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Ms Linda Guerra

Associate - Uría Menéndez

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No Proper Notice

I. General

1.

A party to an arbitration can allege, as a ground for annulment, the tribunal’s failure to provide it with an equal and adequate opportunity to present its case.1 A party’s right to present its case necessarily includes the right to receive proper notice, including notice of the request for arbitration, the appointment of arbitrators, the arbitral proceedings, and even the arbitration award. Depriving a party of such notice violates a party’s right to present its case.2

II. Applicable law

2.

The law applicable to the setting aside of an arbitral award is the lex arbitri (see further Applicable Law to the Proceedings), i.e., the law governing the procedure of the dispute.

3.

Lex arbitri can be divided into internal and external. The internal lex arbitri regulates the conduct of proceedings, and it is usually determined by a set of arbitration rules adopted by the parties. On the other hand, the external lex arbitri governs issues regarding the supervision and control over proceedings (e.g. grounds for annulment), which is commonly determined by the national law of the seat of arbitration.

4.

In cases brought under the ICSID Arbitration Rules, the ICSID Convention governs aspects of both internal and external lex arbitri, such as the annulment of the award.3

III. No proper notice in the annulment of non-ICSID awards

5.

Some national laws consider due process and serious procedural infringements as part of procedural public policy.4 Due process refers to the course of the proceedings carried out regularly and in accordance with established rules and principles. Compliance with the rules and principles of proceedings would prevent unfair, arbitrary or unreasonable treatment of the parties to an arbitration. Under other national laws, denial of due process is a separate ground for setting aside an award.5

6.

The UNCITRAL Model Law adopts the latter approach. Article 34 of the Model Law provides exclusive grounds for the annulment of an award. Article 34(2)(a)(ii) states that an award may be set aside if the applicant “was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present [its] case.”

7.

The vast majority of the procedural guarantees are relevant under Article 34(2)(a)(ii) of the UNCITRAL Model Law. The following guarantees apply generally to all aspects of the proceedings:6

  1. the right to equal treatment;
  2. the right to an adequate opportunity to present one’s case; and
  3. the right to regular, non-arbitrary procedures.
8.

Under the New York Convention, it is possible to reject the enforcement of an award due to the denial of a party’s opportunity to be heard.7 Most of national arbitration legislations provide similar provisions.8

9.

In relation to the appropriate standard of procedural fairness and, therefore, the determination whether a party was duly notified, courts have held that local standards apply in an application to annul an award if the parties did not chose a foreign procedural law.9

10.

For the purpose of this Note, it should be borne in mind that the annulment of an award based on the denial of the opportunity to be heard is different from the annulment for failure to comply with the parties’ agreed procedural arrangements. In particular, the right to receive notice is fundamental to the right to be heard, which is a mandatory procedural guarantee existing independently of party agreement.10

IV. No proper notice in the annulment of ICSID awards

11.

Article 53(1) of the ICSID Convention establishes that ICSID awards cannot be appealed and are not subject to any remedy except for those provided for in the Convention.

12.

Article 52 of the Convention11 provides the only grounds for annulment of an ICSID award, thus excluding the application of any national law.12

13.

Article 52(1)(d) of the Convention establishes “a serious departure from a fundamental rule of procedure” as one of the grounds for annulment.

14.

Article 52(1)(d) thus sets a double requirement for an infringement capable of annulment to be found: (i) the violated rule must be of fundamental character; and (ii) the infringement of the rule must be serious.13

15.

The requirements of a “fundamental rule” means that only serious violations of the most important procedural principles may constitute a ground for annulment, such as the right to be heard and the equality between the parties.14 The applicant under ICSID Article 52(1)(d) bears the burden of proving the said double threshold.15

16.

In Wena v. Egypt, the Committee interpreted the requirement that the departure be “serious,” holding that “the violation of such a rule must have caused the Tribunal to reach a result substantially different from what it would have awarded had such a rule been observed.16

17.

On the other hand, ICSID tribunals have declared that “proper notice is an important element of the State’s consent to arbitration, as it allows the State, acting through its competent organs, to examine and possibly resolve the dispute through negotiation.”17

V. Final considerations

18.

The annulment application based on the lack of notice of a party will depend on the grounds available under the applicable law.

19.

Whereas the UNCITRAL Model Law provides a direct ground for annulment for “no proper notice,”18 the ICSID Convention does not provide such an express ground. Nonetheless, it may be possible to argue the lack of notice as a serious departure from a fundamental rule of procedure19 (since all necessary efforts to guarantee a proper notice to the other party were not carried out).

(Any opinions expressed in this note are that of the author and do not necessarily reflect the views of Uría Menéndez or any other person or entity with whom the author is affiliated).

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