The arbitral tribunals mandate and the arbitral awards

THE ARBITRAL TRIBUNAL’S MANDATE AND ARBITRAL AWARDS Nguyen Thi Thu Trang Student number: 404501 Post-graduate LLM in Arbitration and Business Law Supervisor: Professor Filip De Ly Erasmus University Rotterdam, 06 June 2014 TABLE OF CONTENTS LIST OF ABBREVIATIONS BIBLIOGRAPHY LIST OF CASES 16 INTRODUCTION 26 I Background 26 II Subject and Research Questions 27 III Structure 28 CHAPTER 1: The mandate of the arbitral tribunal 29 I Introduction 29 II The mandate of the arbitral tribunal under the New York Convention 29 III The mandate of the arbitral tribunal under the UNCITRAL Model Law 34 IV The arbitral tribunal’s mandate under national laws 40 Civil law 40 Common law 42 V Harmonization Approach 43 CHAPTER 2: The violation of the substantive mandate of an arbitral tribunal 47 I The violation of the substantive mandate of an arbitral tribunal 47 II Determining the scope of the substantive mandate 47 III Objections regarding the substantive mandate 51 Extra Petita : Exceeding the power under the arbitration agreements 51 Disregard of the contract or the law/ Decision as amicable compositeur 56 Ultra Petita 52 Infra Petita 55 IV Conclusion 60 CHAPTER 3: The violation of the procedural mandate of an arbitral tribunal 61 I Determining the scope of the procedural mandate 61 II Objections regarding the procedural mandate 64 Commencement and early stages of the proceedings 64 Conduct of the proceedings and taking of evidence 66 Rendition of the arbitral award 67 III Conclusion 70 CHAPTER 4: Exceptions of the violation of the arbitrators’ mandate 72 I Waiver of right to object 72 Ex-ante waiver 73 Ex-post waiver 75 II Mandatory rules and public policy 77 III Conclusion 79 CHAPTER 5: Remedies 80 I Additional award 80 II Partial enforcement 82 III Discretionary power to enforce an award 84 IV Conclusion 87 CONCLUSION 88 LIST OF ABBREVIATIONS & and CLOUT Case Law on UNCITRAL texts CPC Civil Procedure Code Decree 2011 Decree No 2011-48 of 13 January 2011 of France reforming the law on arbitration came into force on May 2011 DFT Decision of Swiss Federal Tribunal ECOSOC United Nations Economics and Social Council Ed Edition edited, editor Etc Et cetera ICC International Chamber of Commerce ICC Rules Arbitration Rules of the International Chamber of Commerce, 2012 edition ICCA International Council of Commercial Arbitration In’l Arb International Arbitration No number OLG Oberlandesgericht (German higher regional court) p Page Para Paragraph PILA the Swiss Federal Act on Private International Law of 18 December 1987 Prof Professor The Geneva The Geneva Convention on the Execution of Foreign Arbitral Convention Awards of 1927 The New York The New York Convention on recognition and enforcement of Convention foreign arbitral award of 1958 The UNCITRAL Model Law UNCITRAL Model Law on International Commercial Arbitration 1985 (with amendments as adopted in 2006) UK United Kingdom UKHL United Kingdom House of Lords UN doc Officials documents of the United Nations UNCITRAL United Nations Commission on International Trade Law US United States v versus VIAC Vietnam International Arbitration Centre Vol Volume Y.B.Com Arb Yearbook of Commercial Arbitration BIBLIOGRAPHY LEGISLATIONS The Geneva Convention on the Execution of Foreign Arbitral Awards of 1927 The New York Convention on recognition and enforcement of foreign arbitral award of 1958 The Arbitration Act of Netherlands - December 1986 Dutch Civil Procedure Code Book Four: Arbitration The English Arbitration Act 1996 The Federal Arbitration Act of the United States The French Civil Procedural Code The French Decree No 2011-48 of 13 January 2011 of France reforming the law on arbitration came into force on May 2011 The Swiss Federal Act on Private International Law of 18 December 1987 The UNCITRAL Model Law on International Commercial Arbitration The Arbitration Rules of the International Chamber of Commerce (ICC ), 2012 edition BOOKS A Redfern and M Hunter, Law and Practice of International Commercial Arbitration (London: Sweet& Maxwell, 4th Edition, 2004), Albert Jan van den Berg, The application of the New York Convention by the Court in ICCA Congress series no 9, Improving the efficiency of arbitration agreements and awards- 40 years of application of the New York Convention, Kluwer Law International (1998) Albert Jan van den Berg, Organizing An International Arbitration: Practice Pointers, in Lawrence W Newman, Richard D Hill (ed), The Leading Arbitrators’ Guide To International Arbitration, Juris Publishing Inc (2004) Albert Jan van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation, Kluwer (1981) Allan Philip, The duties of an arbitrator in Lawrence W Newman, Richard D Hill (ed), The leading arbitrators’ guide to international arbitration, Juris Publishing.Inc (2004) Andrew Tweeddale and Keren Tweeddale, A practical approach to arbitration law (London, Blackstone Press, 1999) Aron Broches, Commentary on the UNCITRAL Model Law on International Commercial Arbitration, Kluwer Law and Taxation Publishers (1990) Audley Sheppard, English Arbitration Act (Chapter 23), Part I, Powers of the Court in Relation to Award, Section 68 [Challenging the award: serious irregularity] in Loukas A Mistelis (ed), Concise International Arbitration, (Kluwer Law International (2010) Born, Gary B, International Commercial Arbitration Second Edition (Kluwer Law International 2014) Born, Gary B, International Arbitration: Law and Practice, Volume (Kluwer Law International (2012) Born, Gary B, International Commercial Arbitration Kluwer Law International (2009) Born, Gary B., International Commercial Arbitration, The Hague Transnational Publishers Inc and Kluwer Law International (2001) Borris/ Hennecke in Wolff (ed), New York Convention on