Therecognition and enforcement of the arbitral award is the ultimate purpose ofthe arbitration clause. Proper recognition and enforcement of arbitral awardsserves as a means of ensuring the effectiveness of the arbitration process.However, it is not on all occasions that enforcement proceedings would berequired. In other words, if the losing party accepts the award as binding andwillingly complies with it1,such enforcement proceedings would be unnecessary.
On the other hand, where thelosing party refuses compliance with the award, it is almost certain that suchaward would be enforceable against him2 asthe assurance of enforcement of an award is one of the major reasons thatarbitration is a more preferred dispute resolution mechanism.3This advantage of arbitration arises because, the network of international andregional treaties providing for the recognition and enforcement ofinternational awards is more widespread and better developed than correspondingprovisions for the recognition and enforcement of foreign court judgments4. Therecognition and the enforcement of arbitral awards is an extremely important issuein arbitration relating to international commercial disputes. If it was notpossible to recognize and enforce the arbitral award, arbitration would bepointless5,meaningless6or valueless7.In other words, the continued use of arbitration as a means of disputeresolution will not be maintained without the availability of a reliable, fairand effective means of carrying out the arbitral award.8For instance, Holtzmann observed that, “If businessmen are not reasonably sureof enforcement of foreign arbitral awards, there will be little or noarbitration”.
9Nationallaws also play a very significant role in the recognition and enforcement ofarbitral awards. This is because, the arbitral tribunal, while havingsufficient powers to make the award, has no coercive powers to force areluctant party to comply with the award. This is where the national courtsystem falls in. 4.1 Distinguishing The Terms “Recognition” and”Enforcement”Theterms “recognition” and”enforcement” are usually used interchangeably.
However, they have differentmeanings and each can be used for different purposes.10Whenthe winning party applies to have a foreign award enforced, the terms ‘recognition’and ‘enforcement’ are often used together. These terms are inextricably linked inthe New York Convention 195811and in the Model Law.12 Thesame can be said of English Arbitration Act 1996.
13 Indeed,the reason these terms are normally used inseparably regarding foreign arbitralawards is that a foreign award cannot be enforced without first beingrecognized.14As 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 becauserecognition of a foreign award may be sought alone without enforcement.
18 Thus,the terms “recognition” and “enforcement” may be used separately by providing specialconditions for each one. The Geneva Convention of 1927 distinguishes betweenrecognition and enforcement in Article (1) which states that “to obtain such recognitionor enforcement..
.” In addition, the New York Convention speaks aboutrecognition or enforcement in regard to the conditions that may apply to eachterm.19Furthermore, a clear example of this separation can be found in Vietnameseregimes.20They distinguish between the two terms by providing a special procedure forrecognition and another for enforcement.
An application for recognition issubmitted to the Ministry of Justice (M0J),21 whilean application for enforcement should be submitted according to the Ordinanceon the enforcement of civil judgments (Ordinance II).22Consequently,some arbitration rules in one part speak about recognition and enforcement asone term, while in another part they speak about recognition and enforcement astwo terms.23Aparty who has obtained an award may seek recognition as a proof that thedispute has been determined by arbitration and is no longer subject tolitigation,24or he may seek enforcement to obtain the amount awarded by the arbitral award.25 Themeaning of recognition comes from the application made by the winning party to thecompetent court in order to obtain proof to the effect that the dispute hasbeen determined by arbitration. This proof activates as a defence to preventany allegation that may be made by the losing party relating to the samedispute.26For instance, in Peoples’ InsuranceCompany of China, Hebei Branch (2) China National Feeding Stuff Import/ExportCorporation v Vysanthi Shipping Co Ltd27,an arbitral award was recognized and enforced where it had been made withjurisdiction and at an earlier time than a judgment on the same issues in theChinese courts.
In this regard, the role of the court is negative in the sensethat it does not require any positive action against the losing party.28 Thepurpose of recognition is a defensive process which acts as a shield to preventthe losing party from bringing a second allegation before the local court.29 Ifone party were to bring a court action against the other with regard to thesubject matter of the arbitration, based on the same cause of action, the courtwould dismiss the action on the basis that the issues had been disposed of andwere res judicata.30Thewinning party can also seek recognition of an award in order to prevent thelosing party obtaining another arbitral award in respect of the same dispute,as happened in the Hilmarton /OTVarbitration.31In this case, the French court refused to recognize and enforce the secondaward, which contradicted the first one in respect of the same dispute.32Enforcementon the other hand, entails taking a step further after recognition33to force the losing party to carry out the award.
