUSSIAN FEDERATION
Ratification: 24 August 1960 1st Reservation
25. Federal Arbitrazh Court, Moscow District, 27 August 2009, No. KG-A40/8155-09, Case No. A40-51596/09-68-4371
Parties: Petitioner: Capital Group LLC (Russian Federation) Respondent: Eric van Egeraat Associated Architects BV (Netherlands)
Published in: English translation available online at
Articles: III; V(1)(c); V(2)(b)
Subject matters: – lack of impartiality by arbitrator (no) – scope of arbitration clause – review of evaluation of evidence (no) – review of merits of award (no)
Topics: [5]-[7] = ¶ 521; [8] = ¶ 512; [9] = ¶ 501; [9]-[10] = ¶ 502
Summary
The court granted enforcement of an SCC award, denying the objection that one of the arbitrators was biased because she participated in a conference where claimant’s counsel was one of the speakers and that was allegedly organized by his law firm. Also, the claim for payment for additional work fell under the broad arbitration clause in the contract because this work was performed under the Agreement and had an “obvious and close link” with it. The court could not review a copyright claim and a claim that the compensation awarded was not proportionate because they concerned the merits.
1. The General Editor wishes to thank Mr. Roman Zykov, Hannes Snellman Attorneys, Moscow/Helsinki, for his invaluable assistance in providing this decision and translating it from the Russian original.
Yearbook Comm. Arb’n XXXV (2010) 427 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
On 5 September 2003, Capital Group LLC (Capital) and Eric van Egeraat Associated Architects BV (Van Egeraat) entered into an agreement for certain works. The agreement contained a clause for arbitration of disputes at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). A dispute arose between the parties. On 17 March 2008, an SCC arbitral tribunal rendered an award in favor of Van Egeraat, directing Capital to pay certain sums for the first stage of the works, additional work, loss of profit and violation of Van Egeraat’s copyright, as well as the costs of the arbitration. Van Egeraat sought enforcement of the Swedish award before the Moscow Arbitrazh (Commercial) Court. On 30 June 2009, the court granted enforcement. Capital appealed. The Federal Arbitrazh Court for the Moscow District affirmed the lower court’s decision that there was no ground to deny enforcement. It denied in particular Capital’s allegation that one of the arbitrators had been biased because she participated in a conference where claimant’s counsel was one of the speakers and that was allegedly organized by his law firm. The court noted that the law firm at issue was merely a media sponsor of the conference and concluded that participation in the conference led to “no legal relation, interrelation or commercial interest” between the law firm, its partner who then became Van Egeraat’s counsel, and the arbitrator in the SCC arbitration. Nor was Capital’s argument that the arbitrators decided on matters beyond the scope of the arbitration clause successful. The court reasoned that the arbitration clause in the contract was a broad clause that encompassed Van Egeraat’s claim for payment for additional work because this work was performed under the Agreement and had an “obvious and close link” with it. Last, the court rejected Capital’s argument that the amount of the compensation was not proportionate to the extent of Capital’s liability and a further argument in respect of Van Egeraat’s copyright claim, holding that they both concerned the merits of the case, which could not be reviewed by the enforcement court.
A detailed report of this decision is available online at
428 Yearbook Comm. Arb’n XXXV (2010) RUSSIAN FEDERATION NO. 26
26. Federal Arbitrazh Court, Central District, 7 September 2009, No. F10-915/09(2), Case No. A54-3028/2008-S10 Supreme Arbitrazh Court, 12 November 2009, No. VAS-13211/09 Presidium of the Supreme Arbitrazh Court, 2 February 20101
Parties: Petitioner: Lugana Handelsgesellschaft mbH (Germany) Respondent: OAO Ryazan Metal-Ceramic Instrument Factory (Russian Federation)
Published in: English translations of all decisions available online at
Articles: III; V(1)(a); V(1)(c)
Subject matters: – waiver of defense by participation in arbitration – arbitration agreement “in writing” – intention to arbitrate may (not) be evidenced by party’s behavior – period of limitation to request enforcement of foreign award – availability of post-award interest
Topics: [6] + [11]-[18] + [26]-[32] + [35] = ¶ 504 + ¶ 513; [19]-[21] = ¶ 306; [23]-[24] = ¶ 307
Summary
The first decision denied enforcement of three DIS awards because DIS arbitration was not in accordance with the agreement of the parties, which had not amended the original SCC arbitration clause in their contracts in writing. The second decision reversed, holding that it appeared from the evidence that the Russian party agreed with the proposed amendment to the arbitration clause (from SCC to DIS) and fully participated in the DIS arbitration. By the third decision, the Presidium affirmed the decision of the Supreme Arbitrazh Court.
1. The General Editor wishes to thank Mr. Roman Zykov, Hannes Snellman Attorneys, Moscow/Helsinki, for his invaluable assistance in providing these decisions and translating them from the Russian original.
Yearbook Comm. Arb’n XXXV (2010) 429 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
On 14 December 2000, Lugana Handelsgesellschaft mbH (Lugana) and OAO Ryazan Metal-Ceramic Instrument Factory (Ryazan Ceramic) concluded Contract No. 061200 (the Contract). On 10 January 2001, Lugana and Ryazan Ceramic also concluded an Exclusive Distributor Agreement (the Agreement) for the supply of magnetically operated sealed switches. Both the Contract and the Agreement contained a provision for arbitration of disputes at the Arbitration Institute of the Stockholm Chamber of Commerce (SCC). A dispute arose between the parties. On 27 July 2004, Lugana sent a letter to Ryazan Ceramic outlining its claim and suggesting that arbitration be held at the German Institution of Arbitration (Deutsche Institution für Schiedsgerichtsbarkeit – DIS) rather than the SCC. By letter of 30 July 2004, Ryazan Ceramic’s representative allegedly agreed with this proposal and appointed an arbitrator; it then participated in the ensuing DIS arbitration. On 11 August 2005, a DIS arbitral tribunal rendered an award in favor of Lugana, directing Ryazan Ceramic to pay Lugana US$ 463,317.63 and interest thereon, to provide information to Lugana on certain contracts it had concluded after entering into the Agreement and to supply 500,000 switches to Lugana at the price of US$ 0.072 per switch. The DIS arbitrators subsequently issued two further awards: one on 14 October 2005, directing Ryazan Ceramic to compensate Lugana for the arbitration fees it had advanced and for counsel fees, and one on 27 December 2005 on other costs of the arbitration and counsel fees. Lugana sought enforcement of the three DIS awards in the Russian Federation. On 2 February 2009, the Arbitrazh (Commercial) Court for the Ryazan District granted enforcement. This decision was reversed on 9 April 2009 by the Federal Arbitrazh Court for the Central District. On 24 June 2009, on remand, the Arbitrazh Court of the Ryazan District denied enforcement. Lugana appealed. By the first decision reported, rendered on 7 September 2009, the Federal Arbitrazh Court for the Central District affirmed the lower court’s decision denying enforcement of the three DIS awards. It reasoned that the lower court correctly held that the DIS awards were not in accordance with the agreement of the parties, as provided for in Art. V(1)(c) of the 1958 New York Convention and in the law of the Russian Federation, because the parties did not amend the SCC arbitration clause in their contracts in a valid manner – that is, in writing. Lugana argued that the parties did reach a valid agreement to amend the SCC arbitration clause because Ryazan Ceramic did not raise the objection of the lack of jurisdiction of the DIS arbitrators during the arbitration. The court agreed with the lower court that the failure to raise such objection was not per se evidence of a valid arbitration agreement. Hence, the three DIS awards were
430 Yearbook Comm. Arb’n XXXV (2010) RUSSIAN FEDERATION NO. 26 rendered by an arbitral institution that was not in accordance with the parties’ agreement, and enforcement should be denied. The appellate court disagreed with the lower court’s conclusion that the time limit to seek recognition and enforcement – three years – had expired, noting that Lugana filed its application on 7 August 2008, that is, before expiry of the three-year limit. However, this was irrelevant in light of the appellate court’s conclusion that the decision of the Ryazan court should be confirmed. This is the first decision reported. By the second decision reported, rendered on 12 November 2009, the Supreme Arbitrazh Court of the Russian Federation reached the opposite conclusion: that the parties validly concluded an agreement for DIS arbitration within the meaning of Art. V(1)(a) of the New York Convention. The Court noted that it appeared from the file of the case that Ryazan Ceramic agreed with the proposed amendment to the arbitration clause (from SCC to DIS) and appointed an arbitrator in its reply of 30 July 2004 to Lugana’s letter of 27 July 2004. It added that it appeared from the award that Ryazan Ceramic fully participated in the DIS arbitration, thereby agreeing thereto by its conclusive behavior. The Court therefore referred the case to its Presidium for a decision on the disagreement between its own decision and the decision of the Ryazan Arbitrazh court. This is the second decision reported. By the third decision reported, rendered on 2 February 2010, the Presidium of the Supreme Arbitrazh Court settled the difference in favor of the Supreme Arbitrazh Court and annulled the decision of the Arbitrazh Court for the Ryazan District, directing that court to issue an order for the enforcement of the three DIS awards. This is the third decision reported.
A detailed report of these decisions is available online at
Yearbook Comm. Arb’n XXXV (2010) 431 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
27. Supreme Arbitrazh Court of the Russian Federation, 1 March 2010, No. VAS-17095/09 (BAC-17095/09)1
Parties: Petitioner: Edimax Limited (Cyprus) Respondent: S.P. Chigirinskiy (Russian Federation)
Published in: English translation available online at
Articles: II(3)
Subject matters: – availability of pre-arbitration injunctive relief – commercial transaction and jurisdiction of Arbitrazh (commercial) courts
Topics: ¶ 229
Summary
The Supreme Arbitrazh Court referred this case to the Presidium of the Court, as it found that the Federal Arbitrazh Court’s decision holding that Arbitrazh courts could not hear the present application for an interim injunction because the dispute was not commercial contrasted with the accepted interpretation of the law – that is, that Arbitrazh courts may grant injunctions in aid of arbitration and have jurisdiction over commercial disputes – because the dispute at issue was in fact commercial.
By agreements signed on 2 July 2008, Russian Land (Cyprus) Holding 1 Limited (Russian Land) bought certain shares from Edimax Limited (Edimax). Mr. Shalve Pavlovich Chigirinskiy signed letters of guarantee as security for payment by Russian Land. The agreements also provided that Divieto Limited (Divieto), a company owned by Chigirinskiy, issue a promissory note. On 7 April 2009, Edimax commenced arbitration against Chigirinskiy at the London Court of International Arbitration (LCIA), claiming payment of US$ 32,029,982.40 for the unpaid purchase price of the shares, loans and interest on delay in the performance of the agreement, and seeking an order that
1. The General Editor wishes to thank Mr. Roman Zykov, Hannes Snellman Attorneys, Moscow/Helsinki, for his invaluable assistance in providing and translating this decision from the Russian original.
432 Yearbook Comm. Arb’n XXXV (2010) RUSSIAN FEDERATION NO. 27
Divieto issue a promissory note (Divieto later performed voluntarily under this obligation). This proceeding was pending at the time of the present decision. On 8 May 2009, Edimax sought an interim injunction in aid of the LCIA arbitration from the Arbitrazh (Commercial) Court of the City of Moscow, seeking to attach an apartment owned by Chigirinskiy in Moscow. On 12 May 2009, the court denied Edimax’s application, holding that Edimax failed to prove the existence of any of the grounds set out in the Arbitrazh Court Procedure Code of the Russian Federation (the Arbitrazh Procedure Code) for granting an interim injunction. On 9 July 2009, the Ninth Arbitrazh Court of Appeals reversed and granted an injunction attaching Chigirinskiy’s apartment. Mrs. Tat’yana Romanovna Panchenkova, Chigirinskiy’s former wife, appealed to the Federal Arbitrazh Court for the Moscow District, seeking annulment of this latter decision on the ground that the apartment had become her exclusive property following her divorce from Chigirinskiy. On 26 November 2009, the Federal Arbitrazh Court reversed both earlier decisions and terminated the proceedings, finding that Edimax’s application did not fall within the jurisdiction of the Arbitrazh courts because one of the conditions for such jurisdiction – that the subjects involved are either legal entities or private owners – was not met, as the claim at issue was against Chigirinskiy, an individual who was not a private owner. Edimax appealed. The Supreme Arbitrazh Court of the Russian Federation referred the case to the Court’s Presidium, finding that the Federal Arbitrazh Court’s decision was at odds with accepted interpretation and application of the law in respect of the jurisdiction of Arbitrazh courts. The Supreme Arbitrazh Court noted at the outset that Russian legislation provides that Arbitrazh courts may grant interim injunctions in aid of (international) commercial arbitration, upon the application of a party to the arbitration. Further, Russian legislation provides that Arbitrazh courts have jurisdiction over commercial and other economic activities. The Court stressed that there is a unified practice of Arbitrazh courts and courts of general jurisdiction of the Russian Federation that is based on the jurisdiction of Arbitrazh courts over cases concerning disputes involving citizens participating in economic or business relations. It then reasoned that whether a dispute is commercial depends on the nature of the activities involved, in particular if they concern property and aim at making profit. Here, the letters of guarantee secured payment under agreements for the sale and purchase of shares: the agreements, the letters and the dispute were all of a commercial nature.
Yearbook Comm. Arb’n XXXV (2010) 433 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
The Supreme Arbitrazh Court found that, as a consequence, the decision of the Federal Arbitrazh Court – that the dispute did not fall under the jurisdiction of the Arbitrazh courts – did not follow the accepted interpretation and application of the law by the Arbitrazh courts. It therefore referred the case to the Presidium of the Supreme Arbitrazh Court.
A detailed report of this decision is available online at
434 Yearbook Comm. Arb’n XXXV (2010) RUSSIAN FEDERATION NO. 28
28. Federal Arbitrazh Court, District of Tomsk, 7 July 2010, Case No. A67-1438/20101
Parties: Petitioner: Yukos Capital S.A.R.L. (Luxembourg) Respondent: OAO Tomskneft VNK (Russian Federation)
Published in: English translation available online at
Articles: III; V(1)(a); V(1)(b); V(1)(d); V(2)(b)
Subject matters: – due process and address of communications – public policy and sham arbitration
Topics: [7]-[12] = ¶ 511 (no proof of communication of arbitration documents); [13]-[23] = ¶ 524 (sham arbitration); [24] = ¶ 505; [25]-[26] = ¶ 513; [27] = ¶ 306; [28] = ¶ 301
Summary
Enforcement of an ICC award was denied because (i) the Russian defendant did not receive part of the correspondence relating to the arbitration, in particular, the notification of the arbitration hearing and (ii) because the parties to the ICC arbitration were both companies of the Yukos Group and ultimately fully controlled by the same company; hence, they did not have an economic interest in the arbitration when a simple transfer of funds would have sufficed to repay the loans at issue. The arbitration was found to be a sham and part of an illegal scheme set up by the Yukos Group to avoid tax liabilities and expropriation by the Russian government.
On 20 April 2004, 27 July 2004 and 4 August 2004, Yukos Capital S.A.R.L. (Yukos Capital) entered into three loan agreements with OAO Tomskneft VKN (Tomskneft), under which Yukos Capital lent certain amounts to Tomskneft. Both companies belonged to the Yukos Group. On 2 November 2005, the parties concluded supplementary agreements to the original loan agreements,
1. The General Editor wishes to thank Mr. Roman Zykov, Hannes Snellman Attorneys, Moscow/Helsinki, for his invaluable assistance in providing and translating this decision from the Russian original.
Yearbook Comm. Arb’n XXXV (2010) 435 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 which modified the original choice-of-jurisdiction clause and provided for arbitration of disputes at the International Court of Arbitration of the International Chamber of Commerce (ICC). Yukos Capital commenced ICC arbitration in Paris against Tomskneft and ZAO Yukos EP (Yukos EP), Tomskneft’s controlling company, as provided for in the loan agreements and the supplementary agreements. Yukos EP participated in the arbitration, Tomskneft did not. On 12 February 2007, an ICC sole arbitrator found in favor of Yukos Capital and directed Tomskneft to pay Yukos Capital a total of RUB 7,254,218,987, US$ 275,225.84, UK£ 52,964.84 and interest on part of this sum. Yukos Capital sought enforcement of the ICC award in the Russian Federation. The Federal Arbitrazh (Commercial) Court for the District of Tomsk denied enforcement on violation of due process and public policy grounds. It noted at the outset that the Arbitrazh Court Procedure Code of the Russian Federation (the Arbitrazh Procedure Code) allows arbitrazh courts to deny enforcement of foreign arbitral awards on certain grounds; enforcement can also be denied on the grounds provided for in an international treaty to which the Russian Federation is a party (such as the 1958 New York Convention) and in the Federal Law on International Commercial Arbitration of the Russian Federation. The court first granted Tomskneft’s argument that enforcement should be denied under Art. V(1)(b) of the Convention and its corresponding provision in the Russian Law on Arbitration, because Tomskneft was not properly notified of the arbitration. The court noted that correspondence relating to the arbitration was sent to Tomskneft both at its registered address in the District of Tomsk and care of Yukos EP in Moscow. On 20 June 2006, Yukos EP ceased to act as Tomskneft’s executive organ when Tomskneft’s executive powers were transferred to another company of the Yukos Group, ZAO Yukos RM. As a consequence, held the court, unless it was proved that correspondence had been sent to Tomskneft directly, the sending of correspondence to Yukos EP was no proof, after 20 June 2006, that correspondence was also received by Tomskneft. The court concluded on the evidence that there was no proof that Tomskneft had received notice of, inter alia, the timetable of the arbitration, the date for the hearing and the closing of the proceeding. Hence, enforcement should be denied for lack of proper notification. The court also granted Tomskneft’s contention that recognition and enforcement of the ICC award would violate the public policy of the Russian Federation. It reasoned that Yukos Capital was fully owned by Yukos International UK B.V., which in turn was fully owned by Yukos Finance B.V., a company fully owned by OAO NK Yukos. Also, at the relevant time, OAO NK Yukos was the sole shareholder of Tomskneft. Thus, when the loan agreements
436 Yearbook Comm. Arb’n XXXV (2010) RUSSIAN FEDERATION NO. 28 and the supplementary agreements were concluded, and during the arbitration proceedings, both Yukos Capital and Tomskneft were fully controlled by OAO NK Yukos (this was also the case in respect of Yukos EP). In May 2004, the Moscow Arbitrazh Court – which directed OAO NK Yukos to pay taxes and fines totaling a sum in excess of RUB 99 billion – found that OAO NK Yukos had set up an illegal financial structure involving the companies of the Yukos Group. Under this structure, concluded the Tomsk court, the loans given by Yukos Capital to Tomskneft in fact concerned money previously withdrawn from Tomskneft in the context of a transfer-pricing scheme. Hence, the loan agreements in respect of which the ICC award was rendered were an illegal arrangement entered into by two parties – Yukos Capital and Tomskneft – which were both wholly controlled by OAO NK Yukos and had no economic reason to settle their dispute by ICC arbitration when a simple transfer of funds would have sufficed. Hence, the dispute between the parties was simulated and enforcement of the award would violate public policy. The court then denied the other claims raised by Tomeskneft: (i) that the supplementary agreements containing the ICC arbitration clause were invalid; (ii) that the arbitral procedure was not in accordance with the agreement of the parties because the case was heard by a sole arbitrator and the sole arbitrator allegedly did not apply the substantive law agreed by the parties; (iii) that Yukos Capital did not abide by the three-year time limit to seek enforcement of the award and (iv) that the request for enforcement was signed by an unauthorized person. The court concluded that the evidence of the case proved otherwise in respect of all the above claims.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 437 SINGAPORE
Accession: 21 August 1986 1st Reservation
9. High Court, 29 December 2009, Suit 963/2008, RA 106/2009
Parties: Appellant/Plaintiff: Jiangsu Hantong Ship Heavy Industry Co Ltd (PR China) Respondent/Defendant: Sevan Holding I Pte Ltd (nationality not indicated)
Published in: [2010] 2 Singapore Law Reports 293
Articles: II(3)
Subject matter: – referral to arbitration requires existence of dispute
Topics: ¶ 219
Summary
The court affirmed a stay of court proceedings – denying plaintiff’s argument that there was no dispute to be referred to arbitration because defendant had admitted liability – because it found that a stay may be denied only when the party has unequivocally admitted that the amount at issue is due and payable. This was not the case here.
Jiangsu Hantong Ship Heavy Industry Co Ltd (Hantong), a Chinese shipyard, entered into a contract with Sevan Holding I Pte Ltd (Sevan) for the construction of a vessel called HULL 29. The contract provided that Sevan was to make progress payments within five banking days following its receipt of Hantong’s invoices. It also contained a clause referring “[a]ny dispute arising out of or in connection with” the contract to arbitration in London under the Rules of the London Maritime Arbitrators Association (LMAA). A dispute arose between the parties when Hantong claimed that Sevan owed it US$ 3,646,208 as of 12 December 2008 and demanded payment within three days. When this amount was not paid, Hantong commenced court proceedings
438 Yearbook Comm. Arb’n XXXV (2010) SINGAPORE NO. 9 in the High Court in Singapore. On 1 April 2009, the action was stayed by Assistant Registrar Lim Jian Yi at the request of Sevan, so that the dispute between the parties could be resolved through arbitration in London in accordance with the terms of the contract. Hantong appealed, arguing that there was no “dispute” between the parties that required arbitration pursuant to clause 35 of the contract, because Sevan had admitted liability for the amount owed. The High Court, per Tan Lee Meng J, affirmed the stay. It referred to a 2009 decision of the Singapore Court of Appeal in Tjong,1 where it was held that as the International Arbitration Act aims at minimizing court involvement in matters that the parties have agreed to submit to arbitration and at avoiding concurrent arbitration and court proceedings, unless it is for the purpose of lending curial assistance to the arbitral process, courts will interpret the word “dispute” broadly. As a consequence, they will find that there is a dispute unless the defendant has unequivocally admitted that the claim is due and payable. In the present case, Sevan argued that it did not have to pay the amount at issue because it had substantial counterclaims against Hantong; it also raised issues in respect of the quality of Hantong’s work and claimed that Hantong’s delayed performance of its contractual obligations entitled Sevan to claim liquidated damages. The court noted Hantong’s argument that it appeared from minutes of a 2 December 2008 meeting that Sevan had not challenged the invoices at issue and had in fact asked for more time to settle them, and Sevan’s response that the minutes recorded Hantong’s view and not any admission of liability on Sevan’s part; also, Sevan had not been assisted by counsel at that time. The court again referred to the Tjong case, in which it was held that a court should find that a claim is to be referred to arbitration in all but the “clearest of cases”. As the present case was not such a case, and Sevan did not unequivocally accept liability for the amount claimed, a stay was justified. It was not the court’s task to decide whether Sevan’s case was strong or weak, as this was a matter for the arbitrator to decide.
A detailed report of this decision is available online at
1. Tjong Very Sumito v. Antig Investments Pte Ltd [2009] SGCA 41.
Yearbook Comm. Arb’n XXXV (2010) 439 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
10. High Court, 14 May 2010 and 10 June 2010
Parties: Applicant: Strandore Invest A/S (Denmark) et al. Respondent: Soh Kim Wat (nationality not indicated)
Published in: Both decisions available online at
Articles: V(2)(b); VI
Subject matters: – stay of enforcement proceedings pending annulment action (no) – stay of execution pending appeal against decision denying stay of enforcement (no) – narrow concept of public policy
Topics: [1]-[11] + [19]-[31]= ¶ 601; [12]-[17] = ¶ 518
Summary
By the first decision, the court refused to stay the enforcement proceedings pending a second action to set aside the award in Singapore (following a first unsuccessful attempt in the country of rendition, Denmark). Doubting the principle that the enforcement of a foreign award is a mere mechanic process, the court considered the objections to enforcement raised here and concluded that they did not prove a violation of public policy in its narrow international concept. By the second decision, the court denied an application to stay enforcement pending appeal against the first decision, holding that while in principle courts should not deprive successful litigants of the fruits of their litigation, in the case at hand there was no indication that enforcement of the award would result in such deprivation.
On 22 March 2003, Soh Kim Wat entered into Share Sale Agreements with Strandore Invest A/S (Strandore) and MS Invest Odense A/S (Odense) to purchase their shares in LKE Electric (M) Sdn Bhd (the Company), a Malaysian company of which Soh was director and shareholder. On 10 December 2004, Soh also entered into a Share Sale Agreement with LKE Electric Europe A/S (LKE Europe) to purchase their shares in the Company. All the Share Sale Agreements (collectively, the Agreements) provided that Danish Law was the governing law; they also contained a clause referring disputes to “arbitration before Copenhagen Arbitration according to the Rules of Procedure of
440 Yearbook Comm. Arb’n XXXV (2010) SINGAPORE NO. 10
Copenhagen Arbitration”. “Copenhagen Arbitration” refers to arbitration at the Danish Institute of Arbitration (DIA). A dispute arose when Soh failed to pay most of the amounts owed under the Agreements for the sale and purchase of shares in the Company. Strandore, Odense and LKE Europe (collectively, the Applicants) filed Suit No. 55 of 2006 in the Singapore High Court for the purchase price under the Agreements and served it on Soh on 21 February 2006. On 10 May 2006, the action was stayed at Soh’s request on the basis of the arbitration clause in the Agreements. On 23 June 2006, the Applicants commenced DIA arbitration against Soh. On 30 June 2006, the DIA sent notice of the Request for Arbitration to Soh at his Singapore address. The registered letter was returned unclaimed and, on 4 November 2006, the DIA again sent the original letter to Soh at his Malaysian office address, together with the DIA Rules. Soh received the letter “without prejudice” and, on 8 November 2006, sent a letter to the DIA challenging, inter alia, the validity of the Request for Arbitration and arguing that the Agreements were not real sale and purchase agreements and had been entered into to help Kaare Vagner Jensen, chairman and executive director of the Company, apparently divest his interest in the Company as he was facing legal action by another company for trademark infringement. Soh did not appoint an arbitrator. On 29 December 2006, the DIA sent a letter notifying Soh of its proposal to appoint a three-member arbitral tribunal and requesting Soh for his comments on or before 16 January 2007, failing which the DIA would proceed with the formal appointment of the three arbitrators. On 31 January 2007, the DIA informed the parties of the appointment of the arbitral tribunal. On 15 May 2007, the arbitrators issued a ruling stating that they lacked jurisdiction on the grounds, inter alia, that Soh did not receive the DIA’s letter dated 29 December 2006 on the appointment of the arbitral tribunal. On 24 May 2007, the DIA informed the parties of this ruling and proposed the appointment of the same three arbitrators, adding that unless either party proposed other candidates or gave different instructions no later than 24 July 2007, it would proceed to regard the three arbitrators as approved by the parties. On 16 July 2007, Soh replied by a letter in which it objected to the arbitration, complained that there was no valid Request for Arbitration issued to him, the Agreements were invalid and the DIA was not impartial. On 9 August 2007, the DIA informed Soh that it “could not follow” his objections and urged him to propose an arbitrator no later than 10 September 2007, otherwise the DIA would consider the tribunal as approved by the parties and therefore duly constituted. Soh responded on 6 September 2007, repeating his objections and again objecting to the arbitration and the appointment of the proposed tribunal.
Yearbook Comm. Arb’n XXXV (2010) 441 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
He did not, however, propose or appoint an arbitrator. On 10 September 2007, the DIA appointed the same three arbitrators. Soh did not participate in the arbitration other than by repeating his arguments against the arbitration. On 30 April 2008, the arbitral tribunal rendered a Final Award in the Applicants’ favor. On 29 July 2008, the Applicants commenced enforcement proceedings in Singapore. On 31 July 2008, the High Court granted leave to enforce the DIA Final Award. However, leave to enforce was set aside on 20 February 2009 because Soh had commenced an annulment action against the award before the City Court of Helsingore, Denmark, on 30 July 2008. The request for annulment was denied on 25 June 2009; this decision was affirmed by the High Court of Denmark on 19 November 2009. On 7 January 2010, the Applicants against sought leave to enforce the DIA Final Award by filing Originating Summons (OS) 19/2010 in the Singapore High Court. On 8 January 2010, they also applied for and obtained a worldwide Mareva injunction against Soh, which restrained him from removing from Singapore the proceeds of the sale of certain Singapore property. In the meantime, on 10 November 2009, Soh also commenced annulment proceedings in Singapore – Suit (S) 968 of 2009 – against the DIA Final Award. The present decisions are concerned with Soh’s application to stay the enforcement proceedings ((OS) 19/2010) pending the resolution of the Singapore annulment action (S 968/2009). (In the alternative, it applied to have OS 19/2010 continue as if it had been commenced by way of Writ of Summons and be heard together and consolidated with S 968/2009.) By the first decision reported, rendered on 14 May 2010, the High Court, per Quentin Loh J, denied Soh’s application to stay the enforcement proceedings. The court reasoned that although it was held by the High Court in Aloe Vera1 that the enforcement of a foreign award is “a mechanistic process”, this approach may not be consistent with other cases, including the 2009 decision of the English Court of Appeal in Dallah Estate,2 where the court ruled that proceedings for the enforcement of a foreign award should take the form of a full re-hearing. The court then proceeded to examine Soh’s contention that enforcement of the DIA Final Award should be refused on grounds of public policy. It referred to case law of the Singapore Court of Appeal holding that the concept of public policy has a narrow scope in the context of proceedings for the enforcement of
1. Aloe Vera of America, Inc v. Asianic Food (S) Pte Ltd and another [2006] 3 SLR(R) 174, reported in Yearbook XXXII (2007) pp. 489-506 (Singapore no. 5). 2. Dallah Estate and Tourism Holding Company v. The Ministry of Religious Affairs, Government of Pakistan [2009] EWCA Civ 755, reported in Yearbook XXXIV (2009) pp. 887-925 (UK no. 87).
442 Yearbook Comm. Arb’n XXXV (2010) SINGAPORE NO. 10 foreign awards, and only operates where enforcement would violate the forum’s most basic notion of morality and justice. This was not the case here, where Soh merely argued, inter alia, that the Agreements were unusually brief, contained a clerical mistake (one agreement indicated that the shares were to be transferred from LKE Europe, while the appendix stated that the shares were transferred to LKE Europe) and were made only for a collateral purpose. The court concluded that all these matters should have been brought up in the Danish arbitration proceedings. This is the first decision reported. By the second decision reported, rendered on 10 June 2010, the High Court, again per Quentin Loh J, denied Soh’s application for a stay of execution pending appeal from the first decision, dismissing Soh’s argument that if Soh had to pay the money to the Applicants, then he would have to go to Denmark and pursue them in the event he succeeded in his appeal. The court reasoned that in the case at hand there was no indication that the Applicants were impecunious, so that any money paid over to them would be irrecoverable. Also, Soh did not appear to have had difficulty instructing Danish lawyers to pursue remedies before the Danish Courts. Its complaint that it was expensive to do so was irrelevant. Nor were there special circumstances to grant a stay. The court noted that Soh could only resist enforcement on the grounds set out in the International Arbitration Act (which reflect those in the 1958 New York Convention); he sought to do so by arguing that the subject matter of the award was not capable of settlement by arbitration under the laws of Singapore and that the enforcement of the award was contrary to the public policy of Singapore. The court referred to its 14 May 2010 decision rejecting these arguments. This is the second decision reported.