the recognition and enforcement of foreign arbitral award- Commentary, Hart and Nomos, 2012 Craig Tevendale; Andrew Cannon in Julian D.M Lew; Harris Bor,; Gregory Fullelove, Joanne Greenaway, Arbitration in England, with chapters on Scotland and Ireland, Kluwer Law International, (2013) David St John Sutton, Judith Gill and Matthew Grearing, Russell on Arbitration, (London: Sweet & Maxwell, 2007) De Silveira/ Lévy, Transgression of the Arbitrators’ Authority: Art V(1)(c) of the New York Convention, in : Gaillard/ Di Pietro (eds.), Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice, (Cameron May) (2008) E Gaillard and P de Lapasse, Le nouveau droit franỗais de larbitrage interne et international, Recueil Dalloz, 20 January 2011 E Gaillard and J Savage (eds.), Fouchard Gaillard Goldman on International Commercial Arbitration, Kluwer (1999) Günther J Horvath, 'The Duty of the Tribunal to Render an Enforceable Award' (2001) 18 Journal of International Arbitration, Issue Hanotiau Bernard , Complex Arbitrations: Multiparty, Multi-contract, Multi-Issue and Class Actions, Kluwer Law International, (2006) Hobér, Kaj: International Commercial Arbitration in Sweden Oxford University Press New York (2011) Howard M Holtzmann, Joseph E Neuhaus, A guide to the UNCITRAL Model Law on International Commercial Arbitration: legislative history and commentary, Kluwer Law and Taxation Isaak I Dore, Arbitration and conciliation under the UNCITRAL Rules: A textual analysis, Martinus Nijhoff Publishers Jarvin in Gaillard/ Di Pietro (eds), Enforcement Of Arbitration Agreements And International Arbitral Awards- The New York Convention in Practice, (Cameron May, 2008) Jean-Louis Delvolvé , Gerald H Pointon , et al.,French Arbitration Law and Practice: A Dynamic Civil Law Approach to International Arbitration, Second Edition (Kluwer Law International 2009) Stefan M Kröll, ‘Recognition and Enforcement of Foreign Arbitral Awards in Germany’, 5(5) Int’l Arb L Rev 160, 165 (2002); Landau, Reasons for reasons: The tribunal’s duty in Investor-State Arbitration, in: van den Berg (ed.), 50 years of the New York Convention, ICCA Congress Series No 14, Kluwer Law International 2009 Lew, Loukas A Mistelis, Stefan M Kröll, Comparative International Commercial Arbitration, Kluwer Law International (2003) Margaret L Moses, The principles and Practice of International commercial Arbitration, Cambridge University Press(2012) Matti Kurkela, Santtu Turunen, Due Process in International Commercial Arbitration, Oxford University Press (2010); Mauro Rubino- Summartano, International Law and Practice, Kluwer Law International 2nded ( 2001) Moss, Giuditta Cordero, International Commercial Arbitration: Party Autonomy and Mandatory Rules, Tano Aschehoug (1999) Nacimiento in Kronke/ Nacimiento/ Otto/ Port (eds), Recognition and enforcement offoreign arbitral awards: A global commentary on the New York Convention, Kluwar Law International (2010) Nicola Christine Port, Scott Ethan Bowers and Bethany Davis Noll in Herbert Kronke, Patricia Nacimiento, Dirk Otto, Nicola Christine Port, Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention, Kluwer Law International, 2010 Okezie Chukwumerije, Choice of Law in International Commercial Arbitration, Praeger (1994) Patrik Schöldström, The arbitrator's mandate: a comparative study of relationships in commercial arbitration under the laws of England, Germany, Sweden and Switzerland, Volume Van Rättsvetenskapliga Biblioteket, June 1998 Pierre A Karrer, Responsibility of arbitrators and arbitral institutions in Lawrence W Newman, Richard D Hill (ed) , The leading arbitrators’ guide to international arbitration, Juris Publishing Inc(2003) Pieter Sanders, Quo Vadis Arbitration?- Sixty years of arbitration practice, (Kluwer Law International, 1999) R Wolff ed., Beck, New York Convention on the Recognition and Enforcement of For eign Arbitral Awards – Commentary, Hart and Nomos (2012) Stavros L Brekoulakis and Laurence Shore, UNCITRAL Model Law, Chapter VII, Article 34 [Application for setting aside as exclusive recourse against arbitral award] in Loukas A Mistelis (ed), Concise International Arbitration, (Kluwer Law International 2010) Stefan M Kröll in Karl-Heinz Böckstiegel, Stefan Michael Kröll, Patricia Nacimiento Arbitration in Germany: The Model Law in Practice, Kluwer Law International (2007) W Laurence Craig, William W Park, Jan Paulsson, International Chamber of Commerce Arbitration, ICC Publication (2000) Weigand (ed), Practitioner’s Handbook on International Arbitration, C.H.Beck, DJØF (2002) Yannaca- Small Catherine, Consolidation of Claims: A Promising Avenue for Investment Arbitration? in International Investment Perspectives, 2006 Edition,Available at: http://www.oecd.org/investment/internationalinvestmentagreements/40079691.pdf Yves Derains, ‘Public Policy and the Law Applicable to the Dispute in International 10 As the result, in order to apply ex-ante waiver, it is required that the party be aware of the derogation from the agreement upon procedure In a Kenyan case, 212 the fact that, contrary to the parties’ agreement, no written record of the proceedings existed became apparent after the award had been rendered A party needed to refer to the record to prove that the claimant had renounced certain claims during the proceedings The court held that the party had not waived the right to raise the lack of the agreed written recording of the proceedings by further participating in the proceedings, because the party was not aware of the defect at the time of conclusion of the arbitration clause Ex-post waiver The provision of Article of the UNICTRAL Model Law indicates the application of ex- post waiver: A party who knows that any provision of this Law from which the parties may derogate or any requirement