The and better developed than corresponding provisions for

The
recognition and enforcement of the arbitral award is the ultimate purpose of
the arbitration clause. Proper recognition and enforcement of arbitral awards
serves as a means of ensuring the effectiveness of the arbitration process.
However, it is not on all occasions that enforcement proceedings would be
required. In other words, if the losing party accepts the award as binding and
willingly complies with it1,
such enforcement proceedings would be unnecessary. On the other hand, where the
losing party refuses compliance with the award, it is almost certain that such
award would be enforceable against him2 as
the assurance of enforcement of an award is one of the major reasons that
arbitration is a more preferred dispute resolution mechanism.3
This advantage of arbitration arises because, the network of international and
regional treaties providing for the recognition and enforcement of
international awards is more widespread and better developed than corresponding
provisions for the recognition and enforcement of foreign court judgments4. The
recognition and the enforcement of arbitral awards is an extremely important issue
in arbitration relating to international commercial disputes. If it was not
possible to recognize and enforce the arbitral award, arbitration would be
pointless5,
meaningless6
or valueless7.
In other words, the continued use of arbitration as a means of dispute
resolution will not be maintained without the availability of a reliable, fair
and effective means of carrying out the arbitral award.8
For instance, Holtzmann observed that, “If businessmen are not reasonably sure
of enforcement of foreign arbitral awards, there will be little or no
arbitration”.9

National
laws also play a very significant role in the recognition and enforcement of
arbitral awards. This is because, the arbitral tribunal, while having
sufficient powers to make the award, has no coercive powers to force a
reluctant party to comply with the award. This is where the national court
system falls in. 

 

4.1   Distinguishing The Terms “Recognition” and
“Enforcement”

The
terms “recognition” and
“enforcement” are usually used interchangeably. However, they have different
meanings and each can be used for different purposes.10
When
the winning party applies to have a foreign award enforced, the terms ‘recognition’
and ‘enforcement’ are often used together. These terms are inextricably linked in
the New York Convention 195811
and in the Model Law.12 The
same can be said of English Arbitration Act 1996.13 Indeed,
the reason these terms are normally used inseparably regarding foreign arbitral
awards is that a foreign award cannot be enforced without first being
recognized.14
As a result, recognition and enforcement cannot be separated.15 Therefore,
the precise distinction is between ‘recognition’ on the one hand, and
‘recognition and enforcement’ on the other.16 However,
these terms can be used separately17 because
recognition of a foreign award may be sought alone without enforcement.18 Thus,
the terms “recognition” and “enforcement” may be used separately by providing special
conditions for each one. The Geneva Convention of 1927 distinguishes between
recognition and enforcement in Article (1) which states that “to obtain such recognition
or enforcement…” In addition, the New York Convention speaks about
recognition or enforcement in regard to the conditions that may apply to each
term.19
Furthermore, a clear example of this separation can be found in Vietnamese
regimes.20
They distinguish between the two terms by providing a special procedure for
recognition and another for enforcement. An application for recognition is
submitted to the Ministry of Justice (M0J),21 while
an application for enforcement should be submitted according to the Ordinance
on the enforcement of civil judgments (Ordinance II).22

Consequently,
some arbitration rules in one part speak about recognition and enforcement as
one term, while in another part they speak about recognition and enforcement as
two terms.23

A
party who has obtained an award may seek recognition as a proof that the
dispute has been determined by arbitration and is no longer subject to
litigation,24
or he may seek enforcement to obtain the amount awarded by the arbitral award.25

The
meaning of recognition comes from the application made by the winning party to the
competent court in order to obtain proof to the effect that the dispute has
been determined by arbitration. This proof activates as a defence to prevent
any allegation that may be made by the losing party relating to the same
dispute.26
For instance, in Peoples’ Insurance
Company of China, Hebei Branch (2) China National Feeding Stuff Import/Export
Corporation v Vysanthi Shipping Co Ltd27,
an arbitral award was recognized and enforced where it had been made with
jurisdiction and at an earlier time than a judgment on the same issues in the
Chinese courts. In this regard, the role of the court is negative in the sense
that it does not require any positive action against the losing party.28

The
purpose of recognition is a defensive process which acts as a shield to prevent
the losing party from bringing a second allegation before the local court.29 If
one party were to bring a court action against the other with regard to the
subject matter of the arbitration, based on the same cause of action, the court
would dismiss the action on the basis that the issues had been disposed of and
were res judicata.30