A detailed report of these decisions is available online at
Yearbook Comm. Arb’n XXXV (2010) 443 SPAIN
Accession: 12 May 1977 No Reservations
65. Juzgado de Primera Instancia e Instrucción [Court of First Instance] no. 3, Rubí, 11 June 2007, Exequatur no. 584/06
Parties: Claimant: Pavan s.r.l. (Italy) Defendant: Leng d’Or, SA (Spain)
Published in: Available online at
Articles: III; IV(1)(b); V(1)(b); V(1)(d); V(1)(e); V(2)(b); VI
Subject matters: – European Convention of 1961 – 1958 New York Convention does not regulate litispendence – litispendence regime in 1968 Brussels Convention (EEX) and EU Council Regulation (EC) no. 44/2001 – award “not binding” – due process as ground for violation of public policy – review of evaluation of evidence (no) – review of merits of award (no) – request of both recognition (homologación) and enforcement of award
Topics: [4]-[5] + [17]-[18] + [49] = ¶ 704; [6]-[10] = ¶ 001; [6]-[13] = ¶ 704(C); [14]-[25] = ¶ 514; [19]-[22] + [48]-[51] = ¶ 601; [26]-[27] = ¶ 403; [28]-[31] = ¶ 511 (means of notification); [32]-[34] = ¶ 513; [34] = ¶ 503; [35]-[36] + [41]-[42] = ¶ 523; [38] = ¶ 518; [38]-[43] = ¶ 502 + ¶ 522; [40] = ¶ 524 (illogical reasons); [44]-[47] + [52] = ¶ 301
444 Yearbook Comm. Arb’n XXXV (2010) SPAIN NO. 65
Summary
The defense of international litispendence (enforcement proceedings on the same award pending in Italy) does not apply under the 1958 New York Convention because the Convention provides that the decisions of enforcement courts only have effect in their respective territories, and accepts the existence of decisions reaching opposite results as to enforcement in different States. The automatic suspension of the award in France pending an annulment action in that country was no ground for refusing enforcement, nor did it justify a suspension of enforcement: assuming that defendant sought annulment of the award on the same grounds raised in the present proceeding, the court concluded that there was no likelihood of success of the annulment action and denied the request for suspension in its discretion.
On 3 December 1993, Pavan s.r.l. (Pavan) and Leng d’Or, SA (Leng d’Or) entered into a contract under which Pavan agreed to sell and Leng d’Or to purchase four production lines for manufacturing snack pellets. The contract contained an ICC arbitration clause. A dispute arose between the parties in respect of the lines’ performance and Leng d’Or’s purchase of lines from another manufacturer. On 19 December 2005, an ICC arbitral tribunal in Paris found in favor of Pavan in the amount of € 2,404,868.74 and interest thereon. On 22 May 2006, the tribunal issued an addendum clarifying some aspects of the award. Leng d Or sought to have the award set aside in France. In turn, Pavan sought enforcement in Spain. The Court of First Instance of Rubí, per María Pinto Andrés, Magistrate- Judge, granted recognition and a declaration of enforceability (homologación), applying both the 1958 New York Convention and the 1961 European Convention. The court first dismissed Leng d’Or’s contention that enforcement should be denied on grounds of international litispendence because enforcement proceedings on the same award were pending in Italy and had been suspended because of an annulment action pending in France. Leng d’Or argued that international litispendence, though not provided for in the New York Convention, should be applied either to avoid the risk of contradictory decisions or by application by analogy of the regime of international litispendence established by the Brussels Enforcement Convention (EEX) and EC Regulation no. 44/2001. The court reasoned that under the New York Convention, enforcement courts only render decisions having effect in their respective territories: hence, an Italian decision denying enforcement cannot conflict with a Spanish decision granting it. Also, the existence of decisions reaching opposite results in different States is accepted under the Convention, which permits an award being recognized in a member State and refused recognition in another member State. The court added that application of this principle by analogy was impossible, since both the EEX and Regulation no. 44/2001 expressly exclude
Yearbook Comm. Arb’n XXXV (2010) 445 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 arbitration from their scope of application; further, there can be no identity of purpose between arbitration and court proceedings, whose nature is intrinsically different. The court of first instance then dealt with the objection that the award’s enforceability had been suspended as a consequence of the setting aside action in France and that, therefore, the award was not binding and could not be enforced. The court noted that the New York Convention only provides for the possibility to suspend the enforcement proceeding – rather than for refusal of recognition – when an annulment action is pending against the award. Also, as the award at issue was undoubtedly “binding”, that is, a final award concluding the arbitration proceedings, it could be enforced. Leng d’Or’s contention that Pavan failed to supply the documents required under Art. IV Convention also failed. The court held that the document that Pavan did not submit – an Annex that merely referred to the means of dispute settlement provided for in the main contract, which contained the arbitration clause – was irrelevant to the purpose of Art. IV, which is to allow the enforcement court to review “the validity of the arbitration agreement, the correspondence between the award and the arbitration clause and the non- arbitrability of the dispute”. Nor was the due process objection successful. Leng d’Or argued that the award was not duly notified because it was notified by a messenger (mensajero), a form of notification not provided for in the Terms of Reference. The court reasoned that the Terms of Reference explicitly mentioned delivery by “courier”, a term that is equivalent to “messenger”, and that in any case the means of notification chosen allowed for proof of the sending, as required in the Terms. The court of first instance then dismissed defendant’s allegation that the arbitration proceeding was not in accordance with the parties’ agreement because the arbitrators quantified Pavan’s indemnification for lucrum cessans on the basis of the accounts of one earlier fiscal year, without seeking other evidence from the parties, while the Terms of Reference provided that indemnification be determined “in the course of the proceeding”. The court noted that, on the contrary, it appeared from the award that there had been an evidence-collecting phase in the proceeding during which the parties could submit evidence. The court also denied Leng d’Or’s argument that the award lacked reasons and therefore violated public policy, reasoning that it could not review the arbitral tribunal’s evaluation of the evidence and its conclusions within the limited review available to the enforcement court. The court did find that Pavan’s application was ambiguous in that it could be interpreted to seek both homologation of the award (recognition and a
446 Yearbook Comm. Arb’n XXXV (2010) SPAIN NO. 65 declaration of enforceability) and enforcement, which cannot be cumulated in one application as enforcement presupposes a homologation decision. In fact, however, Pavan did not seek any measure of enforcement and its request was solely a request for homologation of the ICC award. Finally, the court of first instance dealt with Leng d’Or’s request to stay enforcement pending setting aside proceedings in France. The court assumed that defendant sought annulment of the award on the same grounds raised in the present proceeding, and concluded that these grounds did not justify a likelihood of success of the annulment action. The court therefore in its discretion denied Leng d’Or’s request.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 447 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
66. Audiencia Provincial [Court of Appeal], Madrid, 1 April 2009, no. 163/2009 (Section 10)
Parties: Plaintiff: Cadena de Tiendas Venezolanas SA – Cativen (Venezuela) Defendants: (1) GMR Asesores SL (Spain) (2) Inmomercado, CA (Venezuela)
Published in: Available online at
Articles: I(1); I(3); III; IV
Subject matters: – procedural aspects of enforcement regulated by domestic law – competent enforcement court under national law
Topics: ¶ 301; [4] = ¶ 704; [10] = ¶ 101; [11] = ¶ 107; [12] = ¶ 406; [13] = ¶ 405
Summary
The procedural aspects of enforcement under the 1958 New York Convention are governed by domestic law. Spanish law provides that enforcement of a foreign award must be sought before the court of first instance of the domicile or residence of the defendant. Here, the request for recognition was correctly filed in the court of the district where the defendant had its seat according to the Commercial Register, it being irrelevant that the defendant had moved without modifying its details in the Register.
On 23 August 2005, the Centro de Arbitraje de la Cámara de Comercio de Caracas (Arbitration Centre of the Caracas Chamber of Commerce) rendered an award in favor of Cadena de Tiendas Venezolanas, SA (Cativen) and against GMR Asesores, SL (GMR) and Inmomercado, CA. On 18 February 2008, Cativen sought enforcement of the Venezuelan award before the Court of First Instance no. 2 of Pozuelo de Alarcón. On 14 November 2008, following a statement that GMR could not be found as it had moved to Madrid (diligencia negativa de emplazamiento), the Pozuelo court issued a decision holding that territorial competence lay with the Court of First Instance of Madrid. On 4 December 2008, the Madrid court disagreed, holding that it lacked territorial competence.
448 Yearbook Comm. Arb’n XXXV (2010) SPAIN NO. 66
On appeal from the latter decision, the Madrid Court of Appeal affirmed the lower court’s decision, finding that the Pozuelo court had territorial competence. The court first set out the salient characteristics of the 1958 New York Convention and noted that in the Convention’s system the procedural aspects of enforcement are governed by domestic law. According to the relevant Spanish law provisions, enforcement of a foreign award must be sought before the court of first instance of the domicile or residence of the defendant. Here, the request for recognition was correctly filed in the Pozuelo court, where GMR had its seat according to the Commercial Register. It was irrelevant that GMR had physically moved without modifying its details in the Register.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 449 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
67. Audiencia Provincial [Court of Appeal], Burgos, 27 April 2009, no. 180/2009 (Section 3)
Parties: Appellant/defendant: Abonos y Cereales, S.L. (nationality not indicated) Appellee/claimant: Granit Negoce, S.A. (nationality not indicated)
Published in: Available online at
Articles: IV(1)(b); V(1)(b)
Subject matters: – prima facie validity of arbitration agreement – arbitration agreement concluded through agent – due process and notification of hearing
Topics: [4]-[9] = ¶ 403; [10]-[11] = ¶ 511 (letter not received)
Summary
Enforcement was denied because the documents supplied by the party seeking enforcement did not prove that the defendant agreed to submit to arbitration: both contracts were signed only by a broker and there was no evidence of the broker’s authority to enter into an arbitration agreement. Nor had the Spanish defendant been duly informed of the arbitration: a registered letter with acknowledgment of receipt was returned undelivered to the arbitral institution.
On 9 June 2005, Abonos y Cereales, S.L. (Abonos) and Granit Negoce, S.A. (Granit) entered into two sale contracts. The contracts, which were signed only by broker Inter Courtage Bayonne SA, referred to INCOGRAIN Form no. 19, which contains an arbitration clause. A dispute arose between the parties and Granit commenced arbitration at the Arbitration Chamber of Paris (Chambre Arbitrale de Paris); Abonos did not appear in the proceedings. On 16 May 2006, an arbitral tribunal found in favor of Granit, which then sought enforcement of the award in Spain. On 10 October 2008, the Court of First Instance no. 1 of Aranda de Duero granted enforcement of the French award.
450 Yearbook Comm. Arb’n XXXV (2010) SPAIN NO. 67
The Burgos Court of Appeal reversed the lower court’s decision and denied enforcement. It first examined ex officio whether Granit supplied the necessary documents under Art. IV of the 1958 New York Convention and concluded that the contracts in the file did not prove that Abonos intended to submit to arbitration: both contracts were signed only by the broker and it did not appear that Abonos empowered the broker to enter into an arbitration agreement. Although the above conclusion made it unnecessary, the court also examined the second ground for opposition raised by Abonos under Art. V(1)(b) Convention, that it was not duly informed of the arbitration. The court noted that a registered letter with acknowledgment of receipt was sent to Abonos and was returned undelivered to the Paris Chamber of Arbitration. Granit did not prove that the notification was made at Abonos’s correct seat or that other delivery attempts were made; therefore, there was no proof that Abonos was effectively informed of the arbitration.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 451 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
68. Audiencia Provincial [Court of Appeal], Barcelona, 29 April 2009, no. 86/2009 (Section 15)
Parties: Appellant/claimant: Licensing Projects SL (Spain) Appellee/Defendant: Pirelli & C. SpA (Italy)
Published in: Available online at
Articles: II(1); II(3)
Subject matters: – European Convention of 1961 – applicable law to existence, validity of arbitration agreement – arbitration agreement “null and void” because of bankruptcy of party (no) – arbitration agreement “null and void” because of lack of means for arbitration (no) – arbitrability only concerns subject matter of dispute
Topics: ¶ 704; [3] + [5]-[6] + [11]-[13] = ¶ 221; [3] + [10] + [18] = ¶ 220; [7]-[9] = ¶ 201; [14]-[16] = ¶ 223
Summary
The action commenced by the Spanish party in Spain was stayed in favor of ICC arbitration as provided for in the contract between the parties. The arbitration agreement was valid under the law of the country in which the award was to be made (France), as is provided, absent a choice by the parties, by the 1961 European Convention; Art. II(3) of the 1958 New York Convention is silent as to the law under which it must be ascertained whether an agreement is null and void. Further, the arbitration agreement was not affected by LP’s bankruptcy, and the dispute fell within the scope of the arbitration clause.
On 18 December 2001, Pirelli & C. SpA (Pirelli) licensed the marketing of shoes of the brands Pzero and Pirelli to Licensing Projects SL (LP), a company created for this sole purpose. Clause 33 of the license agreement provided for the application of Italian law. Clause 34 of provided that disputes “concerning the validity, interpretation, performance and termination” of the agreement be
452 Yearbook Comm. Arb’n XXXV (2010) SPAIN NO. 68 referred to ICC arbitration in Paris, “with the exception of the jurisdiction of state courts in respect of interim measures at the request of one of the parties”. A dispute arose between the parties when Pirelli unilaterally terminated the agreement in April 2007, alleging breach of contract by LP. On 11 July 2007, LP was declared in voluntary bankruptcy. In November 2007, Pirelli commenced ICC arbitration, seeking termination of the license agreement and damages. On 19 September 2008, the ICC arbitral tribunal rendered a partial award finding that it had jurisdiction. In the meantime, in January 2008, LP commenced an action against Pirelli in the Commercial Court (Juzgado Mercantil) no. 5 of Barcelona, alleging unfair competition and breach of contract and seeking damages. On 22 July 2008, the court granted Pirelli’s objection that the Spanish courts lacked jurisdiction and the matter should be referred to arbitration. The Barcelona Court of Appeal affirmed the lower court’s decision. It agreed with both the partial arbitral award and the commercial court that the validity of the arbitration agreement was to be examined under French law, being the law of the seat of the arbitration, because the parties had not made a choice with respect of the law applicable to the arbitration agreement. Since an arbitration agreement is autonomous and independent from the main contract, there was no reason to apply Italian law, the law applicable to the substance of the agreement. Though Art. II(3) of the 1958 New York Convention is silent as to the law under which it must be ascertained whether an agreement is null and void, the 1961 European Convention provides that, absent a choice by the parties, the law of the country in which the award is to be made applies; here, France. There was no evidence that the arbitration agreement was invalid under French law. Further, the validity of the arbitration agreement was not affected by LP’s bankruptcy, because the mandatory rules of the Spanish Bankruptcy Law are not part of the French concept of international public policy, and neither the New York Convention nor the European Convention provide for a limitation of the efficacy of arbitration agreements in case of bankruptcy. The court also agreed with the court below that the subject matter of the action squarely fell within the scope of the arbitration clause, notwithstanding LP’s attempts to argue that several acts subsequent to the termination of the contract concerned the Law on Unfair Competition.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 453 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
69. Audiencia Provincial [Court of Appeal], Zamora, 27 November 2009, no. 89/2009 (Section 1)
Parties: Appellants/defendants: (1) Mr. Genaro (Spain); (2) Mr. Carmelo (Spain); (3) Agraria del Tormes SA (Spain) Appellee/claimant: Majeriforeningen Danish Dairy Board (Denmark)
Published in: Available online at
Articles: III
Subject matter: – availability of post-award interest
Topics: ¶ 307
Summary
Post-judgment interest can be awarded when enforcing a foreign award that does not provide for such interest. Under Spanish law, which applies to the procedural aspect of enforcement under the 1958 New York Convention, when a court decision orders the payment of a sum, that sum bears annual interest from the moment of the decision in first instance. This principle extends to foreign awards. The starting date for calculating post-award interest is the date of the award.
Agraria del Tormes SA, Mr. Genaro and Mr. Carmelo (collectively, the sellers) sold Company X to Majeriforeningen Danish Dairy Board (the Dairy Board). A dispute arose between the parties in respect of taxes owed by Company X to the Spanish tax authorities for 1984 and January-September 1985. The Dairy Board paid Company X’s tax debt and then sought indemnification from the sellers. The dispute was referred to ICC arbitration in Paris. On 31 July 1995, an ICC arbitral tribunal rendered an award declaring the sellers jointly liable for the tax debt of 155,548,249 Spanish pesetas. The Dairy Board sought recognition and enforcement of the ICC award in Spain. Recognition was first denied by the Supreme Court on 20 June 2000, on the ground that proceedings were pending in the Zamora Court of First Instance no. 4 on a related matter, namely, the alleged nullity of the contract for the sale of
454 Yearbook Comm. Arb’n XXXV (2010) SPAIN NO. 69
Company X’s shares. This latter proceeding ended on 15 September 2004 with a decision of the Zamora Court of Appeal, that held that the matter should be referred to arbitration. The Dairy Board filed a new application to have the ICC award recognized in Spain. On 5 March 2007, the Zamora Court of First Instance no. 5 granted recognition. In the meantime, the sellers (the present defendants) had paid almost the entire sum under the award. Therefore, the Dairy Board sought enforcement of the remaining part of the award, as well as € 843,650.67 in post- award interest calculated from the date of rendition of the award. The Zamora court granted enforcement. The defendants appealed. The Court of Appeal of Zamora, per Pedro Jesús García Garzón, affirmed the lower court decision. The court first dealt with the objection that post-judgment interest [intereses procesales] cannot be granted in respect of foreign awards where, as here, it is not provided for in the award. The court reasoned that, pursuant to Art. III of the 1958 New York Convention, Spanish law applies to the procedural aspects of enforcement. Spanish law, as in force at the relevant time, provided that when a court decision ordered the payment of a sum, that sum would bear annual interest from the moment of the decision in first instance. In the court’s opinion, this principle extended to foreign awards, because the Spanish Arbitration Law of 1988, then in force, referred in respect of enforcement to the rules of civil procedure on the enforcement of foreign court decisions in the version of the Code of Civil Procedure (Ley de Enjuiciamiento Civil – LEC) then in force, which contained the provision on post-judgment interest. The court added that the same conclusion can be reached, on the same grounds, under the enforcement regime presently in force, based on the Arbitration Law of 2003 and a more recent version of the LEC. The court of appeal also denied defendants’ argument that the starting date for calculating post-award interest should be the date on which recognition of the award was granted, rather than the date of the award. The court gave as an example the case of a court decision that has been appealed: when that decision becomes final, the debt established therein bears post-judgment interest from the date of the decision in first instance.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 455 SWEDEN
Accession: 28 January 1972 No Reservations
7. Högsta Domstolen [Supreme Court], 16 April 2010, Case No. Ö 13- 091
Parties: Appellant: Lenmorniiproekt OAO (Russian Federation) Appellee: Arne Larsson & Partner Leasing Aktiebolag (Sweden)
Published in: Available online at
Articles: V(1)(b)
Subject matter: – proper notice
Topics: ¶ 509
Summary
The Swedish Supreme Court denied enforcement of a Russian ICAC award, finding that the Swedish defendant had not been informed of the arbitration, as the request of arbitration had been sent to its former address, which defendant had left prior to the commencement of the arbitration. The arbitrators ignored the fact that a notification sent to that address had been returned.
On 27 April 2004, an arbitral tribunal of the International Commercial Arbitration Court at the Russian Federation Chamber of Commerce and Industry (ICAC) rendered an award in favor of Lenmorniiproekt OAO (Lenmornii) against Arne Larsson & Partner Leasing AB (ALPL). Lenmornii sought enforcement of the ICAC award in Sweden.
1. The General Editor wishes to thank Dr. Gisela Knuts and Ms. Jeanette Björk, Roschier, Sweden, for their invaluable assistance in providing and translating this decision from the Swedish original.
456 Yearbook Comm. Arb’n XXXV (2010) SWEDEN NO. 7
On 4 December 2008, the Svea Court of Appeal in Stockholm refused enforcement, holding that ALPL had not been duly informed of the Russian arbitration. The Swedish Supreme Court affirmed the lower court decision. The Court reasoned at the outset that foreign arbitral awards based on an arbitration agreement are recognized in principle in Sweden. Recognition and enforcement can be denied, however, in the cases listed in the Swedish Arbitration Act, that reflect those in the 1958 New York Convention. There is a ground for refusal when the party against whom the award is relied upon proves that it was not given proper notice of the arbitration or was otherwise unable to present its case. The Court noted that neither the Swedish Act nor the New York Convention specifies what proper notice is. Also, the provisions therein regarding recognition and enforcement of arbitral awards are to be interpreted “in light of the general goal of facilitating enforcement that the Convention expresses”. However, “great demands” must be made in respect of the notification of the request for arbitration, as it would be unacceptable that an arbitral award be recognized and enforced against a party that was completely unaware of the arbitration. In the present case, Lenmornii’s request for arbitration was sent to ALPL’s address as indicated in the contract between the parties. The arbitrators deemed this sufficient, ignoring the fact that a notification sent to the same address had been returned with a note that the addressee could not be found. In fact, ALPL had moved to another address before the commencement of the arbitration. The Court dismissed as irrelevant Lenmornii’s argument that ALPL should have communicated its change of address to the arbitral tribunal, noting that ALPL was not at all aware that arbitration proceedings were pending. The Supreme Court concluded that where it does not appear clearly, from the arbitral award or otherwise, that the request for arbitration has reached the defendant, or the defendant supplies evidence giving rise to reasonable doubt that it did, a ground for refusing enforcement “should generally be deemed to exist”.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 457 UGANDA
Accession: 12 February 1992 1st Reservation
1. Supreme Court of Uganda, 16 January 2004, Civil Appeal No. 18 of 2002
Parties: Appellant: Fulgensius Mungereza (nationality not indicated) Respondent: PricewaterhouseCoopers Africa Central (nationality not indicated)
Published in: Available online at
Articles: II(3)
Subject matters: – arbitration agreement “incapable of being performed” and poverty of defendant (no) – arbitration agreement “incapable of being performed” and failure to attempt mediation – failure to attempt mediation before arbitration is issue for arbitrators
Topics: ¶ 220
Summary
The alleged poverty of a party does not make an arbitration clause incapable of being performed if that poverty is not caused by the party commencing arbitration. The issue whether the party commencing arbitration violated the contract between the parties by failing to resort to mediation first as provided therein is a question for the arbitrators, not the court.
In January 1986, Fulgensius Mungereza, a certified Public Accountant, became a partner in the accounting firm of Coopers and Lybrand. In September 1997, Coopers and Lybrand merged with PricewaterhouseCoopers. On 1 July 1998, the members of PricewaterhouseCoopers in several Central African countries
458 Yearbook Comm. Arbn XXXV (2010) UGANDA NO. 1 signed a Framework Agreement for the conduct of the business and for establishing PricewaterhouseCoopers Africa Central. Clause 29.1 provided that disputes be submitted by the executive committee to the Board of Governance Entity for mediation; if the Board failed to come up with a mutually agreeable settlement, then the matter would be resolved by arbitration (Clause 29.2). On 28 April 2000, PricewaterhouseCoopers Africa Central informed Mungereza that it was no longer interested in working with him. After protracted negotiations for an amicable withdrawal, Mungereza left. He then filed a civil suit against PricewaterhouseCoopers Africa Central (Respondent) in High Court, claiming damages for breach of contract and special damages of US$ 6,200 as leave passages for 1998 and US $ 106,000 as refund on his tax account held by Respondent. On 8 September 2000, Respondent applied to stay court proceedings and refer the case to arbitration based on the arbitration clause in the Framework Agreement. Mungereza argued in return that Respondent, in fundamental breach of the Framework Agreement, dismissed him from the partnership and denied him monies, so that he could not afford going to London for arbitration and/or pay for legal representation. The High Court allowed the application for a stay, holding that Mungereza’s poverty did not render the arbitration clause in the Framework Agreement incapable of being performed. The Court of Appeal at Kampala, per Mpagi- Bahigeine, JA, affirmed the lower court’s decision. The Supreme Court, before Oder, Tsekooko, Mulenga and Kanyeihamba, JJ SC, in an opinion by Odoki, CJ, dismissed Mungereza’s appeal, holding that the alleged poverty of Mungereza was not a sufficient reason for exercising discretion to refuse to stay proceedings on the ground that the agreement has been rendered incapable of being performed. The Court reasoned that in order to justify the exercise of such discretion it had to be established that Mungereza’s poverty had been caused by Respondent. This was not proven. Mungereza did not argue that he had not been paid his emoluments while he was still working nor did he indicate how much it would cost to undertake the arbitration. The Supreme Court also agreed with the appellate court’s finding that the question whether Respondent was in breach of the Framework Agreement because it failed to refer the dispute to mediation before commencing arbitration should be referred to arbitration.
A detailed report of this decision is available online at
Yearbook Comm. Arbn XXXV (2010) 459 UNITED KINGDOM
Accession: 24 September 1975 1st Reservation
88. High Court of Justice, Queen’s Bench Division, 30 October 2009, Case No. CC/2009/APP/0385
Parties: Appellant: Accentuate Limited (UK) Respondent: Asigra Inc (Canada)
Published in: Available online at
Articles: II(3)
Subject matters: – arbitration agreement “null and void” because of violation of mandatory EU law provisions – Commercial Agents (EU Council Directive) Regulations 1993
Commentary Cases: ¶ 217 + ¶ 220 + ¶ 222 + ¶ 704(C)
Summary
An arbitration clause providing for the application of Ontario Law is null and void if it results in the failure to apply mandatory EU provisions protecting commercial agents. The Canadian arbitrators’ finding that the choice of law and the arbitration clause were valid was not conclusive and had to be reviewed by the English court.
On 19 January 2004, Accentuate Limited (Accentuate) and Asigra Inc (Asigra) concluded a Master Reseller Agreement (MRA) for the distribution by Accentuate of software products of Asigra. The MRA contained a choice of law clause, providing that it was governed by Ontario law. It also contained an arbitration clause referring disputes to arbitration in Toronto, Canada. A dispute arose between the parties. Accentuate commenced an action against Asigra before the Chichester District Registry, seeking compensation under the
460 Yearbook Comm. Arb’n XXXV (2010) UNITED KINGDOM NO. 88
European Union’s Commercial Agents (Council Directive) Regulations 1993 (the Regulations). In the meantime, on 13 November 2006, Asigra terminated the MRA. On 21 June 2007, it commenced arbitration in Toronto. The arbitral tribunal rendered three awards: on 20 December 2007, it denied Accentuate’s request for a declaration that the Regulations were outside the scope of the arbitration clause (the First Award); on 3 March 2008, it determined that Ontario law, rather than the Regulations, applied in determining the rights and liabilities of the parties (the Second Award) and, on 10 February 2009, it found in favor of Accentuate on the merits (the Third Award). In England, Asigra sought a stay of court proceedings. On 28 May 2009, DJ Levinson granted the stay. Accentuate appealed. The High Court of Justice, per Mr Justice Tugendhat, lifted the stay. Accentuate argued that the arbitration agreement between the parties was null and void because it purported to apply a foreign law (the law of Ontario) which does not give effect to mandatory provisions of the law of the European Union, namely, an agent’s entitlement to compensation under the Regulations. Accentuate referred to jurisprudence of the European Court of Justice (Ingmar)1 where it was held that it is essential to the purposes of the Regulations that a principal established in a country not belonging to the European Union, whose commercial agent carries on his activity within the European Union, cannot evade the Regulations’ provisions by the simple expedient of a choice-of-law clause. The arbitration clause here was therefore at odds with the mandatory nature of the Regulations and was null and void. Accentuate also argued that the Second Award, which failed to apply the Regulations, was not recognizable in a EU State on public policy grounds. The court agreed that the decision in Ingmar required it to give effect to the mandatory provisions of EU law, notwithstanding any expression to the contrary on the part of the contracting parties. Accordingly, the arbitration clause was “null and void” in so far as it purported to require the submission to arbitration of questions pertaining to mandatory provisions of EU law. The Canadian arbitrators reached the opposite decision in the Second Award, where they held that the protection of commercial agents in the Regulations did not justify restricting the parties’ freedom to choose Ontario law as the governing law of their contract. The court reasoned that arbitrators are allowed under English law to decide on their own jurisdiction first, but their decision is not conclusive and may be reviewed by the court. Here, the court had yet to
1. Ingmar GB Ltd. v. Eaton Leonard Inc.
Yearbook Comm. Arb’n XXXV (2010) 461 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 determine independently whether there was a binding arbitration clause applicable to Accentuate’s claim under the Regulations or an award which could be recognized in England. Hence, the stay should be lifted at this stage. Only the relevant parts of the decision are reported.
A detailed report of this decision is available online at
462 Yearbook Comm. Arb’n XXXV (2010) UNITED KINGDOM NO. 89
89. Court of Appeal (Civil Division), 17 December 2009
Parties: Appellant: Endesa Generacion SA (Spain) Respondent: National Navigation Co (Egypt)
Published in: Available online at
Articles: II(3)
Subject matters: – declaration on existence, validity of arbitration agreement – foreign court decision on validity of arbitration agreement – EU Council Regulation (EC) No. 44/2001 – anti-suit injunction (injunction enjoining foreign law- suit)
Topics: ¶ 229 + ¶ 704(C)
Summary
Following the ECJ decision in West Tankers v. The FRONT COMOR, English courts can no longer issue anti-suit injunctions on the basis of an arbitration agreement. Also as a consequence of West Tankers v. The FRONT COMOR, an EU-State court decision finding that an arbitration clause in a charterparty is not incorporated into the bill of lading is a decision within the scope of Regulation No. 44/2001 and applies in proceedings on the same subject matter in England, even if those proceedings concern arbitration. The United Kingdom’s obligation under the 1958 New York Convention to give effect to arbitration agreements does not prevent the English courts from being bound by a decision of a court of an EU State, also a Convention member, that holds that there is no arbitration clause.
