September 13, 2019 Dispute Resolution Magazine

A New York Convention Primer

What the Convention aims to accomplish and what advocates and arbitrators need to know about it

Lucy Greenwood

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known as the New York Convention, is a fairly unassuming document. It is only about five pages long and includes only 16 articles, yet it is largely responsible for the prevalence of international arbitration as a dispute resolution mechanism across the globe today. The noted British lawyer and judge Michael Mustill (Lord Mustill of Pateley Bridge) once succinctly described it as the “single most important pillar on which the edifice of international arbitration rests.”

The Convention was adopted by a United Nations diplomatic conference in June 1958 and went into effect a year later, on June 7, 1959. The Convention did not always have the widespread support it enjoys today; 10 years after the conclusion of the conference that created it, only 32 countries had ratified it. Today more than 80 percent of the countries in the world are contracting states, a critical mass that makes the New York Convention the most important weapon in an international arbitration practitioner’s arsenal.

What the New York Convention says

What is the New York Convention? The aim of the Convention is to ensure the enforcement of foreign arbitration awards worldwide. It requires contracting states to recognize and enforce foreign arbitration awards in the same way they do domestic awards, by essentially converting the foreign arbitration award into a judgment enforceable by a national court. A further aim of the Convention is to ensure that contracting states uphold valid arbitration agreements by staying court proceedings that have been started in breach of such agreements. Contracting states may make certain “declarations” when they accede to the Convention to limit their obligations under the Convention. The most frequently made declarations are to apply the Convention only to: (i) recognition and enforcement of awards made in the territory of another contracting State (the reciprocity reservation); and (ii) differences arising out of legal relationships that are considered commercial under the national law (known as the commercial reservation). Given the extensive global reach of the Convention and the commercial nature of the vast majority of international arbitration proceedings, neither reservation has much impact in practice.

The Convention deals with two main issues: the recognition and enforcement of (i) arbitration agreements and (ii) foreign arbitral awards. Article II of the Convention addresses the enforcement of arbitration agreements and sets out the requirements for a valid arbitration agreement. Any arbitration agreement that complies with Article II (2) of the Convention must be enforced by the courts of a contracting state, regardless whether there is a stricter form requirement in any applicable national arbitration law.  Similar provisions apply to arbitral awards in Article III of the Convention, which states:

... There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition and enforcement of arbitral awards to which this Convention applies than are imposed on the recognition and enforcement of domestic arbitral awards.

There are a number of limited grounds upon which a party can resist the enforcement of an award rendered against them. Article V of the Convention allows the party against whom the enforcement of an award is sought to challenge its enforcement. It is divided into two sections, Article V(1), which allows the losing party to challenge the execution of the award on, essentially, the basis of a violation of its right to due process; and Article V(2), which does not protect the interests of the losing party per se but allows the courts of a contracting state to deny enforcement on the grounds that permitting the award to be enforced would breach the public policy of the state.

Grounds to Challenge Enforcement

“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
(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.”

What advocates and arbitrators need to know

Some countries have acceded to the Convention but not yet implemented the necessary legislation to bring it into force, so an advocate looking to enforce an arbitration award outside the jurisdiction of the courts of the seat of arbitration should always seek local advice to properly understand the provisions of the local law and the manner in which legislation has been enacted. Myanmar, for example, acceded to the Convention in July 2013 but has not yet implemented the necessary legislation. India is another interesting case: courts there will enforce foreign awards only if they have been issued by a New York Convention country that has also been notified in India’s Official Gazette, a weekly journal that is an authorized legal document of the government, as being a country to which the New York Convention applies; it appears that fewer than one-third of the New York Convention signatory states have been so notified.

To properly carry out the duties of an international arbitrator, the arbitrator must be familiar with the grounds in (a) through (d) above. In relation to (e), most courts at the seat of arbitration will have enacted legislation that reflects the grounds listed in (a) through (d) as grounds to successfully challenge an award. The diligent arbitrator will therefore always confirm the validity of the arbitration agreement under which the arbitrator was appointed and will always ensure that notice has been given of the appointment and the proceedings, which is particularly important in the case of unopposed arbitrations. The arbitrator will also ensure that the parties have been given an opportunity to present their case and acquaint themselves with any particularities of the law of the seat of the arbitration to make sure that the arbitration was conducted in accordance with local laws. It will be of some comfort to an arbitrator to know that courts have narrowly construed defenses to enforcement under the Convention. It should be similarly reassuring that national courts considering applications for recognition and enforcement of foreign awards should not review the merits of the arbitral tribunal’s decision.

Arbitrators should be extremely familiar with the provisions of Article V(1) to ensure that the award cannot be challenged on one of the largely due-process grounds listed.  An advocate seeking to end up with an unassailable award, either at the courts of the seat or where the assets are located, will similarly be very conscious of the grounds listed above.  The onus may well fall on the advocate to ensure that non-participating parties are properly served with notice of proceedings and that the arbitration agreement is demonstrably valid. There are other grounds on which an award can be challenged, but these are generally related to public policy considerations in the jurisdiction where enforcement is sought. 

            As one might expect now the Convention is over 60 years old, some in the arbitration community have suggested that the time has come to update it. Albert Jan van den Berg, a lawyer based in Brussels and an emeritus Professor of law at Erasmus University in Rotterdam, has proposed a complete draft replacement convention called the Miami Draft Convention, but many commentators seem to prefer amending and updating the New York Convention’s text. Given the global reach and overwhelming success of this cornerstone of international arbitration, any such discussion may remain a hypothetical exercise.

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    Lucy Greenwood

    Lucy Greenwood, an independent international arbitrator qualified in England and Wales and Texas, has more than 20 years of experience in commercial and investment treaty arbitrations. She can be reached at www.greenwoodarbitration.com.

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