An award may be refused if it is proven under Article V(1)(e) of the Convention on Recognition and Enforcement of Foreign Arbitral Awards of 1958 (“NY Convention”) that the “award has not yet become binding on the parties.” The five grounds1 for refusal in Article V of the NY Convention are permissive, not mandatory;2 and there is a presumption under Article III of the NY Convention that an award is binding and should be enforced.3
There is a one-step procedure under the NY Convention for recognition and enforcement of a foreign arbitral award,4 and no double-exequatur requirement,5 or further action required at the seat before an award is enforceable in another Contracting State.6 An award is binding as made, requiring no further confirmation.7 The same presumption applies under Article 53 of the ICSID (or Washington) Convention. Many arbitral rules and national arbitration laws also confirm that an award is binding.8
The defense to enforcement at Article V(1)(e) – “award not yet binding” – has, therefore, incited controversy;9 this defense, however, should be narrowly construed.10 An award, including partial and interim awards,11 should be treated as binding, unless the parties’ arbitration agreement provides otherwise.
II. Choice of law - binding award
To determine if an award is binding, courts consider whether the award is binding under the law applicable to the parties’ arbitration agreement.12 Two approaches can be distinguished: (1) the domestic law approach and (2) the autonomous approach.13 Neither approach is satisfying. A narrower reading is possible. An inquiry into the “binding” nature of an award should refer only to the parties’ arbitration agreement,14 terms of reference,15 or the parties’ preconditions to the creation of an enforceable award. An award is “final and binding,” (unless the parties agreed otherwise, e.g. through consent to a multi-stage dispute resolution procedure).16
Nevertheless, dispute resolution provisions often contain language to make clear that an award is “final” and/or “binding” to safeguard against resort to appeal.17 Since arbitration is a creature of contract and an autonomous private dispute resolution system, the parties’ terms should be applied. The two common interpretative approaches are summarized below:
A. Domestic law (national arbitration law of the seat) approach
Courts consider whether there are any additional requirements, such as whether the award must be registered or deposited with a court,18 for an award to become binding under the law of the seat;19 this amounts to a re-introduction of the double exequatur requirement.20 The approach has been applied by courts in England,21 France,22 Germany,23 Italy,24 Switzerland,25 and the United States.26
B. Autonomous approach
Courts on an ad hoc basis consider whether the award is binding: whether it is still open to ordinary recourse, appeal on the merits, or an appeal in full;27 or sometimes, (regrettably) whether a foreign court has refused or suspended enforcement,28 a challenge is pending at the seat, or the award is merely open to further appeal or challenge.29
Some courts combine these approaches or compound the inquiry, referring to all or some of the arbitration agreement, the arbitral rules,30 the text of the award,31 and the national arbitration law.32 These approaches have produced controversy, unpredictability, and confusion.33 Instead, the approach should be to give the award binding effect unless the parties’ agreement imposes additional procedures. This approach is most in line with the NY Convention policy of minimal court intervention and few, exhaustive, narrow grounds for refusal of enforcement.34
III. Case law illustrative of a narrow approach to Article V(1)(e)
In X v. Y, the Higher Regional Court of Cologne enforced the award, stating that the parties did not agree to a review of the arbitral award at a higher arbitral instance and “an arbitral award is deemed binding on the parties when it cannot be impugned, either before a higher arbitral instance or by a means of recourse in court.”36 The court also stated that the status of an appeal at the seat does not affect the binding nature of the award: “[T]he possibility to have the award set aside in the state of rendition through a means similar to the German request for annulment […] does not hinder [the award being] binding. […] This is also true when such annulment proceeding has already been commenced. […] [I]n the present case it must therefore be held that the arbitral award is binding, notwithstanding the still pending annulment proceeding before the competent court of appeal of Milan.”37
IV. Underlying policy: Article V(1)(e) read in conformity with the NY Convention’s pro-enforcement policy
The goal of the pro-enforcement regime of the NY Convention is to enforce foreign arbitral awards per se. Reference is not needed to foreign law, foreign court rulings, or the treatment of the award at the place where the award is made – it is a pro-enforcement regime under the international standards espoused by the NY Convention.38
Aksen, G., American Arbitration Accession Arrives in the Age of Aquarius: United States Implements United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Southwestern University Law Review, 1971, p. 11.
Born, G., International Commercial Arbitration, Kluwer International Law, 2nd ed., 2014, pp. 3428-3444.
Cheng, T., Celebrating the Fiftieth Anniversary of the New York Convention, in van den Berg, A. (ed.), 50 Years of the New York Convention: ICCA International Arbitration Conference, Kluwer International Law, 2009.
Darwazeh, N., Article V (1)(e), in Kronke, H., Nacimiento, P., Otto, D. and Port, N.P. (eds.), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention, Kluwer International Law, 2010, pp. 305-311, 331-341.
Gaillard, E., The Urgency of Not Revising the New York Convention, in van den Berg A. (ed.), 50 Years of the New York Convention: ICCA International Arbitration Conference, Kluwer International Law, 2009, p. 690 n.4.
van den Berg, A., The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation, Kluwer International Law, 1981, pp. 311, 338, 341.
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