The
winning party can also seek recognition of an award in order to prevent the
losing party obtaining another arbitral award in respect of the same dispute,
as happened in the Hilmarton /OTV
arbitration.31
In this case, the French court refused to recognize and enforce the second
award, which contradicted the first one in respect of the same dispute.32

Enforcement
on the other hand, entails taking a step further after recognition33
to force the losing party to carry out the award.34 In
this regard, the role of the court is positive, in that it is required to take
an action against the assets of the losing party by way of seizure,
expropriation, or any other means in the place where the enforcement is sought.35 The
purpose of enforcement, therefore, is to take an attacking action against the
assets of the losing party. The winning party uses enforcement as a sword in this
case.36Enforcement
will be sought after the losing party has refused to comply with or carry out
the award voluntarily. Thus, to force the losing party to carry out the award,
the winning party applies to the competent court to take a positive action
against the assets of the losing party. This action normally takes the form of
different sanctions, the aim of which is to make the losing party carry out the
award. These sanctions differ from one State to another depending on where the
enforcement is sought. Such a sanction may take the form of seizure or
attachment of the losing party’s assets and sometimes includes imprisonment37.

 

4.2   Rationale for the Recognition of Foreign
Awards

Without
effective methods of recognition and enforcement, international arbitration cannot
function effectively. In this regard, Berg comments as follows:

The
effectiveness of international arbitration depends ultimately on the question
whether the awards can be enforced against the losing party. That is not to say
that most arbitrations lead to enforcement proceedings before the courts of
some State. Quite the contrary, arbitral awards are complied with voluntarily
in a large number of cases. But this large degree of voluntary compliance is,
for a significant part, probably due to the fact that effective international
enforcement measures are generally available to the winning party.38

It
has also been submitted that the recognition and enforcement of awards
constitute the key to international arbitration.39 The
importance of recognition and enforcement of an award to international
commercial arbitration was stated by Gaudet, chairman of the ICC Court of
Arbitration, to be ‘the last and decisive step of an international commercial
arbitration.40

The
effect of recognition is to act as res
judicata defence under which the losing party cannot raise an issue which
has been determined by arbitration before another arbitral tribunal or national
court41,
whereas the effect of enforcement is to make the losing party carry out the
award. That is to say, steps will be taken by the court of the recognizing
State with a view to securing compliance with the obligations imposed by the
award by means of public coercive force. In essence, while recognition serves
as a shield, enforcement serves as a sword.

Professor
Agbede42
identified four major distinctions between recognition and enforcement of
foreign judgments viz:

·        
All enforceable judgments must satisfy
the condition for recognition though not all recognizable judgments are
enforceable.

·        
Recognition of foreign judgment is
governed by common law rules while enforcement is governed by statute.

·        
Many foreign judgments fall outside the
scope of statute governing enforcement leaving the judgment creditor with the
option of suing on the foreign judgment if it is recognizable.

·        
Every foreign judgment requires
recognition, whereas some judgments such as divorce decree require no
enforcement.

 

1
This has been expressed by
Fletcher Moulton LJ in the case of Doleman
& Sons v Osset Corpn 1912 3KB 257 at 267, as follows:

It has long been a practice in
certain classes of contracts for the contracting parties to name a private
tribunal to whom contractually they give authority to settle disputes under
that particular contract. If a dispute has been brought before that private
tribunal thus constituted, and an award made, that award is binding on both
parties and concludes them as to that dispute. In effect, the parties have
agreed that the rights of the parties in respect of that dispute shall be as
stated in the award, so that in essence, it partakes of the character of
“accord and satisfaction by substituted agreement”. The original rights of the
parties have disappeared, and their place has been taken by their right under
the award. 

2
Unless parties can be
relatively certain that they will be able to enforce the award at the end of
the arbitral proceedings, “an award in their favour will be only a pyrrhic
victory”. Lew, Mistelis and Kroll,
Comparative International Commercial Arbitration (The Hague: Kluwer Law
International 2003) 688.

3 Loukas Mistelis, International
Arbitration-Corporate Attitudes and Practices-12

4 A Redfern and M Hunter et al, Law and Practice of International commercial
Arbitration (4th edition, London: Sweet & Maxwell 2004) 437.

5 Arbitration for Consumers and
Small Businesses: Guide to the Arbitration Act 1996 (Department of Trade and
Industry London 1997) 34.

6 I Carr, International Trade Law (London: Cavendish Publishing Limited
1996) 214

7 A Asouzu ‘The Adoption of the
UNICITRAL Model Law In Nigeria: Implications on the Recognition and Enforcement
of Arbitral awards’ (1999) Journal of
Business Law 185.

