Arbitration award

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An arbitration award (or arbitral award) is a determination on the merits by an arbitration tribunal in an arbitration, and is analogous to a judgment in a court of law. It is referred to as an 'award' even where all of the claimant's claims fail (and thus no money needs to be paid by either party), or the award is of a non-monetary nature.

Contents

Damages and other remedies

Although a successful party in arbitration will typically be awarded compensation or damages, tribunals usually have a range of remedies that can form a part of the award.

  1. the tribunal may order the payment of a sum of money (conventional damages)
  2. the tribunal may make a "declaration" as to any matter to be determined in the proceedings
  3. in most jurisdictions, the tribunal has the same power as a court to:
    1. order a party to do or refrain from doing something ("injunctive relief")
    2. to order specific performance of a contract
    3. to order the rectification, setting aside or cancellation of a deed or other document.

Enforcement of arbitration awards

Arbitration is particularly popular as a means of dispute resolution in the commercial sphere (for a summary of the various arenas in which arbitration is usually chosen, see the specific article on "arbitration"). One of the reasons for doing so is that, in international trade, it is often easier to enforce an arbitration award in a foreign country than it is to enforce a judgment of the court.

Under the New York Convention 1958, an award issued in a contracting state can generally be freely enforced in any other contracting state, only subject to certain, limited defences. Those defences are:

  1. a party to the arbitration agreement was, under the law applicable to him, under some incapacity, or the arbitration agreement was not valid under its governing law;
  2. a party was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings, or was otherwise unable to present its case;
  3. the award deals with an issue not contemplated by or not falling within the terms of the submission to arbitration, or contains matters beyond the scope of the arbitration (subject to the proviso that an award which contains decisions on such matters may be enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those matters not so submitted);
  4. the composition of the arbitral authority was not in accordance with the agreement of the parties or, failing such agreement, with the law of the place where the hearing took place (the "lex loci arbitri");
  5. the award has not yet become binding upon the parties, or has been set aside or suspended by a competent authority, either in the country where the arbitration took place, or pursuant to the law of the arbitration agreement;
  6. the subject matter of the award was not capable of resolution by arbitration; or
  7. enforcement would be contrary to "public policy".

Virtually every significant commercial country in the world is a party to the Convention, but relatively few countries have a comprehensive network for cross-border enforcement of judgments of the court. [1] Hence in many countries, particularly in emerging markets, a foreign arbitration award is much easier to enforce than an award of the court. For example, it is very difficult to enforce foreign judgments in the former CIS countries, but it is considerably easier to enforce awards of an arbitration tribunal.

The other characteristic of cross-border enforcement of arbitration awards that makes them appealing to commercial parties is that they are not limited to awards of damages. Whereas in most countries only monetary judgments are enforceable in the cross-border context, no such restrictions are imposed on arbitration awards and so it is theoretically possible (although unusual in practice) to obtain an injunction or an order for specific performance in an arbitration proceeding which could then be enforced in another New York Convention contracting state.

The New York Convention is not actually the only treaty dealing with cross-border enforcement of arbitration awards. The earlier Geneva Convention on the Execution of Foreign Arbitral Awards 1927 remains in force, but the success of the New York Convention means that the Geneva Convention is rarely utilised in practise.

Arbitration with sovereign governments

In judicial proceedings in many countries, governments enjoy sovereign immunity from suit. However, governments can submit to arbitration, and certain international conventions exist in relation to the enforcement of awards against nation states.

Nomenclature

Although it is common to talk of an arbitration award as a single concept, in most legal jurisdictions there are several sub-categories of award.