under the arbitration agreement has not been complied with and yet proceeds with the arbitration without stating his objection to such non-compliance without undue delay or, if a time-limit is provided therefore, within such period of time, shall be deemed to have waived his right to object [emphasis added] Contrary to ex-ante waiver, ex- post waiver is often considered as a valid exemption for the violation of the arbitral tribunal’s mandate Under the New York Convention, it is also widely accepted that a party that takes part in arbitration proceedings without raising, in a timely manner, specific objections concerning particular defects is barred from asserting such objections in subsequent proceedings for the recognition and enforcement of the resulting award 213 The waiver may occur by the acceptance by conduct, i.e., the failure to object the defects of the arbitral proceedings “without undue delay” and “within a timelimit”.214 In a Hong Kong case, 215 the Hong Kong Court of Final Appeal considered 212 Siginon Maritime Ltd v Gitutho Associates and Others, High Court, Mombasa, Kenya, 28 July 2005, Miscellaneous Civil Application, 719 of 2004, available on the Internet at http://www.kenyalaw.org/CaseSearch/case_download.php?go=29136052918379844525034&link= 213 Supra no.1, p 2813; Supra no.41, para 9.14; Supra no.15, p 266, France: CA Paris RRev Arb 2001, 918 214 Supra no.37, p 26, para 75 objections based on an alleged non-compliance with arbitration rules precluded in later proceedings for the recognition and enforcement of the resulting award The court finally held that such objection should have been raised in the arbitral proceedings The term “without undue delay” was interpreted as “at the latest with the closing plea” in a German Court decision on an objection to an infringement of due process 216 Furthermore, ex-post waiver is not only implied by the conduct of the party as provided under Article of the UNCITRAL Model Law but also by expressed by an agreement between parties after the arbitral proceedings A Belgium court recognized such agreement of parties in TPI Bruxelles case, 217 in which parties clarified the point in time when an arbitral award was rendered and became binding upon them that: “the award of the tribunal shall be final and binding upon the parties and shall be enforced immediately after it has been rendered, unless the tribunal has fixed an interval for its enforcement or the enforcement of any part thereof The award shall not be subject to appeal or revision The enforcement of the award shall be subject to the rules of enforcement of arbitration awards in the country where enforcement is sought.” In summary, when a party is deemed to waive his right to object, such a party may not invoke non-compliance with the arbitration procedure or agreement as a ground for setting aside the award 218 or as a reason for refusing its recognition and enforcement 219 in the subsequent proceedings after the expire of the time limit or after the award has been issued 215 Hong Kong: Heibei Import & Export Corporation v Polytex Engineering Limited, XXIV a Y.B.Com Arb 6522, 667 (1999) = [1999] HCK 205 216 Oberlandesgericht Stuttgart, Germany, Sch 08/02, 16 July 2002, available on the Internet at http://www.dis-arb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187 217 Belgium: TPI Bruxelles, XXII Y B Com Arb 643 (1997) 218 Oberlandesgericht Stuttgart, Germany, Sch 08/02, 16 July 2002, available on the Internet at http://www.disarb.de/de/47/datenbanken/rspr/olg-stuttgart-az-1-sch-08-02-datum-2002-07-16-id187; see also CLOUT case No 637 [Presidium of the Supreme Court, Russian Federation, 24 November 1999] 219 CLOUT case No 659 [OberlandesgerichtNaumburg, Germany, 10 Sch 08/01, 21 February 2002], also available on the Internet at http://www.dis-arb.de/de/47/datenbanken/rspr/olg-naumburg-az-10sch-08-01-datum-2002-02-21-id166 76 II Mandatory rules or public policy The discretion accorded to the arbitrator to conduct proceedings can be view as “the never ending battle between the interest of justice and fairness on the one hand, and finality and efficiency on the other”.220 Each arbitrator has to take into consideration all issues which might threaten the validity of an award, 221 at least, at the place of arbitration There would be an overriding interest of a public policy nature forcing or enabling the arbitrator from the arbitrants’ wishes in order to protect such interest 222 Consequently, mandatory rules and public interests become another exemption of the violation of the arbitrators’ mandate There are different approaches on mandatory rules in which the arbitrators have to take into account when conducting the arbitral proceedings and rendering the arbitral award (for example, mandatory rules at the place of arbitration; mandatory rules of the law of contract; the law of the enforcement country, or some supranational law that purports to apply in any event) However, in this paper, the author will adopt the approach of mandatory rules of the place of arbitration as the preferable approach 223 because Mandatory laws of the forum could also be applied in order to reduce the chances that the award would be set aside or enforcement prohibited under the New York Convention 224 Mandatory rules are laws that purport to apply irrespective of a contract’s proper law or the procedural regime selected by the parties 225 Mandatory rules can reflect states’ internal or international public policy, and generally protect economic, social or 220 Gerold Herrmann, “Power of arbitrators to determine procedures under the UNCITRAL Model Law”, ICCA Congress Series No 7, p 39, 43 221 GüntherHorvath, “The Duty of Tribunals to Render an Enforceable Award”, 18(2) J Int'l Arb 135 (2001); Supra no.65, p 279 222 Patrik