The facts of this case are also reported in Yearbook XXXIV (2009) at pp. 830- 834 (UK no. 84). Endesa Generacion SA, an electrical generating company, and its co-subsidiary Carboex SA (Carboex) entered into an exclusive supply agreement (the Carboex Supply Agreement) under which Carboex agreed to supply and Endesa agreed to purchase coal for use by Endesa in its power plants. On 14 December 2007, Endesa entered into an individual contract under the Carboex Supply Agreement to purchase from Carboex a certain quantity of sub-bituminous steam coal in bulk, to be delivered at the port of Ferrol in
Yearbook Comm. Arb’n XXXV (2010) 463 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 northwest Spain. The coal had been shipped on 6 December 2007 in Indonesia aboard the vessel WADI SUDR, as evidenced by a Bill of Lading issued on that date. The vessel was owned by National Navigation Co (NNC). The Bill of Lading stated on the reverse that “all terms, liberties and exceptions of the Charterparty dated as overleaf, including the Law and Arbitration clause are herewith incorporated”. No charterparty however was indicated on the front page of the Bill of Lading. At the relevant time, the WADI SUDR was subject to three different (sub-)charters: (1) a time-charter dated 1 October 2007 between NNC and China National Chartering Corporation (Sinochart) (the Head Charter), providing for the application of English law and arbitration of disputes under the Rules of the London Maritime Arbitrators Association (LMAA); (2) a sub-timecharter between Sinochart and Morgan Stanley Capital Group Inc (Morgan Stanley); (3) a voyage charter dated 25 September 2007 between Morgan Stanley and Carboex (the Voyage Charter), providing for arbitration of disputes in London by three LMAA members. On 1 January 2008, the WADI SUDR sustained damage to her rudder; general average was declared and the cargo of coal was discharged on 30 January 2008 at Carboneras, in southeast Spain, rather than Ferrol. Claiming that it had been forced to purchase a second shipment of coal for its plant because of the difficulties in transporting the coal from southeast to northwest Spain, Endesa sought reimbursement of this additional cost from NNC. Proceedings in Spain and England followed; only the relevant procedural steps are mentioned below. On 23 January 2008, Endesa made an application to the Mercantile (First Instance) Court in Almería, Spain, for the arrest of the WADI SUDR (the Spanish Action). The vessel was arrested by an ex parte order on 25 January 2008. On 22 February 2008, Endesa served its substantive claim for compensation in the Spanish Action under Art. 5 of Council Regulation (EC) No. 44/2001 (the Regulation), which lists the cases in which a person domiciled in an EU Member State may be sued in another Member State. NNC replied by challenging the Almería court’s jurisdiction, claiming that the dispute should be referred to arbitration in London; however, it was not in possession of a copy of the Voyage Charterparty containing the arbitration clause. Also on 23 January 2008, a few hours after Endesa filed the Spanish Action, NNC in turn commenced an action in the High Court of Justice, Queen’s Bench Division (Commercial Court) against Endesa, seeking a declaration that it was under no liability to Endesa (the Declaratory Action, Folio 64). On 8 July 2008, NNC also issued an arbitration claim form (the Arbitration Action, Folio 667). In the Spanish Action, NNC then sought a stay of proceedings under Art. 27 of the Regulation, which provides that where proceedings involving the same
464 Yearbook Comm. Arb’n XXXV (2010) UNITED KINGDOM NO. 89 cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seized shall stay its proceedings until the jurisdiction of the court first seized is established. NNC argued that the Commercial Court had jurisdiction as it was first seized of the matter because the action there had been filed on 23 January 2008, prior to the filing of Endesa’s substantive claim in the Spanish Action on 22 February 2008. On 31 July 2008, the Almería court issued a first decision, holding that (i) it had jurisdiction because no arbitration clause was validly incorporated from any charterparty into the Bill of Lading under Spanish law and (ii) in any event, by commencing the Commercial Court Action in England NNC had waived its right to arbitrate the dispute; the court recognized, however, that the proceedings in the English Arbitration Action (Folio 667) concerned the same subject matter as those before it and therefore (iii) stayed its own proceedings pending a decision by the English court on its own jurisdiction. On reconsideration, on 31 December 2008, the Almería court reaffirmed its original reasoning. It reasoned that there might be differences between the approaches of the English and Spanish courts in respect of the impact of the commencement of substantive proceedings on a party’s ability to pursue a claim by arbitration, but held that it was for the English court in the first instance to decide whether to exercise jurisdiction itself or allow NNC to pursue a claim in arbitration. In this context, the Almería court noted that its decision was “without prejudice to the fact that these points do not bind the London court which may well decide the opposite”. On 1 April 2009, the Commercial Court, per Gloster, J, rendered a decision in respect of several applications in the Declaratory Action (Folio 64) and the Arbitration Action (Folio 667). In particular, it decided on (1) NNC’s application for a declaration that the arbitration clause in the Voyage Charter was validly incorporated into the Bill of Lading and the disputes between the parties were therefore referable to London arbitration (the Declaration Application) and (2) NNC’s application for an anti-suit injunction restraining Endesa from prosecuting proceedings in Spain (the Anti-Suit Application). The Commercial Court granted NNC’s Declaration Application – holding that as a matter of English law, its putative applicable law, the bill of lading did contain an arbitration clause – but dismissed the Anti-Suit Application, holding that the decision of the European Court of Justice in The FRONT COMOR,1 which was issued on 10 February 2009, prevented the granting of an anti-suit injunction
1. [2009] 1 Lloyd’s Rep. 413, reported in Yearbook XXXIV (2009) pp. 485-493 (European Union no. 2).
Yearbook Comm. Arb’n XXXV (2010) 465 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 on the basis of an arbitration agreement. The court then examined whether it should stay the Arbitration Action because of the finding in the Spanish decisions that there was no valid arbitration agreement between the parties. It first reasoned that, following the decision in The FRONT COMOR, the Spanish court decisions were decisions under the Regulation and were thus enforceable in the English proceedings. However, they were not so enforceable in the Arbitration Action because arbitration-related proceedings are not covered by the Regulation, which expressly excludes arbitration from its scope of application (Art. 1(2)(d)). She also added that, if she were wrong in her conclusion, she would still not recognize the Spanish decisions on the grounds they “were manifestly contrary to public policy”. This decision is reported in Yearbook XXXIV (2009) at pp. 830-861 (UK no. 84). The Court of Appeal, before Lord Justice Waller, Lord Justice Carnwath and Lord Justice Moore-Bick, in an opinion by Waller, reversed the lower court’s finding that the Spanish court decisions did not apply in the English proceedings, holding that they did and consequently dismissing the Arbitration Action. The Court of Appeal first dismissed NNC’s argument that the 3 December 2008 decision of the Spanish court (the second decision) did not make a final ruling on the question whether the arbitration clause was incorporated in the bill of lading. The Court reasoned that, seen together, the first and second decisions of the Spanish court clearly decided in an unconditional manner that as matter of Spanish law there was no arbitration clause. It was irrelevant that the Spanish court thought that an English court might still feel free to decide this issue, as both Spanish decisions were rendered before The FRONT COMOR and the Spanish court could then believe that a decision on the incorporation of an arbitration clause was outside the Regulation. The Court of Appeal then agreed with the Commercial Court that the Spanish court decisions fell within the scope of the Regulation, reasoning that the ECJ held in The FRONT COMOR that where a judgment is a Regulation judgment, the preliminary ruling therein as to the jurisdiction of the court on the basis of the (lack of) existence of an arbitration clause is also a Regulation judgment. This was the case of the Spanish court’s rulings on the existence of a valid arbitration clause, which were given in an action, the Spanish action, in which Endesa sought compensation. The Court of Appeal, however, reversed the Commercial Court’s ruling in respect of the issue whether the Spanish decisions were binding in the English Arbitration Action. Gloster, J, held that because the Arbitration Action fell outside the Regulation, the Spanish Regulation judgments were not binding in those proceedings. The Court concluded that Gloster, J’s, conclusion was
466 Yearbook Comm. Arb’n XXXV (2010) UNITED KINGDOM NO. 89 contrary to the judgment of the ECJ in The FRONT COMOR, and a Regulation judgment can give rise to an issue estoppel as much in arbitration proceedings excluded from the Regulation as in any other proceedings in an English court. The Commercial Court also held in its 1 April 2009 decision that the Spanish decisions ought not to be recognized in this case on grounds of public policy. The Court of Appeal disagreed, reasoning that there simply was no room for a public policy argument, since Endesa was entitled to challenge the incorporation of the arbitration clause into the bill of lading in the Almería Mercantile Court, and the English court was bound to recognize the decision of the Almería court. The Court of Appeal finally considered NNC’s argument that the United Kingdom was obliged under the 1958 New York Convention to give effect to arbitration agreements. The Court reasoned that it did not believe that this obligation requires an English court not to be bound by a decision of a court of a fellow Member State and co-signatory of the New York Convention that holds that there is no arbitration clause. Lord Justice Moore-Bick filed a concurring opinion.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 467 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
90. Court of Appeal (Civil Division), 10 February 2010, Case Nos.: A3/2009/1664, A3/2009/1664(A), A3/2009/1664(B), A3/2009/1664(C)
Parties: Appellant: Midgulf International Limited (Cyprus) Respondent: Groupe Chimique Tunisien (Tunisia)
Published in: Available online at
Articles: II(3)
Subject matters: – exchange of communications – separability of arbitration clause – anti-suit injunction (injunction enjoining foreign law- suit)
Topics: [1]-[2] = ¶ 222; [1]-[15] = ¶ 206; [16]-[35] = ¶ 229
Summary
The court was “unimpressed” by the argument that since the decision of the European Court of Justice in West Tankers v. The FRONT COMOR English courts should refrain from granting anti-suit injunctions if the foreign country concerned (here, Tunisia) is a party to the 1958 New York Convention. West Tankers v. The FRONT COMOR is no reason to change the settled view in the English courts that the grant of an anti-suit injunction is not incompatible with the Convention.
On 25 June 2008, Midgulf International Limited (Midgulf) sent to Groupe Chimique Tunisien (GCT) a written offer for the sale of a certain quantity of sulphur for delivery at Gabes, Tunisia. The offer required that GCT guarantee “the draft at Gabes Tunisia to be 32 feet”. The offer also contained a clause providing “Arbitration. English law to govern. Venue in London” and further stated “All other terms and conditions as per Midgulf Saudi Arabia standard sales contract.” On 26 June 2008, GCT replied to Midgulf asking that the reference to the Midgulf Saudi standard sales contract be canceled and noting that the “max guaranteed draft at both discharging ports Gabes and Sfax is 31 feet high tide”. On 27 June 2008, Midgulf sent two faxes to GCT. The longer of the two began “Thanks for your purchase confirmation which we have accepted.” The shorter thanked GCT for its confirmation dated 26 June 2008 and attached a signed and stamped contract (the draft June contract) that included the following terms:
468 Yearbook Comm. Arb’n XXXV (2010) UNITED KINGDOM NO. 90
“Buyer to guarantee the draft at Port Gabes or Sfax, Tunisia, is 31.00 feet salt water” and “Buyer guarantees that vessel will be safely accommodated and discharged at discharge port if vessel arrive at a maximum draught of 31 feet.” The draft June contract further provided that English law applied, and that disputes were to be referred to arbitration in London under English law. GCT did not sign or return the draft June contract. On 2 July 2008, Midgulf sent to GTC a new offer for a larger shipment of sulphur (the July contract). The offer included quantity specifications and provided for a July-September 2008 period of shipment. It further stated that all other terms and conditions pertaining, among other things, to jurisdiction and arbitration were to be “as per our contract ... dated 27 June 2008”. On 4 July 2008, Midgulf’s Dr. Dajani and GCT’s Mr. Hamrouni had a telephone conversation whose content was later disputed. On 8 July 2008, GTC sent a fax dated 7 July 2008 to Midgulf, confirming the purchase of the sulphur as per the quality specifications indicated in Midgulf’s 2 July offer and noting that “Draft at Gabes and Sfax ports” should be “31 feet maximum at high tide”. On 9 July 2008, Midgulf responded by an e-mail thanking GCT for its confirmation of acceptance of Midgulf’s 2 July offer. On 14 July 2008, GCT sent a fax to Midgulf proposing to amend the jurisdiction and arbitration clause in the draft June contract to read as follows: “Jurisdiction. This contract is to be construed and governed in all respects in accordance with Tunisian law” and “Arbitration. We suggest that the settlement of disputes to be submitted either to the Tunisian jurisdiction or to the arbitration of the International Chamber of Commerce with the application of a neutral law by both parties.” This fax did not come to the attention to Dr. Dajani. A dispute arose between the parties when, on 21 July 2008, GCT raised a complaint about the quality of the sulphur delivered under the June contract. On 22 July 2008, GCT raised a similar complaint about the first shipment under the July contract and unilaterally terminated the contract. On 26 August 2008, Midgulf commenced arbitration in relation to the July contract. GCT disputed that the contract was governed by English law or by an English arbitration agreement and did not appoint an arbitrator. On 13 October 2008, Midgulf applied to the High Court for the appointment of an arbitrator. In turn, on 24 October 2008, GCT commenced proceedings in Tunisia seeking a declaration that the July contract was not governed by an English arbitration agreement (the declaratory action). On 13 November 2008, GCT commenced a second action in the Tunisian courts, seeking damages for non-compliance of the sulphur with agreed quality specifications. The declaratory
Yearbook Comm. Arb’n XXXV (2010) 469 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 action was dismissed on 28 March 2008; appeal was pending at the time of the present decision. In England, on 13 February 2009, Midgulf applied to the High Court for an anti-suit injunction. On 19 February, Burton J granted a temporary injunction pending the hearing of Midgulf’s 13 October 2008 application for the appointment of an arbitrator. On 11 May 2009, Tere J, having heard both applications, concluded that he should only grant an anti-suit injunction if satisfied that there was a high degree of probability that Midgulf’s case about the existence of an English arbitration agreement was right. This could not be determined without oral evidence from Dr. Dajani and Mr. Hamrouni about their telephone conversation on 4 July 2008. He therefore ordered an expedited trial of the issue whether the July contract contained a London arbitration clause and ordered that the anti-suit injunction should continue in the meantime. On 13 July 2009, Teare J delivered a second judgment. He found that the likely outcome of the 4 July 2008 telephone conversation was that Mr. Hamrouni had only confirmed the quantity and price of the proposed shipment and had not confirmed acceptance of all details of the draft contract of 27 June 2008 to which reference was made in the offer of 2 July. He further found that GCT’s fax dated 7 July was a counter offer that had been accepted by Midgulf’s fax dated 9 July. A contract was then formed on the conditions set out in GCT’s fax dated 7 July and no other terms. The contract therefore did not include a London arbitration clause. The Court of Appeal, before Lord Justice Mummery, Lord Justice Toulson and Lord Justice Patten, in an opinion by Lord Justice Toulson, reversed Teare J’s decision, finding that there was a valid English arbitration clause between the parties. It therefore made an order for the appointment of an arbitrator and granted an anti-suit injunction to restrain GCT from continuing with the Tunisian proceedings. On the facts of the case, the Court of Appeal concluded that GCT accepted Midgulf’s offer dated 2 July 2008, whether by the telephone conversation of 4 July as confirmed by the subsequent exchange of faxes or simply by the subsequent exchange of faxes. Hence, the July contract included an English law clause and an English arbitration clause. The Court of Appeal then held that in the presence of an English arbitration agreement continuation of the declaratory action in Tunisia would be a violation of that agreement. It rejected GCT’s argument that it would not because the declaratory action did not involve directly asking the Tunisian court to determine the parties’ rights and liabilities under the July contract.
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GCT further argued that the anti-suit injunction sought by Midgulf should be refused on two grounds. By the first ground it argued that it would not be just to grant such injunction when the English court’s assumption of jurisdiction was based on a default rule. It reasoned that when an English court is considering an issue of jurisdiction in relation to a contractual dispute which may be governed either by English law or by a foreign court, it cannot resort to the putative applicable law of the contract to resolve it; by default, it must apply its own law. The court disagreed, noting that this contention was based on a decision (Dornoch)1 that had been rendered in a case where the court found that neither party had demonstrated with reasonable certainty what the proper law of the contract was. Here, Midgulf’s offer explicitly referred to English law. As a consequence, only English law could determine whether GCT’s conduct amounted to an acceptance so as to create an English law contract. The court also dismissed as inconclusive, because not founded on the facts of the case, the evidence given for GCT by an expert in Tunisian law that a Tunisian court would consider that the July contract was governed by Tunisian law and did not include an English arbitration clause. GCT’s second argument for opposing an anti-suit injunction was that since the decision of the European Court of Justice in The FRONT COMOR2 English courts should refrain from granting anti-suit injunctions if the foreign country concerned is a party (as Tunisia is) to the 1958 New York Convention, on the strength of the Convention’s Art. II(3). The court of appeal was “unimpressed”. It noted that English courts “have long taken the view that the grant of an anti-suit injunction is not incompatible with the New York Convention”. The court did not see that The FRONT COMOR – which was based on the effect of Council Regulation (EC) no. 44/2001 – provided “a good reason for taking a different view”.
A detailed report of this decision is available online at
1. Dornoch Limited v. Mauritius Union Assurance Co Limited [2006] EWCA Civ 389, [2006] 2 Lloyd’s Rep 475. 2. [2009] 1 Lloyd’s Rep 413, reported in Yearbook XXXIV (2009) pp. 485-493 (European Union no. 2).
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91. High Court of Justice, Queen’s Bench Division, Commercial Court, 30 March 2010, Case No. 2008 Folio 1280
Parties: Claimant: Continental Transfert Technique Limited (nationality not indicated) Defendants: (1) the Federal Government of Nigeria; (2) Attorney General of the Federation (of Nigeria); (3) Ministry of the Interior (of Nigeria); (4) Federal Republic of Nigeria; (5) Nigerian National Petroleum Corporation
Published in: Available online at
Articles: V(1)(e); VI
Subject matters: – enforcement of award pending setting aside in country of origin – discretion to stay enforcement proceedings pending annulment proceedings – stay of enforcement proceedings and posting of security
Topics: [7]-[9] = ¶ 516 + ¶ 517; [13]-[40] = ¶ 601
Summary
An application to set aside the award in the country of rendition does not mean that the award has been set aside or automatically suspended. The court has discretion to order a stay pending annulment proceedings. Here, the balance of discretionary factors weighed against the party seeking a stay. The court granted a stay on the condition that security be posted in the amount of UK£ 100 million.
On 25 May 1999, Continental Transfert Technique Limited (Continental) entered into a supply agreement with the Ministry of the Interior of Nigeria to produce and supply electronic residence cards for use by the Nigeria Immigration Service. The agreement provided that the governing law was the law of Nigeria; it also contained a clause referring disputes to arbitration in Nigeria under Nigerian procedural law.
472 Yearbook Comm. Arb’n XXXV (2010) UNITED KINGDOM NO. 91
A dispute arose between the parties and arbitration proceedings took place between Continental on the one hand and the Federal Government of Nigeria, the Attorney General of the Federation of Nigeria and the Nigerian Ministry of the Interior (the First to Third Defendants) on the other.1 On 14 August 2008, an arbitral tribunal rendered an award in favour of Continental in the amount of NGN 29,660,166,207.48 plus interest and costs.2 The time limit to seek annulment of the award in Nigeria expired on 15 November 2008. On 20 April 2009, the Nigerian parties applied for an injunction to prevent enforcement of the award by Continental and for an extension of time to apply to challenge the award. These proceedings were pending at the time of the present decision. In turn, Continental sought enforcement of the Nigerian award in the United States and England. In the United States, on 23 March 2010, the United States District Court for the District of Columbia dismissed Nigeria’s defenses to enforcement and denied its request to adjourn enforcement pending the Nigerian annulment action. This decision is reported in this Yearbook XXXV (2010) (US no. 696, see fn. 1). In England, on 10 December 2008, the High Court, per Walker J granted an interim order to enforce the award against the First to Fourth Defendants, providing for a period until 4 June 2009 to apply to set the order aside. No application was made to set aside and, on 24 June 2009, Andrew Smith J granted an order to enforce the award and enter the judgment to be incorporated in a single final order from the court. Continental then proceeded to enforce the judgment of the court against, inter alia, property owned by Nigerian National Petroleum Corporation (NNPC), which was joined as Fifth Defendant by order of 28 September 2009. On 23 November 2009, the First to Fifth Defendants (collectively, the Defendants) applied to the court to have all orders in this case set aside or stayed. The High Court, per Mr Justice Hamblen, granted a stay on the condition that the Defendants provide security in the amount of UK£ 100million. The court first denied the Defendants’ argument that the award should be refused enforcement because it had been set aside or suspended in Nigeria, holding that an application to set aside an award does not mean that the award has been set
1. The High Court stated that the arbitration proceedings took place in Nigeria (see, however, the decision of the United States District Court for the District of Columbia in the same case, reported in this Yearbook XXXV (2010) p. 522 (US no. 696), where the court stated that the arbitration took place in London). 2. The High Court noted that this amount corresponded to approximately UK£ 140million.
Yearbook Comm. Arb’n XXXV (2010) 473 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 aside. It also referred to the decision in IPCO,3 where it was held that an application to the court in the country of origin does not automatically result in the award being suspended. The court then examined whether it should grant a stay of proceedings pending the application to set aside the award in Nigeria and concluded that on the facts of the case, the various discretionary factors indicated by case law weighed heavily in favor of Continental: (a) the Defendants did not show that their application to challenge the validity of the award – which appeared to be based on the sole contention that the arbitral tribunal lacked jurisdiction to award damages for loss of profit – had a real prospect of success, since there was Nigerian law evidence before the court to rebut it; (b) the annulment application appeared to involve delaying tactics; and (c) the potentially substantial delay caused by a stay (it was unclear when the Nigerian annulment action would be heard) would result in significant prejudice. The court could therefore either deny to stay the action or grant a stay provided that the Defendants post security. As Continental did not oppose the latter solution, the court granted a stay on the condition that the Defendants provide security in the amount of UK£ 100million.
A detailed report of this decision is available online at
3. IPCO v. NNPC [2005] 2 Lloyd’s Rep 326, reported in Yearbook XXXI (2006) pp. 853-866 (UK no. 70).
474 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES
Accession: 30 September 1970 1st and 2nd Reservation
680. United States District Court, Southern District of Florida, 22 June 2009 and 26 February 2010, Case No. 09-20023-CIV- SEITZ/O’SULLIVAN
Parties: Plaintiff: Olena Bulgakova (Ukraine) Defendant: Carnival Corporation (Panama)
Published in: Decision of 22 June 2009: 2009 U.S. Dist. LEXIS 126771; Decision of 26 February 2010: 2010 U.S. Dist. LEXIS 39231
Articles: II(3)
Subject matters: – arbitration clause “incapable of being performed” because of prohibitive costliness (no) – arbitration agreement “null and void” on public policy grounds (no) – arbitrability of seamen’s wage litigation
Topics: [1] + [3] = ¶ 214; [2]-[7] = ¶ 220; [8]-[20] = ¶ 223
Summary
In the first decision, the court held that prohibitive costliness does not fall under the “null and void” exception in the New York Convention and referred the dispute to arbitration. In the second decision, it denied a motion for reconsideration based on the Eleventh Circuit’s decision in Thomas, where it was held that a similar arbitration clause was null and void on grounds of public policy because it was unlikely that the arbitrators, applying Panamanian law, would make an award on the plaintiff’s US statutory claim; hence, the plaintiff could not raise the public policy defense at the award enforcement stage. Here, both the plaintiff’s US statutory claims and general maritime claims would be referred to arbitration and there was no indication that arbitrators in Monaco, applying Panamanian law,
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would not hear the general maritime claims. The argument that the arbitration clause was void on grounds of public policy was therefore premature and could be raised at the enforcement stage.
On 6 November 2005, Olena Bulgakova entered into a Seafarer’s Agreement with Carnival Corporation (Carnival) to work as a waitress aboard one of Carnival’s vessels. In a section that Bulgakova initialed, the Agreement provided that substantive Panamanian law applied to the Agreement and that any disputes arising from the Agreement be referred to arbitration in London, Monaco, Panama City or Manila, whichever was closer to the employee’s home country. In January 2006, while working aboard the CARNIVAL PRIDE, Bulgakova slipped and injured her knee. She was later discharged from Carnival’s employ. Bulgakova filed suit in state court in the United States, seeking back wages and damages for: (1) Carnival’s failure to adequately secure, clean and inspect the deck surface; (2) maintaining an unseaworthy vessel and overworking its crew and (3) Carnival’s failure to provide adequate medical treatment or worker’s compensation, forcing her to retain and pay an attorney. Carnival removed the suit to federal court and moved to compel arbitration of the dispute in Monaco. By the first decision reported, rendered on 22 June 2009, the United States District Court for the Southern District of Florida, per Patricia A. Seitz, US DJ, granted Carnival’s motion to compel arbitration. Relying on the Eleventh Circuit 2005 decision in Bautista,1 the district court reasoned that courts are bound to a very limited inquiry when deciding motions to compel arbitration under the 1958 New York Convention and its implementing legislation, the Federal Arbitration Act. They must grant such motions unless they find that one of the Convention’s jurisdictional prerequisites are not met or one of its affirmative defenses applies. The jurisdictional prerequisites were met here, as there was an agreement in writing, for arbitration in a Convention country (Monaco), the agreement arose out of a legal and commercial relationship and Bulgakova was not an American citizen. The court then reasoned that the affirmative defense under the Convention that the arbitration provision is “null and void, inoperative or incapable of being performed” must be read narrowly because of the general policy of enforceability of agreements to arbitrate declared by the Convention signatories. Accordingly, the null and void clause must be interpreted to encompass only those situations – such as fraud, mistake, duress, and waiver – that can be neutrally applied on an international scale.
1. Bautista v. Star Cruises, 396 F.3d 1289 (11th Cir. 2005), reported in Yearbook XXX (2005) pp. 1070-1085 (US no. 513).
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Bulgakova argued that the arbitration clause in the Seafarer’s Agreement was incapable of being performed because of her indigence. The court reasoned that there is no universally consistent definition of the prohibitive costs defense that can yield consistent results in all Convention countries. Even assuming that the prohibitive costs defense were uniformly applicable, it would not relieve Bulgakova from the arbitration clause here, as Carnival offered to bear the arbitrator’s costs and fees, and Bulgakova did not show why litigating in the Southern District of Florida would be substantially less expensive than arbitrating in Monaco, which is closer to Ukraine. This is the first decision reported. By the second decision reported, dated 26 February 2010, the district court, again per Seitz, denied Bulgakova’s motion for reconsideration, which was based on a case (Thomas) decided by the Eleventh Circuit shortly after the first decision above.2 In Thomas, the Eleventh Circuit held that a similar arbitration provision to the one at issue here was void on grounds of public policy because the plaintiff’s Seaman’s Wage Act claims could not be vindicated under Panamanian substantive law, which applied pursuant to the arbitration provision. The district court noted that Thomas expressly recognized the continued validity of the Bautista decision. Also, in Thomas only the plaintiff’s claim under the Seaman’s Wage Act met the Convention’s jurisdictional requirements and could be referred to arbitration. The Eleventh Circuit therefore held that the plaintiff would likely receive no award on his US statutory claim, on the basis of which he could maintain an action for enforcement of the award in which his affirmative defense could be heard. Differently, in Bautista the plaintiffs’ Jones Act negligence and unseaworthiness claims survived the Convention’s threshold jurisdictional inquiry. As there was no indication that the arbitration law of the Philippines (where the arbitration was to be held) would bar arbitration of the general maritime claim of unseaworthiness, the Court of Appeals held that arbitration continued to afford meaningful relief for the plaintiffs’ grievances. In the present case, the nature of Bulgakova’s claims – both US statutory claims and general maritime claims – did not suggest that she would not receive an award and be deprived of the opportunity of raising the public policy defense at the enforcement stage. Hence, her public policy claim was premature.
A detailed report of these decisions is available online at
2. Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009), reported in Yearbook XXXIV (2009) pp. 1136-1150 (US no. 674).
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681. United States Court of Appeals, Ninth Circuit, 2 October 2009, No. 07-36011
Parties: Appellant/Plaintiff: Romeo Balen (Philippines) Appellee/Defendant: Holland America Line Inc. (nationality not indicated)
Published in: 2009 U.S. App. LEXIS 21632; 187 L.R.R.M. 2145
Articles: II(3)
Subject matters: – arbitrability of seamen’s wage litigation – arbitration agreement “null and void” on public policy grounds (no) – nonsignatory defendant may rely on arbitration clause
Topics: [1]-[14] = ¶ 223; [15]-[23] = ¶ 220; [24]-[25] = ¶ 214; [26]-[31] = ¶ 217
Summary
The Court affirmed its earlier jurisprudence that the provision in the Federal Arbitration Act (FAA) exempting “contracts of employment of seamen” from domestic arbitration does not apply to arbitration agreements that would otherwise fall within the scope of the New York Convention, so that seamen’s wage claims are arbitrable. Claimant failed to prove that the arbitration agreement was null and void on grounds of public policy, as he failed to show that the public policy regarding the proper treatment of seafarers is stronger than the strong federal public policy favoring (international) arbitration. It was irrelevant that the applicable collective bargaining agreement had been signed for defendant by a licensed Philippine employment agency, because Philippine law requires corporations to use such employment agencies.
In September 2005, Romeo Balen entered into an employment contract with Holland America Line Inc. (HAL) to work as beverage attendant aboard one of HAL’s vessels. The Collective Bargaining Agreement (CBA) then in force included the Gratuity and Beverage Service Charge Plan (the Gratuity Plan) introduced by HAL in 2004. Under the Gratuity Plan, HAL would bill passengers for a daily gratuity charge to be shared among the participating employees and guarantee a minimum gratuity amount for each person, regardless
478 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 681 of actual payment by passengers; with the increased gratuity compensation, HAL set a lower base pay rate. The Gratuity Plan provided that employees reimburse HAL in monthly installments for, inter alia, the travel expenses incurred by HAL for their deployment overseas. When entering into his employment contract, Balen signed a document acknowledging the terms of the Gratuity Plan. The CBA including the Gratuity Plan had been concluded between HAL – acting through its agent, United Philippine Lines, Inc. (UPL) – and the Filipino seamen’s union (Associated Marine Officers’ and Seamen’s Union of the Philippines – AMOSUP). The CBA had been sent to the Philippine Overseas Employment Administration (POEA) – a division of the Department of Labor and Employment of the Republic of the Philippines that regulates the employment of Filipino seamen by foreign corporations – which marked it with a “received” stamp and the attached payscale with an “approved” stamp. The CBA incorporated the POEA Standard Terms and Conditions, which provide at Sect. 29 for arbitration of disputes in the Philippines. In March 2006, Romeo Balen was discharged because he could not repay to HAL US$ 2,119 in travel expenses. On 27 April 2007, he commenced an action in the United States District Court for the Western District of Washington, claiming, inter alia, that HAL violated the Seamen’s Wage Act. On 20 November 2007, the district court granted HAL’s motion to compel arbitration. The United States Court of Appeals for the Ninth Circuit, before Kim McLane Wardlaw, Richard A. Paez, and N. Randy Smith, CJJ, in an opinion by N. Randy Smith, affirmed the lower court’s decision. The Court first reiterated its earlier jurisprudence (see Rogers, below) that the provision in the Federal Arbitration Act (FAA) exempting “contracts of employment of seamen” from arbitration applies only to domestic arbitration and does not apply to arbitration agreements that would otherwise fall within the scope of the 1958 New York Convention. Balen argued that the arbitration agreement in the Standard Terms was void because it inadmissibly required him to abandon his Seamen’s Wage Act rights. The Court noted that the provision of the US Code relied on by Balen (Sect. 10317) does not apply to foreign vessels, and that Balen could bring his Wage Act claims in the arbitration proceedings. Nor was the arbitration agreement null and void on grounds of public policy, as Balen failed to show that the public policy regarding the proper treatment of seafarers is stronger than the strong federal public policy favoring arbitration, including international arbitration. The Court of Appeals finally dismissed Balen’s contention that there was no valid arbitration agreement between the parties because HAL was not a party to the CBA and the CBA had not been approved by the POEA. The Court noted
Yearbook Comm. Arb’n XXXV (2010) 479 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 that the CBA was expressly between AMOSUP and HAL, represented by UPL; it was irrelevant that the CBA was signed by UPL, as corporations are obliged under the law of the Philippines to use employment agencies licensed by the POEA to employ Filipino seamen. Also, Sect. 29 of the Standard Terms provides for arbitration without limiting its application to only those agreements approved by the POEA.
A detailed report of this decision is available online at
480 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 682
682. United States Court of Appeals, Second Circuit, 8 October 2009, Docket Nos. 07-4974-cv(L); 08-6184-cv(CON); 08-6188-cv(CON)
Parties: Petitioner/Appellee: Telenor Mobile Communications AS (Norway) Respondent/Appellant: Storm LLC (Ukraine) Appellants: (1) Altimo Holdings & Investments Limited (nationality not indicated); (2) Alpren Limited (nationality not indicated); (3) Hardlake Limited (nationality not indicated)
Published in: 584 Federal Reporter, Third Series (2nd Circuit) p. 396 et seq.; 2009 U.S. App. LEXIS 22156
Articles: III; V(1)(a); V(2)(b)
Subject matters: – manifest disregard of the law – foreign court decision on validity of arbitration agreement is collusive and non-binding – public policy and violation of foreign judgment – narrow concept of public policy
Topics: [4] = ¶ 301; [5]-[6] = ¶ 501; [7] = ¶ 503; [8]-[10] = ¶ 505; [11]-[12] + [14]-[22] + [27]-[32] = ¶ 524 (manifest disregard of the law); [23]-26] = ¶ 524 (enforcement would violate foreign judgment); [26] = ¶ 518
Summary
The Court affirmed the district court’s decision enforcing the award. It held that the arbitrators did not manifestly disregard the law by failing to give preclusive effect to Ukrainian court decisions that the parties’ dispute was not arbitrable because the respondent’s representative lacked authority to sign the underlying contract. The arbitral tribunal had “colorable reasons” for treating the Ukrainian decisions as not binding, as it found those decisions to be collusive. Nor did the arbitrators manifestly disregard the law because they failed to require a jury trial to determine the arbitration agreement’s existence and validity – and consequently, the underlying contract’s arbitrability – pursuant to the Second Circuit’s 2001 decision in Sphere Drake. The party concerned failed to bring sufficient evidence that there was a dispute as to the validity of the arbitration agreement, as the person who
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signed the contract on its behalf had the apparent authority to do so under the applicable New York law.
