"I’ve received an arbitral award: what’s next?"
Prague, Czech Republic

By Lakshmi Gopal (Lecturer and Senior Researcher, Universität Halle-Wittenberg) and Magdaléna Machová (Allen & Overy, Prague)

On 9 October 2019, Young ICCA and the Ministry of Finance of the Czech Republic hosted a skills-training workshop in Prague on the theme of what actions can be taken by parties after receiving an arbitral award. The event was co-sponsored by Allen & Overy, Arnold & Porter, Dechert LLP and DLA Piper.  The audience was composed of State representatives and young arbitration practitioners.

Ms. Anna Bilanová and Mr. Jaroslav Kudrna, of the Czech Ministry of Finance’s International Arbitration and Investment Protection unit provided introductory remarks and thanked the Prime Minister of the Czech Republic for providing the Liechtenstein Palace for the conference.  The workshop comprised of two panels, focused on (1) annulment and other post-award considerations; and (2) enforcement of arbitral awards. 

The first panel was moderated by Mr. Simon Batifort (Partner, Curtis, Mallet-Prevost, Colt & Mosle (NYC)) and featured three speakers: Mr. Florian Quintard (Senior Associate, Pinsent Masons (Paris)); Ms. Andrea de la Brena (Counsel, zeiler.partners (Mexico City)); and Ms. Samantha Rowe (Partner, Debevoise & Plimpton (London)).

Mr. Batifort opened the discussion by underscoring the importance of staying calm in the face of an unfavorable award.  He noted that the rendering of the award is a critical moment in a dispute and can be an emotional time for a client.  Mr. Batifort reminded the audience that, in order to preserve all possible post-award options, a losing party should quickly assess the contents of the award to see, first, if the award can be remedied; and, second, whether there is any possibility of reaching a post-award settlement agreement.

Mr. Quintard followed this lead by discussing the seemingly counter-intuitive benefits of post-award settlement.  At the outset of a dispute, parties negotiate to settle in order to save relationships, avoid costs, and create a reliable settlement instrument. Nevertheless, once an award has been published, parties generally assume that these benefits are lost. However, there still may be relationships to rebuild, enforcement costs to avoid, and outcomes preferable to those set out in the award. Further, some adverse parties are more open to settlement after the delivery of an award, as opposed to prior. For example, when it comes to post-award settlement with sovereign adversaries, State representative might have a duty to attempt post-award settlement because of a responsibility to reduce what the State is required to pay. There may also be new claims to consider for inclusion in a settlement agreement.

Mr. Quintard, however, advised exercising considerable caution when drafting a post-award settlement – to consider each aspect with care, especially when relating to enforcement possibilities; and to seek the advice of reliable counsel specializing in the particular issues involved in the award.

Next, Ms. de la Brena focused on the differences between different post-award remedies.  She warned that parties may at times attempt to use these means to get a ‘second bite at the apple’. Ms. de la Brena recommended careful analysis of the scope and purpose of each remedy advanced by an adverse party.  She cited the particular example of rectification, which serves to correct omissions or errors in the award, leaving core merits untouched. She further referred to supplementation which applies in cases where the tribunal failed to address purely accessory questions. As for annulment, it is restricted to very limited grounds. Recently, there has been a notable reduction in successfully-annulled awards. In practice, the line can be much harder to draw between supplementation and annulment, and it is important to scrutinize the scope of supplementation.

Ms. de la Brena noted that the use and misuse of such remedies is central to the current debate on whether arbitration would benefit from some kind of appeals process. The debate boils down to a question of finality versus correctness: the need for finality comes out of commercial arbitration, where the finality and speed of a decision may be more valuable than getting it right. In Investor-State arbitration, where public issues and interests are at stake, correctness may be more important. Ms. de la Brena suggested a client’s priorities should guide pursuit of post-award remedies.

Ms. Samantha Rowe focused on annulment in both the ICSD and non-ICSID procedural contexts in light of recent high-profile annulments of significant awards by ICSID ad hoc committees and mounting controversies regarding the current system of investor-State dispute settlement. Ms. Rowe highlighted that ICSID annulment applications tend to be advanced on a combination of grounds, including that the tribunal “manifestly exceeded its powers” or failed to observe certain standards of due process. She evidenced, nonetheless, an overall decrease in successful annulment applications stating that statistics indicate a significant increase in the number of ICSID awards and the quantum accompanied by a proportional decrease in the number of awards annulled. Furthermore, in recent successful annulment cases, ad hoc committees have been basing their decisions on core principles, including, for example, absence of jurisdiction or failure to apply the correct governing laws. Ms. Rowe submitted that to the extent that tribunals are making such fundamental mistakes, decisions should be reviewed. Expanding on the current debate on finality versus correctness, Ms. Rowe observed that while finality might outweigh correctness in the commercial context, in the investor-State arbitration context, where public issues and interests are at stake, correctness may be of greater value. Ms. Rowe suggested that these differences warranted consideration and due calibration, and looked forward to keeping an open mind as the debate evolved.