Schöldström, The arbitrator's mandate: a comparative study of relationships in commercial arbitration under the laws of England, Germany, Sweden and Switzerland, Volume Van Rättsvetenskapliga Biblioteket, June 1998, p.30 223 William Craig, William Park and Jan Paulsson, International Chamber of Commerce Arbitration (3rd ed, 2000), p 499, 500 224 Waincymer, Jeffrey Maurice, International Commercial Arbitration and the Application of Mandatory Rules of Law (2009) Asian International Law Journal, Vol 5, No 1, 2009 Available at SSRN: http://ssrn.com/abstract=1912318 or http://dx.doi.org/10.2139/ssrn.1912318 225 Pierre Mayer, ‘Mandatory Rules of Law in International Arbitration’ (1986) Arbitration International 274, 275 77 political interests 226 They represent the fundamental policy of a state in the sense that they cannot compete with other foreign laws or the will of the parties 227 Although the parties’ freedom of choice is a general principle of private international law and is to be respected in principle, it should operate within the limits imposed by such equally important general principles of law or subject to any restraint of public policy 228 However, mandatory rules of the seat will only be applied to the extent they reflect “fundamental principles generally accepted on an international level” 229 Arbitrators often find it difficult to determine the degree of universal acceptance required before the principle becomes ‘truly international’, which has the potential to lead to inconsistency, but this is unavoidable 230 Indeed, the parties’ freedom to agree on the arbitral procedure under article 19 (1) of the UNCITRAL Model Law 231 is subject to the “mandatory” provisions in the Model Law 232 A Canadian court had determined that the parties’ choice of procedural rules must not conflict with any mandatory provision of the law or with public policy.233 This maintains the balance between the parties’ autonomy over the procedure to be followed and any overriding requirements of the legal regime that governs the arbitration Also, in an ICC case between a French company and a Spanish company regarding a licence agreement, the tribunal considered whether the chosen law had any rules that would appear to contradict with the ordre public of Spain which in turn would prevent the award from being enforced in that country 234 Notably, as mentioned in chapter herein, it is true that in light of Article V(1)(d) the New York Convention, the agreement of the parties the agreement of the parties concerning the 226 Yves Derains, ‘Public Policy and the Law Applicable to the Dispute in International Arbitration’ in Pieter Sanders (ed), Comparative Arbitration Practice and Public Policy in Arbitration (1987) 227, 228 227 Chukwumerije(1994), Choice of Law in International Commercial Arbitration, p.180 228 A F M Maniruzzaman, ‘International Arbitrator and Mandatory Public Law Rules in the Context of State Contracts: An Overview’ (1990) 7(3) Journal of International Arbitration, p.53, 54 229 Cordero Moss, International Commercial Arbitration(1999), p 329 230 Supra no.140, p 851 231 Article 19(1) of the UNCITRAL Model Law: Determination of rules of procedure Subject to the provisions of this Law, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings 232 Supra no.37, p 100, para 233 Noble China Inc v Lei Kat Cheong, Ontario Court of Justice, Canada, November 1998, [1998] CanLII 14708 (ON SC), published in (1998) 42 O.R (3d) 69, available on the Internet at http://canlii.ca/t/1vvkr 234 ICC Case no 3281 of 1981, Clunet, 1982 p 990-993,991 78 arbitral procedure prevails, irrespective of the requirements of the applicable law 235 However, in the case of such a conflict and if the procedure complied with the agreement, enforcement of the award would not be refused under sub-paragraph (d) but, since the award may be set aside, enforcement may be effectively refused under sub-paragraph (e) 236 of Article V of the New York Convention 237 III Conclusion In general, the waiver of right to object and the mandatory rules are exceptions for not only the violation of the mandate of the arbitral tribunal but also apply in relation to other grounds for annulment of the arbitral awards under Article 34 of the UNCITRAL Model Law or grounds for refusing enforcement of arbitral awards under Article V of the New York Convention The waiver of the right to object can be made before or after the commencement of the arbitral proceedings It can also be made by the conduct of parties or omission 238 and often be recognized by the courts On the contrary, in order to invoking the mandatory rules or public policy as an exception of the violation of the arbitrator’s mandate, it is really difficult to prove that such mandatory rules are “fundamental principles generally accepted on an international level” 239 235 Switzerland: BG, BGE 108 Ib 85= IX Y B Com Arb 437, 438 (1984); Supra no.112, para 1702 Article V(1)(e) of the New York Convention : “[ ]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.” 