Harmonization and Delocalization in International Arbitrational Ayushi Tiwari

Harmonization and Delocalization in International Arbitrational Ayushi Tiwari & Parimal Kashyap

International Arbitration and Enforcement of Foreign Awards • Beginnings: 1. 1923 Geneva Protocol on Arbitration Clauses 2. Geneva Convention on the Execution of Foreign Arbitral Awards 3. New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 4. UNCITRAL Model Law on International Commercial Arbitration

Nature of an Award

The Delocalization Theory • Freeing an international arbitration from the constraints of the procedural laws of the place of arbitration • International arbitration should not be restricted by mandatory procedural rules of the forum and should be detached from the country of origin. • International arbitration would be substantially simpler if it could rely on a universal lex arbitri which would not differ from the seat of the arbitration. • The only system of supervision of the state would be in terms of the petition for recognition and enforcement of the award – international arbitration would be supranational (transnational, cross-border, or floating).

Positive Impact of Delocalisation • The problems associated with excessive court intervention could outweigh the advantages, especially when national courts at the seat of arbitration decide that there should be judicial control of the proceedings and of the award. • Because of delocalisation parties to the arbitration would remain unaffected by unforeseen and undesired local procedural law and therefore would not face the risk of having an unenforceable arbitral award due to non-compliance with the local procedural law.

Applying Delocalization in Enforcement of Awards • Article VII of New York Convention seems to support delocalization. • French Approach: In Ticaret Sirketi v. Norsolor, relying on Article VII of the New York Convention, French Cour de cassation indicated that an award, which had been set aside in Austria, could be enforced in France In Hilmarton v. OTV, the French Court favoring the application of the “more-favorable-right provision” to allow the enforcement of an award which has been annulled in Switzerland. In 2007, the French Cour de cassation, in P. T. Putrabali Adyamulia v. Rena Holding, (88) once again allowed an award that had been set aside to be confirmed and enforced in France. The French Cour de cassation decided that the annulment of the award by the English courts did not have any effect on the French courts. The French court emphasized that:

US Approach to Enforcement of Annulled Awards • Chromalloy Aeroservices v. Arab Republic of Egypt • Despite the fact that the contract between the parties provided that an arbitral award should be “final and binding and cannot be made subject to any appeal or recourse, ” the Egyptian Court of Appeal nullified the award upon an appeal filed by the losing party (Egypt). Therefore, there was a “solemn promise” not to appeal which was broken by the state. In this framework, the U. S. district court concluded that Egypt was seeking “to repudiate its solemn promise to abide by the results of the arbitration, ” and that recognizing the Egyptian judgment would be contrary to the United States' policy favoring arbitration. • Criticism of the Judgment: Effect of enforcing an award that has been annulled in one country would be that parties would not be able to rely on the judicial control of the state where the arbitration takes place, as an annulled award could always be recognized and enforced somewhere in the world. (A REASON WHY PARTIES PICK SEAT OF ARBITRATION COULD BE NULLIFIED). • However, the Chromalloy ruling remains an exception rather than rule as US Courts have frequently departed from this stance in recent rulings. Eg: Baker Marine (Nig. ) Ltd. v. Chevron Ltd. (99) and in Spier v. Calzaturificio Tecnica S. p. A

UK Approach to Enforcement of Annulled Awards • In England, there has been a marked reluctance to accept the concept of delocalized • • arbitration. (110) For example, in Bank Mellat v. Helliniki Techniki S. A. , (111)the English Court of Appeal emphasized that: Despite suggestions to the contrary by some learned writers under other systems, our jurisprudence does not recognize the concept of arbitral procedures floating in the transnational firmament, unconnected with any municipal system of law. Similarly, in Naviera Amazonica Peruano S. A. v. Compania Internacional de Seguros del Peru, the court once again highlighted that: English law does not recognize the concept of a “delocalized” arbitration … Accordingly, every arbitration must have a “seat” or locus arbitri of forum which subjects its procedural rules to the municipal law which is there in force. (114) In this context, it is well known that English courts are traditionally against the idea of delocalized arbitration, placing a very strong emphasis on the role of the place of arbitration.

Civil-Common Divergence • Monism/Dualism Debate • French courts consider arbitral awards as part of an international legal order and are therefore prepared to enforce awards which have been set aside in the seat of the arbitration. In contrast, U. S. courts seem to attach arbitral awards to the seat of arbitration and therefore recognize the universal validity of an annulment by the courts of the seat of arbitration. • Therefore, by comparing the attitudes in the United States, England, and France, one can see a lack of consensus on this point. While three countries have a strong tradition of international arbitration, their approaches towards the delocalization theory vary significantly. England clearly rejects that idea, the United States might accept it in exceptional circumstances, and France has gone the furthest in adopting the delocalization theory. • Most annulled awards will also fall under exceptions to enforcement of awards in New York Convention. Thus, the foregoing cases are limited in number.

Delocalisation in Practice (Case of Belgium) • A country which opted for a very high degree of delocalization in the past was Belgium. • The Act of 27 March 1985 supplemented Article 1717 of the Belgian Judicial Code, which stipulated that the losing party does not have the right to challenge an award rendered in international arbitration if at least one of the parties had its seat/registered office in, or any other connection with, a country different from Belgium. • Nonetheless, this provision was subsequently repealed, because it deterred, rather than attracted, parties to choose Belgium as the seat of arbitration. • Problems with Delocalisation: Especially because countries want to maintain a certain degree of control over arbitration; it also demonstrates the fact that the denationalization of arbitration generally does not even meet the actual interests of the parties. The reason often lies in the greater security guaranteed in localized proceedings.

Arguments Against Delocalisation • Theory completely excludes the role of the place of arbitration and that is undesirable since the place of arbitration could no longer assist the arbitration. For instance, if there is a problem at the beginning of the arbitration when constituting the arbitral tribunal, national courts at the seat of arbitration could not step in as the default appointing authoring for the constitution of the tribunal. • The powers of an arbitral tribunal are generally limited to the parties involved in the arbitration and, therefore, an order that involves a third party would be outside the scope of the arbitral tribunal. • National courts have wider powers to grant interim measures than arbitral tribunals and national arbitration laws recognize that arbitrators might need to refer to a state court to compel the appearance of witnesses or to issue injunction orders.

Debatable Issues • Whether the procedural laws of the place of arbitration normally support or disrupt the arbitration process? Would international commercial arbitration work more effectively if it were detached from the procedural laws of the place of arbitration?