Describe how the New York Convention governs enforcement of awards
Once a state issues an arbitral award, it becomes binding on all parties who are legally
obliged to ‘undertake to carry out the award without delay ’1 based on most international and
institutional rules of arbitration. 156 signatory states have signed and ratified the Convention.
Article III requires each contracting state to recognise the award based on its merits. These
mostly include final awards (although LCIA uniquely recognises emergency arbitration
awards as final awards2 whereas SCC only recognises final awards). It has become the legal
framework that governs the enforcement of awards, regardless of arbitration rules under
which proceedings were conducted. As Wetter quotes, it is ‘the single most important pillar
on which the edifice of international arbitration rests’3 and it ‘perhaps could lay claim to be
the most effective instance of international legislation in the entire history of commercial
law’4. It enshrines a strong pro-enforcement policy, which allows national courts to make
quasi-automatic recognition and enforcement of awards. However, they remain subject to
some procedural and substantive grounds for objecting enforcement, thus it is intended to be
limited in scope.
The Convention’s objectives are as follows. Firstly, it aims to facilitate the enforcement of
arbitral agreements by forcing member states’ courts to recognise and effectuate them, as it
applies to both the agreement and the award. If enforced in a state outside the seat of
arbitration, it should be considered a foreign award under Article 1(1). Originally, the US
Courts viewed the Convention in a traditional manner in which the seat must be different to
the enforcing state. However, in Bergesen5, it recognised its functional character by which an
award will be considered foreign only if it incorporates a foreign element such as a foreign
law determining its enforceability. Secondly, it creates a level playing field by setting
international standards and uniform rules applicable in all member states. For example, it
removes the ‘double exequatur’ rule, which was applied in many states before the Convention
was enacted. Such rule required the winning party to obtain leave for enforcement from the
courts where the award was issued, in order to enforce it in a foreign jurisdiction. Third, it
sets an exhaustive list of exceptions for preventing enforceability by the domestic courts.
Lastly, it can provide the possibility of settlement, ‘whether primarily to preserve business
relationships or to save time and costs, is enhanced. In this sense, it is hard not to see
enforcement and settlement as complementary forces in international arbitration.’6
Because most awards are carried out voluntarily, national courts do not need to enforce them.
According to 84% of participants in arbitrations, 76% of awards are voluntarily complied
with or enforced by the opposing party7. This is principally due to preserving business
relationships. This is mostly seen in re-insurance, pharmaceuticals, shipping, aeronautics, and
oil and gas sectors. Most corporations have not encountered major difficulties in such
enforcement. Only 19% have encountered them when enforcing damages awards and
1
UNCITRAL Rules, Article 34(2).
2
LCIA Articles 9(9) and 26(8).
3
Wetter, ‘The present status of the International Court of Arbitration of the ICC: An appraisal’ (1990) 1 Am
Rev Intl Arb 91, at 93.
4
Mustill, ‘Arbitration: History and background’ (1989) 6 J Intl Arb 43, at 49. See also Schwebel, ‘A celebration
of the United Nations' New York Convention’ (1996) 12 Arb Intl 823.
5
Bergesen v Joseph Muller Corporation 548 F.Supp. 650.
6
Laurence Shore, “Settlement in International Arbitration.” The unpublished paper was presented at the
inaugural conference of AFSIA (Alumni and Friends of the School of International Arbitration) held in London
in December 2008.
7
Queen Mary Survey - International Arbitration: Corporate attitudes and practices (2008).
Once a state issues an arbitral award, it becomes binding on all parties who are legally
obliged to ‘undertake to carry out the award without delay ’1 based on most international and
institutional rules of arbitration. 156 signatory states have signed and ratified the Convention.
Article III requires each contracting state to recognise the award based on its merits. These
mostly include final awards (although LCIA uniquely recognises emergency arbitration
awards as final awards2 whereas SCC only recognises final awards). It has become the legal
framework that governs the enforcement of awards, regardless of arbitration rules under
which proceedings were conducted. As Wetter quotes, it is ‘the single most important pillar
on which the edifice of international arbitration rests’3 and it ‘perhaps could lay claim to be
the most effective instance of international legislation in the entire history of commercial
law’4. It enshrines a strong pro-enforcement policy, which allows national courts to make
quasi-automatic recognition and enforcement of awards. However, they remain subject to
some procedural and substantive grounds for objecting enforcement, thus it is intended to be
limited in scope.
The Convention’s objectives are as follows. Firstly, it aims to facilitate the enforcement of
arbitral agreements by forcing member states’ courts to recognise and effectuate them, as it
applies to both the agreement and the award. If enforced in a state outside the seat of
arbitration, it should be considered a foreign award under Article 1(1). Originally, the US
Courts viewed the Convention in a traditional manner in which the seat must be different to
the enforcing state. However, in Bergesen5, it recognised its functional character by which an
award will be considered foreign only if it incorporates a foreign element such as a foreign
law determining its enforceability. Secondly, it creates a level playing field by setting
international standards and uniform rules applicable in all member states. For example, it
removes the ‘double exequatur’ rule, which was applied in many states before the Convention
was enacted. Such rule required the winning party to obtain leave for enforcement from the
courts where the award was issued, in order to enforce it in a foreign jurisdiction. Third, it
sets an exhaustive list of exceptions for preventing enforceability by the domestic courts.
Lastly, it can provide the possibility of settlement, ‘whether primarily to preserve business
relationships or to save time and costs, is enhanced. In this sense, it is hard not to see
enforcement and settlement as complementary forces in international arbitration.’6
Because most awards are carried out voluntarily, national courts do not need to enforce them.
According to 84% of participants in arbitrations, 76% of awards are voluntarily complied
with or enforced by the opposing party7. This is principally due to preserving business
relationships. This is mostly seen in re-insurance, pharmaceuticals, shipping, aeronautics, and
oil and gas sectors. Most corporations have not encountered major difficulties in such
enforcement. Only 19% have encountered them when enforcing damages awards and
1
UNCITRAL Rules, Article 34(2).
2
LCIA Articles 9(9) and 26(8).
3
Wetter, ‘The present status of the International Court of Arbitration of the ICC: An appraisal’ (1990) 1 Am
Rev Intl Arb 91, at 93.
4
Mustill, ‘Arbitration: History and background’ (1989) 6 J Intl Arb 43, at 49. See also Schwebel, ‘A celebration
of the United Nations' New York Convention’ (1996) 12 Arb Intl 823.
5
Bergesen v Joseph Muller Corporation 548 F.Supp. 650.
6
Laurence Shore, “Settlement in International Arbitration.” The unpublished paper was presented at the
inaugural conference of AFSIA (Alumni and Friends of the School of International Arbitration) held in London
in December 2008.
7
Queen Mary Survey - International Arbitration: Corporate attitudes and practices (2008).