The facts of this case are also reported in Yearbook XXXII (2007) at pp. 943-946 (US no. 608) and Yearbook XXXIII (2008) at pp. 1041-1044 (US no. 630). On 30 January 2004, Telenor Mobile Communications AS (Telenor) and Storm LLC (Storm) concluded a Shareholders Agreement under which Telenor was the majority shareholder and Storm the minority shareholder of Kyivstar G.S.M. (Kyivstar), a Ukrainian telecommunications venture. Storm held the shares of Kyivstar for its ultimate corporate parent, Altimo Holdings & Investment Limited (Altimo). Altimo owned Storm through, inter alia, Alpren Limited (Alpren). The Shareholders Agreement was signed on Storm’s behalf by its then general director, Mr. Nilov. It contained a clause providing for arbitration of disputes by three arbitrators in New York. A dispute arose between the parties when Storm allegedly violated the Shareholders Agreement by failing to participate in the management of Kyivstar. On 7 February 2006, Telenor commenced arbitration in New York pursuant to the arbitration clause in the Shareholders Agreement. Storm participated in the arbitration by appointing an arbitrator. Alpren commenced proceedings against Storm in the Ukrainian courts, seeking a declaration that the Shareholders Agreement was invalid (the Alpren litigation). Telenor was not named as a defendant in the suit nor was it advised of its pendency. Storm appeared in the proceedings through its new general director, Vadim Klymenko. The Ukrainian court granted a declaration that the Shareholders Agreement was invalid. An appellate court affirmed the lower court’s decision and specified that not only the Agreement but also the arbitration clause therein was invalid. In the US arbitration, the panel issued a Partial Final Award denying Storm’s defense that Nilov lacked the authorization to sign the Shareholders Agreement in 2004. In reply, Storm filed a petition in New York state court to enjoin the arbitration from continuing. Telenor removed the action to the United States District Court for the Southern District of New York under the 1958 New York Convention. The district court denied Storm’s petition, holding that it could not review an interlocutory award. Alpren then obtained a ruling in Ukraine barring Klymenko from participating in the arbitration. The Ukrainian court also enjoined Storm and Telenor from proceeding with the arbitration under threat of criminal sanctions. Telenor sought relief from the US district court, counterpetitioning to compel arbitration and seeking an anti-suit injunction against Storm, Alpren and Altimo to prevent further court litigation in Ukraine. On 18 December 2006, the
482 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 682 district court granted Telenor’s motion and enjoined Storm, Altimo and Alpren from bringing or continuing any legal action in Ukraine “that would disrupt, delay or hinder in any way the arbitration proceedings between Telenor and Storm in New York”. This decision is reported in Yearbook XXXII (2007) at pp. 943-958 (US no. 608). On 1 August 2007, the arbitral tribunal issued a unanimous Final Award granting various relief to Telenor. Telenor petitioned the district court to confirm the Final Award; Storm cross-moved to vacate it, arguing that enforcement would violate public policy, that the arbitrators exceeded their authority and that there was an incapacity and a violation of due process as a consequence of the Ukrainian ruling enjoining Klymenko from participating in the New York arbitration. Storm also argued that the award was in manifest disregard of the law. On 2 November 2007, the district court granted Telenor’s motion and dismissed Storm’s. This decision is reported in Yearbook XXXIII (2008) at pp. 1041-1077 (US no. 630). The United States Court of Appeals for the Second Circuit, before Sack and Parker, CJJ, and Timothy C. Stanceu, Judge of the United States Court of International Trade, sitting by designation, in an opinion by Sack, affirmed the enforcement decision. The Court denied Storm’s argument that the arbitral tribunal manifestly disregarded the law by failing to give preclusive effect to the Ukrainian court judgments holding that the Shareholders Agreement was not arbitrable because Nilov, who signed it on behalf of Storm, was not authorized to do so. The Court held that the arbitrators had “colorable reasons” for rejecting this argument: first, though not using this term for understandable reasons, the arbitral tribunal found that the judgments in the Alpren litigation were collusive and therefore not binding on the tribunal; second, Nilov had apparent authority under the applicable New York law. Storm also argued that its compliance with the award would entail actions that would place it in contempt of the Ukrainian courts, contrary to New York public policy. The Court disagreed, reasoning that Art. V(2)(b) of the New York Convention must be construed very narrowly to encompass only violations of the most basic notions of morality and justice. This was not the case here. Also, noted the Court, Storm brought the Ukrainian judgments upon itself through use of “highly questionable litigation tactics”.
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Nor did the arbitrators and the district court manifestly disregard the Second Circuit’s 2001 decision in Sphere Drake,1 where it was held that the issue whether the dispute between the parties could have been heard in arbitration should be decided in court rather than arbitration. The Court of Appeals concluded that Storm failed to present sufficient evidence of a dispute as to the existence and validity of the arbitration agreement to warrant a jury trial under Sphere Drake. In particular, Storm did not provide sufficient evidence to support its allegation that Nilov lacked apparent authority to execute the agreement Storm’s behalf.
A detailed report of this decision is available online at
1. Sphere Drake Ins. Ltd. v. Clarendon Nat’l Ins. Co., 263 F.3d 26 (2d Cir. 2001), reported in Yearbook XXVII (2002) pp. 700-709 (US no. 375).
484 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 683
683. United States Court of Appeals, Third Circuit, 15 October 2009, No. 08-2924
Parties: Appellant: Century Indemnity Company (nationality not indicated) Appellee: Certain Underwriters at Lloyd’s, London, Subscribing to Retrocessional Agreement NOS. 950548, 950549, and 950646 (nationality not indicated)
Published in: 584 Federal Reporter, Third Series (3rd Circuit 2009) p. 513 et seq.; 2009 U.S. App. LEXIS 22619
Articles: II(1); II(3); V(2)(b) (by implication)
Subject matters: – incorporation of arbitration clause by reference – interpretation of arbitration agreement according to ordinary principles of contract formation – scope of arbitration clause – presumption in favor of dispute falling within scope of arbitration clause – arbitrator’s “misconduct” and violation of due process (fair hearing)
Topics: [12]-[18] + [21]-[44] = ¶ 217 + ¶ 220; [19]-[20] + [45] + [106] = ¶ 209; [107]-[108] = ¶ 201; [110]- [122] = ¶ 523
Summary
The district court’s rulings first compelling arbitration and then denying a petition to vacate the ensuing award were affirmed. The Third Circuit held preliminarily that the presumption of arbitrability applicable to the determination whether a dispute falls within the scope of the arbitration agreement “probably” does not apply to the determination whether the parties agreed to arbitrate. However, this point need not be decided here because the Court held that there was a valid agreement to arbitrate even without applying this presumption. Also, arbitration agreements need not be “express” and “unequivocal” to be valid and enforceable; even if this requirement was not rejected, as it likely was, by the Supreme Court in First Options in 1995, the language of the Federal Arbitration Act, which provides that written arbitration agreements are valid “save upon such grounds as exist at law
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or in equity for the revocation of any contract” excludes additional threshold limitations placed on arbitration: only ordinary state-law principles on the formation of contracts govern the issue of whether the parties have agreed to arbitrate. In the case at issue, the retrocessional agreements between the parties referred to and validly incorporated by reference reinsurance treaties containing an arbitration clause, and the dispute at hand fell within the scope of that clause. Further, the district court correctly dismissed the petition to vacate the award: the arbitrators were not guilty of misconduct affecting a party’s right to a fair hearing because they refused to hear extrinsic evidence that they deemed irrelevant and inadmissible, in particular because the retrocessional agreements expressly relieved them from any obligation to follow the strict rules of law.
Argonaut Insurance Company (Argonaut) issued insurance policies to Western Asbestos Company and Western MacArthur Company (collectively, Western), to cover losses from Western’s distribution of asbestos products. Argonaut then entered into three reinsurance treaties with Insurance Company of North America (INA), the predecessor of Century Indemnity Company (Century). The reinsurance treaties contained a clause referring disputes to arbitration. Century in turn entered into retrocessional agreements Nos. 950548, 950549 and 950646 with Certain Underwriters at Lloyd’s, London (Lloyd’s), pursuant to which Lloyd’s agreed to pay 90 percent of the losses in return for 90 percent of the premiums that accrued to Century under the corresponding reinsurance treaties. The retrocessional agreements between Century and Lloyd’s referred to and incorporated “all” of the reinsurance treaties between Argonaut and Century. They also contained a service-of-suit clause providing that all matters arising from disputes brought pursuant to the service-of-suit clause “shall be determined in accordance with the law and practice of the Court” where the action was brought. Starting in the late 1970s, persons allegedly exposed to asbestos filed injury claims against Western. Western sought coverage from Argonaut for coverage on the insurance policies; Argonaut refused payment. Declaratory judgment litigation between Western and Argonaut followed over the scope of the policies’ coverage. In 2001, Century reimbursed Argonaut approximately US$ 2.2 million for its litigation expenses; it then turned to Lloyd’s for Lloyd’s 90 percent share of these costs. Lloyd’s refused to pay, contending that Century should not have paid Argonaut for the declaratory judgment litigation expenses. Century commenced an action in the Court of Common Pleas in Philadelphia County, claiming the amount allegedly owed under the retrocessional agreements. Lloyd’s removed the case to federal court under the 1958 New York Convention and its implementing legislation – Chapter 2 of the Federal Arbitration Act (FAA) – and sought to compel arbitration, asserting that the retrocessional agreements incorporated the reinsurance treaties’ arbitration clauses. On 18 May 2006, the United States District Court for the Eastern
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District of Pennsylvania granted Lloyd’s motion to compel arbitration. On 12 December 2007, an arbitral tribunal issued an award in favor of Lloyd’s. Century then moved in the Eastern District of Pennsylvania to vacate the award. On 30 May 2008, the district court denied the motion to vacate. Century appealed. The United States Court of Appeals for the Third Circuit, before McKee, Hardiman and Greenberg, CJJ, in an opinion by Greenberg, held that the district court (1) properly compelled arbitration on 18 May 2006 because the retrocessional agreements incorporated the arbitration clause in the reinsurance treaties and the dispute fell within the scope of the arbitration clause and (2) properly denied Century’s motion to vacate the award on 30 May 2008 because the contention that the arbitrators deprived Century of a fair hearing by excluding certain evidence that Century proposed to introduce was unfounded. The Court of Appeals noted at the outset that a court must compel arbitration if it ascertains that the parties have concluded a valid agreement to arbitrate and their dispute falls within the scope of that agreement. The Court added that two preliminary issues arise in this respect. First, while it is accepted that a presumption in favor of arbitration applies when it must be determined whether a dispute falls within the scope of the arbitration agreement, it is uncertain whether this presumption also applies to the issue whether the parties have agreed to arbitrate. The Court of Appeals reasoned that the presumption “probably” does not apply, as held by other Circuits. However, it did not reach a definite conclusion on this point as even without applying the presumption it deemed that the parties entered into a valid agreement to arbitrate in the present case. Second, the Third Circuit held in earlier case law that agreements to arbitrate must be “express” and “unequivocal” in order to be valid and enforceable. The Court noted that it had used this language in two different ways: either to explain that referral to arbitration is precluded when there is a genuine issue of fact as to whether there is an agreement to arbitrate, or as a substantive standard applying to the determination of an arbitration agreement’s enforceability as a general matter. Here, there was no genuine issue of fact concerning the formation of the arbitration agreement; rather, Century and Lloyd’s disputed the legal effect of uncontested contractual language, that is, they disagreed on the issue of contract interpretation whether the arbitration clause in the reinsurance treaties was incorporated into the retrocessional agreements. As to the “express” and “unequivocal” language as a substantive standard, which was based on the Third
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Circuit’s 1994 decision in First Options,1 the Court of Appeals reasoned that this standard was probably rejected outright by the Supreme Court on certiorari in that case in 1995. However, even if it was not, the Court of Appeals held that it is at any event precluded by the language of the FAA – which provides that written arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”. Hence, only ordinary state-law principles on the formation of contracts govern the issue of whether the parties have agreed to arbitrate. The Court of Appeals then applied Pennsylvania law – which it found to be applicable pursuant to the choice of law in the service-of-suit clause in the retrocessional agreements – to examine whether Century and Lloyd’s had concluded a valid arbitration agreement in the present case. It concluded that “the most reasonable, probable, and natural construction of the incorporation- by-reference clause of the retrocessional agreements”, which provided that the clauses incorporated “all” of the reinsurance treaties’ terms and provisions, “is to apply the clause to include the arbitration provision of the reinsurance treaties”. Further, the dispute between the parties fell within the scope of the arbitration agreement. The Court of Appeals took into account the presumption of arbitrability, which applied here because the arbitration clause was broad, but added that it would reach the same result – that the dispute between Century and Lloyd’s over Lloyd’s obligation with respect to the declaratory judgment expenses fell within the scope of their arbitration agreement – “with or without the presumption of arbitrability”. The Court of Appeals held that as a consequence the district court properly compelled Century to submit the dispute to arbitration. The Court finally dismissed Century’s motion to vacate the award. Century argued that the panel erred in refusing to hear extrinsic evidence that Century sought to submit regarding reinsurance industry custom and practice, the parties’ course of dealing and Lloyd’s own historical corporate practice of paying as well as seeking reimbursement for declaratory judgment expenses under reinsurance contracts covering expenses. Century claimed that this exclusion deprived it of a fair hearing and therefore required vacating the award. The Court of Appeals disagreed. It reasoned that the FAA allows district courts to vacate awards only under narrow circumstances, one of such circumstances being where arbitrators are guilty of misconduct in refusing to hear evidence pertinent and material to the controversy and their refusal affects
1. First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995), reported in Yearbook XXII (1997) pp. 278-286.
488 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 683 the rights of a party in such manner as to deprive that party of a fair hearing. In the present case, the arbitrators refused to admit Century’s extrinsic evidence because they deemed it to be irrelevant and inadmissible. The Court also noted that the reinsurance treaties incorporated into the retrocessional agreements expressly relieved the arbitrators of “all judicial formalities” and any obligation to follow “the strict rules of law”. Considering the arbitrators’ wide latitude in making evidentiary determinations, the Court of Appeals could not find that there was a statutory basis to vacate the award. The district court therefore did not err in refusing Century’s vacatur petition.
A detailed report of this decision is available online at
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684. United States Court of Appeals, Third Circuit, 28 October 2009, Nos. 08-3442, 08-3631
Parties: Plaintiff/Appellant: Alexander Razo (Philippines) et al. Defendants/Appellees: (1) Nordic Empress Shipping Ltd. (nationality not indicated); (2) Royal Caribbean Cruises Ltd. a/k/a Royal Caribbean Cruises, Ltd., d/b/a Royal Caribbean Cruise Line, d/b/a Royal Caribbean International Inc. (Liberia); (3) Royal Caribbean Cruises Inc. (nationality not indicated) et al.
Published in: 2009 U.S. App. LEXIS 23713
Articles: II(3)
Subject matters: – requirements for referral to arbitration (in general) – seamen’s employment contracts are commercial contracts subject to the 1958 New York Convention – Jones Act claims
Topics: ¶ 214 + ¶ 223
Summary
The Court affirmed the district court’s decision compelling arbitration, holding that the jurisdictional requirements for referral under the New York Convention were met. In particular, the arbitration clause in the POEA Standard Terms was validly incorporated into the seafarer’s contract and did not conflict with a provision therein that only dictated the venue of the arbitration; also, seamen’s employment contracts are “commercial” contracts.
The facts of this case are also reported in Yearbook XXXIII (2008) at pp. 1187- 1189 (US no. 647). On 27 January 2004, Alexander Razo signed a contract of employment with Royal Caribbean Cruises Ltd (Royal Caribbean) to work on board the cruise ship M/V EMPRESS OF THE SEAS. Royal Caribbean was the operator and bareboat charterer of the vessel; Nordic Empress Shipping Ltd (Nordic) was its owner. Razo was employed under a collective bargaining
490 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 684 agreement (CBA) between Royal Caribbean and the Norwegian Seamen’s Union. The employment contract was a Philippine Overseas Employment Administration (POEA) standard contract incorporating the Standard Terms and Conditions Governing the Employment of Filipino Seafarers On Board Ocean-Going Vessels (POEA Standard Terms), which provide for arbitration of disputes in the Philippines and for the application of the laws of the Philippines. Sect. 5 of the POEA Standard Terms provides that claims and disputes arising from the employment contract “shall be brought ... exclusively before the proper courts in Metro Manila”. On 7 September 2004, Razo was injured on board the vessel. On 6 September 2007, Razo commenced an action in a state court in New Jersey asserting claims under the Jones Act against Royal Caribbean and Nordic (collectively, the defendants). On 28 November 2007, the defendants petitioned for removal to federal court and sought to compel arbitration of the dispute. On 24 July 2008, the United States District Court for the District of New Jersey granted the motion as to Royal Caribbean, finding that all jurisdictional requirements for referral to arbitration under the 1958 New York Convention were met, but remanded Razo’s claims against Nordic to state court, holding that there was undisputedly no arbitration agreement in writing between Razo and Nordic. The district court also held that although Jones Act claims in respect of personal injury of a seaman are generally not removable, the statute implementing the New York Convention in the United States, Chapter II of the Federal Arbitration Act (the Convention Act), does not recognize an exception for foreign seamen’s employment contracts.This decision is reported in Yearbook XXXIII (2008) pp. 1187-1198 (US no. 647). The United States Court of Appeals for the Third Circuit, before McKee, Chagares, and Nygaard, CJJ, in an opinion by Nygaard, affirmed the district court’s decision, dismissing Razo’s argument that the claims were not removable pursuant to the Savings to Suitors clause of 28 U.S.C. Sect. 1333 and the anti- removal statute applicable to Jones Act and Federal Employer’s Liability Act cases, and that no arbitration agreement existed between Razo and Royal Caribbean at the time of Razo’s injury. The Court of Appeals first agreed with the district court’s finding that the arbitration clause in the POEA Standard Terms was validly incorporated into Razo’ contract and that the arbitration clause did not conflict with Sect. 5 of the contract, which in the opinion of the Court of Appeals merely dictated the venue of the arbitration. Razo also contested the district court’s holding that the four requirements for referral to arbitration under the Convention were met. The Court of Appeals
Yearbook Comm. Arb’n XXXV (2010) 491 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 disagreed, holding, as the district court did, (1) that an arbitration agreement had been validly incorporated into Razo’s contract, and (2) that it was beyond question that the Philippines, the place in which arbitration was to be ordered, is a New York Convention signatory and (3) that Razo was not a US citizen. Also, the district court was correct in finding (4) that seamen’s employment contracts are “commercial” contracts. The Court of Appeals found that the district court correctly ruled that Razo’s reliance on the Jones Act and the Federal Employer’s Liability Act was misplaced, reasoning that the Jones Act does not apply because the Convention Act provides a separate basis for jurisdiction and encompasses seamen’s employment contracts; because the Jones Act does not apply, the provisions of the Federal Employer’s Liability Act are not implicated.
A detailed report of this decision is available online at
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685. United States District Court, District of Utah, Central Division, 9 November 2009, Case No. 2:08-CV-902-TC
Parties: Plaintiff: William Belcourt (nationality not indicated) Defendants: (1) Grivel, srl (Italy); (2) Gioachino Gobbi (nationality not indicated)
Published in: 2009 U.S. Dist. LEXIS 105133
Articles: II(3)
Subject matters: – waiver of arbitration by substantial participation in court proceedings – waiver of right to arbitration falls under “null and void” exception
Topics: ¶ 220
Summary
A motion to compel arbitration based on an arbitration clause in the contracts between the parties was denied because the defendants, which sought to rely on the arbitration clause, actively engaged in the litigation before the court in a manner that was inconsistent with the right to arbitrate. The court found, therefore, that they had waived their right to compel arbitration, holding that such waiver falls under the “null and void” exception in Art. II(3) of the 1958 New York Convention.
William Belcourt and a partner, Mark Twight, were the owners of GNA Corporation (GNA), a company created by Belcourt and Twight to be the North American distributor for Grivel, srl (Grivel), a mountaineering equipment firm owned by Gioachino Gobbi (collectively, the Defendants). The parties entered into a series of contracts, which contained, inter alia, an agreement to arbitrate disputes arising out of the subject matter covered by the contracts. On 20 November 2008 Belcourt commenced the present action in the Utah district court, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, negligent or intentional misrepresentation, breach of fiduciary duty and interference with prospective economic advantage. On 4 March 2009, a default certificate was filed; on 6 March 2009, the Defendants filed a motion to set aside the default and, on 21 April 2008, the court granted
Yearbook Comm. Arb’n XXXV (2010) 493 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 the Defendants’ motion. On 4 May 2009, the Defendants filed (1) an answer, in which they specifically consented to jurisdiction and venue in the District of Utah; (2) a third-party complaint, which brought in GNA and Twight as third- party defendants (the Third-Party Defendants) and (3) a counterclaim. Several other procedural steps followed. On 10 August 2009, the Defendants filed a motion to compel arbitration based on the arbitration clause in the contracts. The United States District Court for the District of Utah, Central Division, per Tena Campbell, Chief Judge, denied the Defendants’ motion. The court noted the strong federal policy favoring arbitration agreements and the very narrow scope of the inquiry that the court performs when dealing with a request to refer an international dispute to arbitration, which is limited to ascertaining whether the arbitration agreement is “null and void, inoperative or incapable of being performed”. The Tenth Circuit has held that this exception must be narrowly construed; it has not addressed the question whether waiver falls under the “null and void” exception. However, the court noted that other district courts have dealt with this specific matter and have concluded that because the right to arbitration is a contract right, it, just like any other contract right, can be waived. The court agreed with this conclusion. Applying the “well-established” test under domestic US law for determining whether the right to arbitration has been waived, the district court then held that the Defendants waived their right in the present case for the following reasons: (1) their actions were inconsistent with the right to arbitrate, as they consented to jurisdiction and venue in their answer, appeared before the court at the hearing to set aside the default certificate and made numerous filings; (2) some important litigation steps had been taken before the court in the four months following the setting aside of the default certificate; (3) the Defendants filed both a counterclaim and a third-party complaint and (4) the delay in invoking the arbitration clause prejudiced the opposing parties as it led them to believe that the Defendants planned to litigate this matter in the Utah court, causing them to spend significant time and resources for their defense. Further, even after the motion to compel arbitration the Defendants indicated a willingness to proceed in the district court provided Italian law was applied to the claims.
A detailed report of this decision is available online at
494 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 686
686. United States Court of Appeals, Fifth Circuit, 9 November 2009, No. 06-30262
Parties: Plaintiff/Appellee: Safety National Casualty Corporation (nationality not indicated) Intervenor Plaintiff/Appellee: Louisiana Safety Association of Timbermen – Self Insurers Fund (US) Defendant/Appellant: Certain Underwriters at Lloyd’s, London (nationality not indicated) et al. Plaintiff/Appellant: Certain Underwriters at Lloyd’s, London (nationality not indicated) Defendants/Appellees: (1) Safety National Casualty Corporation (nationality not indicated); (2) Louisiana Safety Association of Timbermen (US)
Published in: 587 Federal Reporter, Third Series (5th Circuit) p. 714 et seq.
Articles: II(3)
Subject matters: – invalidity of arbitration clause because of violation of state law on insurance – 1958 New York Convention not reverse preempted by state law on insurance
Topics: ¶ 223
Summary
This case held that the 1958 New York Convention is not reverse preempted by a Louisiana statute prohibiting arbitration of insurance disputes. The Court found that the McCarran-Ferguson Act – which does not permit an Act of Congress to be construed to invalidate state law on insurance unless the Act of Congress specifically relates to the insurance business – does not apply to the 1958 New York Convention. Even if the Convention is not self-executing and requires enabling legislation, the term “Act of Congress” in the McCarran-Ferguson Act does not encompass a non-self-executing treaty that has been implemented by congressional legislation, because implementing legislation does not replace the treaty, which remains an international agreement negotiated by the Executive Branch and does not become an Act of Congress. Also, when examining whether the Louisiana insurance statute is superseded, the court must construe the Convention (a treaty) rather than its implementing legislation
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(Chapter 2 of the Federal Arbitration Act – the Convention Act) because the Convention Act operates with reference to the contents of the Convention. Concerns that a state’s regulatory policies regarding insurance contracts may not be recognized in an international arbitration may be addressed at the award-enforcement stage.1
The facts of this case are also reported in Yearbook XXXIV (2009) at pp. 986- 987 (US no. 657). Louisiana Safety Association of Timbermen-Self Insurers Fund (LSAT), a self-insurance fund, provided workers’ compensation insurance for its members. Certain Underwriters at Lloyd’s, London (the Underwriters) provided excess insurance to LSAT by reinsuring certain claims. Each reinsurance agreement between the Underwriters and LSAT contained an arbitration clause. LSAT assigned its rights under the reinsurance agreements to Safety National Casualty Corporation (Safety National). The Underwriters refused to recognize the assignment, contending that LSAT’s obligations were non-assignable. Safety National sued the Underwriters in the United States District Court for the Middle District of Louisiana. The Underwriters filed a motion to stay proceedings and compel arbitration. The district court granted the motion. The Underwriters then initiated arbitration against Safety National and LSAT. When the parties could not agree upon the manner of selection of the arbitrators, the Underwriters filed a motion in the district court to lift the stay in order to join LSAT as a party and to compel arbitration to resolve the dispute about how to compose the arbitral tribunal. In response, LSAT moved to intervene, lift the stay and quash arbitration, arguing that the arbitration agreements in the reinsurance agreements were unenforceable under Louisiana law. The district court granted LSAT’s motion to quash arbitration, holding that although the 1958 New York Convention would otherwise require arbitration, a Louisiana statute that has been interpreted to prohibit arbitration agreements in insurance contracts was controlling. On 29 September 2008, the United States Court of Appeals for the Fifth Circuit, before King, DeMoss and Owen, CJJ, in an opinion by Priscilla R. Owen, reversed the lower court’s decision. Under the McCarran-Ferguson Act, a 1945 federal act regulating insurance, no “Act of Congress” shall be construed to supersede state law regulating the business of insurance. The Court held, however, that the New York Convention is not an Act of Congress within the meaning of the McCarran-Ferguson Act, even if it is not self-executing and requires enabling legislation passed by Congress. Hence, the McCarran-Ferguson Act does not cause the Louisiana statute at issue to reverse-preempt the
1. Note General Editor. The Supreme Court of the United States denied certiorari in this case on 4 October 2010.
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Convention. This decision is reported in Yearbook XXXIV (2009) at pp. 986- 999 (US no. 657). The 29 September 2008 decision was vacated when rehearing en banc was granted. By the present en banc decision, the Fifth Circuit affirmed its earlier decision by a majority (Priscilla R. Owen, CJ, with whom Jones, Chief Judge, King, Jolly, Davis, Wiener, Barksdale, DeMoss, Benavides, Stewart, Dennis, Prado, Southwick and Haynes, CJJ, concurred) and remanded the case to the district court. The Court again noted that the McCarran-Ferguson Act allows state law to reverse-preempt an otherwise applicable federal statute because it does not permit an “Act of Congress” to be “construed to invalidate, impair, or supersede” state law unless the Act of Congress “specifically relates to the business of insurance”. It was undisputed that the New York Convention and its implementing legislation, Chapter 2 of the Federal Arbitration Act (the Convention Act), do not relate to insurance. Nonetheless, the Court of Appeals held that the relevant Louisiana statute – La. Rev. Stat. Ann. Sect. 22:629 – does not reverse-preempt the Convention under the McCarran-Ferguson Act because (1) a treaty such as the Convention is not an “Act of Congress” within the meaning of that term in the McCarran-Ferguson Act, and (2) the Court had to “construe” the treaty – that is, the Convention rather than the Convention Act – to determine the parties’ respective rights and obligations. The Court of Appeals first dealt with LSAT’s argument that the New York Convention is not self-executing and can only have effect in the US courts because of the enabling legislation passed by Congress (the Convention Act), which is an Act of Congress. Hence, the McCarran-Ferguson Act applies and the Convention is reverse preempted by the Louisiana insurance statute. The Court disagreed, holding that even if the Convention is a non-self-executing treaty requiring legislation to implement its provisions in US courts, “that does not mean that Congress intended an Act of Congress, as that phrase is used in the McCarran-Ferguson Act, to encompass a non-self-executing treaty that has been implemented by congressional legislation”. Implementing legislation does not replace a treaty, which remains an international agreement negotiated by the Executive Branch and ratified by the Senate, not by Congress: the treaty does not become an Act of Congress. The Court added that its conclusion is supported by the Convention Act, which provides that Convention proceedings shall be deemed to arise “under the laws and treaties of the United States”. Hence, even in the act of Congress that was arguably necessary to implement the Convention in domestic courts,
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Congress recognized that jurisdiction over actions to enforce rights under the Convention did not arise solely under an “Act of Congress”. The Court of Appeals then noted that the Convention Act operates with reference to the contents of the Convention and “directs us to the treaty it implemented”. Hence, when examining whether the Louisiana statute is superseded the Court must construe a treaty (the New York Convention) rather than an Act of Congress (the Convention Act). This conclusion was in the Court’s opinion “bolstered by the ... national policy favoring arbitration of international commercial agreements”. Though the McCarran-Ferguson Act embodies a strong policy that the states have an interest in the regulation of the business of insurance, concerns that a state’s regulatory policies regarding such contracts may not be recognized in an international arbitration are not a basis for refusing to require that an arbitration go forward. The “national courts of the United States will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement” of public-interest law has been addressed. Edith Brown Clement, CJ, filed a concurring opinion, in which she suggested that Art. II of the Convention is self-executing by its plain meaning and preempts the Louisiana statute. Jennifer Walker Elrod, CJ – joined by Jerry E. Smith and Emilio M. Garza, CJJ – filed a dissenting opinion, in which she argued that the New York Convention is not self-executing, so that only its implementing legislation is capable of preempting state law in US courts. As the Convention Act implementing the Convention is an Act of Congress that does not specifically relate to the business of insurance, the Convention Act is reverse-preempted by the Louisiana statute by operation of the McCarran-Ferguson Act.
A detailed report of this decision is available online at
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687. United States District Court, Southern District of New York, 13 November 2009, 06 Civ. 13107 (LAK)
Parties: Plaintiff: China National Chartering Corp. n/k/a China National Chartering Co., Ltd. (nationality not indicated) Defendant: Pactrans Air & Sea, Inc. (nationality not indicated)
Published in: 2009 U.S. Dist. LEXIS 106074
Articles: VI
Subject matters: – discretion to stay enforcement proceedings pending annulment proceedings – counsel fees
Topics: ¶ 601
Summary
The court refused to stay enforcement pending an annulment action against the award in the country of rendition, China, finding that the balance of competing interests elaborated by the Second Circuit in Europcar weighed in favor of enforcement. In particular, the dispute had already been fully arbitrated and the annulment action was in its early stages.
By a charterparty of 24 April 2006, China National Chartering Corp. (China National) chartered a vessel to Pactrans Air & Sea, Inc. (Pactrans) for the transport of certain goods. The charterparty contained a clause for arbitration of disputes at the China Maritime Arbitration Commission (CMAC). A dispute arose between the parties when China National claimed that it was damaged by Pactrans and commenced CMAC arbitration as provided for in the charterparty. On 31 March 2009, a CMAC arbitral tribunal issued a final award in China National’s favor in the amount of US$ 543,814.74 plus interest and fees to be paid within thirty days. On 17 July 2009, China National sought enforcement of the CMAC award in the United States. Pactrans opposed enforcement arguing, inter alia, that it had commenced an action to set aside the award before the Tianjin Maritime Court in August 2009.
