The third post in our “new term catch up” series looks at the law concerning the enforcement of arbitration awards. This is often neglected by parties and their legal representatives alike. This is ironic as it is arguably the most commercially critical stage of the entire arbitral process. Many a party has spent much blood, sweat, and money to achieve a positive result, only to find it an essentially pyrrhic victory.
It is with the crucial importance of this area of law in mind that in this post, the third in our new legal term series, two recent Commercial Court decisions concerning the circumstances in which recognition or enforcement of a New York Convention award may be refused are summarised. The cases are Zavod Ekran v Magneco and Anatolie Stati v The Republic of Kazakhstan.
This case concerned an application by the Defendant (Magneco) to set aside an order of Males J giving leave to the Claimant (Zavod Ekran) to enforce an award (the “Award”) published by a tribunal of the International Commercial Arbitration Court (the “ICAC”) at the Chamber of Commerce and Industry of the Russian Federation. The Award was made in the Russian Federation, and so was a New York Convention award for the purpose of s.100(1) of the Arbitration Act 1996 (the “1996 Act”).
The question for the Court was whether the Defendant had been given “proper notice” of the arbitration proceedings within the meaning of s.103(2)(c) of the 1996 Act, one of the grounds for the refusal or recognition/enforcement of a Convention award. The Defendant contended that it had not been given proper notice of the appointment of the tribunal, or the arbitration proceedings themselves, and was otherwise unable to present its case in the arbitration.
Blair J noted that there is relatively little English authority as to the meaning of “proper notice”. However, in recounting the authority that did exist, the Judge outlined the following principles:
The Defendant’s application was rejected. It had alleged that a bundle of claim documents sent to it (and received by it) from the ICAC seeking, amongst other things, the appointment of the Defendant’s arbitrator, was insufficient to properly notify it of the arbitration because the bulk of the documents were in Russian. The Court rejected this submission. The heading of the covering letter to the bundle of documents had read “THE INTERNATIONAL COMMERCIAL ARBITRATION COURT AT THE CHAMBER OF COMMERCE AND INDUSTRY OF THE RUSSIAN FEDERATION”. This should have made it abundantly to the recipient of the documents that the documents concerned an arbitration, especially against the background of the parties having contracted for ICAC arbitration in the Russian language. The Defendant had, therefore, had “proper notice”, and had been able (in principle) to present its case in the arbitration.
In this case the Defendant State (Kazakhstan) sought refusal of an application for recognition/enforcement of a New York Convention award made in Sweden (the “Award”) on the basis that it had been obtained by the Claimant’s latterly discovered fraud. It therefore relied upon the ground in sections 103(1) and (3) of the 1996 Act, which provide that a Convention award may be refused recognition or enforcement in England where to do so would be contrary to public policy.
The facts of the case, which involved post-Award proceedings in both Sweden and the United States, are complex. By way of brief summary only, the Defendant had originally applied to the English Court for an order refusing the recognition/ enforcement of the Award on a number of bases, but not by reason of fraud/public policy. However, the Defendant (on its case) later became aware of the alleged fraud of the Claimant, and sought by way of the application presently before the Court to amend the bases of its refusal application to include fraud, and for such issues to be sent for trial.
Knowles J provided a helpful summary of the key principles in his judgment:
Knowles J granted the Defendant’s application. Powerfully, the Judge rejected the submission from the Claimant that the Defendant should have, or could have, made itself aware of the facts said to demonstrate the fraud at the time of the arbitration. He approved the previous sentiment of Burton J in JH Heinz Co Ltd v EFL Inc  2 Lloyd’s Rep 727 to the effect that where concealed fraud is concerned, a dishonest party ought not to be able to escape the repercussions simply because the right stone was not turned over by the innocent party at the time. It seems (from §69 and §79 of the judgment) that the Judge considered that only if an innocent party could have discovered evidence of an alleged fraud by the exercise of reasonable diligence, which in the event it failed to exercise, might a plea such as that made by the Claimant have some merit.
The Defendant was therefore allowed to amend its grounds for refusal of recognition/enforcement to include fraud, the matter was sent for trial.