Author

Ms Denise Jansen

Associate - Houthoff

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Composition of the Arbitral Tribunal (As a Ground to Refuse Recognition and Enforcement of Non-ICSID Awards)

I. Definition

1.

Under the New York Convention, an arbitral award may not be recognized and enforced if a party successfully proves that:

"The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place."1

2.

Put differently, according to Article V(1)(d) of the NYC, the enforcement court may deny the recognition and enforcement of an arbitral award if (1) the composition of the arbitral authority or (2) the arbitral procedure was not in accordance with the parties' agreement, or in the absence of such agreement, the laws of the seat of arbitration.2 In practice, the laws of the seat are applied regularly in the absence of the parties' agreement in that respect.3

3.

This note will focus on the composition of the arbitral authority. For other grounds, see Recognition and Enforcement of non-ICSID Awards.

II. Procedural issues under the New York Convention

III. Party autonomy with respect to the composition of the arbitral authority under the New York Convention

6.

The starting point of Article V(1)(d) of the New York Convention is that the composition of the arbitral authority must be established according to the parties' agreement.7 When examining whether Article V(1)(d) of the New York Convention is breached, the court must first examine whether there is an agreement in place between the parties on the composition of the arbitral authority. In case the parties have included such provisions, the court will determine the extent of the parties’ agreement and whether such provision has been violated.8

7.

If there is no agreement with respect to the composition of the arbitral authority, the enforcement court should determine whether the parties have agreed on another law than the law of the seat of arbitration.9 If the parties have not agreed to a specific composition of the arbitral authority, and if there is no specific law that governs such composition, the enforcement court should examine whether the composition of the arbitral authority was in accordance with the law of the seat of arbitration.10

IV. Criteria for invoking Article V(1)(d) of the New York Convention

A. Burden of proof

8.

When raising an argument relating to an alleged improper composition of the arbitral authority, the party that opposes the recognition and enforcement further to that ground for refusal of the recognition and enforcement of the arbitral award shall bear the Burden of Proof.11

B. Standard of proof

V. Case law

11.

The inappropriate composition of an arbitral authority may lead to the refusal of the recognition and enforcement of an arbitral award under the laws of many countries worldwide.15

12.

However, in practice, the improper composition of the arbitral authority has in very few cases been accepted as a violation of the New York Convention. Consequently, there are at time of writing a small number of cases in which refusal on the recognition and enforcement of an arbitral award was based on this specific ground.16 Therefore the award was not enforced when:

  1. a court had appointed the chairman following the application of a party to do so, even though the parties agreed that the two party-appointed arbitrators would attempt to agree on the appointment of the chairman;17
  2. parties had started arbitrations both in Stockholm and Beijing, whereas the parties envisaged one arbitration only. Both parties raised on objection in the arbitration proceedings commenced by the other party by stating that the arbitral tribunal lacked jurisdiction. It was concluded that the constitution of the Chinese arbitral tribunal in the arbitral proceedings that were commenced only after the first arbitration in Sweden was commenced, was not in accordance with the arbitration agreement.18
  3. the two party-appointed arbitrators did not appoint a third arbitrator, whereas the parties had agreed to a tribunal consisting of three arbitrators.19
  4. an arbitration took place in two stages (a quality arbitration in which two experts dealt with the case and a proper arbitration in which three arbitrators dealt with the case), whereas the parties had agreed to an arbitration in which "all disputes should be settled in one and the same arbitral proceedings".20

13.

Courts have rejected a broad range of allegations arising out of investor-State arbitration relating to Article V(1)(d), including, but not limited to, arguments that:

  1. An arbitrator is biased because "arbitrations are her main source of income and she is mostly appointed by state parties".21
  2. Under the BIT, the defendant "only consented to jurisdiction to proceedings governed by the ICSID Convention", instead of also to the Additional Facility. Given that the referred to “the Convention on Settlement of Investment Disputes Between States and Nationals of other States”, the court determined that this reference oversees multiple types of arbitration. The Court did not see any “valid reason to interpret the clause as limiting its jurisdiction to proceedings governed by the Convention".22
  3. Article V(1)(d) is violated because the SCC appointed an arbitrator on respondent's behalf. The Court held that the rules plainly allow for the SCC to do so when a party fails to appoint an arbitrator by the set deadline.23 The tribunal lacked jurisdiction over a dispute since "there was no valid arbitration clause between the parties, as a consequence of the fact that the [parties] had not complied with the three-month period for amicable settlement provided for in the ECT dispute settlement provision".24

14.

Courts may also decide to recognize and enforce an arbitral award in case of only a minor violation.25 An example of such a minor violation could cover the situation in which it is agreed that an arbitrator should have a certain quality, e.g. somebody with certain industry experience, and the actual arbitrator does not meet such qualification. Notwithstanding the absence of such correct qualification, enforcement courts may recognize and enforce such award.26

15.

This makes sense in light of the discretion of the courts in respect of Article V(1) in its entirety, as that article stipulates that a court "may" refuse to recognize and enforce and arbitral award, in combination with the courts' pro-enforcement attitude.27

Bibliography

Gaillard, E. and Bermann, G. A., Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 2017.

Wolff, R., New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards –Commentary, 2nd ed., 2019.

Jarvin, S., Irregularity in the Composition of the Arbitral Tribunal or the Arbitral Procedure, in Gaillard, E. and Di Pietro, D. (eds.), Enforcement of Arbitration Agreements and International Arbitral Awards: The New York Convention in Practice, 2008.

Van den Berg, A., The New York Convention of 1958: An Overview, in Emmanuel, G. and Di Pietro, D., Enforcement of Arbitration Agreements and International Arbitral Awards, 2008.

Nacimiento, P., Article V(1)(d), in Kronke, H., Nacimiento, P., Otto, D. and Port, C. (eds.), Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention, 2010. 

Böckstiegel, K., Kröll, S. and Nacimiento, P. (eds.), Arbitration in Germany. The Model Law In Practice, 2014.

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