28 июля 2016г.
Winning the arbitration process does not frequently mean the automatic gain of the fruits of the award. The final act of the Arbitral tribunal is only the first step on the way of receiving money from the Respondent. The parties will likely meet each other in the state court in the process of enforcement of an Arbitral award. Thanks to the wide membership of the signatories to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, New York, 19581 (hereinafter “the New York Convention”) the litigation process should resolve into the Court’s review of the grounds named in Article V of the New York Convention. However it should be noted that the procedure of enforcement of the award is regulated by the national procedural act and with particularities that could be established by the State at the time of signature. Notwithstanding the procedure of enforcement can be even more complicated if the party seeks the execution of the award in the State that is non-signatory to the New York Convention.
Nevertheless lack of accession to the New York Convention shall not lead to the impossibility of the enforcement of the award.
The current article will demonstrate other options of the enforcement of foreign awards in the absence of accedence to the New York Convention as a legal basis. The article will illustrate the matter through the example of Seychelles – the country that has never ratified the New York Convention.
It should be noted that the exceptions from the principle of territorial jurisdiction were highlighted by the famous Russian scholar E. Trubetskoy who pointed out that exclusive application of national laws would make the international trade relations very complicated or even made them impossible. In sense of that national laws of the foreign country should be applicable.2
Since the article touches the issue concerning the case when the “classic” sources of law are not pertinent at hand we should refer to the works of such professors as G. Shershenevich and D. Meyer in relevant parts devoted to the problem of sources of law. Thus, G. Sherchenevich named among classic sources of law as written provisions in the legislature – legal custom. Especially, as G. Shershenevich noted, the legal custom is applicable in the sphere of public governance and administration.3
1 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, UN, 1958.
2 E. Trubetskoy, Encyclopaedia of Law (Entsiklopedia Prava), Moscow, 1917, p. 153.
It seems undoubted that probable court opponent will take the stance that there is no legal provision enabling the execution or enforcement of the final Award in the country. It is pertinent to note that while passing a legislation Seychelles Parliament had intention to accede to the New York Convention. Professor Chloros states at page 156 of his commentary that the intention of the second part of section 226 of the Seychelles Commercial code,4 introduced by him, was by way of adopting the New York Convention as “internal law on the basis of reciprocity”. He clearly felt that Seychelles would accede to that Convention as to give effect to the law. This is made clear to endnote 87 to his commentary at page 162: “87 it is also important that Seychelles should adhere to the Convention at the earliest opportunity”.5
It is important to note that it was the Convention which introduced the so-
called “pro-enforcement bias”. As was stated in Diag Human SE v The Czech Republic [2014] EHWC 1639 (Comm) at para 10, the Convention comprises an “overall sheme” for the facilitation of the enforcement of an award”. The scheme reflects a “pro-enforcement bias” …or…constitutes a praesumtio juris tantum, for the enforceability of an award…”.6
In this respect the principle of reciprocity should be examined.
Articles 146 and 148 of the Commercial Code of Seychelles, respectively provides thus:
Article 146: On the basis of reciprocity, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, and the arbitral award within the meaning of the said Convention shall be binding. Such Conventional shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than Seychelles and arising out of
3 G. Shershenevich, Learning about Law and Government (Uchenie o Prave i Gosudarstve), Moscow, 1911, p. 108.
4 Commercial Code of Seychelles Act, Laws of Seychelles, 1st January, 1977.
5 A.G. Chloros, Codification in a Mixed Jurisdiction: The Civil and Commercial Law of Seychelles, North Holland Publishing, 1977, p. 162.
6 Van der Berg, The New York Convention 1958: Towards a Uniform Judicial Interpretation (Kluwer 1981), p. 267.
differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in Seychelles; and
Article 148: Arbitral awards under the said Convention shall be recognized as binding and shall be enforced in accordance with the rules of procedure in force in Seychelles. The conditions or fees or charges on the recognition or enforcement of arbitral awards to which the said Convention applies shall not be more onerous than those required for the recognition or enforcement of the domestic arbitral awards.7
It should be noted that a foreign Arbitral Award is binding, enforceable and executory in the Seychelles if the following conditions are satisfied:
(i) there is reciprocity between the State (from which the Arbitral Award was made) and the Seychelles, in respect of the enforcement between Arbitral Award made from each other’s territory. The reciprocity is not dependent of the New York Convention; and
(ii) the term “arbitral award within the meaning of the convention” applies to:
(a) made in the territory of a State other than Seychelles and arising out of differences between persons whether physical or legal; and/or
(b) not considered as domestic awards in Seychelles.