34 Inthis regard, the role of the court is positive, in that it is required to takean 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 Thepurpose of enforcement, therefore, is to take an attacking action against theassets of the losing party. The winning party uses enforcement as a sword in thiscase.36Enforcementwill be sought after the losing party has refused to comply with or carry outthe 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 actionagainst the assets of the losing party. This action normally takes the form ofdifferent sanctions, the aim of which is to make the losing party carry out theaward.
These sanctions differ from one State to another depending on where theenforcement is sought. Such a sanction may take the form of seizure orattachment of the losing party’s assets and sometimes includes imprisonment37. 4.2 Rationale for the Recognition of ForeignAwardsWithouteffective methods of recognition and enforcement, international arbitration cannotfunction effectively.
In this regard, Berg comments as follows:Theeffectiveness of international arbitration depends ultimately on the questionwhether the awards can be enforced against the losing party. That is not to saythat most arbitrations lead to enforcement proceedings before the courts ofsome State. Quite the contrary, arbitral awards are complied with voluntarilyin a large number of cases.
But this large degree of voluntary compliance is,for a significant part, probably due to the fact that effective internationalenforcement measures are generally available to the winning party.38Ithas also been submitted that the recognition and enforcement of awardsconstitute the key to international arbitration.39 Theimportance of recognition and enforcement of an award to internationalcommercial arbitration was stated by Gaudet, chairman of the ICC Court ofArbitration, to be ‘the last and decisive step of an international commercialarbitration.
40Theeffect of recognition is to act as resjudicata defence under which the losing party cannot raise an issue whichhas been determined by arbitration before another arbitral tribunal or nationalcourt41,whereas the effect of enforcement is to make the losing party carry out theaward. That is to say, steps will be taken by the court of the recognizingState with a view to securing compliance with the obligations imposed by theaward by means of public coercive force. In essence, while recognition servesas a shield, enforcement serves as a sword.ProfessorAgbede42identified four major distinctions between recognition and enforcement offoreign judgments viz:· All enforceable judgments must satisfythe condition for recognition though not all recognizable judgments areenforceable.· Recognition of foreign judgment isgoverned by common law rules while enforcement is governed by statute.· Many foreign judgments fall outside thescope of statute governing enforcement leaving the judgment creditor with theoption of suing on the foreign judgment if it is recognizable.· Every foreign judgment requiresrecognition, whereas some judgments such as divorce decree require noenforcement.
1This has been expressed byFletcher Moulton LJ in the case of Doleman& Sons v Osset Corpn 1912 3KB 257 at 267, as follows:It has long been a practice incertain classes of contracts for the contracting parties to name a privatetribunal to whom contractually they give authority to settle disputes underthat particular contract. If a dispute has been brought before that privatetribunal thus constituted, and an award made, that award is binding on bothparties and concludes them as to that dispute. In effect, the parties haveagreed that the rights of the parties in respect of that dispute shall be asstated in the award, so that in essence, it partakes of the character of”accord and satisfaction by substituted agreement”. The original rights of theparties have disappeared, and their place has been taken by their right underthe award. 2Unless parties can berelatively certain that they will be able to enforce the award at the end ofthe arbitral proceedings, “an award in their favour will be only a pyrrhicvictory”. Lew, Mistelis and Kroll,Comparative International Commercial Arbitration (The Hague: Kluwer LawInternational 2003) 688.
3 Loukas Mistelis, InternationalArbitration-Corporate Attitudes and Practices-12 4 A Redfern and M Hunter et al, Law and Practice of International commercialArbitration (4th edition, London: Sweet & Maxwell 2004) 437.5 Arbitration for Consumers andSmall Businesses: Guide to the Arbitration Act 1996 (Department of Trade andIndustry London 1997) 34.6 I Carr, International Trade Law (London: Cavendish Publishing Limited1996) 2147 A Asouzu ‘The Adoption of theUNICITRAL Model Law In Nigeria: Implications on the Recognition and Enforcementof Arbitral awards’ (1999) Journal ofBusiness Law 185. 8 L Hu ‘Enforcement of ForeignArbitral Awards and Court Intervention in the People’s Republic of China'(2004) 20(2) Arbitration International167, 167.9 HM Holtzmann ‘Commentary’ (1984)International Arbitration 60 Years of ICC Arbitration a Look at the Future 361,362.