  1. a provisional award is an award on a provisional basis subject to the final determination of the merits. [5]
  2. a partial award is an award of only part of the claims or cross claims which are brought, or a determination of only certain issues between the parties. Importantly, this leaves it open to the parties to either resolve or to continue to arbitrate (or litigate) the remaining issues. [6]
  3. an agreed award is usually in the form of a settlement between the parties of their dispute (the equivalent of a judgment by consent). [7] But by embodying the settlement in the form of an award it can have a number of advantages. [8]
  4. a reasoned award is not a sub-category of award, but is used to describe an award where the tribunal sets out its reasoning for its decision. [9]
  5. an additional award is an award which the tribunal, by its own initiative or on the application of a party makes in respect of any claim which was presented to the tribunal but was not resolved under the principal award. [10]
  6. a draft award is not an award as such, and is not binding on the parties until confirmed by the tribunal. [11]

The legal requirements relating to the making of awards vary from country to country and, in some cases, according to the terms of the arbitration agreement. Although in most countries, awards can be oral, this is relatively uncommon and they are usually delivered in writing.

By way of example, in the United Kingdom, the following are requirements under the Arbitration Act 1996 which the award must comply with, unless the parties agree to vary them under section 52 of the Act:

  1. the award must be in writing and signed by all of the arbitrators assenting to the award (dissenting minority arbitrators need not sign unless the parties agree that they must);
  2. the award must contain reasons;
  3. the award must state the "seat" of the arbitration (the place where the arbitration took place); and
  4. the award must state the date upon which it is made. This is important for the calculation of interest.

Many countries have similar requirements, but most permit the parties to vary the conditions, which reflects the fact that arbitration is a party-driven process.

Appeals

It is sometimes said that arbitration awards are not normally subject to appeal (often another reason given in favour of using arbitration), but that is usually an oversimplification.

Most countries in the world allow arbitration awards to be "challenged" in the court, although they usually limit the circumstances in which such challenges may be brought. The two most commonly permitted grounds of challenge are:

  1. that the tribunal did not have jurisdiction to make the award; [12] or
  2. serious irregularity on the part of the tribunal. [13]

Arbitration awards are non-justiciable. Distinguish from an "expert determination" where the expert determines a matter of fact (which is ordinarily not subject to any form of appeal at all, except in cases of obvious bias or manifest error or bad faith). [14]

In addition, although not by way of challenge, many countries permit appeals on a point of law (although almost no countries permit appeals to be made in relation to findings of fact). This right is usually closely circumscribed to avoid undermining the commercial efficacy of arbitration. [15]

See also

Related Research Articles

Arbitration, in the context of the law of the United States, is a form of alternative dispute resolution. Specifically, arbitration is an alternative to litigation through which the parties to a dispute agree to submit their respective evidence and legal arguments to a third party for resolution. In practice, arbitration is generally used as a substitute for litigation. In some contexts, an arbitrator has been described as an umpire.

<span class="mw-page-title-main">Permanent Court of Arbitration</span> Intergovernmental organization

The Permanent Court of Arbitration (PCA) is a non-UN intergovernmental organization headquartered at the Peace Palace, in The Hague, Netherlands. Unlike a judicial court in the traditional sense, the PCA provides administrative support in international arbitrations involving various combinations of States, State entities, international organizations and private parties. The cases span a range of legal issues involving territorial and maritime boundaries, sovereignty, human rights, international investment, and international and regional trade. The PCA is constituted through two separate multilateral conventions with a combined membership of 122 Contracting Parties. The PCA is not a United Nations agency, but has been a United Nations observer since 1993.

Expert determination is a historically accepted form of dispute resolution invoked when there is not a formulated dispute in which the parties have defined positions that need to be subjected to arbitration, but rather both parties are in agreement that there is a need for an evaluation.

The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established in 1966 for legal dispute resolution and conciliation between international investors and States. ICSID is part of and funded by the World Bank Group, headquartered in Washington, D.C., in the United States. It is an autonomous, multilateral specialized institution to encourage international flow of investment and mitigate non-commercial risks by a treaty drafted by the International Bank for Reconstruction and Development's executive directors and signed by member countries. As of May 2016, 153 contracting member states agreed to enforce and uphold arbitral awards in accordance with the ICSID Convention.

<span class="mw-page-title-main">Convention on the Recognition and Enforcement of Foreign Arbitral Awards</span> International treaty within the UN framework

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention, was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959. The Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states. Widely considered the foundational instrument for international arbitration, it applies to arbitrations that are not considered as domestic awards in the state where recognition and enforcement is sought.