237 Second Draft, A/CN.9/WG.II/WP.42,Article 37, n 5, p 92 238 Supra no.171, p.32 239 Supra no.229 236 79 CHAPTER 5: Remedies As discussed in Chapter and hereof, if arbitrators violate their mandate the consequent award can be set aside or sent back to the arbitrators for review, and it may be refused enforcement 240 However, it is possible to invoke some remedies to avoid the annulment or refusal of recognition of such the arbitral award This chapter addresses three remedies which could be invoked by parties, by arbitral tribunals themselves and by national courts or exequatur courts, including (1) rendering an additional award; (2) partial enforcement of the arbitral award and (3) discretionary power to enforce an award of exequatur courts I Additional award Rendering an additional award is the remedy for an infra petita award However, as mentioned in chapter above, the text of the New York Convention does not regulate the case of an incomplete award (infra petita) at all Article V(1)(c) of the New York Convention is the "replacement" of Article of the Geneva Convention 241 which concerns the partial enforcement of an award extra petita or ultra petita Hence, the case of an incomplete award is no longer listed as a ground for refusal of enforcement under the New York Convention 242 As the result, this remedy is only applicable at the place of arbitration, or in other words, in setting aside proceedings under the UNCITRAL Model Law Article 33(3) of the UNCITRAL Model Law provides a mechanism to deal with infra petita awards, in particular: 240 Supra no.65, p 279 Article of the Geneva Convention: Even if the conditions laid down in Article hereof are fulfilled, recognition and enforcement of the award shall be refused if the Court is satisfied:— (a) That the award has been annulled in the country in which it was made; (b) That the party against whom it is sought to use the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case; or that, being under a legal incapacity, he was not properly represented; (c) That the award does not deal with the differences contemplated by or fading within the terms of the submission to arbitration or that it contains decisions on matters beyond the scope of the submission to arbitration If the award has not covered all the questions submitted to the arbitral tribunal, the competent authority of the country where recognition or enforcement of the award is sought can, if it think fit, postpone such recognition or enforcement or grant it subject to such guarantee as that authority may decide 242 Supra no.15, p 320 241 80 [ ], a party, with notice to the other party, may request, within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to claims presented in the arbitral proceedings but omitted from the award [ ] and “the arbitral tribunal may extend, if necessary, the period of time within which it shall make [ ] an additional award under paragraph [ ] (3) of this article.”[Emphasis added] Accordingly, a tribunal may on its own or by a request of a party, issue an additional award to cover a claim that was omitted from the award, provided that this claim has initially been presented in the proceedings 243After making its final award, the tribunal has no power to entertain a new claim, which was not previously advanced during the arbitration If a tribunal fails, or is unable, to make an additional award addressing a claim that was presented during the arbitral proceedings, then its award will be subject to annulment or non-recognition (on grounds of infra petita) 244 Moreover, even after an application to annul the award has been filed, Article 34(4) of the UNCITRAL Model Law 245stipulates the possibility of “remitting” an award to the tribunal In effect, this permits a court, presented with an annulment application, to allow the arbitrators an opportunity to take further steps, which might render the annulment application unnecessary 246 When issuing an additional award covering claims presented in the arbitral proceedings but omitted from the award in the course of such remission proceedings, the tribunal avoids the annulment of the arbitral award under Article 34(3) of the UNCITRAL Model Law 247 An example may be found in a Canadian court case concerning an issue of prejudgment interest In that case, the arbitral tribunal who had already delivered the “final” award dealing with income tax matters and costs between the parties, was subsequently asked to make a further award on pre-judgment interest The arbitrator 243 Supra no.138, p 643 Supra no 2, p 346 245 Article 34(4)of the UNCITRAL Model Law: The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside 246 Supra no 1, p 348 247 The exception under Article 34(4) of the UNCITRAL Model Law regarding “the award deals with a dispute not contemplated with the terms of the submission to arbitration,” 244 81 did so as he considered that his mandate had not been terminated The court upheld the additional award 248 However, it should be noted that the court cannot draw authority from Article 34(4) of the UNCITRAL Model Law to refer the matter back to the arbitral tribunal and request that it consider the question of the applicable rate of interest where that question had not been originally considered by the arbitrators 249 Similarly, a remission will not be ordered so that the tribunal cannot take fresh evidence on the merits of the case 250 Additionally, additional awards are autonomous and therefore they can be challenged or enforced independently from the main award 251 II Partial enforcement In case the arbitral award is made based on a matter not included in the arbitration agreement or clause or goes beyond the scope of the arbitration agreement or clause, the court may reject the enforcement concerning this part of the award and therefore, a partial enforcement of the arbitral award is possible This appears from the provision at the end of Article V(1)(c) of the New York Convention which states “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 matters submitted to arbitration may be recognized and enforced.” Accordingly, the court has a discretion to grant partial enforcement of an award if the award is only partly beyond the jurisdiction of the arbitral tribunal, provided that the part falling within the jurisdiction of the arbitral tribunal can be separated 252 The discretionary power to enforce an award notwithstanding the presence of a ground for refusal of enforcement is one of the seven “wish list” of the New York Convention’s development 253 During the history of drafting the