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The United States District Court for the Southern District of New York, per Lewis A. Kaplan, US DJ, granted enforcement, dismissing Pactrans’s defense based on the pending annulment action in China. The district court reasoned that the discretion to stay enforcement under Art. VI of the 1958 New York Convention should not be exercised lightly. In the present case, the balance of the “competing concerns” elaborated by the Second Circuit in Europcar1 to guide the exercise of a district court’s discretion weighed in favor of granting enforcement. In particular, enforcement would advance the goals of the Convention – expeditious resolution of disputes and avoidance of litigation – as the parties’ dispute had already been fully dealt with in arbitration, and Pactrans’s Chinese appeal was in its early stages.2
A detailed report of this decision is available online at
1. Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310 (2d Cir. 1998), reported in Yearbook XXIV (1999) pp. 860-870 (US no. 280). 2. On 23 November 2009, a CMAC arbitral tribunal rendered an award in favor of Pactrans in another dispute between the same parties. The 29 March 2010 decision by the United States District Court for the Northern District of Florida, Pensacola Division, granting enforcement of that award, is reported in this Yearbook XXXV (2010) p. 526 (US no. 697).
500 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 688
688. United States Court of Appeals, Third Circuit, 19 November 2009, Nos. 08-1853 and 08-2568
Parties: Claimant/Appellee: Steel Corporation of the Philippines (Philippines) Defendant/Appellant: International Steel Services, Inc. (US)
Published in: 2009 U.S. App. LEXIS 25404
Articles: V(1)(e); V(2)(b)
Subject matters: – primary v. secondary jurisdiction under 1958 New York Convention – setting aside of award only in country of rendition – setting aside of award by court of country under the law of which the award was made (no) – “under law of which” refers to procedural, not substantive law – choice of seat of arbitration is presumption of choice of procedural law – public policy and pending action for setting aside – discretion to enforce award pending setting aside proceedings
Topics: [4]-[12] = ¶ 516; [13]-[17] = ¶ 518
Summary
The district court decision enforcing a Singapore award was affirmed. It was irrelevant that the award had allegedly been annulled in the Philippines, as the Philippine courts were not courts of primary jurisdiction that could validly set aside the award, which had been rendered in Singapore. Nor had the award been rendered “under the law of” the Philippines, as the “under the law of which” language in Art. V(1)(e) of the 1958 New York Convention refers to the procedural law of the arbitration. Here, the award expressly stated that the sole arbitrator applied Singapore procedural law. The argument that the court should look at the procedural law agreed by the parties (allegedly, Philippine law), rather than the procedural law applied by the arbitrator, was also without merit: the choice for a seat of the arbitration creates a presumption that the procedural law of the seat applies. Defendant failed to overcome this presumption. Its argument that the contract provided that Philippine law applied to
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the “validity, performance and enforcement” of the contract did not suffice to create the “once-in-a-blue-moon set of circumstances” that the parties agreed on a procedural law other than the law of the seat of the arbitration. Further, defendant’s contention that enforcing a foreign award while annulment proceedings are pending violates public policy was unfounded and actually contravened the very purpose of the New York Convention, that is, to promote the enforcement of commercial arbitration agreements in international contracts. Under the New York Convention, parties may seek enforcement notwithstanding the existence of pending annulment proceedings, and the enforcement court has discretion to grant enforcement even when such proceedings are pending.
The facts of this case are also reported in Yearbook XXXII (2007) at pp. 789-791 (US no. 590) and Yearbook XXXIII (2008) pp. 1125-1127 (US no. 637). On 1 April 1996, Steel Corporation of the Philippines (SCP) and International Steel Services, Inc. (ISSI) entered into an Acid Regeneration Plant Supply and Installation Agreement (the ARP Agreement), under which ISSI was to build an acid regeneration plant for SCP. On 15 April 1997, the parties also entered into an Iron Oxide Sales Agreement (the IOSA Agreement), under which ISSI was to buy iron oxide produced by the plant that was the subject of the ARP Agreement. Both Agreements provided for the application of Philippine law to the “validity, performance and enforcement” of the agreement and contained a clause referring disputes to ICC arbitration in Singapore. Disputes arose between the parties in respect of both Agreements. On 18 September 2002, ISSI commenced arbitration of a construction dispute under the ARP Agreement before the Construction Industry Arbitration Commission (CIAC) of the Philippines, rather than by ICC arbitration in Singapore as provided for in the Agreement. SCP consented to CIAC arbitration. On 20 August 2003, the arbitral tribunal rendered an award in favor of ISSI in the amount of US$ 150,000 (the Philippine ISSI Award). On 5 May 2003, SCP filed a request for ICC arbitration in Singapore of a dispute arising under the IOSA Agreement. The sole arbitrator issued two awards: an award on liability in SCP’s favor on 24 June 2004 and a final award on 3 November 2004, awarding SCP US$ 647,965.50 (collectively, the Singapore SCP Award). The award stated that the arbitrator applied Singapore law to the proceedings and Philippines law to the merits of the dispute. In the Philippines, ISSI commenced two distinct actions. First, it sought to annul the Singapore SCP Award (the annulment petition). SCP moved to dismiss the annulment petition. On 14 December 2004, a Regional Trial Court dismissed SCP’s motion; on 4 January 2006, it declared SCP in default of the annulment petition and allowed ISSI to present its evidence ex parte. SCP filed a motion for reconsideration and, on 18 April 2007, the Regional Trial Court referred the dispute to mediation and stayed proceedings.
502 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 688
Second, ISSI sought execution under the Philippine ISSI Award. On 4 October 2005, it obtained a writ of execution from a Philippine Regional Trial Court. On 17 July 2007, the Philippine Court of Appeals set aside the writ, granting SCP’s argument that the monetary award in the Philippine ISSI Award was extinguished by the greater award in SCP’s favor in the Singapore SCP Award. The court rejected ISSI’s argument that the Singapore SCP Award was not payable because of ISSI’s annulment petition, reasoning, inter alia, that only Singapore, as the country with primary jurisdiction, could annul the award. In the United States, by a petition of 19 January 2006, SCP sought to enforce the Singapore SCP Award in the Court of Common Pleas of York County, Pennsylvania. ISSI removed the action to federal court. It then filed a motion for Judgment on the Pleadings, arguing that the award had been nullified by the default judgment entered against SCP by the Philippine Regional Trial Court and was in violation of public policy; also, the composition of the arbitral authority was not in accordance with the agreement of the parties. On 31 July 2006, the United States District Court for the Western District of Pennsylvania denied ISSI’s motion. This decision is reported in Yearbook XXXII (2007) pp. 789-796 (US no. 590). On 6 February 2008, the Pennsylvania district court rendered a second decision in this case, denying ISSI’s motion to dismiss SCP’s petition to confirm the Singapore SCP Award and granting SCP’s petition. ISSI again argued before the court that the award violated US public policy against forum shopping, was not rendered in accordance with the arbitration agreement and had been nullified by the Philippine Regional Trial Court’s default decision or at the very least was under review and therefore has not become final and binding. This decision is reported in Yearbook XXXIII (2008) pp. 1125-1132 (US no. 637). The United States Court of Appeals for the Third Circuit, before Smith, Fisher and Nygaard, CJJ, in an opinion by Fisher, CJ, affirmed the lower court’s decision. ISSI first argued that the district court erred in dismissing ISSI’s defense to enforcement under Art. V(1)(e) of the 1958 New York Convention. The Court disagreed, holding that ISSI failed to prove that the Philippine Regional Trial Court was a court of primary jurisdiction which could validly set aside the Singapore SCP Award. There was no such jurisdiction, contrary to ISSI’s contention, because the SCP Award had been rendered “under the law of” the Philippines. The Art. V(1)(e) language “under the law of which” refers exclusively to the procedural law of the arbitration. Here, the SCP Award expressly indicated that the sole arbitrator applied Singapore procedural law and Singapore, not the Philippines, was the country of primary jurisdiction.
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The Court of Appeals also rejected ISSI’s argument that the court should look at the procedural law the parties agreed should be applied, rather than the procedural law that the arbitrator applied. The Court first reasoned that ISSI bore the burden to prove that a law other than the law of the Singaporean seat of the arbitration applied, in light of the presumption under the New York Convention that an agreement specifying the place of the arbitration creates a presumption that the procedural law of that place applies. ISSI argued that the parties necessarily agreed to an application of Philippine procedural law by stating in the IOSA Contract that Philippine law applied to the Contract’s “enforcement”. The Third Circuit referred to the decision of the Fifth Circuit in Karaha Bodas,1 where it was held that agreements providing for a procedural law that is not the law of the seat of the arbitration are a “once-in-a-blue-moon set of circumstances” and concluded that the use of the term “ enforcement” – rather than “procedure” – in the IOSA Contract did not suffice to create such set of circumstances. The Court of Appeals also rejected ISSI’s argument that enforcement of the Singapore SCP Award while annulment proceedings were pending in the Philippines would violate the fundamental principles of res judicata and judicial comity and would run contrary to the US public policy against forum shopping. The Court held that, on the contrary, this contention was at odds with the very purpose of the New York Convention, which is to promote the enforcement of commercial arbitration agreements in international contracts. Under the New York Convention, parties may seek enforcement notwithstanding the existence of pending annulment proceedings, and the enforcement court has discretion to grant enforcement even when such proceedings are pending.
A detailed report of this decision is available online at
1. Karaha Bodas Co., L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274 (5th Cir. 2004), reported in Yearbook XXIX (2004) pp. 1262-1302 (US no. 482).
504 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 689
689. United States District Court, Northern District of Illinois, Eastern Division, 25 November 2009 and 2 December 2009, No. 09 C 7333
Parties: Plaintiff: Virginia Surety Company, Inc. (nationality not indicated) Defendant: Certain Underwriters at Lloyd’s, London (nationality not indicated)
Published in: Decision of 25 November 2009: 2009 U.S. Dist. LEXIS 110320; Decision of 2 December 2009: 2009 U.S. Dist. LEXIS 111870
Articles: III
Subject matters: – removal from state court to federal court – removal provision of Sect. 205 Federal Arbitration Act (FAA) does not apply in actions for setting aside (vacatur)
Topics: ¶ 301
Summary
The provision in Sect. 205 of the Federal Arbitration Act that provides for removal to federal court of actions falling under the New York Convention applies only in the context of actions to enforce an award. It does not apply in actions to vacate an award.
Virginia Surety Company, Inc. (Virginia Surety) commenced an action in state court – the Circuit Court of Cook County – seeking to vacate an award rendered in the United States in a dispute between Virginia Surety and Certain Underwriters at Lloyd’s, London (Lloyd’s). Lloyd’s sought to remove the action to federal court under the 1958 New York Convention, invoking the removal provision of Sect. 205 in Chapter 2 of the Federal Arbitration Act, which implements the Convention in the United States. By the first decision reported, rendered on 25 November 2009, the United States District Court for the Northern District of Illinois, Eastern Division, per Milton I. Shadur, Senior US DJ, ordered counsel for the parties to file
Yearbook Comm. Arb’n XXXV (2010) 505 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 submissions addressing the “surprising jurisdictional question” of whether the New York Convention grants district courts subject matter jurisdiction in actions to vacate – as opposed to actions to confirm – an award. The court noted that the New York Convention speaks only of “Recognition and Enforcement of Foreign Arbitral Awards”, making no reference to vacatur proceedings. This is the first decision reported. By the second decision reported, rendered on 2 December 2009, the district court, again per Judge Shadur, held that the removal provision of Sect. 205 FAA only applies to actions to confirm rather than actions to vacate an award. This is the second decision reported.
A detailed report of these decisions is available online at
506 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 690
690. United States District Court, Western District of Texas, Austin Division, 4 December 2009, Case No. A-09-CA-488-SS
Parties: Plaintiff: China National Building Material Investment Co., Ltd. (PR China) Defendant: BNK International LLC (US)
Published in: 2009 U.S. Dist. LEXIS 113194
Articles: III; V(1)(a); V(1)(b); V(1)(d); V(2)(b)
Subject matters: – estoppel from raising defense not raised prior to arbitration – incapacity to attend hearing is not incapacity under Art. V(1)(a) – due process and incapacity to attend hearing
Topics: [6]-[15] = ¶ 303; [17]-[18] = ¶ 505; [19]-[27] = ¶ 511 (incapacity to attend hearing); [28]-[29] = ¶ 513; [30]- [31] = ¶ 524 (incapacity to attend hearing)
Summary
The objection that the party that commenced arbitration lacked standing is untimely if raised at the enforcement stage; the party relying on the lack of standing should have raised this objection prior to the arbitration, by refusing to participate therein. Further, the incapacity of a party to attend the arbitration hearing is not an incapacity under Art. V(1)(a) Convention, which refers to the time of conclusion of the arbitration agreement. Nor did it result in a violation of due process under Art. V(1)(b) in the case at issue, because it appeared from the record that the arbitrators had offered alternatives to the party concerned. Objections under Art. V(1)(d) and Art. V(2)(b) Convention based on the same argument were also denied.
In 2004, BNK International LLC (BNK) entered into an Agency Agreement with BND Co., Ltd. (BND), under which BNK agreed to secure customers for BND in the United States to purchase hardwood floor products. The Agency Agreement provided for arbitration of disputes in Hong Kong at the Hong Kong International Arbitration Centre (HKIAC). BND underwent a name change to China National Building Material Investment Co., Ltd. (China National) sometime after concluding the Agency
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Agreement. A dispute arose between the parties. In January 2008, China National commenced HKIAC arbitration against BNK as provided for in the Agency Agreement. A three-member arbitral tribunal was established on 28 May 2008. In January 2009, the arbitral tribunal rendered a First Final Award in favor of China National. In March 2009, it rendered a Second Final Award on costs. China National sought enforcement of the HKIAC awards in the United States. BNK filed a motion for summary judgment in which it raised several affirmative defenses to enforcement. The United States District Court for the Western District of Texas, Austin Division, per Sam Sparks, US DJ, granted enforcement. BNK first argued that the Agency Agreement was between BNK and BND and that China National lacked standing to seek enforcement of the HKIAC awards. The court held that this objection was untimely. It reasoned that when China National served a notice of arbitration on BND, BND was entitled to refuse to participate in the arbitration and if it believed that China National and BND were not the same entity, it could have forced China National to bring a district court action to compel its participation in the arbitration. On the contrary, BNK participated in the arbitration without raising the issue of whether China National “could stand in the shoes of BND and enforce the Agency Agreement” and it assumed on several occasions during the arbitration that the Agency Agreement was an agreement between BND and China National. The district court then denied several objections to enforcement raised by BNK under the 1958 New York Convention. These objections were all based on the argument that BNK’s president, largest shareholder and principal witness, Mr. Jeffrey Chang, was unable to participate in the arbitration hearing due to a medical condition. BNK argued first that enforcement should as a consequence be denied under Art. V(1)(a) Convention. The court disagreed, noting that while the Convention does not indicate expressly which is the relevant moment to judge whether a party was under an incapacity for purposes of Art. V(1)(a), Art. V(1)(a) as a whole appears to refer to the validity of the underlying agreement to arbitrate, so that the incapacity must refer to the time of conclusion of that agreement, not the arbitration proceedings. BND also relied on Chang’s incapacity to travel and attend the hearing to argue that the arbitral tribunal violated due process (Art. V(1)(b) Convention) by allowing the arbitration hearing to take place in Chang’s absence. However, it appeared from the record that the tribunal offered video-conferencing and scheduled a further hearing on a date requested by Chang (who eventually did not attend). Also, Chang was represented by Hong Kong attorneys but did not instruct them to appear at the hearing on his behalf. The court concluded that
508 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 690 though Chang may well have been inconvenienced by the fact that the hearings took place in Hong Kong, he and BND freely entered into an agreement to arbitrate in Hong Kong, and his inconvenience in attending hearings there did not amount to a violation of due process. The district court also denied BNK’s objections to enforcement under Art. V(1)(d) and Art. V(2)(b) Convention, which were based on the same argument that Chang did not attend the arbitration hearing.
A detailed report of this decision is available online at
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691. United States District Court, Northern District of California, San Jose Division, 9 February 2010, No. C-09-3355 RMW
Parties: Plaintiff: Key Asic, Ltd. (nationality not indicated) et al. Defendants: Innovative Semiconductors, Inc. (nationality not indicated)
Published in: 2010 U.S. Dist. LEXIS 10980
Articles: II(3)
Subject matters: – waiver of arbitration by substantial participation in court proceedings – third-party beneficiary – removal from state court to federal court
Topics: ¶ 217 + ¶ 220
Summary
Removal to federal court was denied. Plaintiff did not rely on the contract containing an arbitration clause to assert third party beneficiary rights and, even if it did, defendants waived their right to arbitration by failing to raise arbitration as an affirmative defense in their answer and engaging in discovery before the court.
Key ASIC, Ltd. and Key ASIC, Inc. (collectively, Key ASIC), entered into a contract (the Key ASIC contract) with Innovative Semiconductors Inc. (Innovative), pursuant to which Innovative agreed to provide certain chip design and testing services. Innovative transferred its obligations under the Key ASIC contract to Phylinks, Ltd. (Phylinks) by a set of contracts, including one concluded orally or by conduct. A dispute arose when Key ASIC claimed that the contract was not performed to its satisfaction. On 29 September 2008, it filed suit in Santa Clara County Superior Court alleging, inter alia, (i) breach of contract against Innovative for breaching the Key ASIC/Innovative contract and (ii) breach of contract against Innovative and Phylinks, asserting rights as a third-party beneficiary to the Innovative/Phylinks agreement. On 22 July 2009, Innovative and Phylinks
510 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 691
(collectively, defendants) filed a notice of removal of the case to federal court, contending that they first discovered a basis for removal under the 1958 New York Convention when Key ASIC allegedly revealed, in response to discovery requests, that the contract pursuant to which it asserted third-party beneficiary rights was a Semiconductor Technology License Agreement dated 14 November 2006 between Innovative and Phylinks (the Licensing Agreement), which contained an arbitration clause. The United States District Court for the Northern District of California, San Jose Division, per Ronald M. Whyte, US DJ, dismissed the notice of removal and remanded the case to state court. It first noted that there were at least three written agreements between Innovative and Phylinks that presumably related to the work to be performed for Key ASIC; only one, the Licensing Agreement, contained an arbitration clause. It then held that Key ASIC did not clearly admit in its discovery responses that it based its third party beneficiary rights on the Licensing Agreement; rather, it appeared from Key ASIC’s complaint that it relied on an oral contract between Innovative and Phylinks, or a contract created by conduct, rather than on a written agreement. Hence, Key ASIC did not rely on the contract containing the arbitration clause and was not bound by it. Key ASIC conceded at the hearing before the court that it may in fact seek third-party beneficiary rights under the Licensing Agreement but argued that defendants waived their right to arbitrate. The court agreed, holding that Phylinks’s conduct was inconsistent with a right to arbitrate as Phylinks filed an answer to Key ASIC’s complaint without raising arbitration as an affirmative defense and benefitted from discovery before the court, though largely through Innovative, as both parties were represented by the same counsel.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 511 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
692. United States District Court, Southern District of Texas, Houston Division, 10 March 2010 and 4 August 2010, Civil Action No. H-09- 1274
Parties: Plaintiffs: (1) Astra Oil Trading NV (Netherlands); (2) Astra GP, Inc. (US); (3) Astra Tradeco LP LLC (US) Defendants: (1) Petrobras America Inc. (US); (2) PAI PRSI Trading General LLC (US); (3) PAI PRSI Trading Limited LLC (US)
Published in: Decision of 10 March 2010: 2010 U.S. Dist. LEXIS 21921; Decision of 4 August 2010: 2010 U.S. Dist. LEXIS 78573
Articles: I(1)
Subject matters: – nondomestic award – Sect. 202 Federal Arbitration Act (FAA) defines nondomestic award – “nerve center” test
Topics: ¶ 102
Summary
An award rendered in the United States is non-domestic and falls under the 1958 New York Convention if it is not entirely between US citizens. To this purpose, a corporation is a US citizen if it is incorporated or has its principal place of business there. Here, the corporation at issue was incorporated in The Netherlands. The court examined whether its principal place of business was in the United States by applying the “nerve center” test developed by the US Supreme Court, that is, by locating the center of the corporation’s overall direction, control and coordination. It found that the nerve center was in Belgium, where the corporation’s 100 percent owner was located. By the second decision, the court vacated its first order, finding on a review of the evidence and newly discovered correspondence that the corporation’s sole officer in the United States held and exercised all authority necessary to direct, control and coordinate the corporation’s activities.
Astra Oil Trading NV (AOT), Astra GP, Inc. (Astra GP) and Astra Tradeco LP LLC (Astra LP) (collectively, Petitioners), on the one hand, and Petrobras
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America, Inc. (PAI), PAI PRSI Trading General LLC (PAI General) and PAI PRSI Trading Limited LLC (PAI Limited) (collectively, Respondents), on the other hand, were 50 percent co-owners of a joint venture consisting of two companies: Pasadena Refining System, Inc. (PRSI), which owned a refinery in Texas, and PRSI Trading Company LP (the Trading Company), an entity supplying feedstocks to the refinery. PRSI was governed by a Shareholders Agreement between AOT and PAI; the Trading Company was governed by a Partnership Agreement between Astra GP, Astra LP, PAI General and PAI Limited. Both the Shareholders Agreement and the Partnership Agreement gave to Petitioners, under certain circumstances, the right to put for sale to Respondents their ownership interests in PRSI and the Trading Company. A dispute arose among the parties when Petitioners claimed that circumstances had arisen which gave them the right to put their interests for sale to Respondents. The dispute was referred to arbitration in the United States. On 10 April 2009, an arbitral tribunal issued an award directing Petitioners to transfer their ownership rights to Respondents against payments totaling US$ 639,166,258.90. Petitioners sought confirmation of the award. By the first decision reported, rendered on 10 March 2010, the United States District Court for the Southern District of Texas, Houston Division, per Ewing Werlein, Jr., US DJ, granted confirmation, holding that it had jurisdiction over the case under the 1958 New York Convention because the award, though rendered in the United States, was not a domestic award. Chapter 2 of the Federal Arbitration Act (FAA), which implements the Convention in the United States, vests jurisdiction to hear actions involving awards under the Convention in the federal district courts. However, an award arising from a relationship which is entirely between citizens of the United States is considered a domestic award and does not fall under the Convention (unless that relationship involves property located abroad, envisages performance or enforcement abroad or has some other reasonable relation with one or more foreign states – which was not argued here). In this respect, a corporation is deemed a US citizen if it is incorporated or has its principal place of business in the United States. The court noted that this language in the FAA reflects the language in the US diversity-of-citizenship statute. It therefore referred to a 2010 decision of the Supreme Court (Hertz)1 where the Court interpreted the meaning of a corporation’s “principal place of business” in a diversity case, reasoning that this decision should guide it in interpreting the identical language in the FAA. In Hertz, the Supreme Court adopted the “nerve center” test, that is, a test that
1. Hertz Corp. v. Friend, S.Ct., 175 L.Ed.2d 1029, 2010 WL 605601 (2010).
Yearbook Comm. Arb’n XXXV (2010) 513 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 points the court in a single direction, towards the center of the corporation’s overall direction, control and coordination. Here, AOT was a corporation organized under the laws of the Netherlands; its chairman and CEO, however, resided in and worked from California. The court found from a preponderance of the evidence that AOT did not receive its “overall direction, control, and coordination” from its sole officer in California but rather from AOT’s 100 percent owner, a Belgian corporation. Thus, it could be deemed that the “nerve center” for AOT’s business was lodged in Belgium. The district court then confirmed the award under the domestic provisions of Chapter 1 of the FAA. Only the relevant part of the decision is reported. This is the first decision reported. By the second decision reported, rendered on 4 August 2010, the district court, again per Judge Werlein, vacated its earlier decision and dismissed the action, finding that it lacked jurisdiction under the New York Convention. The court again reviewed the evidence of the case and new correspondence that had been obtained in related court proceedings and concluded that AOT’s officer held and exercised “all of the authority necessary to direct, control, and coordinate” AOT’s activities from his office in California. Hence, AOT’s nerve center was in the United States, all parties were US citizens and the award at issue was a domestic award which did not fall under the New York Convention. This is the second decision reported.
A detailed report of these decisions is available online at
514 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 693
693. United States District Court, Eastern District of Virginia, Alexandria Division, 11 March 2010, Civil Action No.: 1:10-mc-8
Parties: Petitioner: Trax Construction, Ltd. (nationality not indicated) Respondent: Dyncorp International, LLC (nationality not indicated)
Published in: 2010 U.S. Dist. LEXIS 23251
Articles: V(1)(e)
Subject matter: – award “not (yet) binding”
Topics: ¶ 514
Summary
Enforcement of the award was denied pending an appeal to a Kenyan court, because the arbitration agreement between the parties provided that payment under the award would only take place “after the final decision of the arbitrator’s award or appeal, whichever is applicable”.
Trax Construction, Ltd. (Trax) and Dyncorp International, LLC (Dyncorp) entered into an arbitration agreement providing that payment under the award be made only after either the award or an appeal against its had become final. When an award was rendered in Kenya, Dyncorp appealed before the Kenya High Court, while Trax sought enforcement in the United States. The United States District Court for the Eastern District of Virginia, Alexandria Division, per Liam O’Grady, US DJ, denied enforcement, finding that Trax could not enforce the award until the appeal process had been exhausted.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 515 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
694. United States District Court, Southern District of Florida, 16 March 2010, Case no. 09-23442-CIV-GOLD/MCALILEY
Parties: Plaintiff: Agnelo Cardoso (India) Defendant: Carnival Corporation (nationality not indicated)
Published in: 2010 U.S. Dist. LEXIS 24602
Articles: II(3)
Subject matters: – Jones Act claims – arbitration agreement “null and void” on public policy grounds (no) – unenforceable choice of law clause severed from Seafarer’s Agreement
Topics: ¶ 220
Summary
The court enforced the arbitration clause in a Seafarer’s Agreement and referred plaintiff’s Jones Act and common law claims to arbitration in the Philippines. However, it severed as being unenforceable (severance was allowed under the Agreement) the Panamanian choice-of-law clause, finding that by operating in tandem with the arbitration clause it would deprive the seaman of his US statutory rights and, as it was likely that arbitrators in the Philippines deciding under Panamanian law would not render an award on the plaintiff’s statutory claims, of a “meaningful” public policy review at the award-enforcement stage.
On 19 June 2008, Agnelo Cardoso entered into a Seafarer’s Agreement with Carnival Corporation (Carnival) to work aboard Carnival’s vessel M/S ELATION. Para. 7 of the Seafarer’s Agreement provided that, with the exception of wage disputes governed by Carnival’s grievance policy, all disputes be referred to arbitration in England, Monaco, Panama or Manila, whichever was closer to the Seafarer’s home country. Para. 8 provided that the Agreement was governed by the law of the flag of the vessel, here, Panamanian law. Para. 9 provided that invalid or unenforceable provisions be severed from the Agreement, the remaining provisions of which remained valid.
516 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 694
Cardoso was injured while working aboard the M/S ELATION. On 25 September 2009, he commenced an action against Carnival in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida alleging claims for maintenance and cure, Jones Act negligence, unseaworthiness and failure to provide prompt and adequate treatment. On 10 November 2009, Carnival removed the action to federal court. The United States District Court for the Southern District of Florida, per Alan S. Gold, US DJ, referred the dispute to arbitration, but struck the choice-of-law provision from the Seafarer’s Agreement, finding that it was null and void. The court stated at the outset that the 1958 New York Convention requires courts to enforce arbitration agreements that meet four jurisdictional prerequisites – that there is an agreement in writing within the meaning of the Convention, providing for arbitration in the territory of a Convention signatory and arising out of a commercial legal relationship, and that a party to the agreement is not an American citizen or the commercial relationship has some reasonable relation with one or more foreign states. It was not disputed that these requirements were met here. Under the New York Convention, courts can then refuse to refer the dispute to arbitration if the arbitration agreement is “null and void, inoperative or incapable of being performed”. Cardoso argued that the arbitration clause in the Sefarer’s Agreement was null and void because it forced him to arbitrate his claims in an arbitral forum, the Philippines, and under a foreign (Panamanian) law that do not apply the law of the United States, thereby creating a waiver of his US statutory rights in violation of public policy. The district court agreed. It referred to the 2009 Eleventh Circuit decision in Thomas,1 where it was held that public policy is an affirmative defense falling under the “null and void clause” if the choice-of-law clause and arbitration clause in a seafarer’s agreement “operate in tandem” as a prospective waiver of a seafarer’s rights to pursue a Seaman’s Wage Act claim without the assurance of a subsequent opportunity for review. This was also the case here, where the choice-of-law clause and the arbitration clause in the Seafarer’s Agreement, if enforced “in tandem” would lead to a prospective waiver of Cardoso’s US statutory remedies in violation of public policy. The court reasoned that although Thomas concerned claims under the Seaman’s Wage Act, a “holistic reading” of the decision indicated that the Eleventh Circuit’s reasoning also applies to claims brought pursuant to the Jones Act and
1. Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009), reported in Yearbook XXXIV (2009) pp. 1136-1150 (US no. 674).
Yearbook Comm. Arb’n XXXV (2010) 517 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 thus to the present case. Further, as in Thomas, there was here a distinct possibility that arbitrators deciding under Panamanian law could render a decision that would result in Cardoso receiving “no award” and his being as a consequence deprived of the opportunity for “meaningful review” at the award- enforcement stage. It did not matter that Cardoso brought common law claims, which were cognizable under non-US law, in addition to his Jones Act claims, while in Thomas the only arbitrable claims were US statutory claims. The district court then turned to the question of how to remedy this public policy violation that rendered the choice-of-law clause and the arbitration clause in the Seafarer’s Agreement unenforceable. It concluded that severing the Panamanian choice-of-law provision, as allowed under para. 9 of the Seafarer’s Agreement, was the appropriate remedy. This solution maintained the enforceability of the arbitration clause and promoted both public-interest policies involved – the strong international policy favoring commercial arbitration and the protection of a party’s right to pursue statutory remedies at the heart of the Thomas decision – without unnecessarily elevating one over the other. The court further rejected Cardoso’s contention that his Jones Act claims were not arbitrable and that the arbitration clause was defective due to the parties’ unequal bargaining power. The court referred to the 2005 Eleventh Circuit decision in Bautista,2 which was binding on district courts in the Circuit, where it was expressly held that the inequality of bargaining power is not an affirmative defense to arbitration under the Convention and that Jones Act claims are arbitrable.
A detailed report of this decision is available online at
2. Bautista v. Star Cruises, reported in Yearbook XXX (2005) pp. 1070-1085 (US no. 513).
518 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 695
695. United States District Court, District of Columbia, 16 March 2010, Civil Action No.: 08-2042 (RMU), Re Document No.: 11
Parties: Petitioners: G.E. Transport S.p.A. (nationality not indicated); (2) Athena S.A. (nationality not indicated) Respondent: Republic of Albania, Ministry of Public Works, Transport and Telecommunications
Published in: 693 Federal Supplement, Second Series (District of Columbia 2010) p. 132 et seq.; 2010 U.S. Dist. LEXIS 24180
Articles: III; V; VI
Subject matters: – subject matter jurisdiction – (1958 New York Convention) arbitration exception to sovereign immunity under Foreign Sovereign Immunities Act (FSIA) – service of process under Foreign Sovereign Immunities Act (FSIA) – personal jurisdiction over foreign defendant – stay of enforcement proceedings pending annulment action (no) – currency of award – rate of post-award, pre-judgment interest
Topics: [3]-[9] + [17]-[18] = ¶ 301; [10] = ¶ 500; [11]-[16] = ¶ 601; [19]-[21] = ¶ 307
Summary
An Italian ICC award was granted enforcement. Albania, which remained in default, was not immune from jurisdiction under the Foreign Sovereign Immunities Act, which provides for an exception to immunity in respect of actions under treaties such as the 1958 New York Convention. As there was subject matter jurisdiction and service had been proper, the court also had personal jurisdiction over Albania. No grounds for refusing enforcement appeared to exist. No adjournment was granted pending an annulment action in Italy, because (i) further delay would undermine the expeditious resolution of the dispute and (ii) the Italian annulment action was not expected to be resolved within a short time.