In law, the enforcement of foreign judgments is the recognition and enforcement in one jurisdiction of judgments rendered in another ("foreign") jurisdiction. Foreign judgments may be recognized based on bilateral or multilateral treaties or understandings, or unilaterally without an express international agreement.

<span class="mw-page-title-main">Arbitration clause</span> Contract clause requiring parties to resolve disputes via arbitration

In contract law, an arbitration clause is a clause in a contract that requires the parties to resolve their disputes through an arbitration process. Although such a clause may or may not specify that arbitration occur within a specific jurisdiction, it always binds the parties to a type of resolution outside the courts, and is therefore considered a kind of forum selection clause.

International arbitration is arbitration between companies or individuals in different states, usually by including a provision for future disputes in a contract.

<span class="mw-page-title-main">Arbitration</span> Method of dispute resolution

Arbitration is a formal method of alternative dispute resolution (ADR) involving a neutral third party who makes a binding decision. The third party neutral render the decision in the form of an 'arbitration award'. An arbitration decision or award is legally binding on both sides and enforceable in the courts, unless all parties stipulate that the arbitration process and decision are non-binding.

<span class="mw-page-title-main">Arbitral tribunal</span> Panel convened to resolve a dispute by way of arbitration

An arbitral tribunal or arbitration tribunal, also arbitration commission, arbitration committee or arbitration council is a panel of unbiased adjudicators which is convened and sits to resolve a dispute by way of arbitration. The tribunal may consist of a sole arbitrator, or there may be two or more arbitrators, which might include a chairperson or an umpire. Members selected to serve on an arbitration panel are typically professionals with expertise in both law and in friendly dispute resolution (mediation). Some scholars have suggested that the ideal composition of an arbitration commission should include at least also one professional in the field of the disputed situation, in cases that involve questions of asset or damages valuation for instance an economist.

Alternative dispute resolution (ADR), or external dispute resolution (EDR), typically denotes a wide range of dispute resolution processes and techniques that parties can use to settle disputes with the help of a third party. They are used for disagreeing parties who cannot come to an agreement short of litigation. However, ADR is also increasingly being adopted as a tool to help settle disputes within the court system.

<span class="mw-page-title-main">Contract</span> Legally binding document establishing rights and duties between parties

A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typically involves the transfer of goods, services, money, or a promise to transfer any of those at a future date, and the activities and intentions of the parties entering into a contract may be referred to as contracting. In the event of a breach of contract, the injured party may seek judicial remedies such as damages or equitable remedies such as specific performance or rescission. A binding agreement between actors in international law is known as a treaty.

<span class="mw-page-title-main">Jean-Paul Béraudo</span>

Justice Jean-Paul Beraudo is a lawyer, academic and author of legal works. He was Justice at the French Supreme Court and vice-chairman of the International Court of Arbitration. He lectures on International Private Law and International Trade Law at Panthéon-Sorbonne University and on Company law at Sciences-Po, Paris. The International Institute for the Unification of Private Law (UNIDROIT) appointed him correspondent for France and a member of the scientific committee.

Investor–state dispute settlement (ISDS), or an investment court system (ICS), is a set of rules through which countries can be sued by foreign investors for certain state actions affecting the investments (FDI) of that investor by that state. This most often takes the form of international arbitration between the foreign investor and nation. For the rules to be effective, they must have been agreed upon between the states concerned.

<span class="mw-page-title-main">Arbitration Act 1996</span> United Kingdom legislation

The Arbitration Act 1996 is an Act of the Parliament of the United Kingdom which regulates arbitration proceedings within the jurisdiction of England and Wales and Northern Ireland.

<span class="mw-page-title-main">Arbitration Act 1979</span> United Kingdom legislation

The Arbitration Act 1979 was an Act of the Parliament of the United Kingdom that reformed arbitration law in England and Wales. Prior to 1979, arbitration law was based on the Arbitration Act 1950, which allowed use of the "case stated" procedure and other methods of judicial intervention, which marked English arbitration law as significantly different from that of other jurisdictions. The prior law significantly increased the cost and time required for arbitration, which made England an unpopular jurisdiction to conduct such negotiations in. As a result, while London maintained its traditional position as a centre for arbitration in insurance, admiralty and commodities trading, it failed to attract more modern forms of trade. Following pressure from industry groups, the Lord Chancellor introduced the Arbitration Bill into Parliament, having it passed hours before the dissolution of James Callaghan's government. It was given royal assent on 4 April 1979, and commenced working on 1 August 1979.

Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), is a United States Supreme Court decision concerning arbitration of antitrust claims. The Court heard the case on appeal from the United States Court of Appeals for the First Circuit, which had ruled that the arbitration clause in a Puerto Rican car dealer's franchise agreement was broad enough to reach its antitrust claim. By a 5–3 margin it upheld the lower court, requiring that the dealer arbitrate its claim before a panel in Tokyo, as stipulated in the contract.

Arbitration in the British Virgin Islands is regulated principally by the Arbitration Act, 2013 which came into force on 1 October 2014. Prior to that date, arbitration was regulated by the Arbitration Cap, 1976.

Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974), is a US labor law case, concerning arbitration with collective agreements for labor rights.

Henry Schein, Inc. v. Archer & White Sales, Inc., 586 U.S. ___ (2019), was a case decided by the Supreme Court of the United States on January 8, 2019. The case decided the question of whether a court may disregard a valid delegation of arbitrability—a contract provision stating that an arbitrator should decide whether a dispute is subject to arbitration—when the argument in favor of arbitration is "wholly groundless." In a unanimous (9-0) opinion written by Justice Brett Kavanaugh, the court sided with petitioner Henry Schein, Inc., holding that the "wholly groundless" exception to arbitrability violates the Federal Arbitration Act, and therefore a valid delegation of arbitrability should be honored even if a court believes the argument for arbitration to be "wholly groundless." It was Justice Kavanaugh's first Supreme Court opinion.

References

  1. ↑ Although some regions have multi-lateral arrangements which have a similar effect over a smaller area, such as the European Union's Brussels and Lugano Conventions, the Commonwealth countries have a multiplicity of reciprocal enforcement of judgments states, and many Federal legal systems employ the "full faith and credit" doctrine.
  2. ↑ Tupman, "Case Studies in the Jurisdiction of the International Centre for Settlement of Investment Disputes" (1986) 35 ICLQ 813
  3. ↑ The U.S. Government froze billions of dollars' worth of Iranian assets and wanted to set up an impartial tribunal to determine claims to compensation out of those assets by corporations who had been subject to expropriation without compensation in Iran.
  4. ↑ Dallal v Bank Mellat [1986] 1 QB 441
  5. ↑ In the United Kingdom, see Arbitration Act 1996, section 39.
  6. ↑ In the United Kingdom, see Arbitration Act 1996, section 47.
  7. ↑ In the United Kingdom, see Arbitration Act 1996, section 51.
  8. ↑ For example, the losing party may only be entitled to an indemnity where there is an actual award under a policy of insurance. An award is also easier to enforce than a settlement agreement, and gives rise to an estoppel against re-litigating settled issues. Occasionally having an award rather than a settlement agreement may confer tax advantages.
  9. ↑ In the United Kingdom, section 52 of the Arbitration Act 1996 provides that awards must be reasoned unless the parties have agreed that the tribunal may dispense with giving reasons.
  10. ↑ In the United Kingdom, see Arbitration Act 1996, section 57.
  11. ↑ Many tribunals make a practice of permitting the parties to see a draft award to allow basic factual errors or arithmetic mistakes to be flushed out. The practice helps reduce appeals on trivial technical points.
  12. ↑ for example, that there was no binding agreement to submit to arbitration
  13. ↑ "Serious irregularity" covers a multitude of sins, from accepting a bribe and failing to hear the arguments of one party, to have an improper number of arbitrators or ruling evidence inadmissible when it should not have done so.
  14. ↑ Reisberg, Steven H. "What Is Expert Determination? The Secret Alternative to Arbitration" (PDF). New York Law Journal. Retrieved 12 February 2022.
  15. ↑ For example, in the United Kingdom, appeal on a point of law can only be made with the leave of the court, and the court will only give leave in very specific and limited circumstances.
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