convention, it was agreed that 248 Supra no.37, p 130, para 2, Maruna v Lopatka, Supreme Court of British Columbia, Canada, 19 July 2002, [2002] BCSC 1084 (CanLII), available on the Internet at http://canlii.ca/t/582c 249 CLOUT Case No 12, Federal Court of Canada, April 1988 250 CLOUT Case No 391, Superior Court of Justice, Canada, 22 September 1999; see also : Supra no.138, pp 649 251 Supra no.138, pp 643 252 Supra no.17, p 94 253 More information, see Albert Jan Van Den Berg, Striving for uniform interpretation, Enforcing Arbitration Awards under New York Convention- Experience and Prospects, New York 1999, United Nations, p 41, available at: www.uncitral.org/pdf/english/texts/arbitration/NY-conv/NYCDay-e.pdf 82 partial enforcement may be granted if the matter in excess of the arbitrator's authority is of a very incidental nature and the refusal of enforcement would lead to unjustified hardship for the party seeking enforcement 254Consistent with this provision, courts have granted partial enforcement to awards (or made clear that they would be prepared to so in appropriate cases) 255 The concept of partial enforcement under Article V(1)(c) of the New York Convention represents a general, underlying principle of the Convention, which also applies in relation to other grounds for refusal or recognition and enforcement under Article V, 256 including Article V(1)(d) Also, as a general rule, partial awards may be enforced under the New York Convention and the UNCITRAL Model Law (provided under Article 34(2)(a)(iii)) 257 One should also be distinguished “the partial enforcement of an arbitral award” and “the enforcement of a partial award” An example of a partial award which was enforced in a German case, in which the German court granted enforcement of a Swiss partial award which established that particular provisions of a license agreement continued to bind the parties even after the agreement itself was terminated The court examined whether this was a final determination of the issue (that is, the ongoing application of a contractual provision) and after being satisfied that it was, held that enforcement should be granted 258 However, in a case where a subsequent partial award depends on an earlier partial award, such as where an earlier award addresses the grounds of a claim and a subsequent partial award settles the amount, the latter award may be enforced only if 254 UN DOC E/CONF.26/SR.17, available at: http://daccess-dds-ny.un.org/doc/UNDOC/GEN/N58/156/30/PDF/N5815630.pdf?OpenElement 255 Judgment of 26 January 2005, XXX Y.B Comm Arb 421, 435 (Austrian ObersterGerichtshof) (2005); Judgment of 14 January 1981, VIII Y.B Comm Arb 386, 388 (Trento Corte di Appello) (1983) 256 Supra no.23, p.328, para 258; Supra no.1, p 2731 257 Article 34(2)(a)(iii) of the UNCITRAL Model Law: […]provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside; 258 OLG Jena, Schieds VZ 2008,44 (decided Aug 8, 2007)= YCA XXXIII (2008), 534 (Jena Court of Appeal, Germany) 83 both partial awards are submitted for enforcement 259 In case the first award does not contain an enforceable element, submission for recognition only should suffice, unless enforcement (or recognition) of the earlier award has already been applied for The reason is that the second award is not autonomous but is in fact inseparable from the first one as it is the basis of the second award An enforcing court is unable to decide on the enforcement of the subsequent award if enforceability of the earlier award is in doubt 260 It should be noted that the possibility of partial enforcement is unknown in a certain number of countries In these countries the provision of Article V(l)(c) will introduce a novelty where the partial enforcement is made subject to certain conditions, such as a guarantee, the relevant provisions of their laws are superseded by this uniform rule of the Convention 261 III Discretionary power to enforce an award The discretionary power to enforce an arbitral award is provided by the word “may” in Article V (1) of the New York Convention 262 It is said that the most significant aspect of Article V(1) is its structure, which is to establish an affirmative obligation to recognize awards, subject to specified exceptions – but not to establish an affirmative obligation to deny recognition 263 In other words, nothing in the Convention requires a Contracting State ever to deny recognition to an award The Convention requires only that Contracting States recognize awards (and arbitration agreements) in specified circumstances Nothing in Article V, nor the basic structure and purpose of the Convention, imposes the opposite obligation, not to recognize an award 264 Consequently, although a defendant in enforcement proceeding proved that one of the grounds listed under Article V(1) is fulfilled, the enforcing court is not under an 259 Corte di Appello di Bologna, Riv, Dell’arb, 4,4 1994, 303 (decided Feb 4, 1993)= YCA XIX (1994), 700 (at 701) (Bologna Court of Appeal, Italy) 260 Herbert Kronke, Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention, Kluwer Law International, 2010, p 156 261 Supra no.15, p 319 262 Article V(1) of the New York Convention: Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought[ ] 263 Supra no.2, p 381 264 Ibid 84 obligation to refuse enforcement owing to the permissive nature of the “may” language 265 There were different interpretations of this structure, which adopted in the decision of the Supreme Court in Dallah v Pakistan 266 The Supreme Court concluded that the word “may” was designed “to enable the court to consider other circumstances, which might on some recognisable legal principle affect the prima facie right to have an award set aside” However, the author of this thesis agrees with the interpretation of