The said argument is supported by the fact that the term ”arbitral award within the meaning of the said convention” is actually defined in the second and third sentence of Article 146. Hence if the foreign arbitral award comes within the meaning of the Second or Third sentence of Article 146 and an arbitral award from the Seychelles is capable of being recognized and enforced in the other country (for which the foreign arbitral award was made) such foreign Arbitral Award is capable of being recognized and enforced in the Seychelles.
It is pertinent to note that the Supreme Court of Seychelles considered a case related to the procedure of enforcement of foreign arbitral award. Thus, in the case of Omisa Oil Management v/s Seychelles Petroleum Company Ltd [2001]
7 Commercial Code of Seychelles Act, Laws of Seychelles, 1st January, 1977.
S.R.L 50,8 the Supreme Court, refused to enforce in Seychelles an arbitral award made in Switzerland due to the absence of reciprocity, between Seychelles and Switzerland, in respect of enforcement of arbitral award. The Court came to the conclusion that an Arbitral Award made in Seychelles could not be enforced in Switzerland. In the final paragraph of the said judgment Juddo. J. stated thus: “In the end result, for reasons given earlier, I find that the application for registration and enforcement of the foreign arbitration award made in Switzerland, dated 7 October 1998, cannot be granted in view of the lack of reciprocity between Switzerland and Seychelles in that respect. Accordingly, the application is dismissed”.9
However taking into consideration that the award could be issued in the jurisdiction of France where one of the most respectful arbitration institute locates the conditions laid down in Article 146 of the Commercial Code are satisfied as explained below:
(i) the Arbitral Award, being one made in France, is an arbitral award made in the territory of a state other than Seychelles and arising of differences between person, who are legal, OR alternatively It is an arbitral award not considered as domestic award in Seychelles; and
(ii) the requirement of “reciprocity” is satisfied in the present case, as an Arbitral Award made in the Seychelles is capable of being recognized and enforced in France. It is that respect that the present case is distinguishable from that of the Omisa case. The fact that an Arbitral Award made in the Seychelles can be enforced or recognized in France is supported by the following. An Arbitral Award made in the Seychelles would be recognized and enforced in France in terms of Article 1514 of the French code of Civil Procedure, Book IV entitled ‘arbitration’.10 Article 1514, which falls under Chapter III of the said code and under the heading “recognition and enforcement of the Arbitral Awards made abroad or in International Arbitration”, provides thus; “an arbitral shall be recognized on it can prove its existence and if such recognition or enforcement is not manifestly contrary to international public policy”. The procedure of enforcement in France, an arbitral award made in Seychelles, is laid down in Articles 1515 to 1517 of the said Code.11
8 Omisa Oil Management vs Seychelles Petroleum Co Ltd, 2001, SLR 50, the Seychelles Supreme Court.
9 Omisa Oil Management vs Seychelles Petroleum Co Ltd, 2001, SLR 50, the Seychelles Supreme Court.
In terms of the aforementioned the arbitration award rendered in France shall be enforced in the Seychelles as the requirements of the principle of reciprocity are met.
In the alternative to the argument above in relation to the issue of reciprocity, that in the event that the Court upholds the stance that reciprocity must exist in terms of the New York Convention, in the circumstances when the award is rendered by one of the French Arbitration venues, still the award shall be executed.
Thus, in terms of Articles 146 to 150 of the Commercial Code, the legislator has incorporated and codified the New York Convention as part and parcel of the domestic legislation. By so doing, the legislation has permitted Seychelles to recognize and enforce a New York Convention Arbitral Award, made in a member state of the Convention provided the condition of reciprocity is satisfied. In other words Seychelles, by incorporating and codifying the New York Convention as part and parcel of our domestic law, has been placed in the same position as if it has signed and ratified the said Convention.
For the purpose of the argument advanced, it is apt to raise the following question; is an arbitral Award made in Seychelles, capable of being enforced in France, as per the terms of the New York Convention? It is submitted that the above question, must be answered in the affirmative.
Article VII of the said Convention provides thus: “the provisions of present Convention shall not … 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...of the country where such award is sought to be relied upon”.
Therefore the New York Convention itself contains provisions that allows for an arbitral award to be enforced and recognized in accordance with the specific laws of member state.