Yearbook Comm. Arb’n XXXV (2010) 519 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
The Euro portion of the award was converted into US dollars at the exchange rate of the day of the award on quantum. Prejudgment interest was justified but the application was denied without prejudice because the petitioners failed to justify the application of a higher rate than the prime rate.
On 15 September 2003, G.E. Transport S.p.A. and Athena S.A. (collectively, the petitioners) entered into a contract with the Ministry of Public Works, Transport and Telecommunications of the Republic of Albania (Albania) to modernize part of Albania’s railway network. The contract provided that it was governed by Italian law. It also contained a clause for ICC arbitration in Rome. A dispute arose between the parties. On 1 June 2006, the petitioners filed a request for ICC arbitration as provided for in the contract. Arbitration proceedings followed in Rome. On 1 October 2007, an ICC arbitral tribunal issued a Partial Award finding that Albania was in breach of contract. On 28 July 2008, the arbitral tribunal issued a Final Award directing Albania to pay € 10,619,016.79 and US$ 145,601.32 in lost profits suffered by petitioner G.E. Transportation S.p.A., € 1,995,548.91 in lost profits suffered by petitioner Athena S.A., US$ 328,500 in arbitration costs and € 207,452.45 as reasonable defense costs. Albania filed an application for the correction and interpretation of the awards, which the arbitral tribunal denied. Albania sought annulment of the Partial Award and the Final Award (collectively, the Award) in the Court of Appeal in Rome. This action was pending at the time of the present decision. The petitioners in turn sought enforcement of the Award in the United States. Albania did not appear in the US proceeding. The United States District Court for the District of Columbia, per Ricardo M. Urbina, US DJ, granted enforcement of the Italian award. The court first held that it had subject matter jurisdiction over the case. Foreign states are presumptively immune from the jurisdiction of US courts unless one of the exceptions specified in the Foreign Sovereign Immunities Acts (FSIA) applies; one such exception concerns actions to confirm awards governed by an international treaty, such as the 1958 New York Convention. As this case arose under the New York Convention, to which Italy (the country of rendition), the United States (the country of enforcement) and Albania are all parties, the FSIA’s arbitration exception applied. Further, since there was subject matter jurisdiction and Albania had been properly served, the court also had personal jurisdiction over the foreign defendant. The district court then held that it appeared from its review of the record that none of the grounds for refusal of recognition specified in Art. V of the Convention were present in this case.
520 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 695
The court then examined whether enforcement should be adjourned under Art. VI Convention because of the pending annulment action in Rome. In the absence of case law in its Circuit, the court referred to a 1998 decision of the Second Circuit in Europcar,1 which articulated a list of factors that a district court should consider when deciding whether to adjourn enforcement proceedings pursuant to Art. VI Convention. Of these, the following were relevant in the present case: (i) the general objectives of arbitration, that is, the expeditious resolution of disputes and (ii) the estimated time for the foreign proceedings to be resolved. The district court concluded that both these factors weighed in favor of enforcement rather than adjournment in the present case. First, Albania agreed to arbitration, fully participated in the proceedings that led to the Award, pursued an unsuccessful appeal with the arbitral tribunal and failed to satisfy the Award nearly four years after arbitration was commenced. A further delay would therefore undermine the expeditious resolution of this dispute. Second, according to the undisputed assertion of the petitioners, the Italian annulment proceedings were likely to last until 2014. Hence, adjournment of the present enforcement proceeding was unwarranted. The court noted that the currency of part of the Award, the Euro, had depreciated since the Final Award was issued. Accordingly, it converted the portion of the Award awarded in Euros into US dollars by applying the exchange rate at the date of the Final Award. The court finally denied without prejudice the petitioners’ request for prejudgment interest. While prejudgment interest was fully consistent in this case with the accepted purposes of such interest, the petitioners failed to explain why the court should apply a compound interest rate of 2.33 percent rather than the prime rate which the District of Columbia Circuit had expressly approved.
A detailed report of this decision is available online at
1. Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310, (2d Cir. 1998), reported in Yearbook XXIV (1999) pp. 860-870 (US no. 280).
Yearbook Comm. Arb’n XXXV (2010) 521 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
696. United States District Court, District of Columbia, 23 March 2010, Civil Action No. 08-2026 (PLF)
Parties: Plaintiff: Continental Transfert Technique Limited (Nigeria) Defendant: Federal Government of Nigeria
Published in: 697 Federal Supplement, Second Series (D.C. Circuit 2010) p. 46 et seq.; 2010 U.S. Dist. LEXIS 27336
Articles: I(1); III; V(1)(c); V(1)(e); VI
Subject matters: – domestic v. international award – sovereign immunity from jurisdiction under Foreign Sovereign Immunities Act (FSIA) – personal jurisdiction over foreign State – service of process under Foreign Sovereign Immunities Act (FSIA) – forum non conveniens – discretion to enforce (no) – discretion to stay enforcement proceedings pending annulment proceedings
Topics: [1]-[4] = ¶ 102 + ¶ 104; [2]-[4] = ¶ 103; [5] = 105; [6]-[14] = ¶ 301; [15] = ¶ 500; [17] = ¶ 516 + ¶ 517; [18]-[28] = ¶ 601
Summary
The argument that an award rendered in England between Nigerian parties and under Nigerian substantive and procedural law was “domestic” and thus did not fall under the New York Convention was dismissed as “implausible”, because the critical element under the Convention is where the award is rendered: if that place is in a contracting country, all other Convention states are required to enforce the award, regardless of the citizenship or domicile of the parties. Also, enforcement should not be denied under Art. V(1)(e), because defendant Nigeria, which had commenced annulment proceedings in Nigeria, did not prove that a Nigeria court had ruled on the award’s substantive validity. Nor was enforcement to be adjourned under Art. VI Convention pending the annulment proceedings in Nigeria. The court concluded that on the balance of the “competing concerns” to be taken into account in exercising a court’s discretion to adjourn, adjournment should be denied.
522 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 696
On 25 May 1999, Continental Transfert Technique Limited (Continental) entered into a contract with the Federal Government of Nigeria to produce computer-compatible identification cards. The contract was governed by Nigerian law. It also contained a clause referring disputes to arbitration under the procedural law of Nigeria. In 2007, Continental commenced arbitration, claiming that Nigeria had failed to perform its obligations under the contract. On 14 August 2008, an arbitral tribunal in London1 rendered an award in favor of Continental as to some claims and in favor of Nigeria as to others. The arbitrators found that once damages owed to Nigeria were set against those owed to Continental, Nigeria was liable to Continental in the amount of approximately NGN 29.7 million.2 The arbitrators awarded, inter alia, damages for loss of profits. Proceedings followed in the United States, the United Kingdom and Nigeria. On 25 November 2008, Continental sought enforcement of the award in the United States. Nigeria initially did not respond and only filed an appearance later in the proceedings. On 9 December 2008, Continental also sought enforcement of the award in the United Kingdom. The High Court gave Continental leave to enforce the award, granting Nigeria a time limit to apply to set aside the order. Nigeria did not react. On 26 June 2009, the High Court issued an updated version of its order, entering judgment for Continental in the terms of the award and stating that the order was now absolute. (On 30 March 2010, the High Court granted a stay of enforcement on the condition that Nigeria and the other defendants in the UK action provide security in the amount of UK£ 100 million. This decision is reported in this Yearbook XXXV (2010) p. 472 (UK no. 91).) On 20 April 2009, Nigeria in turn commenced proceedings before the Nigerian Federal High Court, Lagos Division, seeking (1) an order extending the time to apply to set aside the award; (2) a declaration that the award was domestic and not falling under the 1958 New York Convention; (3) a declaration that the arbitral tribunal “misconducted itself” when awarding damages for loss of profits contrary to the agreement of the parties; (4) an order setting aside the award and (5) an injunction restraining Continental from seeking enforcement of the award.
1. See, however, the decision of the High Court in London in the same case, reported in this Yearbook XXXV (2010) p. 551 (UK no. 91), where the court stated that the arbitration took place in Nigeria. 2. The district court noted that this amount corresponded to approximately US$ 252 million.
Yearbook Comm. Arb’n XXXV (2010) 523 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
On 23 April 2009, the Nigerian court issued an ex parte order granting the time extension and barring Continental from seeking enforcement of the award pending “the hearing and determination” of Nigeria’s motion for an “interlocutory injunction” (at (5) above), which was scheduled on 27 April 2009. By the decision reported, the United States District Court for the District of Columbia, per Paul L. Friedman, US DJ, dismissed all of Nigeria’s defenses against enforcement as not “persuasive” and some even “border[ing] on the frivolous”. It also refused to adjourn enforcement pending the annulment action in Nigeria. Nigeria first argued that the New York Convention did not apply because the award was not “international” as it was rendered on a contract concluded between Nigerian citizens and governed by Nigerian law. The court defined this argument “implausible”, reasoning that the critical element under the Convention is the place of the award: if that place is in a signatory State, all other Convention states are required to enforce the award, regardless of the citizenship or domicile of the parties. Here, the award was rendered in England, a Convention country. The district court briefly dismissed Nigeria’s contention that it did not waive its sovereign immunity to jurisdiction, holding that under the Foreign Sovereign Immunities Act (FSIA) a foreign state is not immune from US court jurisdiction in award-enforcement proceedings governed “by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards”. The New York Convention “is exactly the sort of treaty Congress intended to include in the arbitration exception” to the FSIA. Also the argument that the court lacked personal jurisdiction over Nigeria was without merit, because service to Nigeria had been made properly, thus creating personal jurisdiction. The district court further refused to dismiss the case on forum non conveniens grounds. It noted that only US courts may attach Nigeria’s properties located in the United States, so that Nigeria could not establish the existence of an adequate alternative forum. The court added that in any event it would exercise its discretion not to dismiss the case on this ground, because the balance of “private and public interest factors” did not strongly favor dismissal. The court finally dealt with Nigeria’s argument that the court should deny enforcement “of the suspended award” because Nigeria had “applied to a court of competent jurisdiction in Nigeria to set aside” the award. The court noted that two provisions of the New York Convention could relate to this defense – though neither was mentioned by Nigeria: Art. V(1)(e), if the award had already been suspended in Nigeria, or Art. VI, if Nigeria was seeking suspension there. The former provision was inapplicable, because Nigeria presented no evidence
524 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 696 that a Nigerian court had ruled on the award’s substantive validity. The 23 April 2009 ex parte order of the Federal High Court in Lagos merely barred Continental – temporarily – from seeking enforcement; it did not set aside or suspend the award. As to the latter provision, Art. VI Convention, in the absence of case law of the District of Columbia Circuit, the district court referred to the list of factors elaborated by the Second Circuit in Europcar3 to guide courts in exercising their discretion to stay enforcement pending annulment proceedings against an award. On the balance of these “competing concerns”, the court held that adjournment should be denied. The court noted in particular that the procedural history of the case strongly indicated that Nigeria commenced the annulment action in Nigeria only in order to manufacture a defense to Continental’s claims in the US. Also, the status of the Nigerian proceedings was uncertain, in light of the fact that the judge assigned to the case had retired and no new judge had yet been appointed. Under Europcar, the court should also consider “whether the award sought to be enforced will receive greater scrutiny in the foreign proceedings under a less deferential standard of review”. The court held that Nigeria failed to prove that this was the case, considering that the relevant Nigerian law provisions closely resemble the language of the New York Convention, to which Nigeria is also a party. Only the relevant part of the decision is reported.
A detailed report of this decision is available online at
3. Europcar Italia, S.p.A. v. Maiellano Tours, Inc., 156 F.3d 310 (2d Cir. 1998), reported in Yearbook XXIV (1999) pp. 860-870 (US no. 280).
Yearbook Comm. Arb’n XXXV (2010) 525 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
697. United States District Court, Northern District of Florida, Pensacola Division, 29 March 2010, Case no. 3:06-cv-369/RS-EMT
Parties: Plaintiff: Pactrans Air & Sea, Inc. (nationality not indicated) Defendant: China National Chartering Corp. (nationality not indicated) et al.
Published in: 2010 U.S. Dist. LEXIS 42773
Articles: III; V(1)(d); V(1)(e)
Subject matters: – award “not (yet) binding” – counterclaim v. (consolidated) separate claim
Topics: [1] = ¶ 503; [3] = ¶ 514; [4] = ¶ 301; [5]-[6] = ¶ 513
Summary
Enforcement of a CMAC award was granted. The objection that the award was not final and binding on the parties failed because the court found that under Chinese law the legal effects of an award begin on the day of rendition. Defendant also argued, but failed to prove, that the CMAC’s decision to reject the other party’s counterclaim because it was not timely filed while allowing that party to file a separate claim that was later consolidated with defendant’s claim was improper under Chinese law or had been prejudicial to defendant.
Pactrans Air & Sea, Inc. (Pactrans), China National Chartering Corp. (China National), Devon International Trading Inc. (Devon) and Northern Pacific Corp. (NPC) entered into an agreement for the carriage of gypsum board from China to Florida. The agreement contained a clause for arbitration of disputes at the China Maritime Arbitration Commission (CMAC). On 29 August 2006, Pactrans filed an action for declaratory judgment against China National, Devon and NPC in the Northern District of Florida in respect of the shipment. China National did not appear. On 10 November 2006, Devon sought referral of the dispute to arbitration. On 26 January 2007, the court ordered the parties to arbitrate in Beijing. On 9 July 2008, Devon commenced CMAC arbitration. On 20 April 2009, Pactrans attempted to file a counterclaim with CMAC; the counterclaim was
526 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 697 dismissed pursuant to CMAC rules which require counterclaims to be filed within thirty days of the original Notice to Arbitrate. On 7 May 2009, Pactrans filed a separate claim with the CMAC; this claim was consolidated with Devon’s claim. By an award of 23 November 2009, a CMAC arbitral tribunal found in favor of Pactrans. On 22 January 2010, Pactrans sought enforcement of the CMAC award in the United States. The United States District Court for the Northern District of Florida, Pensacola Division, per Richard Smoak, US DJ, granted enforcement. It dismissed Devon’s argument that the award was not yet binding on the parties, reasoning that under the Chinese Arbitration Law the legal effects of an award begin on the day it is rendered. Nor was enforcement to be denied on the ground that the arbitral procedure was not in accordance with Chinese law, as the law of the seat of the arbitration. Devon contested the CMAC’s decision to reject Pactrans’s counterclaim because it was not filed within the established time limit, while permitting it to file a separate action which was later consolidated with Devon’s claim. The court held that Devon failed to show that this decision was improper under Chinese law or that Devon was prejudiced by it.1
A detailed report of this decision is available online at
1. On 31 March 2009, a CMAC arbitral tribunal rendered an award in favor of China National in another dispute between the same parties. The 13 November 2009 decision by the United States District Court for the Southern District of New York granting enforcement of that award is reported in this Yearbook XXXV (2010) p. 499 (US no. 687).
Yearbook Comm. Arb’n XXXV (2010) 527 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
698. United States District Court, District of Colorado, 2 April 2010, Civil Action No. 10-cv-00673-CMA
Parties: Plaintiff: Colorado Mills LLC (US) Defendants: (1) Sunrich, LLC (US); (2) Colorado Sun Oil Processing LLC (US)
Published in: 2010 U.S. Dist. LEXIS 43206
Articles: II(3) (by implication)
Subject matter: – removal from state court to federal court
Topics: ¶ 217
Summary
Defendant argued that this case – which asserted a state-law claim and was between US entities – should nevertheless be removed to federal court because of defendant’s Canadian parent company. The court remanded the case to state court, holding that defendant gave neither relevant legal authority nor substantive reasons for its request. Any attempt to inject a federal question into a state action violates the principle that the plaintiff gets its choice of forum.
Colorado Mills LLC (Colorado Mills) and Sunrich, LLC (Sunrich) entered into a Joint Venture Agreement to establish Colorado Sun Oil Processing LLC (Sun Oil). The Agreement contained an arbitration clause. A dispute arose between the parties. On 16 March 2010, Colorado Mills sued Sunrich and Sun Oil (collectively, Defendants) in Prowers County District Court, Colorado. On 22 March 2010, Sunrich removed the case to the federal court, arguing that there was federal question jurisdiction because Sunrich was a wholly-owned subsidiary of a Canadian corporation, SunOpta, Inc. (SunOpta) and thus the action fell under the 1958 New York Convention. The United States District Court for the District of Colorado, per Christine M. Arguello, US DJ, dismissed this argument and remanded the case to the state court. It noted that Sunrich simply stated that its Canadian parent company could “step into its shoes for purposes of jurisdiction” and did not substantively address the issue whether its Canadian parent was a party to, or otherwise bound by, the contract signed by its subsidiary.
528 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 698
The court was “not persuaded by Sunrich’s maneuvering” and by the relevance of the legal authority on which it relied, as all the cases cited by Sunrich were distinguishable from the facts of the present case. The court also noted that Sunrich’s attempt to inject a federal question into a state action would violate the principle that the plaintiff gets its choice of forum.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 529 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
699. United States District Court, Middle District of Florida, Orlando Division, 8 April 2010 and 14 June 2010, Case No. 6:09-cv-2099-Orl- 31DAB
Parties: Plaintiff: Nurettin Mayakan (Turkey) Defendant: Carnival Corporation (Panama)
Published in: Decision of 8 April 2010: 2010 U.S. Dist. LEXIS 45234 Decision of 14 June 2010: 2010 U.S. Dist. LEXIS 58570
Articles: II(3)
Subject matters: – Jones Act claims – requirements for referral to arbitration (in general)
Topics: ¶ 223
Summary
Under the 2009 Eleventh Circuit decision in Thomas, requiring arbitration of Jones Act claims where it is certain that only foreign (here, Panamanian) law will be applied in the arbitration amounts to a prospective waiver of a seaman’s statutory rights under US law. Hence, arbitration should not be compelled.
On 30 July 2006 and 16 June 2007, Nurettin Mayakan signed two seaman’s contracts to work as headwaiter on cruise ships of Carnival Corporation (Carnival). Both contracts were governed by the substantive law of Panama and provided for arbitration of disputes in one of four locations, whichever was closest to the seaman’s home country – in the present case, Monaco. On 26 October 2006, Mayakan was injured after carrying heavy boxes onboard the CARNIVAL CONQUEST, a Panamanian-flagged vessel sailing out of Galveston, Texas. Mayakan alleged that, notwithstanding its knowledge of his initial injury, Carnival compelled him to perform additional heavy work onboard the CARNIVAL GLORY, a Panamanian-flagged vessel sailing out of Port Canaveral, Florida, some time after 16 June 2007. This additional heavy work aggravated his initial injury; Mayakan suffered severe spinal injuries as a consequence. Mayakan commenced an action against Carnival in the Eighteenth Judicial Circuit Court in and for Brevard County, Florida, asserting Jones Act negligence
530 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 699 claims and general US maritime law claims. Carnival removed the action to federal court under the 1958 New York Convention and sought referral of the dispute to arbitration. By its first decision, rendered on 8 April 2010, the United States District Court for the Middle District of Florida, Orlando Division, per Gregory A. Presnell, US DJ, directed the parties to provide supplemental briefs in respect of the substantive law governing the dispute, the scope of the arbitration clauses in the contracts and the arbitrability of Mayakan’s claims. This is the first decision reported. By its second decision, rendered on 14 June 2010, the district court, again per Gregory A. Presnell, US DJ, denied Carnival’s motion to refer the dispute to arbitration. The court first noted that seaman’s contracts that contains an agreement to arbitrate generally fall under the New York Convention because the Convention and its implementing legislation do not recognize an exception for seaman’s employment contracts as the one provided for domestic arbitration and hold that such contracts are “commercial” for purposes of the Convention. The court then considered that the inquiry carried out by the court in deciding a motion to compel arbitration under the Convention, is “very limited”. The court must compel arbitration where (1) there is an agreement in writing within the meaning of the Convention; (2) the agreement provides for arbitration in the territory of a party to the Convention; (3) the agreement arises out of a legal relationship, whether contractual or not, which is considered commercial; and (4) a party to the agreement is not an American citizen, or the commercial relationship has some reasonable relation with one or more foreign states. In the present case, all four jurisdictional prerequisites were met. However, there is no referral to arbitration where the arbitration agreement is null and void in the sense of Art. II(3) Convention or there is a prospective waiver of a party’s right to pursue US statutory remedies. Mayakan contended that requiring arbitration of his Jones Act claims would amount to a prospective waiver of his statutory rights under US law. The district court recognized that authorities are split on this issue, but agreed with the authorities holding that Jones Act claims are not subject to arbitration. It referred to the 2009 decision of the Eleventh Circuit in Thomas, where it was held that an arbitration clause that required a seaman to arbitrate his statutory right claim (under the Seaman’s Wage Act) in the Philippines under Panamanian law was unenforceable because the choice-of-law and arbitration provisions worked in tandem to operate as a prospective waiver of the seaman’s right to pursue his statutory remedies under US law. The Eleventh Circuit stated that arbitration clauses should be enforced only if (1) US substantive law would definitely be
Yearbook Comm. Arb’n XXXV (2010) 531 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 applied or (2) there is a possibility that US law will be applied and there will be a subsequent opportunity for review. The district court agreed with the reasoning and the conclusion of the district court for the Southern District of Florida in Sivanandi,1 which held that where it is certain that only foreign law will be applied arbitration should not be compelled, irrespective of whether there would be a subsequent opportunity for review of the arbitrator’s decision. This was the case here. The court therefore concluded that absent additional guidance from the Eleventh Circuit, “Thomas generally precludes arbitration of Jones Act claims”. This is the second decision reported.
A detailed report of these decisions is available online at
1. Sivanandi v. NCL (Bahamas) Ltd., Case No. 10-CV-20296, 2010 U.S. Dist. LEXIS 54859, 2010 WL 1875685 (S.D. Fla. 15 Apr. 2010), reported in this Yearbook XXXV (2010) p. 533 (US no. 700).
532 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 700
700. United States District Court, Southern District of Florida, 15 April 2010, Case No. 10-20296-CIV-UNGARO
Parties: Plaintiff: Sivkumar Sivanandi (India) Defendant: NCL (Bahamas) Ltd., d/b/a NCL (nationality not indicated)
Published in: 2010 U.S. Dist. LEXIS 54859
Articles: II(3)
Subject matters: – Jones Act claims – removal from state court to federal court of Jones Act claims – arbitration agreement “null and void” on public policy grounds
Topics: [1]-[3] + [11] = ¶ 217; [4]-[10] = ¶ 220
Summary
An arbitration clause in a seaman’s employment agreement was null and void on grounds of public policy because, read together with the clause providing that a non-US (here, Bahamian) law applied to the merits of the dispute, it operated as a prospective waiver of the seaman’s right to pursue his US statutory remedies under the Jones Act.
In December 2006 and January 2009, Sivkumar Sivanandi sustained two injuries when he slipped and fell down stairs while working as an assistant line cook on NCL (Bahamas) Ltd.’s (NCL’s) vessels. Both incidents resulted in knee pain and, after the second incident, Sivanandi underwent left knee surgery. On 29 November 2008, prior to the second incident, Sivanandi entered into an Employment Agreement with NCL. The Employment Agreement incorporated the Collective Bargaining Agreement (CBA), negotiated by NCL with the Norwegian Seafarer’s Union, which provides that:
“The parties to the Agreement recognize that Bahamian law will apply to all disputes notwithstanding and without regard to any provision of
Yearbook Comm. Arb’n XXXV (2010) 533 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
Bahamian law that might be construed to preclude the application of Bahamian law to non-Bahamian Seafarers.”
The Employment Agreement also contained a clause referring disputes – including Jones Act claims – to arbitration pursuant to the 1958 New York Convention. The arbitration clause further provided that the place of arbitration
“shall be the Seaman’s country of citizenship, unless arbitration is unavailable under The Convention in that country in which case, and only in that case, said arbitration shall take place in Nassau, Bahamas”.
On 3 December 2009, Sivanandi commenced an action against NCL in the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, asserting Jones Act claims. On 29 January 2010, NCL removed the case to federal court under the New York Convention; immediately thereafter, it moved to compel arbitration pursuant to the arbitration clause in the Employment Agreement. The United States District Court for the Southern District of Florida, per Ursula Ungaro, US DJ, held that the arbitration clause at issue was unenforceable on grounds of public policy and denied NCL’s motion to compel arbitration. The district court affirmed at the outset its finding in earlier cases that removal of Jones Act claims to federal court under the Convention is proper. The court then examined Sivanandi’s contention that the arbitration clause at issue was null and void as against public policy because it required the application of Bahamian law, thereby precluding Sivanandi from pursuing his US statutory remedy under the Jones Act. Sivanandi relied on the 2009 decision of the Eleventh Circuit in Thomas,1 where it was held that an arbitration clause that required a seaman to arbitrate his Seaman’s Wage Act claim in the Philippines under Panamanian law was void on grounds of public policy because the choice- of-law and arbitration clauses, if applied “in tandem”, would operate as a prospective waiver of the seaman’s right to pursue his statutory remedies under US law. The Eleventh Circuit stated that arbitration clauses should be upheld only if it is evident that (1) US law will definitely be applied or (2) there is a possibility that US law will be applied and there will be a subsequent opportunity for review. The district court concluded that the present dispute should not be referred to arbitration based on the principles set out in Thomas. Here too, as in Thomas,
1. Thomas v. Carnival, 573 F.3d 1113 (11th Cir. 2009), reported in Yearbook XXXIV (2009) pp. 1136-1150 (US no. 674).
534 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 700 the choice-of-law and arbitration clause in the Employment Agreement, if applied together, would deprive Sivanandi of his US statutory protection under the Jones Act. Also, it was certain that US law would not be applied to the merits of the dispute in the arbitration proceedings, because the parties expressly chose for Bahamian law as the governing law of the Employment Agreement. In light of this certainty that US law would not be applied it was irrelevant whether there would be a subsequent opportunity for review of the arbitrator’s decision at the award-enforcement stage. The court dismissed the argument that Thomas was inapplicable because Thomas concerned Seaman Wage Act claims rather than Jones Act claims. The court referred to its 16 March 2010 holding in Cardoso2 that a “holistic reading” of Thomas indicates that the Eleventh Circuit’s reasoning applies with equal force to claims brought pursuant to the Jones Act.
A detailed report of this decision is available online at
2. Cardoso v. Carnival Corp., 2010 U.S. Dist. LEXIS 24602, 2010 WL 996528, *3, Case No. 09-23442- CV-GOLD (S.D. Fla. 16 Mar. 2010), reported in this Yearbook XXXV (2010) p. 516 (US no. 694).
Yearbook Comm. Arb’n XXXV (2010) 535 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
701. United States District Court, Southern District of Florida, Miami Division, 11 May 2010, Case No. 10-20799-CIV-ALTONAGA/Brown
Parties: Plaintiff: Anna Dockeray (UK) Defendant: Carnival Corporation (nationality not indicated)
Published in: 2010 U.S. Dist. LEXIS 78984
Articles: II(3)
Subject matters: – Jones Act claims – arbitration agreement “null and void” on public policy grounds (no) – unenforceable choice of law clause severed from Seafarer’s Agreement – waiver of arbitration by (substantial) participation in court proceedings
Topics: ¶ 220
Summary
The court enforced the arbitration agreement in a seafarer’s employment agreement but severed – pursuant to an express severability clause – the choice-of-law clause that referred to Panamanian law, holding in light of the Eleventh Circuit’s decision in Thomas that the two “operated in tandem” to deprive the seafarer of her US statutory (Jones Act) claims. The court also found that the party seeking referral to arbitration had not waived its right thereto by substantially participating in litigation, and that the arbitration clause was not procedurally unfair in respect of disclosure.
Anna Dockeray signed an employment agreement with Carnival Corporation (Carnival) to work as a dancer on Carnival’s Panamanian-flagged vessel MIRACLE. The employment agreement stated that “Seafarer agrees to appear for medical examinations by doctors designated by Carnival in specialties relevant to any claims Seafarer asserts, and otherwise the parties agree to waive any and all rights to compel information from each other”. It also contained a severability clause providing that any invalid or unenforceable provision “shall be deemed severed from this Agreement”. The employment agreement was governed by the law of
536 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 701 the flag of the vessel; it further provided for arbitration of disputes by a sole arbitrator under the International Rules of the American Arbitration Association/International Centre for Dispute Resolution. The place of arbitration was to be chosen among London, Monaco, Panama City or Manila, whichever was closer to the seafarer’s home country. In September 2009, Dockeray broke her wrist when a chair she was performing on as part of a show collapsed. In January 2010, she commenced an action against Carnival for Jones Act negligence; breach of the warranty of seaworthiness; failure to provide maintenance and cure; failure to provide prompt, proper and adequate maintenance and cure; and failure to pay unearned wages and penalties. On 3 February 2010, Carnival filed an answer and affirmative defenses, none of which raised arbitration. On 26 February 2010, Dockeray filed a Notice of Trial, indicating the cause was at issue and ready to be tried. On 5 March 2010, Carnival moved for an extension of time to respond to Dockeray’s discovery requests. On 10 March 2010, Dockeray noticed Carnival’s motion for a hearing; on 16 March 2010, she also filed a notice of taking the deposition of Carnival’s corporate representative. On 17 March 2010, Carnival removed the case to federal court under the 1958 New York Convention and its implementing legislation, Chapter 2 of the Federal Arbitration Act. The United States District Court for the Southern District of Florida, Miami Division, per Cecilia M. Altonaga, US DJ, referred the parties to arbitration but severed as against public policy the choice-of-law clause in the employment agreement. Dockeray raised three arguments against Carnival’s motion to compel arbitration: (1) Carnival waived its right to arbitrate by litigating in state court before removing the case to federal court; (2) the arbitration clause in the employment agreement was procedurally unfair and (3) the arbitration agreement is contrary to public policy in light of the Eleventh Circuit decision in Thomas.1 The court considered at the outset that the parties did not dispute that the four jurisdictional requirements for compelling arbitration under the New York Convention were met: there was an arbitration agreement in writing, providing for arbitration in a signatory State (England) and arising out of a commercial relationship, and at least one of the parties was not a US citizen. Rather, Dockeray argued that an affirmative defense prevented referral to arbitration, namely, the arbitration agreement was null and void as against public policy. She
1. Thomas v. Carnival Corp., 573 F.3d 1113 (11th Cir. 2009), reported in Yearbook XXXIV (2009) pp. 1136-1150 (US no. 674).