Professor Van den Berg because of following reasons First, Article VII of the New York Convention267 allows refusal of enforcement based on a smaller range of objections than those defined in the Convention As the result, it is unreasonable to state that the word “may” allows the court to consider other grounds rather than the enumerated exceptions in Article V(1) of the New York Convention Second, regarding the drafting history of the New York Convention, while Article 2(1) of the Geneva Convention provided that “enforcement shall be refused”; the ECOSOC Draft changed this wording into “may”.268 The same does for the different use of the word “may” in Article V (1) and other articles in the New York Convention In particular, while Article V contains the word “may”, Article III and IV 269 contain the word 265 Supra no.41,para 10-13, p 445; Supra no.65, p 706- 707 Dallah Real Estate and Tourism Holding Company v Ministry of Religious Affairs, Government of Pakistan, [2010] UKSC 46, [2011] AC 763, available at: http://www.newyorkconvention1958.org/index.php?lvl=notice_display&id=798&seule=1 267 Article VII of the New York Convention: The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral awards in the manner and to the extent allows by the law or the treaties of the country where such award is sought to be relied upon 268 Supra no.23, p.264, E/2704; Article of the Geneva Convention; Darwazeh in Kronke/Nacimiento/Otto/Port, Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention, Kluwer Law International, 2010, p 308 269 Article III of the New York Convention: Each contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles There shall not be imposed substantially more onerous condition or higher fees or charges on the recognition and enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards Article IV of the New York Convention: To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall at the time of application supply […] 266 85 “shall” It is therefore suggested that they cannot both have the same meaning 270All things considered, the only way to interpret the meaning of the term “may” is that the exequatur court is not obliged to refuse the enforcement of the arbitral awards even if such the award fall within the grounds under Article V of the New York Convention More crucially, Professor Van den Berg clarified the provision of Article V (1) of the New York Convention in the hypothetical draft Convention that “enforcement shall be refused in manifest cases only In manifest cases, there is no room for the application of a residual power” 271 Pursuant to Professor van den Berg’s explanation, the discretionary power may be exercised notably if (i) the respondent invoking the ground for refusal can be deemed to be estopped from invoking the ground e.g., failure to timely object in the arbitration to the lack of a valid arbitration agreement (the Convention is silent in this respect); or (ii) the defect is insignificant; or (iii) It would not have led to a different result 272 In other words, the enforcing court has residual discretionary power to enforce the award even when the ground is made out where violation is de minimis 273 In practice, the court generally does so where the ground for refusal concerns a minor violation of the procedural rules applicable to the arbitration – a de minimis case – or the respondent neglected to raise that ground for refusal in the arbitration 274 Defences based on a claim that the arbitrator acted in excess of authority rarely succeed In one case, arbitrators awarded consequential damages even though the parties’ contract had specifically excluded such damages Despite an assertion that the 270 Supra no.23, p.264; Darwazeh in Kronke/Nacimiento/Otto/Port Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention, Kluwer Law International, 2010, p 308 271 Supra no.16 272 Albert Jan van den Berg, The application of the New York Convention by the Court in ICCA Congress series no 9, Improving the efficiency of arbitration agreements and awards- 40 years of application of the New York Convention, Kluwer Law International, p 30 273 Albert Jan van den Berg, Summary of Court Decisions in the NY Convention of 1958, ASA special series No 9, (1996) p 265 274 Hong Kong: Supreme Court of Hong Kong, High Court, 15 January 1993 (Paklito Investment Ltd v Klockner East Asia Ltd.) Yearbook Commercial Arbitration XIX(1994) pp 664-674 (Hong Kong no 6) and Supreme Court of Hong Kong, HighCourt, 16 December 1994 (Nanjing Cereals, Oils and Foodstuffs Import & Export Corporation v Luckmate Commodities Trading Ltd) Yearbook Commercial Arbitration XXI (1996) pp 542-545 (Hong Kong no 9); British Virgin Islands: Court of Appeal, 18 June 2008 (IPOC International Growth Fund Limited v LV Finance Group Limited) Yearbook Commercial Arbitration XXXIII(2008) pp 408-432 (British Virgin Islands no 1); United Kingdom: High Court, Queen’s Bench Division (Commercial Court), 20 January 1997 (China Agribusiness Development Corporation v Balli Trading) Yearbook Commercial Arbitration XXIV (1999) pp 732-738 (UK no 52) 86 tribunal had exceeded its authority, an US court stated that under New York Convention, the award should be enforced 275 the more favourable provision of Article VII (1) allows a party to obtain leave for enforcement on the basis of a more favourable domestic law concerning enforcement of foreign arbitral award 276 This discretionary power of the court not only applies in case of recognition and enforcement of foreign arbitral awards under the New York Convention but also apply in the setting aside proceedings at the court of the place of arbitration It is recognized that the national courts have frequently rejected claims that a tribunal's failure to comply with time limits imposed by the