Enforcing arbitration awards Image

Enforcing arbitration awards

Posted: 02/07/2015

In this four-part series of articles we have looked at various ways of challenging arbitration awards in the courts under the Arbitration Act 1996 (AA 1996). This final article looks at how you can enforce the award once you have successfully defeated any challenges to it. 

Methods of enforcement

A considerable advantage of international arbitration over litigation is the existence of a wide-reaching enforcement regime for foreign arbitration awards: the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (NYC). 154 countries are signatories to the NYC, each agreeing to recognise and enforce awards made in the territories of the other signatory states (although inevitably with certain reservations for some). The UK is a signatory and has enacted the NYC into domestic legislation under sections 100-104 AA 1996. The NYC can be used to enforce both foreign and domestic awards, and is likely to be your first port of call if you are seeking to enforce against assets outside the UK.

Section 66 sits alongside the NYC regime and can also be used for the enforcement of both foreign awards and domestic awards. It is a mandatory provision that parties cannot opt out of. Where leave to enforce an award under s66 is obtained, the award may be enforced in the same manner as a judgment or order of the court to the same effect, and judgment may also be entered in terms of the award (as is also the case when enforcing under the NYC).  

A further method of enforcement is under the common law, which involves bringing a fresh legal action in court on the basis of the implied promise by each party to the arbitration agreement to abide by the terms of the award. This route may be useful where the agreement to arbitrate is oral rather than in writing (which would preclude the use of the NYC or section 66). 

There are also a number of less common methods of enforcement (eg under the Geneva Convention) which are outside the scope of this article. 

Interests on awards post judgment

In La Société pour la Recherche, la Production, le Transport, la Transformation et la Commercialisation des Hydrocarbures SPA v Statoil Natural Gas LLC [2014] EWHC 875 (Comm) (already considered in the second article in this series in the context of s68), the claimant sought inter alia, to set aside an earlier order of Cooke J granting Statoil permission to enforce the award in the same manner as a judgment under section 66.

In particular, Sonatrach sought to set aside the part of the order which required it to pay interest at a rate of 8% under the Judgments Act 1838 on the outstanding sums from the date of the order. Sonatrach relied on the fact that no interest had been awarded by the tribunal and that no claim for post award interest had been pleaded. 

Dismissing this part of the application, Mr Justice Flaux noted that once judgment on an award has been entered under s66 (or s101(2) for a NYC award) the judgment has the same characteristics as any other judgment of the court and interest will run under the Judgments Act 1838 from the date of the judgment. There is no tension between s49(4) and the Judgments Act 1838, as was contended by Sonatrach’s counsel. Once judgment is entered under s66, “…a different regime to that of the arbitration itself applies, since the obligation to honour the award merges into a judgment debt which carries interest at 8% under the Judgments Act.” 

Enforcement under common law where award is set aside by court

In Yukos Capital SARL v OJSC Rosneft Oil Co (No.3) [2014] EWHC 2188 (Comm) the claimant sought to enforce awards under the common law and the NYC. Mr Justice Simon heard preliminary arguments on whether an award which has been set aside by the courts of the seat of the arbitration (in this case Russia) can be enforceable and whether interest can be awarded on such an award under Russian and/or English law. 

The claimant had succeeded in obtaining four awards against the defendant, but the Moscow Arbitrazh court had subsequently set aside each of the awards. The claimant pleaded in the English proceedings that the Moscow court’s set-aside decisions were biased, contrary to natural justice, contrary to the Article 6 right to a fair trial and part of an illegal campaign of commercial harassment against them. The defendant argued that the set-aside decisions had the effect that the awards could not be enforced by the English court at common law because they no longer existed in a legal sense (ex nihilio nil fit or 'nothing comes of nothing') and hence there was also no basis for awarding interest.  

Finding for the claimants, Mr Justice Simon held that the principle of ex nihilio nil fit did not prevent the English courts from giving effect to awards in circumstances such as these. It would be most unsatisfactory if the English courts were bound to uphold decisions of foreign courts that offended against basic principles of honesty and natural justice. Accordingly, if the allegations made by the claimant were subsequently proven, the court would have the power under the common law to enforce the awards, despite the set-aside decisions of the Moscow court. 

The claim for interest on the award was pleaded on two alternative bases, ie that interest was payable either under Russian law and/or under English law (s35A of the Senior Courts Act 1981). Although Simon J found, after hearing from Russian law experts, that interest was not recoverable on the principal sums under the awards as a matter of Russian law, he held that interest was recoverable under English law in the English enforcement proceedings as a matter of principle under s35A. This ties in with the approach seen in Sonatrach v Statoil.

Summary judgment test for refusing enforcement

In Honeywell International Middle East Limited v Meydan Group LLC [2014] EWHC 1344 (TCC) the claimant, Honeywell, sought to enforce a Dubai arbitration award made under the rules of the Dubai International Arbitration Centre by way of the NYC. Honeywell made a successful application to the English court under s101(2) AA 1996 for leave to enforce the award in the same manner as a judgment or order of the court. The defendant, Meydan, made a subsequent application for the order giving leave to be set aside and Mr Justice Ramsey ordered a hearing to determine whether its application could be dealt with summarily.  

The case raised questions under s103 AA 1996, which sets out grounds under which recognition or enforcement of an NYC award can be refused. Meydan claimed that recognition and enforcement ought to be refused on numerous grounds under section 103. Ramsey J noted that English law recognises an important public policy in the enforcement of arbitration awards and that the courts will only refuse enforcement under s103 in a clear case. The grounds for refusal in s103 should be construed narrowly.  

He went on to say that while there may be instances where disclosure and cross examination are necessary for the court to determine whether to allow enforcement of an award, the court should be cautious about taking that approach. The court should generally be able to come to a decision on whether the grounds for refusal are made out by applying the usual test on summary judgment under CPR Part 24. The test is therefore whether there is a real prospect of successfully establishing a ground under s103 or whether there is some other compelling reason why the issue should be disposed of at a trial. Applying that approach to various arguments raised by Meydan under s103 to resist enforcement, Ramsey J found that they did not satisfy the test. Accordingly, the order giving leave to enforce remained in place and Honeywell was entitled to enforce in the same manner as a judgment or order of the court. 

Although the s103 grounds for refusal in relation to NYC awards do not specifically apply to section 66 applications, it is safe to assume that very similar considerations will also apply under s66. In any case, whichever route to enforcement is engaged, the clear message from Honeywell is that defendants to enforcement proceedings will need to demonstrate that their grounds for resisting enforcement pass the summary judgment test if an attempt at resistance is to get off the ground. 

This article was published in New Law Journal in June 2015.

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