Yearbook Comm. Arb’n XXXV (2010) 537 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 relied on Thomas, where the Eleventh Circuit held that in addition to Art. II(3), Art. V Convention – in particular, the public policy ground in Art. V(2)(b) – provides affirmative defenses to a suit that seeks a court to compel arbitration. The district court first dismissed Dockeray’s contention that Carnival had waived its right to compel arbitration by participating in the court litigation without raising the arbitration objection. The court concluded that although Carnival’s delay in raising its right to arbitrate as an affirmative defense caused Dockeray expenses and thus prejudice, Carnival had not substantially participated in litigation “to a point inconsistent with an intent to arbitrate and this participation results in prejudice to the opposing party” as required by Eleventh Circuit case law. The district court disagreed with Dockeray’s argument that the arbitration clause at issue was procedurally unfair because it provided that the parties waived all rights to compel information from each other, while at the same time providing that the seafarer agreed to undergo medical examinations by doctors designated by Carnival in specialties relevant to claims the seafarer asserted. The court noted that by agreeing to arbitrate, parties trade “the procedures and opportunity for review of the courtroom for the simplicity, informality, and expedition of arbitration”. Discovery limitations are consistent with these goals of simplicity, informality and expedition. The district court then dealt with Dockeray’s argument that the arbitration agreement was null and void because the choice-of-law clause and arbitration clause in the employment agreement “operated in tandem” as a prospective waiver of her US statutory rights under the Jones Act. The Eleventh Circuit held in Thomas that a similar combination of arbitration clause and choice-of-law clause – providing for arbitration in the Philippines and application of substantive Panamanian law – was null and void because it resulted in a prospective waiver of the seafarer’s Seaman’s Wage Act claim. Referring to Supreme Court case law, the Court of Appeals held that arbitration clauses “should be upheld if it is evident that either US law definitely will be applied or if, there is a possibility that it might apply and there will be later review’. In Thomas, there was a choice for Panamanian law and a distinct possibility that the seafarer would receive no award under that law, given the US-based nature of his claim. Hence, there would be no award to enforce in US courts and no opportunity to review it at the enforcement stage for a violation of public policy. Carnival argued that the case was different here, because the only claim governed by the New York Convention in Thomas was a Seaman’s Wage Act claim, while Dockeray asserted both statutory (Jones Act) and non-statutory claims; thus, there was no “distinct possibility” of not obtaining an award that
538 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 701 could be later reviewed for public policy by a US court. Carnival further noted that district courts in the Eleventh Circuit are split on this issue. The court listed the diverging conclusions reached by its sister courts and concluded that, as most of their orders had been appealed, the Eleventh Circuit will eventually decide “the question of what a district court must do where a seafarer’s complaint raises statutory and nonstatutory claims” and the agreement requires the seafarer to arbitrate and apply law that does not recognize Seaman’s Wage Act or Jones Act claims. However, in the meantime “the judges of the Southern District, to which the bulk of these actions are removed, will continue to try to arrive at the correct solution (if there is just one)”, trying to comply with Thomas while balancing the parties’ express agreements to arbitrate and US federal policy favoring arbitration. In the present case, because Dockeray’s employment agreement contained a severability clause, the court decided to severe the choice-of-law clause and uphold the arbitration clause.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 539 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
702. United States District Court, Southern District of Texas, Houston Division, 14 May 2010, Civil Action NO. H-09-879 and Civil Action NO. H-08-3627
Parties: Plaintiff: Eres, N.V. (Belgium) Defendant: Citgo Asphalt Refining (nationality not indicated) et al.
Plaintiff: Citgo Petroleum Corp. (nationality not indicated) et al. Defendant: NuStar Asphalt Refining, LLC (nationality not indicated) et al.
Published in: 2010 U.S. Dist. LEXIS 47691
Articles: II(3)
Subject matters: – assignee bound by arbitration clause – renewal of contract (novatio)
Topics: [7]-[29] = ¶ 217; [30]-[39] = ¶ 213
Summary
The court stayed proceedings and ordered the parties to arbitration in New York, holding that the assignees had been assigned and had assumed all obligations under the contract, including the arbitration clause. There had been no novation of the contract as one of the original signatories could not be deemed to have released the others because it had not received the written guaranty it had requested as a condition.
In November 2004, Citgo Asphalt Refining Co. (CARCO) entered into a Contract of Affreightment (COA) with Eres, N.V. (Eres) to utilize Eres’s vessels for a period of seven years, beginning 1 January 2005, for shipment from Venezuela of at least three million barrels of asphalt annually. CARCO’s parent company, Citgo Petroleum Corporation (Citgo) guaranteed CARCO’s performance under the COA. The COA contained a clause providing for arbitration of disputes in New York.
540 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 702
By a Sale and Purchase Agreement (SPA) executed on 5 November 2007, CARCO sold all of its assets, including the COA, to NuStar Asphalt Refining, LLC (NuStar Asphalt). While the SPA was being amended (it was finalized on 20 March 2008), CARCO on 21 November 2007 sought Eres’s consent to assign the COA to NuStar Asphalt (though such consent was not required under the COA). CARCO’s consent letter to Eres stated that upon assignment NuStar Asphalt “will succeed to all of CARCO’s liabilities and obligations” under the COA. Eres responded that it would consent if NuStar Asphalt’s parent company, NuStar Energy LP (NuStar Energy, not a party to these proceedings) guaranteed NuStar Asphalt’s performance under the COA. On 27 December 2007, NuStar Energy sent a draft guaranty to Eres. Shortly thereafter, however, it was determined that NuStar Marketing, LLC (NuStar Marketing) was actually the entity intended to take over the COA. CARCO sent a new consent letter to Eres and NuStar Energy adjusted the draft guaranty to guarantee NuStar Marketing’s performance. The parties exchanged emails altering the guaranty’s language through early February 2008, but never signed a guaranty or a consent. On 20 March 2008, NuStar Asphalt and CARCO finalized the SPA. The same day, NuStar Asphalt and NuStar Marketing (collectively, the NuStar Parties) and CARCO entered into an Assignment and Assumption Agreement (the Assignment Agreement). Under the Assignment Agreement – which was made subject to the terms and conditions of the SPA – CARCO agreed to assign to NuStar Marketing all rights under the contracts attached as Exhibit A. The list of contracts contained only the COA. Also on 20 March 2008, NuStar Asphalt guaranteed NuStar Marketing’s performance of the contracts it assumed under the Assignment Agreement. Neither CARCO and Citgo (collectively, the Citgo Parties) nor the NuStar Parties performed under the COA, whereupon Eres considered the COA repudiated as of August 2008. It then filed a motion to compel arbitration of its dispute with the Citgo and NuStar Parties in the district court. The United States District Court for the Southern District of Texas, Houston Division, per Ewing Werlein, Jr., US DJ stayed proceedings and ordered the parties to arbitration in New York as provided for under the COA. The court noted at the outset that all conditions for referral to arbitration under the 1958 New York Convention were fulfilled, the only issue being whether the NuStar Parties, the Citgo Parties, or both, were bound by the arbitration clause in the COA. The NuStar Parties were bound by the arbitration clause if they assumed the COA, while the Citgo Parties, as the original parties to the COA, were bound to arbitrate unless there was a novation by which the
Yearbook Comm. Arb’n XXXV (2010) 541 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
NuStar Parties were substituted for CARCO. The court concluded that all parties were bound by the arbitration clause in the COA. The court first held that on the face of the SPA and the Assignment Contract the NuStar Parties assumed performance of CARCO’s obligations under the COA. The NuStar Parties argued, however, that while the COA did not require Eres’s consent to assignment, the SPA required that consent as a precondition to CARCO’s assignment and/or the NuStar Parties’ assumption of the COA. The court disagreed, finding no language to that purpose in the SPA. Accordingly, the NuStar Parties effectively assumed CARCO’s obligations under the COA and were bound by its arbitration clause. The district court then considered whether Eres consented to a novation of the COA. It concluded that it did not. While a novation agreement may be inferred from the acts and conduct of the parties and other facts and circumstances, all drafts of the guaranty exchanged between Eres and NuStar Energy included a signature block for the signature of NuStar Energy’s Senior Vice President, Chief Financial Officer and Treasurer. Hence, the intention was clearly to have a guaranty in writing as a condition to releasing the Citgo Parties. Since no such guaranty was delivered to Eres, the Citgo Parties remained bound to the COA and to its arbitration clause.
A detailed report of this decision is available online at
542 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 703
703. United States Court of Appeals, Second Circuit, 18 May 2010, 09- 1784-cv
Parties: Petitioner/Appellee: Betzalel Schwartzman (nationality not indicated) Respondent/Appellant: Yaakov Harlap, a/k/a Jacob Charlap (nationality not indicated)
Published in: 2010 U.S. App. LEXIS 10057
Articles: V(2)(b)
Subject matter: – public policy and disclosure by arbitrator
Topics: ¶ 524 (disclosure by arbitrator)
Summary
The district court’s decision enforcing an Israeli award rendered by a religious tribunal was affirmed. Defendant’s public policy argument that the arbitrator, a Rabbi, had been employed by petitioner to certify petitioner’s orchards as kosher was dismissed, because a non-disclosed relationship is not an obstacle to enforcement when it could have been discovered by the party concerned before or during the arbitration. Here, the Rabbi’s involvement in the kosher certification was mentioned in the contract.
The facts of this case are also reported in Yearbook XXXIV (2009) at pp. 1072- 1074 (US no. 666). The Schwartzman family – growers of esrog, an ancient fruit that plays a role in the Jewish holiday of Sukkot – sold esrogim to Yaakov Harlap for over thirty years. On 8 September 2005, Betzalel Schwartzman and Harlap concluded a contract setting forth the terms governing their relationship for that year. The contract provided, inter alia, that Harlap would be Schwartzman’s exclusive distributor in the United States and that Schwartzman would maintain the kosher certification on all esrog orchards “from Belz or [Rabbi Eliezer] Stern”. Schwartzman’s orchards had long been certified as kosher by the Belz organization, but the certification responsibility was switched to Rabbi Stern shortly after the signing of the contract at issue. At the bottom of the contract there was a hand-written arbitration clause providing that Rabbi Stern would arbitrate any disputes under the contract.
Yearbook Comm. Arb’n XXXV (2010) 543 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
A dispute arose between the parties when Harlap complained that Schwartzman had violated his exclusive distributorship and refused to pay the balance owed on his account. By a submission agreement of September 2006, the parties agreed to submit the dispute to Rabbi Stern in Israel. Rabbi Stern eventually rendered an award in favor of Schwartzman. Schwartzman sought enforcement of the Israeli award in the United States District Court for the Eastern District of New York. Harlap opposed enforcement and sought to vacate the award, challenging its merits and asserting that Rabbi Stern failed to disclose that Schwartzman had hired him to supply the kosher certification for the esrog orchards. On 13 April 2009, the United States District Court for the Eastern District of New York granted enforcement. This decision is reported in Yearbook XXXIV (2009) at pp. 1072-1076 (US no. 666). The United States Court of Appeals for the Second Circuit, before Ralph K. Winter, Joseph M. McLaughlin and Debra Ann Livingston, CJJ, affirmed the enforcement decision. The Court noted at the outset that disclosure by arbitrators of material relationships with the parties that could impact their impartiality is a fundamental aspect of US public policy and as such can be a ground for refusing enforcement of the ensuing award under the 1958 New York Convention. Arbitrators have an obligation to disclose dealings of which the parties cannot reasonably be expected to be aware. However, a party cannot oppose enforcement based on its discovery of a non-disclosed relationship where it could have discovered it “just as easily before or during the arbitration rather than after it lost its case”. Here, Harlap should have known that Rabbi Stern could be employed by Schwartzman to certify the orchards at the time he entered the sales contract in 2005, since this was specified in the contract itself. The Court of Appeals vacated the decision of the district court insofar as it directed that payment be made directly to Schwartzman, finding that the district court did not deal with Harlap’s contention that the award directed that payment should be made “only into the hands of the court secretary”.
A detailed report of this decision is available online at
544 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 704
704. United States District Court, District of Columbia, 7 June 2010, Civil Action No. 08-485 (RBW)
Parties: Plaintiff: Republic of Argentina Defendant: BG Group Plc (UK)
Published in: 2010 U.S. Dist. LEXIS 56055
Articles: I(1); I(3); V(2)(b)
Subject matters: – nondomestic award – Sect. 202 Federal Arbitration Act (FAA) defines nondomestic award – reciprocity reservation bar to enforcement of nondomestic award (no)
Topics: [12]-[20] = ¶ 101; [12]-[16] + [21]-[22] = ¶ 102
Summary
The court denied Argentina’s request to vacate an award rendered in Washington, DC. It held that it had jurisdiction under the 1958 New York Convention because the reciprocity reservation made by the United States when acceding to the Convention does not compel district courts to recognize and enforce only awards rendered in a foreign state. Here, the award was “nondomestic” in the sense of Art. I(1) Convention and Sect. 202 of the Federal Arbitration Act (FAA). The court rejected all of Argentina’s grounds for seeking vacatur of the award and granted its request for a supplemental memorandum on whether the award violated public policy and should be refused enforcement under Art. V(2)(b) Convention.
BG Group Plc (BG Group) acquired a majority interest in Gas Argentino, S.A., a consortium of investors that owned a majority interest in MetroGAS, one of eight distribution companies into which the Republic of Argentina had divided its gas distribution industry in the late 1980s and early 1990s. In 2001, Argentina began to experience an economic crisis. In 2002, it enacted an emergency law implementing measures that had a negative impact on BG Group’s investment in MetroGAS. On 25 April 2003, BG Group commenced arbitration as provided for in the Agreement for the Promotion and Protection of Investments (the Investment Treaty) concluded between Argentina and the United Kingdom on 11 December 1990. Art. 8(2) of the Investment Treaty
Yearbook Comm. Arb’n XXXV (2010) 545 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 provides for arbitration of disputes when the parties so agree or, at the request of one of the parties, (i) after eighteen months from the moment the dispute was submitted to a competent court of the investment country or (ii) where the parties are still in dispute after a final decision of that court. Art. 8(3) provides that disputes can be submitted either to the International Centre for Settlement of Investment Disputes (ICSID) or to ad hoc arbitration under the Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL). BG Group elected to commence ad hoc arbitration under the UNCITRAL Rules. The International Chamber of Commerce (ICC) was indicated as the appointing authority. By an award issued in Washington, DC, on 24 December 2007, an arbitral tribunal unanimously ruled in favor of BG Group in the amount of US$ 185,285,485.85 and costs, attorneys’ fees and interest. The arbitrators rejected numerous arguments raised by Argentina, one of which was its reliance on the “state of necessity” doctrine to exonerate it from liability; concluded that Argentina breached the Investment Treaty; and awarded damages to BG Group based on the fair market value of its investment in MetroGAS. On 21 March 2008, Argentina filed a petition in federal court to vacate or modify the award. BG Group cross-moved to have the award confirmed. The United States District Court for the District of Columbia, per Reggie B. Walton, US DJ, denied Argentina’s petition to vacate and requested the parties to file supplemental memoranda on confirmation. The district court first examined whether it had subject-matter jurisdiction under Sect. 203 of the Federal Arbitration Act (FAA), which confers jurisdiction on federal courts to entertain actions falling under the 1958 New York Convention. The first question was whether the award at issue, though rendered in the District of Columbia, did fall under the Convention pursuant to the provision in its Art. I(1) covering awards “not considered as domestic awards” in the State where enforcement is sought. The parties disagreed as to whether the United States recognizes the “non-domestic” provision at all and, even if it does, whether the award was “non-domestic”. As to the first issue, the court dismissed Argentina’s contention that the reciprocity reservation made by the United States under Art. I(3) Convention compels district courts to recognize and enforce only awards rendered in a foreign state. The court held that the reciprocity reservation is not concerned with the applicability of the “non-domestic” provision, but rather states the inapplicability of the New York Convention to awards rendered in States that are not a party to the Convention.
546 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 704
As to the second issue, the court held that the award was a “non-domestic” award under the Convention. It noted that Sect. 202 FAA defines non-domestic awards by extending the coverage of the Convention to arbitral awards between citizens of the United States that have some “reasonable relation” with one or more foreign states. The court reasoned that since this provision plainly intended for the Convention to cover certain awards issued in matters involving two domestic parties, it would be “nonsensical” to conclude that the present award – which was issued in a dispute involving two foreign parties – fell outside the Convention, which was ratified for the purpose of enforcing foreign awards. The district court then rejected all of Argentina’s grounds for seeking vacatur of the award. The court dealt with Argentina’s contentions based on an alleged excess of authority first. (1) Argentina claimed that the ICC, acting as appointing authority, exceeded its authority by denying Argentina’s request to disqualify one of the arbitrators. The court held that the ICC’s authority to entertain Argentina’s objection to the arbitrators was undisputed and that Argentina failed to provide any evidence establishing the arbitrator’s partiality. (2) Argentina also claimed that the arbitrators exceeded their authority by failing to recognize that the Investment Treaty contained an impediment to arbitration unless recourse was first taken to the courts. The court disagreed, noting that Argentina had promulgated emergency legislation barring recourse to the courts, so that its interpretation of the Investment Treaty would lead to an absurd and unreasonable result, which is proscribed by the Vienna Convention on the Law of Treaties. (3) The claim that the arbitrators exceeded their authority by allowing BG Group to file a derivative claim on behalf of MetroGAS also failed: the arbitrators reviewed several arbitration decisions on this issue and ultimately concluded that those cases supported the proposition that derivative claims are allowed under international law. (4) Nor did the arbitrators exceed their authority in calculating damages. In the silence of the Investment Treaty, they properly turned to sources of international law to identify the rule of law governing the standard for calculating damages and determined that under customary international law BG Group was entitled to the difference in value of its investment before and after the enactment of Argentina’s emergency laws. The court added that it could not review whether the arbitral tribunal’s conclusions were correct: it sufficed that those conclusions could arguably be justified by a colorable construction of the Investment Treaty and international law concepts. The court was satisfied that that threshold was met here. The court then dismissed Argentina’s argument that the arbitrators decided in manifest disregard of the law, holding (1) that the arbitrators construed rather than ignored the plain language of the Investment Treaty and (2) that Argentina’s
Yearbook Comm. Arb’n XXXV (2010) 547 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 argument that the arbitral panel failed to correctly apply the “state of necessity” doctrine was nothing more than a mere assertion of error. Nor was the award to be vacated because one of the arbitrators allegedly rendered inconsistent decisions in other cases arising under the same Investment Treaty and was therefore partial. The court held that there could be a number of innocuous reasons to explain why the arbitrator reached different conclusions and that there was no basis for the court to conclude that he was biased. The district court also dismissed Argentina’s contention that the award was procured by corrupt, fraudulent or undue means because certain witness statements contained passages that were (substantially) identical to a witness statement presented in another unrelated case. In the court’s opinion, this meant at best that counsel drafted the declarations in both cases. This did not rise to the level of wrongdoing as Argentina could not prove that the witnesses signed the statement without subscribing to the facts stated therein. The court rejected Argentina’s request to modify the award because the arbitral tribunal’s rejection of the discounted cash flow basis standard led to a disproportionate, unfair and irrational award, holding that this was not one of the cases in which the FAA allows a court to modify an award. The court finally examined BG Group’s cross-motion to enforce the award. Argentina argued in its Petitioner’s Reply that it should be given a full opportunity to respond to BG Group’s cross-motion, “considering the serious violations of public policy” allegedly committed by the arbitrators. The court was “ highly skeptical” that the award violated the “most basic notions of morality and justice” of the US. Nonetheless, in light of Argentina’s express reservation for further briefing on the issue of whether enforcement should be denied under Art. V(2)(b) of the New York Convention, it concluded that Argentina should be given the opportunity to submit a supplemental memorandum.
A detailed report of this decision is available online at
548 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 705
705. United States District Court, Southern District of Florida, Miami Division, 15 June 2010, Case Number: 10-20293-CIV-MORENO
Parties: Plaintiff: John D. Watt (Jamaica) Defendant: NCL (Bahamas) LTD d/b/a NCL (nationality not indicated)
Published in: 2010 U.S. Dist. LEXIS 67745
Articles: II(3)
Subject matters: – Jones Act claims – removal from state court to federal court of Jones Act claims – arbitration agreement “null and void” on public policy grounds
Topics: ¶ 220; [3] = ¶ 214
Summary
An arbitration clause in a seaman’s employment agreement was null and void on grounds of public policy because, read together with the clause providing that a non-US (here, Bahamian) law applied to the merits of the dispute, it operated as a prospective waiver of the seaman’s right to pursue his US statutory remedies under the Jones Act.
John D. Watt was injured while working aboard a Bahamas-flagged cruise ship operated by NCL (Bahamas) LTD d/b/a NCL (NCL). His employment agreement with NCL provided that:
“Seaman agrees ... that any and all claims ... including, but not limited to claims such as personal injuries, Jones Act claims, actions for maintenance and cure, unseaworthiness ... shall be referred to and resolved exclusively by binding arbitration pursuant to [the Convention Act].... The place of the arbitration shall be the Seaman’s country of citizenship.... The substantive law to be applied to the arbitration shall be the law of the flag state of the vessel.”
Yearbook Comm. Arb’n XXXV (2010) 549 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
Watt brought claims in a Florida state court against NCL for Jones Act negligence, unseaworthiness and failure to provide maintenance and cure. NCL removed the action to federal court under the 1958 New York Convention and moved to compel arbitration in Jamaica under substantive Bahamian law, as provided for in the employment agreement. The United States District Court for the Southern District of Florida, Miami Division, per Federico A. Moreno, US DJ denied NCL’s motion to compel arbitration and remanded the action to state court. The court noted at the outset that Jones Act claims – though not generally removable – may be removed to federal court where a there is a valid arbitration agreement falling under the New York Convention. The court further found that the jurisdictional requirements for removal to be proper were all met here: there was a written agreement to arbitrate, providing for arbitration in a Convention signatory and arising out of a commercial relationship, and at least one of the parties to the agreement was not a US citizen. However, the district court granted Watt’s argument that the arbitration agreement was null and void as against public policy because its enforcement would constitute a waiver of Watt’s rights to pursue his US statutory claims, that is, his Jones Act claims. The court shared the reasoning and conclusion of a judge of the same district court, who found in Sivanandi1 that the choice-of-law clause and the arbitration clause in the contract “operated in tandem” to deprive the seaman of his US statutory rights.
A detailed report of this decision is available online at
1. Sivkumar Sivanandi v. NCL (Bahamas) Ltd., d/b/a NCL, Case No. 10-20296-CIV-UNGARO, 2010 U.S. Dist. LEXIS 54859, reported in this Yearbook XXV (2010) p. 533 (US no. 700).
550 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 706
706. United States District Court, Southern District of California, 17 June 2010, Case no. 09-cv-2266 BEN (NLS) (consol. with Case No. 09- cv-2322)
Parties: Petitioner: Trevino Hernandez, S. de R.L. de C.V. (Mexico) Respondent: Smart & Final, Inc. (US)
Published in: 2010 U.S. Dist. LEXIS 60755
Articles: III; V(2)(b) (by implication)
Subject matters: – 1975 Panama Convention incorporates jurisdiction and venue provisions of 1958 New York Convention – relationship Chapters 1, 2 (1958 New York Convention) and 3 (1975 Panama Convention) of Federal Arbitration Act (FAA) – nonsignatory party may rely on arbitration clause – lack of impartiality by arbitrator (no)
Topics: 704(A); [1]-[7] = ¶ 301; [12]-[18] = ¶ 524 (manifest disregard of the law); [19]-[26] = ¶ 521; [27]-[31] = ¶ 524 (refusal to hear evidence); [32]-[34] = ¶ 524 (award procured through undue means)
Summary
The petition to vacate an ICC award rendered in California was denied; the award was enforced. The court found that it had jurisdiction under the 1975 Inter-America (Panama) Convention, which incorporates provisions of the New York Convention – inter alia, those on jurisdiction and venue. As the award arose out of a commercial relationship and concerned a non-US corporation, it fell under the New York Convention, which gives district courts original jurisdiction. The court examined the petitions to vacate and confirm the award under the Federal Arbitration Act (FAA), since the FAA’s terms on confirmation and vacatur of an award do not conflict with the Panama Convention. None of the FAA’s grounds was present here. In particular, the arbitrators did not exceed their powers because the dispute in the arbitration was between a signatory and a nonsignatory to the contract containing the arbitration clause, since the contract expressly allowed the other signatory to operate through the nonsignatory.
Yearbook Comm. Arb’n XXXV (2010) 551 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
On 15 December 1992, Trevino Hernandez, S. de R.L. de C.V. (Tre-Her) and Smart & Final, Inc. (SFI) entered into a Joint Venture Agreement (JVA) to form a Mexico corporation to establish and operate a chain of stores in Northwest Mexico, called Smart & Final de Nordeste S.A. de C.V. (SFDN). SFI formed a wholly owned subsidiary, Smart & Final de Mexico, S.A. de C.V. (Smart-Mex) which, together with Tre-Her, incorporated SFDN in Mexico. The JVA provided for ICC arbitration of disputes in California. In 2006, a dispute arose between the parties from an alleged failure to distribute profits. On 7 November 2007, SFI commenced ICC arbitration as provided for in the JVA asserting, inter alia, breach of contract, fraud and deceit claims. The arbitration took place in San Diego, California. At the arbitration hearing, SFI presented fact and expert witnesses. Tre-Her had scheduled an expert witness to appear on day four of the arbitration, but was unsuccessful in rescheduling the expert when the arbitration was completed on day three. Tre- Her did submit written statements by the expert witness. On 9 July 2009, the arbitral tribunal issued an award in favor of SFI. On 13 October 2009, Tre-Her sought annulment of the award; SFI sought the award’s enforcement. The two actions were consolidated. The United States District Court for the Southern District of California, per Roger T. Benitez, US DJ, denied the vacatur petition and confirmed the award, finding that it had jurisdiction under the 1958 New York Convention and that the grounds for vacatur of the award invoked by Tre-Her under the Federal Arbitration Act (FAA) were unfounded. The district court found at the outset that it had jurisdiction under the 1975 Inter-American (Panama) Convention, which requires courts of Contracting States to give effect to private arbitration agreements and to recognize and enforce awards made in other signatories – the United States and Mexico are both Panama Convention countries. The court further noted that the Panama Convention incorporates provisions of the New York Convention, including the provisions governing jurisdiction and venue. Those provisions – which are contained in the New York Convention’s implementing legislation, Chapter 2 of the FAA – provide that district courts have original jurisdiction over any action falling under the New York Convention. Awards fall under the New York Convention when they arise out of a commercial legal relationship that is not entirely domestic in scope. Here, the award arose out of a commercial relationship and concerned a non-US corporation, Tre-Her. Hence, it fell under the New York Convention. The court then examined Tre-Her’s petition to vacate the ICC award. It noted first that the Panama Convention incorporates the FAA’s terms unless they are
552 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 706 in conflict with the Panama Convention’s terms. As the FAA’s terms regarding confirmation, vacatur and modification of an award do not conflict with the Panama Convention, a court applying the Panama Convention may confirm or vacate an award on the grounds set forth in the FAA. The court dismissed all grounds for vacatur invoked by Tre-Her. It first held that the ICC arbitrators did not exceed their power by deciding the dispute, which was between SFDN and Smart-Mex, while the signatories to the JVA and the arbitration clause therein were SFI and Tre-Her. The court reasoned that the issue whether a claim involving a non-signatory may be referred to arbitration must be decided by reference to the agreement containing the arbitration clause that is executed by the signatories, which must be interpreted according to ordinary principles of law and equity, with due regard given to the federal policy favoring arbitration. In the present case, the JVA expressly permitted SFI to establish and operate SFDN through Smart-Mex, so that SFI had the right to arbitrate disputes involving Smart-Mex and SFDN. Nor was one of the arbitrators partial because he was the US Chair of the US- Mexico Bar Association, while a partner at one of the law firms representing SFI was the Association’s US Vice-Chair. Also, the failed rescheduling of Tre-Her’s expert testimony did not amount to a refusal to hear evidence, and the award was not procured through undue means because SFI failed to disclose that its expert on Mexico law was or had been a partner of one of the attorneys for SFI.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 553 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
707. United States District Court, District of New Jersey, 21 June 2010, Civil Action No. 09-CV-4354 (DMC) - (CCC)
Parties: Plaintiff: CCP Systems AG (Germany) Defendants: (1) Samsung Electronics Corp. Ltd. (South Korea); (2) Samsung Electronics America, Inc. (US); (3) Samsung Networks, Inc. (South Korea); (4) IBM Corporation (US)
Published in: 2010 U.S. Dist. LEXIS 61398
Articles: II(3)
Subject matters: – personal jurisdiction over foreign defendant – applicable law to whether nonsignatory defendant may rely on arbitration agreement – nonsignatory defendant may rely on arbitration agreement/clause
Topics: ¶ 217
Summary
The law chosen by the parties to apply to the contract – Swiss law – applied to the issue whether a nonsignatory defendant was allowed to invoke the arbitration clause against a signatory. Swiss jurisprudence holds that in principle an arbitration clause is binding only on signatories. Here, however, the contract expressly incorporated subsidiaries (such as the present defendant). Also, Swiss law advocates a broad interpretation in the application of arbitration clauses and recognizes exceptions to the general prohibition above. Consequently, the court found that Swiss law does not rule out an invocation of the arbitration clause by a nonsignatory against a signatory, and granted the nonsignatory defendant’s motion to compel arbitration. The court also ordered discovery on the issue of personal jurisdiction.
In June 2004, CCP Systems AG (CCP) licensed certain software products to IBM Deutschland GmbH (IBM Germany). The license agreement (the IBM Agreement) granted IBM Germany the authority to sub-license. IBM Germany subsequently granted a sub-license to Samsung Electronics Co., Ltd. (Samsung Electronics). On 11 December 2007, CCP and Samsung Electronics accordingly
554 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 707 entered into a Software Remarketing Agreement (the Software Agreement). Sect. 3.5 of the Software Agreement provided that Samsung Electronics allowed Samsung Electronics to grant secondary licenses to other Samsung entities, including subsidiaries, subcontractors and other affiliates or business partners, by providing that Samsung “may perform this Agreement and any of its rights, licenses and obligations under this Agreement through/to the Samsung Electronics Corporation, its subsidiaries, subcontractors, and other companies affiliated with Samsung such as Samsung Business Partners”. Samsung Electronics granted one such secondary license to its wholly owned US subsidiary Samsung Electronics America, Inc. (Samsung America). Sect. 15.5 of the Software Agreement provided that the Agreement was governed by the laws of Switzerland; it also referred disputes to ICC arbitration in Paris. On 25 May 2009, CCP gave written notice to IBM Germany terminating the IBM Agreement. On 15 July 2009, a Samsung Electronics Vice-President sent an e-mail to Samsung Electronics personnel and Samsung affiliates acknowledging termination of the IBM Agreement. A dispute arose when CCP discovered infringing software available for download on the Samsung website
Yearbook Comm. Arb’n XXXV (2010) 555 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 provided the medium through which the alleged infringing activity occurred, namely downloading the copyrighted material and patented software. However, Samsung Networks argued that it neither posted the links for downloading nor controlled the content of the website. The court therefore held that it was not clear that the exercise of specific personal jurisdiction was justified, and ordered discovery concerning this issue. The district court then dealt with Samsung America’s motion to compel arbitration. It first reasoned that if Samsung America wished to invoke the arbitration clause in the Software Agreement, it should also accept the Swiss choice-of-law clause in that Agreement. Thus, Swiss law governed the issue whether a nonsignatory to the Software Agreement, Samsung America, was permitted to invoke the arbitration clause. The court referred to the 2004 decision in Motorola,1 where the Second Circuit concluded from an extensive examination of relevant Swiss jurisprudence that Swiss law holds that in principle an arbitration clause is binding only on those parties which have entered into a contractual agreement to submit to arbitration. Though acknowledging this general preclusion, the district court held that the present case was “unique and distinguishable” because Sect. 3.5 of the Software Agreement explicitly conferred upon Samsung Electronics the right to perform the Agreement through subsidiaries, subcontractors and other affiliated companies. This provision therefore incorporated these nonsignatories, such as Samsung America, by reference, and evidenced CCP’s acquiescence to that incorporation. The district court noted that the jurisprudence quoted in Motorola concerned attempts by signatories to invoke arbitration clauses against nonsignatories, while “the invocation of an arbitration clause by a nonsignatory against a signatory appears to be an unprecedented issue in Swiss case law”. The court concluded, however, that even if it does not address such invocation, Swiss law does not foreclose it. It appeared from the jurisprudence quoted in Motorola that Swiss law advocates a broad interpretation in the application of an arbitration clause and recognizes exceptions to the general prohibition concerning the invocation of an arbitration clause against a nonsignatory (inter alia, legal succession, corporate veil piercing and assignment). Hence, in light of the explicit incorporation by reference of nonsignatory subsidiaries in the Software Agreement, the broad interpretation afforded to arbitration clauses and the exceptional circumstances articulated by Swiss law
1. Motorola Credit Corp. v. Uzan, 388 F.3d 39 (2d Cir. 2004), reported in Yearbook XXX (2005) pp. 951-962 (US no. 504).
556 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 707 permitting a signatory to invoke an arbitration clause against a nonsignatory, the court could not find that the invocation of an arbitration clause by a nonsignatory against a signatory is absolutely excluded under Swiss law.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 557 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
708. United States District Court, District of New Jersey, 29 June 2010, Civil Action No. 2:09-cv-03785
Parties: Plaintiff: Quanqing (Changshu) Cloth-Making Co. Ltd. (nationality not indicated) Defendant: Pilgrim Worldwide Trading, Inc. (US)
Published in: 2010 U.S. Dist. LEXIS 64515
Articles: III; V(1)(a)
Subject matters: – nonsignatory defendant not bound to arbitration clause – estoppel (equitable)
Topics: ¶ 303 + ¶ 505
Summary
A CIETAC award was denied enforcement because the US defendant did not sign the Sales Confirmation containing the arbitration clause and there was no evidence that the person who signed it “for the account” of the US defendant was its representative or agent. Nor was the US defendant equitably estopped from denying its obligation to arbitrate, as it did not rely on the Sales Confirmation but simply benefitted from the contractual relationship between the parties to it.