8 L Hu ‘Enforcement of Foreign
Arbitral Awards and Court Intervention in the People’s Republic of China’
(2004) 20(2) Arbitration International
167, 167.

9 HM Holtzmann ‘Commentary’ (1984)
International Arbitration 60 Years of ICC Arbitration a Look at the Future 361,
362.

10
G Soo ‘International
Enforcement of Arbitral Awards’ (2000) 11 (7) International Company and Commercial Law Review 253.

11
Arts IV and V also used the
terms as inseparable.

12 C VIII of Model Law

13 Part III.

14 A Redfern & M Hunter et al, Law and Practice of International Commercial
Arbitration (4th edition, London: Sweet & Maxwell 2004)
515-517.

15 Ibid.

16 Ibid 515.

17 DD Pietro and M Platte Enforcement of International Arbitration
Awards: The New York Convention of 1958 (1st Edition, Cameron
London 2001) 22-23.

18 A Redfern & M Hunter et al
(n 14) 515-517.

19 Art III of the New York
Convention 1958.

20 TV Toan and SE Vecchi ‘Enforcing
a Foreign Arbitral Award in Vietnam’ (2000) International
Business Lawyer 317, 319; Nicholson and NT Minh ‘Commercial Disputes and
Arbitration in Vietnam'(2000) 17(5) Journal
of International Arbitration 1, 4.

21 TV Toan and SE Vecchi (n 14)
317, 319.

22 Ibid.

23 The New York Convention speaks
in Articles IV and V about recognition and enforcement as one term, while it
speaks about them in Article III as two terms. English Arbitration Act 1996
also speaks in Part III about them as one term and it speaks about them as two
terms in Sections 102, 103, and 104.

24 G Soo (n 10) 253, 254. In
England, the use of recognition as a means of proof can be found in Dallal v Bank Mellat  1986 2 WLR 745. In this case, the
English court found that the tribunal was competent and its award was
recognized as a valid judgment, but it was not enforceable in England under the
New York Convention. 

25 DD Pietro and M Platte (n 17)
22-23.

26 A Redfern & M Hunter (n 14)
516.

27 2003 EWHC 1655 (Comm).

28
J Hill, The Law Relating to International Commercial
Disputes (2nd Edition, LLP London 1998) 4.

29
A Redfern & M Hunter et
al (n 14) 516.

30 Ibid 459. See also Margaret L
Moses, Principles and Practice of
International Commercial Arbitration (Cambridge University Press 2008) 203.

31
Omnium
de Traitement et de Valorisation SA v Hilmarton Ltd 
1999 2 Lloyd’s Rep 223

32 C Kessedjian ‘Court Decisions on
Enforcement of Arbitration Agreement and Awards’ (2001) 18(1) Journal of International Arbitration 1,
8-9.

33 A Redfern & M Hunter et al
(n 8) 435.

34
G Soo (n 10) 253, 254.

35 J Hill (footnote 28) 4; DD
Pietro & M Platte (n 17) 22-23.

36 A Redfern & M Hunter (n 14)
517.

37 Ibid. In some jurisdictions, the award
must first be recognized before the award creditor can use the enforcement
mechanism of the enforcing court. In Portugal for instance, the award must
first be recognized before it can be enforced in accordance with the provisions
of the Portugal Procedural Rules regarding enforcement of judicial decisions.
Arbitration World, European Lawyer Reference Series (2006) 290; referred to in
Margaret L Moses (n 29) 203. In other jurisdictions however, there may be no
practical difference between procedures for recognition and for enforcement.
When an award is enforced, it is a priori
recognized. 

38
AJVD Berg ‘Recent
Enforcement Problems under the New York and ICSID Conventions’ (1989) 5 Arbitration International Journal 2, 2.

39
M Secomb ‘Shades of
Delocalisation Diversity in the Adoption of the UNCITRAL Model Law in
Australia, Hong Kong and Singapore’ (2000) 17(5) Journal of International Arbitration 123, 145.

40
As cited in M Suffian
‘International Commercial Arbitration in a Changing World.’ 1984
International Arbitration 60 Years of ICC Arbitration a Look at the Future 377,
378.

41 As expressed in the English
Arbitration Act 1996, S 101 (1), “the award is recognized as binding on the
persons as between whom it was made” so that it may accordingly be used by
these persons “by way of defence, set-off, or otherwise” in any legal proceedings
in England and Wales and Northern Ireland.

42 IO Agbede Themes on Conflict of Laws (Ibadan: Shanesen C.I Ltd 1989)

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