France is a party of the convention since 1959. So, it is binding and it is complied with the provisions of the Convention. The enforcement in France, recognition and enforcement in France will not be required directly on basis of the convention but rather on the basis of this decree. France, being as a party to the New York convention has to comply with the provisions of the Convention. So, the Court has to recognize and enforce in France awards when required by the Convention. And in fact the text of the decree and of the former decrees, allowed recognition of the award issued in the jurisdiction of Seychelles.
As can be argued by the Defendant, Seychelles, by incorporating and codifying the New York Convention as part and parcel of its domestic law, has been placed in the same position as if it has signed and ratified the said convention. France, which is a party to the said Convention contains provisions in its law which allows for enforcement and recognition of any foreign arbitral Award, including Arbitral Convention Award, in accordance with its specific legal provisions, namely Articles 1514 to 1517 of the French Civil Procedure Code. The recognition and enforcement of a Convention Award, in terms of the above- referred Articles of the French Civil Procedure Code, is in terms and accordance of Article VII of the New York Convention. It is, therefore, concluded that an Arbitral Award made in Seychelles is capable of being enforced and recognized in France, in accordance with the terms of the New York Convention.
Moreover, we believe that the party in enforcement procedure is entitled to resort to common law principles, either on the basis that the powers, authorities and jurisdiction of the English High Court can be exercised even when there are corresponding provisions in Seychelles, or on the basis that Seychelles law is silent, or both, in order to seek the recognition and enforcement of the award in Seychelles. Apart from enforcement under the Convention (to which the United
Kingdom is a signatory) there are two methods of enforcing a foreign arbitral award in England. Both require court proceedings.12
The first procedure can be done in terms of section 66 of the Arbitration Act 1996.13 A party may also choose to bring an action on the award in terms of section 40 (a) of the Arbitration Act 1950.14
Following the English jurisprudence it is important to refer to the English lawyer where he stated that “there cannot be any doubt that the rule that the foreign judgment may be denied recognition or enforcement because the proceedings in which it was obtained were opposed to natural justice also applies to foreign awards”.15
It shall be also mentioned that despite the fact of the absence of the relevant
provision in the legislature the relations of the parties shall be governed by the legal custom. As was remarked by the famous professor D. Meyer “the law is cancelled by the custom, grows out of use”.16
Furthermore, the Party that is seeking the enforcement in the country that is a non-signatory to the New York Convention is always entitled to refer to the articles of the Contract that provides the arbitration clause. As Parties agree to submit their disputes to arbitral tribunal they should be treated as being bound to comply with the Final Award. Such application to the fulfillment of obligations should not be disregarded during the enforcement procedure.
Summing up it is pertinent to note that in case the Party looks for the execution of the arbitral award in the jurisdiction in which the New York Convention is not applicable as the government of the country has never acceded to the Convention other grounds should serve as legal basis: (i) the principle of reciprocity, (ii) reference to the New York Convention in the domestic legislation;
(iii) common principles of the fulfillment of the obligations.
12 Morris, Conflict of Laws, London, 1971, p. 447.
13 Arbitration Act 1996, as in force from 17th June, 1996.
14 Arbitration Act 1950, as in force from 3rd November, 1950. 15 Dicey, Conflict of Laws, 14th edition, London, 2012, p. 761. 16 D. Meyer, Russian Civil Law, Moscow, 1973, p. 37.
Bibliography
1. A.G. Chloros, Codification in a Mixed Jurisdiction: The Civil and Commercial Law of Seychelles, North Holland Publishing, 1977.
2. Dicey, Conflict of Laws, 14th edition, London, 2012.
3. D. Meyer, Russian Civil Law, Moscow, 1973.
4. Morris, Conflict of Laws, London, 1971.
5. G. Shershenevich, Learning about Law and Government (Uchenie o Prave i Gosudarstve), Moscow, 1911.
6. E. Trubetskoy, Encyclopaedia of Law (Entsiklopedia Prava), Moscow, 1917.
7. Van der Berg, The New York Convention 1958: Towards a Uniform Judicial Interpretation (Kluwer 1981).
Acts and legislature
1. Arbitration Act 1950, as in force from 3rd November, 1950.
2. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, UN, 1958.
3. Commercial Code of Seychelles Act, Laws of Seychelles, 1st January, 1977.
4. Code of Civil Procedure, Book IV, Art. 1514, as in force from 14th May, 1981.
5. Arbitration Act 1996, as in force from 17th June, 1996.
Case Law
1. Omisa Oil Management vs Seychelles Petroleum Co Ltd, 2001, SLR 50, the Seychelles Supreme Court.
