Article V.1(b) of the New York Convention
sets a two pronged test based on procedural rights for when a court may refuse
to enforce an arbitration award against a party. The first prong test whether a
party was given notice of appointment of the arbitrator and the arbitral
process and the second prong is the phrase “was otherwise unable to present his
case” (“Phrase”) incorporating basic notion of procedural fairness.[1]
UK and Australia
In the UK, the Phrase is incorporated into language
in subsections 103(1) and 103(2)(c) of the Arbitration Act, 1996 (the “Act”). Colman
J in Minmetals said:[2]
Article V
of the Convention protects the requirements of natural justice reflected in the
audi alterem partem rule. Therefore where the tribunal is procedurally entitled
to conduct its own investigations into the facts, the effect of this provision
will be to avoid enforcement of an award based on findings of fact derived from
such investigations if the enforcee has not been given any reasonable
opportunity to present its case in relation to the results of such
investigations.
In Uganda
Telecom, the court, interpreting similar Australian legislative language,
supported enforcement against such a defence, found that a party had actually
received notice and had the opportunity to present its case, but simply chose
not to do so.[3]
In Kanoria,
the award against a party was not enforced because that party was unable on
account of sickness to present his case.[4]
In Dallah
(and developing Dardana) the court said
that once a defence to enforcement under the Convention is made, the court is constrained
to not enforce the award retaining no further discretion to enforce an award with
no further consideration of whether the procedural irregularity materially
affected the final award. [5]
In the British Virgin Islands, the Court of
Appeal surveyed the attitudes of courts in reviewing Convention defences.[6] It identified two broad
streams of jurisprudence, 1) Southeast Asian cases where courts retain
discretion to enforce even if a Convention defence is made, as long as there is
no material impact on the final award, and 2) English cases where the courts stop
the analysis when the defence is made, with no further review.
South East Asia
In a Singapore case, the court quotes another
leading case, Soh Beng Tee
& Co Pte Ltd v Fairmount Development Pte Ltd., saying that “even if
there had been a breach of the rules of natural justice, there had to be a
causal nexus between the breach and the award made.”[7]
United States
In Generica,
the court, after describing the basic components of due process, said:[8]
parties
that have chosen to remedy their disputes through arbitration rather than
litigation should not expect the same procedures they would find in the
judicial arena.
The court ruled that although a party was
not allowed to cross-examine a witness, that witness was not the only possible
source of evidence of that party’s assertion, and that the arbitrator was
justified in not finding that the particular witness’s testimony was “central
to the liability issue.”[9] In Fitzroy, the court said demonstrating the inability to present
one’s case requires convincingly showing that it “affected the outcome of the
proceedings” and that merely failing to appear, without good excuse, will not
satisfy the test.[10]
Thus, a party resisting award enforcement on
the basis of the inability to present its case will face slightly differing
burdens depending on the jurisdiction of enforcement. Unlike in the UK, in
pro-enforcement jurisdictions in Asia and the US, the resisting party may be
required to additionally prove that the lack of due process materially impacted
the final award.
[1] Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (the New York Convention), 10 June, 1958, 330 UNTS 4739 (entered into
force on 7 June 1959) [Convention]
[2] Minmetals Germany Gmbh v
Ferco Steel Ltd, [1999] 1 All E.R. (Comm.) 315; [1999] C.L.C. 647
[Minmetals]at 657
[3] Uganda Telecom Limited v.
Hi-Tech Telecom Pty Ltd., Federal Court of Australia, NSD 171 of 2010, 22
February 2011 [Uganda Telecom]
[4] Ajay
Kanoria
, Esols Worldwide Limited, Indekka Software Pvt Limited v.
Tony Francis
Guinness, [2006] EWCA Civ 222. [Kanoria]
[5] Yukos Oil Company V. Dardana
Limited, [2002] EWCA Civ 543 [Dardana],
an earlier case where the court in its analysis appears to better reflect the
pro-enforcement bias of the text of the Convention, and yet opened the door to
the later cases by inferring that the word “may” in section 103(2) is an
indication of revived remedies for parties resisting enforcement under Article
V.1(b). Dallah
Real Estate and Tourism Holding Company v. The Ministry of Religious Affairs,
Government of Pakistan, [2010] UKSC 46 [Dallah]
at para 67. As with Kanoria, the
English court appears to be reviewing a foreign law decision on the merits, See
para 140 for a concession that the tribunal’s analysis of the law was in
consonance with French law. Paras 132 to 142 are a wholesale re-examination of
the facts.
[6] British Virgin Islands No. 3, Pacific China Holdings Ltd v. Grand
Pacific Holdings Limited, Court of Appeal, Territory of the Virgin Islands, 20
September 2010, in Albert Jan van
den Berg (ed), Yearbook Commercial Arbitration 2011 - Volume XXXVI,
Yearbook Commercial Arbitration, Volume XXXVI (Kluwer Law International 2011)
pp. 262 – 265.
[7] Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH [2008] SGHC 67 at 126
[8]
Generica Limited, Plaintiff-appellee, v.
Pharmaceutical Basics, Inc., United States Court of Appeals, Seventh
Circuit.125 F.3d 1123[Generica] at para
33.
[10] Fitzroy Engineering Ltd. v. Flame Engineering Ltd., No. 94-C- 2029,
1994 U.S. Dist. LEXIS 17781 at para 14.