parties' agreement provides a basis for annulling an award 277 IV Conclusion The New York Convention and the UNCITRAL Model Law both have a “proenforcement” bias Three remedies mentioned in this Chapter show how the proenforcement bias works Owning to these remedies, the violation of the arbitrators’ mandate may not result in the annulment or refusal of enforcement of the arbitral award Those remedies could be invoked by parties (requesting the arbitral tribunal to render an additional award), by the arbitral tribunal (issuing an additional award), or by the court (partial enforcement of the arbitral award and discretion power to enforce an arbitral award) The first two remedies are clearly provided in the text of both the New York Convention and the UNCITRAL Model Law and widely applied in practice However, whether the arbitral tribunal can, by using its discretionary power, disregard the ground to set aside and refusal of recognition the arbitral award to grant the enforcement of such the award is still disputable Nevertheless, it is undeniable the effect of this pro- enforcement bias that limits the number of cases refused to be enforced 275 Margaret L Moses, The principles and Practice of International commercial Arbitration , p 212 Supra no.250, p 42 277 Fiat SpA v Ministry of Fin and Planning, 1989 U.S.Dist LEXIS 11995 (S.D.N.Y 1989) (arbitrators' failure to comply with AAA's rule requiring awards to be made within 30 days of hearing not basis for vacating award); Laminoirs-Trefileries-Cableries de Lens, SA v Southwire Co., 484 F.Supp 1063 (N.D.Ga 1980) (arbitrators' alleged failure to comply with ICC rule that award be issued within months from signing Terms of Reference not basis for vacating award); Local 355 etc v FontainebleauHotel Corp., 423 F.Supp 83 (S.D Fla 1976) (failure to comply with 30 day contractual limit for issuing award not basis to vacate); Judgment of 16 March 2004, 22 ASA Bull 770, 779 (Swiss Federal Tribunal) (2004) 276 87 CONCLUSION The question of what is the mandate of the arbitral tribunal is still controversial There is no common understanding of the term “mandate” in the New York Convention, the UNCITRAL Model Law or among countries in common law and civil law countries However, without knowing exactly what the mandate is and how to examine it, it is impossible to examine the effect of the violation of the arbitral tribunal mandate Therefore, the interpretation of “the mandate of the arbitral tribunal” as the authority granted by parties through specific agreement regarding both substantive matters and procedural matters is proposed to harmonize the differences in the understanding of this term In line with this understanding, the violation of the mandate of arbitral tribunal comprises two types: the first is the violation of the substantive mandate which is embodied in Article V(1)(c) of the New York Convention and Article 34(2)(a)(iii) of the UNCITRAL Model Law; the second is the violation of the procedural mandate which is provided in Article V(1)(d) of the New York Convention and Article 34(2)(a)(iv) of the UNCITRAL Model Law As the result of this interpretation, when a party wants to base a challenge against an arbitral award on the violation of the arbitral tribunal’s mandate, it has to make a distinction between the substantive mandate and the procedural mandate to invoke the right provision Defences against the award on wrong grounds may be refused by the exequatur court More crucially, it is highly recommended that, regardless the general provision of arbitration agreement, the disputed parties should have due care in drafting other submissions such as their claims or counter claims, request for reliefs, terms of reference, or any agreement regarding the arbitral proceedings (time limit, collection of evidence) etc, which define the scope of the arbitral tribunal’s mandate Moreover, the proposed interpretation of the arbitrators’ mandate does not expand the grounds to refuse the recognition of the arbitral award On the contrary, the adoption of this interpretation may decrease the number of arbitral award being annulled and refused enforcement because the broader the scope of the arbitrators’ mandate, the narrower the violation of the mandate will be construed, and thus, the lesser an award 88 will be set aside or refused recognition and enforcement on the ground of excess of mandate 278 In any case, it is widely accepted that the violation of the mandate of the arbitral tribunal may lead to the annulment of the arbitral award at the place of arbitration or the refusal of recognition of that arbitral award before the exequatur courts However, in practice, it is difficult for an award to be set aside or refused the enforcement on this ground because of the exceptions and remedies provided under the New York Convention and the UNCITRAL Model Law These exceptions and remedies reflect the pro-enforcement bias under the New York Convention and the UNCITRAL Model Law which limits the number of cases in which enforcement have been refused 279 278 Supra no 69 Albert Jan van den Berg, "New York Convention of 1958: Refusals of Enforcement", ICC ICArb Bull Vol l8 (2007) No 2, p 15 at 49 279 89 ... the case of the submission agreement, on the other hand, there is no need to distinguish between the agreement and the mandate since the mandate is defined in the agreement itself 27 Therefore,... the termination of the mandate of the arbitral tribunal, the tribunal’s jurisdiction over the parties and the arbitration cease 37 Therefore, it appears that the strict understanding of the mandate. .. proceedings as agreed In other words, the arbitral tribunal shall have the mandate regarding the substantive matters (hereinafter the substantive mandate) and the mandate regarding the procedural matters