In September 2005, Pilgrim Worldwide Trading, Inc. (Pilgrim) issued three purchase orders for men’s suits to M.A. Trading International (M.A. Trading), a South Korean business operated by Han Joo Kim, with whom Pilgrim and its President Sei Ho Go had an established business relationship. Kim notified Pilgrim and Go that delivery under the Purchase Orders would be delayed. New contractual terms were agreed to and Kim sent a Sales Confirmation to Go in November 2005. The Sales Confirmation, which was signed by Kim on behalf of the “buyer” for the “account of” Pilgrim, referred to Quanqing (Changshu) Cloth Making Co., Ltd. (Quanqing); Go subsequently claimed that it understood this reference to refer to Kim’s subcontractor. Pilgrim did not sign the Sales Confirmation. In December 2005, it issued revised Purchase Orders to M.A. Trading. The Sales Confirmation contained a clause
558 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 708 providing for arbitration of disputes at the China International Economic and Trade Arbitration Commission (CIETAC). The garments were delivered and Pilgrim made payments to M.A. Trading and another South Korean entity operated by Kim. At Kim’s direction, Pilgrim also made some payments to “Changshu Winprofit Imp and Exp Co.”. On 5 March 2008, CIETAC sent Pilgrim notice of arbitration proceedings commenced by Quanqing against Pilgrim. It was disputed whether the notice, in Chinese, was accompanied by an English translation. At any event, Pilgrim ignored it and CIETAC arbitration was held in Pilgrim’s absence. A CIETAC arbitral tribunal eventually issued an award in Quanqing’s favor. Quanqing sought enforcement of the Chinese award in the United States. The United States District Court for the District of New Jersey, per William J. Martini, US DJ, denied enforcement, holding that there was no written agreement to arbitrate between Quanqing and Pilgrim. The only agreement put forward by Quanqing that contained an arbitration clause was the Sales Confirmation, which was not signed by Pilgrim. Though it was signed by Kim on behalf of the “buyer” for the “account of” Pilgrim, there was no evidence that Kim, who died in 2007, was a representative or agent of Pilgrim. The court dismissed Quanqing’s contention that Pilgrim, though a non- signatory, was equitably estopped from denying its obligation to arbitrate. The court noted that there is equitable estoppel when one party “knowingly exploits” the agreement containing the arbitration clause despite not having signed it. Here, Pilgrim’s conduct did not appear to be one of such knowing exploitation. Pilgrim agreed to pay for the men’s suits, accepted delivery and paid the purchase price. It did not rely on the Sales Confirmation in any way and benefitted from the contractual relationship between the parties to the Sales Confirmation, Kim and Quanqing, by accepting delivery of the goods as provided in its Purchase Orders, rather than from the Sales Confirmation.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 559 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
709. United States District Court, Southern District of California, 15 July 2010, Case No. 09-CV-1301 - IEG (POR)
Parties: Plaintiffs: (1) Leatt Corporation (US); (2) Exceed Holdings (Pty) Ltd. (South Africa) Defendants: (1) Innovative Safety Technology, LLC (US); (2) Kevin Heath Enterprises, Inc. (US); (3) Kevin Heath (nationality not indicated); (4) E.V. Technology (PR China)
Published in: 2010 U.S. Dist. LEXIS 71362
Articles: I(1)
Subject matters: – agent – enforcement against principal
Topics: ¶ 106 + ¶ 212
Summary
The court granted enforcement of a South African award against non-parties to the arbitration, finding that they were bound under the agency theory in accordance with California law.
In 2006, Leatt Corporation (Leatt) and Exceed Holdings (Pty) Ltd. (collectively, Plaintiffs) developed an innovative neck safety brace for use in car motor sports (the Moto-R). A first version of the Moto-R was prototyped in the late summer or early fall of 2006 (Prototype 1); a second prototype was developed in the summer of 2007 (Prototype 2). In January 2008, two of Plaintiffs’ employees, Grant Nelson and Karl Ebel, resigned from Leatt and, together with Doug Williams, an investor, developed and began production of a neck brace with a raised stabilizer bar similar to Prototype 2 (the DefNder). They allegedly did so by using Plaintiffs’ confidential information concerning Prototype 2. In June 2008, Nelson, Ebel and Williams formed Innovative Safety Technology, LLC (IST). Shortly thereafter, IST entered into a distribution agreement with Kevin Heath, who arranged for the DefNder to be manufactured in China and to be imported and sold in the United States through two of his companies, E.V.
560 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 709
Technology (EVT) and Kevin Heath Enterprises, Inc. (KHE). Heath allegedly met with Nelson and Ebel on several occasions between January 2005 and January 2008 and took active part in the plans that eventually led to the development of the DefNder and the creation of IST. Plaintiffs commenced an action against Nelson, Ebel and Williams in the courts of South Africa for misappropriating trade secrets and for copyright infringement. The South African action was referred to arbitration. A sole arbitrator found that Nelson used his knowledge of Plaintiffs’ confidential information in designing the DefNder and enjoined Nelson, Ebel and Williams until 31 July 2010 from using or disclosing that confidential information. On 16 June 2009, Plaintiffs also commenced an action in the United States against IST, as well as against Kevin Heath, EVT and KHE (collectively, the Heath Defendants). Plaintiffs (i) sought enforcement of the South African award and (ii) alleged causes of action for misappropriation of trade secrets, unfair competition and tortious interference. The Heath Defendants opposed enforcement on the ground that they were not parties in the South African action and sought dismissal of Plaintiffs’ tort claims, which they argued were preempted by the Uniform Trade Secrets Act (UTSA). The United States District Court for the Southern District of California, per Irma E. Gonzalez, US DCJ, granted enforcement of the South African award; it also granted the Heath Defendants’ motion to dismiss in part. The court first held that the Heath Defendants had indeed not been parties to the South African arbitration, but were bound by the award rendered against IST under the agency theory. To satisfy the agency test under California law, the agent must be engaged in activities that, but for the existence of the agent, the principal would have to undertake itself. Here, IST represented Heath at the relevant time by performing services that were sufficiently important to Heath that if he did not have IST to perform them, he would have had to undertake to perform substantially similar services. The court pointed out in particular that without IST Heath would have had to design and promote the DefNder product all by himself. Further, Plaintiffs adequately argued that Heath was “one of the primary architects behind the wrongdoings alleged”, meeting with Nelson and Ebel on several occasions between January 2005 and January 2008 and discussing with them their impending business ventures just before they resigned from Leatt in January 2008. Heath “individually and through his companies, directed, authorized, and participated in all of the allegedly wrongful acts” committed by IST and the other defendants. Also, at the relevant time Heath exercised control over IST, being one of its investors, personally registering the
Yearbook Comm. Arb’n XXXV (2010) 561 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 domain name and owning and operating the website located at
A detailed report of this decision is available online at
562 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 710
710. United States District Court, Southern District of New York, 29 July 2010, 09 Civ. 4792 (NRB),10. Civ. 1790 (NRB)
Parties: Plaintiff: Bogdan Dumitru (Romania) Defendant: Princess Cruise Lines, Ltd. (nationality not indicated)
Published in: 2010 U.S. Dist. LEXIS 78424
Articles: II(3)
Subject matters: – requirements for referral to arbitration – relationship Chapters 1 and 2 (1958 New York Convention) of Federal Arbitration Act (FAA) – seamen’s employment contracts are commercial contracts subject to the 1958 New York Convention – arbitration agreement “null and void” on public policy grounds – arbitrability of Jones Act claims – unenforceable choice of law clause severed from Seafarer’s Agreement – unenforceable choice of arbitration venue clause severed from Seafarer’s Agreement – remand from federal court to state court
Topics: [3]-[19] = ¶ 214; [21]-[31] + [36]-[44] = ¶ 220; [32]- [35] = ¶ 223; [45]-[47] = ¶ 217
Summary
The court referred a dispute concerning a seafarer’s injury to arbitration, but severed the Bermuda choice-of-law and the Bermuda choice-of-venue provisions, holding that they operated in tandem to deprive the seafarer of his US statutory rights under the Jones Act. In light of the non-enforceability of the Bermuda choice-of-law provision and the fact that Bermuda had no connection to the place of the seafarer’s injury, the Bermuda choice-of-venue provision was also possibly in violation of the law regulating recovery for personal injury or death of a railway employee (the Federal Employers Liability Act (FELA)), which applies to seafarers. However, this problem was solved by the employer’s offer to arbitrate in fora that would be available under the FELA. Taking into account the strong federal policy favoring arbitration and the presence of a separate severability clause in the contract, the court
Yearbook Comm. Arb’n XXXV (2010) 563 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
enforced the core agreement to arbitrate, severing the Bermuda choice-of-law and the Bermuda choice- of venue provisions. The court also affirmed that international seafarer agreements are not exempted from arbitration as are domestic seafarer agreements, and that Jones Act claims may be arbitrated.
On 30 November 2006, Bogdan Dumitru signed an Acceptance of Employment Terms and Conditions (the Acceptance Agreement) with Princess Cruise Lines, Ltd. (PCL). The Acceptance Agreement stated that the parties acknowledged that PCL’s Principal Terms and Conditions of Employment (the Terms) were incorporated into the contract by reference and agreed that any dispute would be resolved by arbitration as provided for in the Terms. Art. 14 of the Terms stated that the Terms and any dispute arising thereunder were governed by the law of Bermuda; it also provided for arbitration in Bermuda.1 Art. 15 of the Terms provided that void or unenforceable provisions were severable. It was disputed whether Dumitru also signed PCL’s Crew Agreement, whose Art. 1 provided that employees are considered members of the crew “in the service of the assigned ship and covered by these Terms” with effect from the date of signing. PCL did not produce a Crew Agreement in the present proceeding, but provided a “List of Crew and Signatures of Seamen Who Are Parties to the Crew Agreement”, on which Bogdan Dumitru’s name appeared, accompanied by a signature under “Signature of Seaman on engagement”. Dumitru argued that the signature was not his. On 2 December 2006, Dumitru began work as a buffet steward on the M/V STAR PRINCESS, a Bermuda-flagged vessel operated by PCL. On 19 February 2007, he allegedly slipped on a wet surface and fell down a set of stairs on the ship, resulting in a broken ankle. PCL claimed that Dumitru broke his ankle playing soccer on the deck of the ship. Dumitru disembarked in the Cayman
1. Art. 14 of the Terms provided in relevant part:
“Governing Law, Arbitration, Venue and Examinations (....) [A]ny and all disputes, claims or controversies whatsoever ... shall be referred to and resolved exclusively by binding arbitration pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the ‘Convention’) in Hamilton, Bermuda, to the exclusion of any other fora, in accordance with the Bermuda International Conciliation and Arbitration Act 1993 and the UNCITRAL Arbitration Rules as at present in force, all of which are deemed to be incorporated herein by reference into this provision. If, and only if, the Bermuda venue provision is found legally unenforceable, then and only then, all disputes shall be resolved by binding arbitration pursuant to the Convention exclusively in Los Angeles, California, and will be administered by the American Arbitration Association under its international dispute resolution procedures.”
564 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 710
Islands where he underwent surgery, which PCL paid for. On 30 April 2009, Dumitru filed suit against PCL in the Supreme Court of the State of New York, New York County,2 claiming that his ankle required new surgery and prevented him from working. On 21 May 2009, PCL removed the action to federal court. On 17 February 2010, Dumitru filed a second suit in the Supreme Court of the State of New York, New York County. On 5 March 2010, PCL removed also this case to federal court. Dumitru alleged four causes of action in the two suits he brought against PCL:
“(1) Negligence under the Jones Act, 46 U.S.C. Sect. 30104; (2) Unseaworthiness under General Maritime Law (GML); (3) Maintenance and cure under GML; and (4) Unpaid and penalty wages under the Merchant Seaman’s Protection and Relief Act (Seaman’s Wage Act), 46 U.S.C. Sect. 10313”.
PCL moved to compel arbitration; Dumitru moved to remand. The United States District Court for the Southern District of New York, per Naomi Reice Buchwald, US DJ, denied Dumitru’s motion to remand and granted PCL’s motion to compel arbitration, but severed the Bermuda choice-of-law and choice-of-venue part of the arbitration clause. The district court first held that the agreement to arbitrate between the parties fell under the 1958 New York Convention, as all four jurisdictional requirements were met: (1) the agreement was in writing and (2) provided for arbitration in the territory of a Convention signatory; (3) the subject matter was commercial and (4) not entirely domestic in scope. The court dismissed Dumitru’s argument that there was no written arbitration agreement because PCL failed to produce the Crew Agreement, reasoning that Dumitru both signed the Acceptance Agreement which provided that disputes would be resolved by arbitration as provided by the Terms and acknowledged reviewing the Terms; also, Dumitru’s name appeared on the “List of Crew and Signatures of Seamen Who Are Parties to the Crew Agreement”. The court added that Dumitru could not bring suit based on his status as a PCL employee while simultaneously claiming that the agreed-upon conditions of his employment were never met.
2. “PCL is registered with the New York Secretary of State as a foreign corporation doing business in New York State, with a registered agent residing in New York, New York. Accordingly, the Supreme Court of the State of New York had personal jurisdiction over PCL and venue was proper in New York County. See 46 U.S.C. Sect. 30104; 45 U.S.C. Sect. 56.”
Yearbook Comm. Arb’n XXXV (2010) 565 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
Dumitru also claimed that seamen’s employment contracts are expressly exempted from arbitration by Sect. 1 of the Federal Arbitration Act (FAA). The FAA was enacted in 1925 and codified in 1947 as Chapter 1 of Title 9 of the United States Code. Chapter 1 governs domestic arbitration. The 1958 New York Convention was codified in 1970 as Chapter 2 of Title 9 of the United States Code. Dumitru argued that Sect. 1 FAA appears under the heading “exceptions to operation of title” and thus apparently extends to the entire Title 9, including Chapter 2, which implements the Convention and regulates international arbitration. The court disagreed, holding that while it is unclear whether the heading should be read to apply Sect. 1 to the entire “title” as it exists today, or whether it applies only to Chapter 1 (the “title” as it existed in 1947), the text of Chapter 2 supports the latter approach: when the drafters of Chapter 2 wished to incorporate a provision of Chapter 1, they included a cross- reference, and no cross-reference was made to Sect. 1. Hence, the exemption in Sect. 1 FAA does not apply to international arbitration. The district court then considered whether Dumitru’s affirmative defense that the arbitration agreement was null and void made any part of the parties’ agreement unenforceable. Dumitru argued that the Bermuda choice-of-law and choice-of-venue provision in Art. 14 of the Terms should not be enforced because it resulted in a prospective waiver of his US statutory rights under the Jones Act in violation of public policy. He relied on Thomas,3 where the Eleventh Circuit stated that arbitration clauses must be upheld “if it is evident that either US law definitely will be applied or if there is a possibility that it might apply and there will be later review”. Applying this approach, the Eleventh Circuit held that an agreement to arbitrate in the Philippines under Panamanian law (i.e., where it was certain that US law would not be applied) was invalid as it barred the seafarer from relying on his US statutory rights under the Seaman’s Wage Act and the court would have “no opportunity for review” at the enforcement stage because of the “distinct possibility” that the plaintiff would receive no award of his Sea Wage Act claim under Panamanian law. The court agreed with Dumitru that the Bermuda choice-of-law provision in Art. 14 of the Terms, in combination with the Bermuda choice-of-venue provision, was unenforceable under Thomas, as Dumitru would have no remedy for his statutory claims in Bermuda and the US courts would have no opportunity for review. The court further noted that while the core agreement to arbitrate was per se valid, as Jones Act claims are arbitrable, the Bermuda venue for arbitration was
3. Thomas v. Carnival Corp., 573 F.3d 1113, (11th Cir. 2009), reported in Yearbook XXXIV (2009) pp. 1136-1150 (US no. 674).
566 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 710 possibly not enforceable. Since that forum had no connection to the place of Dumitru’s injury and, moreover, the Bermuda choice-of-law provision was unenforceable, a Bermuda forum might violate the law regulating recovery for personal injury or death of a railway employee, i.e., the Federal Employers Liability Act (FELA), which applies to seafarers. This problem was solved, however, by PCL’s offer to arbitrate in New York, Miami or Los Angeles, giving Dumitru a choice of several locations that would be available under the FELA. The district court therefore concluded that the arbitration provision in the Terms, as amended by PCL’s offer, could be enforced. The court finally examined whether the Bermuda choice-of-law and choice-of- venue clauses, which were found to be unenforceable, should be severed and the core agreement to arbitrate enforced. In light of the strong federal policy favoring arbitration, the presence of the severability clause and the fact that the choice-of-law provision stood separate and independent in the contract between the parties, the court held that severance was the proper remedy.
A detailed report of this decision is available online at
Yearbook Comm. Arb’n XXXV (2010) 567 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
711. United States District Court, Southern District of New York, 10 August 2010, 10 Civ. 3163 (DLC)
Parties: Petitioner: The Burton Corporation (US) Respondent: Shanghai ViQuest Precision Industries Co., Ltd. (PR China)
Published in: Available online at
Articles: I; V(1)(e)
Subject matters: – domestic law applies to setting aside (vacatur) of 1958 New York Convention award – manifest disregard of the law
Topics: ¶ 102 + ¶ 104 + ¶ 524 (manifest disregard of the law)
Summary
The court denied a petition to vacate and granted a cross-petition to confirm an award rendered in the United States and governed by the New York Convention, applying domestic grounds for vacatur under the Federal Arbitration Act (FAA). The interested party failed to prove that the arbitrators exceeded their authority or the award was in manifest disregard of the law. Manifest disregard survives in the Second Circuit where it has been “reconceptualized” as “a judicial gloss” on the FAA’s specific grounds for vacatur.
On 16 January 2005, with retroactive effect as of 1 August 2004, The Burton Corporation (Burton) and Shanghai ViQuest Precision Industries Co., Ltd. (ViQuest) entered into a Manufacturing Agreement under which ViQuest would manufacture snowboard bindings for Burton using Burton’s molds. The Agreement was entered into initially for one year and was automatically renewed for successive one-year periods unless Burton provided written notice of cancellation sixty days prior to expiration of the relevant period. Sect. 4.05 of the Agreement provided that Burton could terminate the Agreement if it determined that ViQuest’s financial position posed a risk to Burton’s business. Sect. 2.04(d) provided that Burton could request that ViQuest return its molds at any time. The Manufacturing Agreement stated that it was governed by the law of Vermont; it further contained an arbitration clause.
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On 1 August 2005, the Manufacturing Agreement was automatically renewed for one year, through 31 July 2006 (the 2006 fiscal year). At Burton’s request, ViQuest produced photo-samples for products to be produced during the 2006 fiscal year and received orders from Burton for the preparation of such samples. However, there was no actual purchase order for the production of bindings. On 6 October 2005, Burton notified ViQuest that it was terminating the Agreement due to “financial concerns”. At the time of termination, Burton undisputedly owed ViQuest approximately US$ 1.8 million in unpaid purchase orders. When ViQuest refused to return Burton’s molds, Burton arranged with a third party to manufacture replacement molds. On 19 May 2006, Burton commenced arbitration at the American Arbitration Association (AAA) seeking, inter alia, the return of its molds and reimbursement of US$ 355,244.00 in costs incurred to replace the molds. ViQuest counterclaimed, seeking, inter alia, lost profits of US$ 726,135.34, which it claimed it would have earned in the 2006 fiscal year had Burton not terminated the Agreement. On 15 January 2010, an AAA arbitral tribunal rendered a majority award finding, inter alia, that (1) under Sect. 4.05 of the Agreement Burton could validly terminate the Agreement “only after reasonably proving that [ViQuest’s] financial position posed a financial risk to Burton’s business”; (2) Burton did not prove the existence of valid grounds to terminate the Agreement and (3) though Burton was entitled to the return of all molds, it was not so entitled since it was not itself fulfilling its own obligations under the Agreement. The arbitrators further awarded ViQuest US$ 360,780.70 in lost profits for the 2006 fiscal year. On 14 April 2010, Burton filed a petition to vacate the award in part. On 28 May 2010, ViQuest filed its opposition and cross-petitioned for confirmation of the award. The United States District Court for the Southern District of New York, per Denise Cote, US DJ, denied Burton’s petition to vacate and granted ViQuest’s cross-petition to confirm the award. The court noted at the outset that this action was governed by the 1958 New York Convention. However, since the arbitration took place in the United States, the award was at the same time subject to the provisions of the Federal Arbitration Act (FAA) governing domestic awards “pursuant to Art. V(1)(e) of the Convention”. Hence, it could be vacated on certain grounds, the only relevant one here being that “the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter was not made” (Sect. 10(a)(4) FAA). The court added that the Second Circuit consistently accords the narrowest of readings to Sect. 10(a)(4), reading it to cover only cases where arbitrators stray from interpretation and application of the agreement.
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Also, courts in the Second Circuit have vacated awards that were in manifest disregard of the law, that is, awards for whose outcome there was not even “a barely colorable justification”. The district court noted that while the future of the manifest-disregard standard “is unsettled” in light of the recent decision of the Supreme Court in Stolt-Nielsen,1 this ground for vacatur survives in the Second Circuit, where it “has been reconceptualized” as “a judicial gloss” on the FAA’s specific grounds for vacatur. In the present case, the district court found that Burton failed to prove that the arbitrators exceeded their authority or acted in manifest disregard of the law. The reasonableness requirement in respect of the termination of the Manufacturing Agreement was derived from the covenant of good faith and fair dealing, which Vermont law recognizes is implicit in every contract; the finding that Burton could not count on the return of the molds when it was not itself fulfilling its own obligations under the Agreement could be based on the fundamental principle of contract law that a party’s performance is excused where the other party has substantially failed to perform its side of the bargain. Further, the arbitrators based their calculation of lost profits on ViQuest’s 2005 net profits, reducing this amount in view of different factors potentially compromising ViQuest’s business throughout the 2006 fiscal year irrespective of Burton’s termination and further reducing it because there was no evidence that ViQuest undertook to find a replacement for Burton. While acknowledging that these reductions could not be calculated with mathematical certainty, the arbitrators clearly believed they had a reasonable basis for their calculation of ViQuest’s lost profits. Hence, the amount of lost profits awarded to ViQuest was based on more than a “barely colorable justification”.
A detailed report of this decision is available online at
1. Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S.Ct. 1758 (2010), reported in this Yearbook XXXV (2010) p. 617.
570 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 712
712. United States Court of Appeals, Third Circuit, 18 August 2010, No. 09-1921, 09-2989 & 09-2991, No. 09-1922, 09-2990 & 09-2992
Parties: Appellants: (1) Joel S. Ario, Insurance Commissioner of the Commonwealth of Pennsylvania, in his official capacity as the statutory liquidator of Legion Insurance Company (in liquidation) (US); (2) Pepper Hamilton, LLP (US) Cross-Appellants: The Underwriting Members of Syndicate 53 at Lloyd’s for the 1998 Year of Account (nationality not indicated)
Published in: 2010 U.S. App. LEXIS 17195
Articles: I; III
Subject matters: – removal from state court to federal court – opting-out of Chapter 2 Federal Arbitration Act (FAA) (no) – domestic law applies to setting aside (vacatur) of 1958 New York Convention award – nondomestic award
Topics: [8]-[9] = ¶ 301; [20]-[52] = ¶ 102 + ¶ 104
Summary
The district court decision enforcing a New York Convention award rendered in the United States was confirmed. Removal of the enforcement action to federal court under Chapter 2 of the Federal Arbitration Act (FAA) was proper: the provision in the arbitration clause that the arbitration shall be in accordance with the Pennsylvania Uniform Arbitration Act (i) could not operate to “opt out” of the FAA in its entirety, as opting out of the FAA in its entirety is not allowed, (ii) nor was it a sufficiently clear and unequivocal expression of an intent to waive the specific right to removal to federal court under Chapter 2. The Third Circuit then adopted the Second Circuit’s finding in Yusuf that the FAA domestic vacatur standards apply to awards rendered in the United States but falling under the Convention because they are nondomestic. There were no grounds for vacatur here.
Two Pennsylvania insurers, Legion Insurance Company and Villanova Insurance Company (collectively, the Primary Insurers), entered into four reinsurance
Yearbook Comm. Arb’n XXXV (2010) 571 COURT DECISIONS ON THE NEW YORK CONVENTION 1958 treaties with the Underwriting Members of Syndicate 53 at Lloyd’s for the 1998 Year of Account (the Reinsurers). The treaties provided that disputes be submitted to arbitration in the United States and that arbitration be in accordance “with the rules and procedures established by the Uniform Arbitration Act as enacted in Pennsylvania” (PUAA).1 The treaties further contained a service-of- suit clause providing that Reinsurers agreed to “submit to the jurisdiction of a Court of competent jurisdiction within the United States” if they failed to pay under the treaties; it was further stated that nothing in this clause constituted a waiver of, inter alia, the Reinsurers’ right to remove an action to a US federal court.2
1. “ARBITRATION As a condition precedent to any right of action hereunder, any dispute or difference between the [primary insurers] and the Reinsurers relating to the interpretation or performance of this Agreement, including its formation or validity, or any transaction under this Agreement, whether arising before or after termination, shall be submitted to binding arbitration, with the exception of matters requiring resolution by way of injunctive relief. Upon written request of any party, each party shall choose an arbitrator and the two chosen shall select a third arbitrator. If either party refuses or neglects to appoint an arbitrator within thirty (30) days after receipt of the written request for arbitration, the requesting party may appoint a second arbitrator. If the two arbitrators fail to agree on the selection of a third arbitrator within thirty (30) days of their appointment, each of them shall name three individuals, of whom the other shall decline two, and the selection of the third arbitrator from those remaining named individuals shall be named by the Federal District Court for the Eastern District of Pennsylvania. All arbitrators shall be disinterested in the outcome of the arbitration. Each party shall submit its case to the arbitrators within thirty (30) days of the appointment of the third arbitrator. The parties hereby waive all objections to the method of selection of the third arbitrator, it being the intention of both sides that the third arbitrator be chosen from those submitted by the parties. The arbitrators shall have the power to determine all procedural rules for the holding of the arbitration[,] including but not limited to inspection of documents, examination of witnesses[,] and any other matter relating to the conduct of the arbitration. The arbitrators shall interpret this Agreement as an honorable engagement and not as merely a legal obligation, they are relieved of all judicial formalities and may abstain from following the strict rules of law. The arbitrators may award interest and costs, but in no event shall punitive or exemplary damages be awarded. Each party shall bear the expense of its own arbitrator and shall share equally with the other party the expense of the third arbitrator and of the arbitration. Arbitration hereunder shall take place in Philadelphia, Pennsylvania unless both parties otherwise agree. Except as hereinabove provided, the arbitration shall be in accordance with the rules and procedures established by the Uniform Arbitration Act as enacted in Pennsylvania.”
2. “SERVICE OF SUIT CLAUSE (USA) – NMA 1998 It is agreed that in the event of the failure of Reinsurers hereon to pay any amount claimed to be due hereunder, the Reinsurer hereon, at the request of the Reinsured, will submit to the jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Clause constitutes or should be understood to constitute a waiver of Reinsurers’ rights to commence an action in any Court of competent jurisdiction in the United States, to remove an action to a United
572 Yearbook Comm. Arb’n XXXV (2010) UNITED STATES NO. 712
A dispute arose between the Primary Insurers and the Reinsurers when the Reinsurers asserted that the Primary Insurers were not underwriting the business as described in the initial placement material, causing the Reinsurers to suffer substantial losses, and refused to pay the claims of the Primary Insurers. On 18 September 2006, the Primary Insurers responded by commencing arbitration. The arbitral tribunal eventually issued an award rescinding three of the four treaties. On the rescinded treaties, the Reinsurers were relieved of any obligation to pay losses owing; on the remaining treaty, the Reinsurers were ordered to pay losses owing. On 6 August 2008, Joel S. Ario, Insurance Commissioner of the Commonwealth of Pennsylvania, in his official capacity as the liquidator of the Primary Insurers, who had been in liquidation since mid-2003 (collectively, Ario), filed a motion in state court to enforce the part of the award in the Primary Insurers’ favor and vacate the part in the Reinsurers’ favor. The Reinsurers removed the case to federal court and moved to enforce the award. The United States District Court for the Middle District of Pennsylvania denied the motion to vacate and granted the Reinsurers’ motion to enforce the award. The United States Court of Appeals for the Third Circuit, before Ambro, Smith, and Aldisert, CJJ, in an opinion by Ambro, affirmed the district court’s decision enforcing the award. Ario first argued that, although the 1958 New York Convention governed the award, by their reference to the PUAA in the insurance treaties the parties “opted out” of Chapter 2 of the FAA, which implements the Convention in the United States, in its entirety, so that removal to federal court under the relevant provision of Chapter 2 FAA was precluded. Alternatively, the arbitration clause included a clear and unequivocal expression of intent to opt out of the removal provision in Chapter 2 specifically. The Court disagreed, reasoning that opting-out of the FAA is not allowed and that the arbitration clause in the reinsurance treaties did not contain any clear language opting out of the removal provision. The Court noted that removal was not mentioned in the arbitration clause. On the contrary, the service-of-suit clause explicitly stated that the parties did not waive the right to remove an action to a district court. The Court of Appeals then held that the vacatur standards of the FAA, rather than those of the PUAA, applied. It noted that the grounds for vacatur of an award under the New York Convention are limited to the seven grounds in the
States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States or of any State in the United States.”
Yearbook Comm. Arb’n XXXV (2010) 573 COURT DECISIONS ON THE NEW YORK CONVENTION 1958
Convention’s Art. V. However, awards rendered in the US but still falling under the Convention because nondomestic may be vacated under the “slightly broader” vacatur standards of the FAA. The Court adopted on this issue the holding of the Second Circuit in Yusuf3 that the domestic grounds for vacatur apply to Convention awards rendered in the United States. It then concluded that the parties had expressed no clear intent to apply PUAA vacatur standards and that there were no grounds to vacate the award under the applicable FAA standards. It therefore confirmed the district court’s decision to enforce the award. Aldisert, CJ, filed an opinion dissenting in part. Only the relevant part of the decision is reported.
A detailed report of this decision is available online at
3. Yusuf Ahmed Alghanim & Sons v. Toys “R” Us, Inc., 126 F.3d 15 (2d Cir. 1997), reported in Yearbook XXIII (1998) pp. 1058-1067 (US no. 261).
574 Yearbook Comm. Arb’n XXXV (2010)