10G Soo ‘InternationalEnforcement of Arbitral Awards’ (2000) 11 (7) International Company and Commercial Law Review 253.11Arts IV and V also used theterms as inseparable.12 C VIII of Model Law13 Part III.
14 A Redfern & M Hunter et al, Law and Practice of International CommercialArbitration (4th edition, London: Sweet & Maxwell 2004)515-517.15 Ibid.16 Ibid 515.17 DD Pietro and M Platte Enforcement of International ArbitrationAwards: The New York Convention of 1958 (1st Edition, CameronLondon 2001) 22-23.18 A Redfern & M Hunter et al(n 14) 515-517.19 Art III of the New YorkConvention 1958.20 TV Toan and SE Vecchi ‘Enforcinga Foreign Arbitral Award in Vietnam’ (2000) InternationalBusiness Lawyer 317, 319; Nicholson and NT Minh ‘Commercial Disputes andArbitration in Vietnam'(2000) 17(5) Journalof International Arbitration 1, 4.21 TV Toan and SE Vecchi (n 14)317, 319.
22 Ibid.23 The New York Convention speaksin Articles IV and V about recognition and enforcement as one term, while itspeaks about them in Article III as two terms. English Arbitration Act 1996also speaks in Part III about them as one term and it speaks about them as twoterms in Sections 102, 103, and 104.24 G Soo (n 10) 253, 254. InEngland, the use of recognition as a means of proof can be found in Dallal v Bank Mellat 1986 2 WLR 745.
In this case, theEnglish court found that the tribunal was competent and its award wasrecognized as a valid judgment, but it was not enforceable in England under theNew 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).28J Hill, The Law Relating to International CommercialDisputes (2nd Edition, LLP London 1998) 4.
29A Redfern & M Hunter etal (n 14) 516.30 Ibid 459. See also Margaret LMoses, Principles and Practice ofInternational Commercial Arbitration (Cambridge University Press 2008) 203.
31Omniumde Traitement et de Valorisation SA v Hilmarton Ltd 1999 2 Lloyd’s Rep 22332 C Kessedjian ‘Court Decisions onEnforcement of Arbitration Agreement and Awards’ (2001) 18(1) Journal of International Arbitration 1,8-9.33 A Redfern & M Hunter et al(n 8) 435.34G Soo (n 10) 253, 254.35 J Hill (footnote 28) 4; DDPietro & M Platte (n 17) 22-23. 36 A Redfern & M Hunter (n 14)517.37 Ibid.
In some jurisdictions, the awardmust first be recognized before the award creditor can use the enforcementmechanism of the enforcing court. In Portugal for instance, the award mustfirst be recognized before it can be enforced in accordance with the provisionsof the Portugal Procedural Rules regarding enforcement of judicial decisions.Arbitration World, European Lawyer Reference Series (2006) 290; referred to inMargaret L Moses (n 29) 203.
In other jurisdictions however, there may be nopractical difference between procedures for recognition and for enforcement.When an award is enforced, it is a priorirecognized. 38AJVD Berg ‘RecentEnforcement Problems under the New York and ICSID Conventions’ (1989) 5 Arbitration International Journal 2, 2.39M Secomb ‘Shades ofDelocalisation Diversity in the Adoption of the UNCITRAL Model Law inAustralia, Hong Kong and Singapore’ (2000) 17(5) Journal of International Arbitration 123, 145.40As cited in M Suffian’International Commercial Arbitration in a Changing World.’ 1984International Arbitration 60 Years of ICC Arbitration a Look at the Future 377,378.41 As expressed in the EnglishArbitration Act 1996, S 101 (1), “the award is recognized as binding on thepersons as between whom it was made” so that it may accordingly be used bythese persons “by way of defence, set-off, or otherwise” in any legal proceedingsin England and Wales and Northern Ireland.42 IO Agbede Themes on Conflict of Laws (Ibadan: Shanesen C.I Ltd 1989)