What is Arbitration: Law and Enforcement

The laws of arbitration are applicable when the tribunal is constituted, during the course of the proceedings and when the parties seek to enforce the award. Identifying the seat of the arbitration is therefore a vital part of the process.

The Seat of the Arbitration

The seat of the arbitration is the country/jurisidction in which the arbitration legally takes place and whose laws are therefore applied to the proceedings. Where all of the factors of an arbitration are domestic, then clearly domestic laws will apply to those proceedings and the subsequent enforcement of the award.

For international proceedings, in much the same way that parties can choose the rules under which the arbitration is to proceed, they can also select a choice of law. The chosen country’s laws will then govern the conduct of the proceedings, the level of assistance that the domestic court may provide and the enforcement of an arbitration agreement and the enforcement of the award.

Whilst some jurisdictions have fairly liberal arbitral laws (such as Switzerland, New York, England and Wales), others can be more restrictive. Liberal arbitration laws merely make provisions for the commencement of arbitration and the enforcement of arbitral awards leaving all other provisions to be decided by the parties (i.e. through their selected rules). Some jurisdictions even actively encourage arbitration by placing arbitration provisions throughout their legislation.

For international arbitration it is therefore important that the agreement is drafted in such a way to select a seat of arbitration that is arbitration friendly and not too restrictive on the proceedings. If the agreement is silent as to the seat of the arbitration, then the parties may agree on these provisions at the preliminary stages of the proceedings.

Enforcement of the Arbitral Award

When parties wish to enforce an award outside of the country in which the seat is held, then the laws of these other countries will also need to be considered. To this extent a small number of international conventions are available to assist.

One of the most significant benefits of arbitration is the scope to which parties are able to enforce an arbitral award internationally. The most significant convention that enables this enforcement is the New York Convention 1958.

 

The New York Convention 1958

The convention requires contracting states to enforce valid arbitration agreements and makes provisions for the simple enforcement of arbitral awards. Signatories to the convention undertake to enforce a foreign arbitral award in the same way that they would enforce a domestic award and may only refuse to enforce an award at the request of the party against whom it is invoked if they can show that:

• The arbitration agreement is invalid for want of capacity or is invalid according to the seat of law; or

• 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

• The award does not deal with the dispute submitted to arbitration or extends to matters beyond the scope of the submission to arbitration; or

• The composition of the arbitral authority or arbitral procedure was not in accordance with the agreement of the parties or else not in accordance with the laws of the seat of the arbitration; or

• The award has not yet become binding or was set aside in the country in which it was made.

Signatories may also refuse to enforce an award if the matter in question is not capable of being arbitrated under the rules of that country or in the interests of public policy.

Whilst there are other complimentary conventions, the New York Convention without doubt provided the most extensive scope for the enforcement of arbitration awards internationally and currently has over 110 signatories.

In addition to the New York Convention, parties may also turn to the national laws in the countries within which they seek to enforce their award.

The Arbitration Company will be significantly involved in the law and enforcement aspects of your arbitration and will assist you in identifying all of the potential jurisdictions relating to the dispute and the proceedings. Having done so we can then help you to choose your choice of law and highlight concerns that may arise regarding enforcement of the agreement and the award. The Arbitration Company will also evaluate the final award before it is sent out to you and endeavour to ensure that it will be enforceable wherever necessary.