Next, Ms. Rowe presented an overview of the review of set-aside regimes in three key jurisdictions: England, Switzerland, and France. On the one hand, English Courts will review jurisdictional challenges de novo, accepting fresh evidence and new arguments. She cited the example of the well-known Dallah case, in which the UK Supreme Court set aside an ICC award rendered in Paris on the grounds that the tribunal lacked jurisdiction (Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs, Government of Pakistan). Post-Dallah challenges against investment treaty awards received similar treatment. Within the last year, in GPF Gp S.á.r.l v Republic of Poland, the English courts set aside a jurisdictional award rendered by a tribunal composed of renowned arbitrators on the scope of the dispute resolution clause in the relevant investment dispute treaty. While the Swiss Federal Supreme Court also reviews jurisdictional challenges de novo, and can freely examine any question of law, it is stricter than the English courts in terms of (a) considering legal issues of its own volition, (b) reviewing, correcting or completing findings of fact, or (c) considering new evidence.  Finally, Ms. Rowe brought attention to the recent changes taking place in France, traditionally an extremely non-interventionist jurisdiction that has witnessed recent annulments of a number of awards on jurisdictional and public policy grounds. For example, in Belokon vs. Kyrgyzstan, the Paris Court of Appeal overturned a decision by the arbitral tribunal (finding insufficient evidence to conclude that money laundering had occurred) and set aside the award on public policy grounds.

Ms. de la Brena then discussed remission, a specialized mechanism to simultaneously save and revise an award that is applied differently across different jurisdictions.  Taking the example of the procedure directed by Article 34 of the UNCITRAL Model Law (as amended in 2006), a party can ask a local court to remit the award back to the tribunal to correct an error, in order to “save” the award. Ms. de la Brena noted that both Mexican and Canadian law allow for this remedy, but pointed out that Czech law does not.  She also pointed out that there are circumstances where remission cannot be ordered.  For instance, under the ICSID Convention, there is limited basis for recourse to national courts and no possibility for remission of an award to the tribunal by court order. Finally, Ms. de la Brena noted that, even where a remission order can be made, other issues need to be considered, including the availability of arbitrators and how this will affect fees – meaning that its use should be decided on a case-by-case basis.

Mr. Quintard closed the first panel with a set of tips for parties seeking to challenge awards: know your enemy, i.e. the award; know your seat of arbitration and its post-remedy rules and procedures; compare the outcome in the award, the relief originally sought, and the powers of the tribunal, and ensure there are no discrepancies; look for anything that ‘smells fishy’ – primarily in the costs section, where there might be errors or rate problems;  be vigilant throughout the process, including by keeping a log of concerns you may have with the tribunal’s actions; and keep track of the record. Mr. Quintard’s final tip to parties was not to give up, noting that parties should explore every possible avenue if they believe the award should be annulled.

The second panel on the topic of enforcement of arbitral awards was moderated by Ms. Kristen Young (Partner, White & Case (DC)), and featured Ms. Sarah Schröder (Associate, Cleary Gottlieb (Paris)); Ms. Silvia Pavlica Dahlberg (Partner, Vinge (Gothenburg)); and Dr. Anna Kozmenko (Partner, Schellenberg Wittmer (Zurich)).

Ms. Young explained that, while sometimes award debtors comply voluntarily or are willing to settle with the other party, enforcement is required if the award debtor does not do so.  Ms. Young framed the panel discussion by stressing the difficulties related to effective enforcement of an award, and outlining three scenarios:

  1. Enforcement of an ICSID award in an ICSID Member State;
  2. Enforcement in a New York Convention Contracting State;
  3. Enforcement in a State where neither the ICSID Convention nor the New York Convention is in force.

Ms. Schröder presented a general overview of how to enforce ICSID awards. She noted that the ICSID Convention provides a self-contained system in which Member States are required to enforce the pecuniary obligations imposed by an ICSID award as if they were resulting from a final judgment of a local court of that Member State. In practice, a majority of ICSID awards result in settlement or voluntarily compliance. Ms. Schröder noted that one of the biggest obstacles to an enforcement action can be determining which assets to properly seize, in order to satisfy the pecuniary obligations encapsulated in an award.

Ms. Dahlberg focused on enforcement under the New York Convention, discussing the formal requirements for enforcement, as well as the exhaustive grounds for refusing enforcement under the Convention.

Dr. Kozmenko addressed the case of an enforcement action in a jurisdiction where neither the ICSID Convention nor the New York Convention are in force. In that situation, researching the location where an adverse party holds its assets is a useful exercise prior to invoking an arbitration clause.  If essentially all of that party’s assets are located in jurisdictions where neither the ICSID Convention nor the New York Convention are in force (or where reciprocity reservations prevent application of these instruments), then enforcement can prove challenging.  Dr. Kozmenko noted that, when seeking enforcement in such jurisdictions, due diligence research on the governing laws, including reciprocity reservations, international treaties, and local/national laws might also prove useful.  She explained that finding good local counsel is also key in this respect. Dr. Kozmenko concluded by noting that the best option is often not to arbitrate in this type of jurisdiction, and to ensure that assets of a counter party are located in reputable and accessible jurisdictions.

Ms. Schröder then addressed the practical consequences of the ground-breaking Achmea judgment of the CJEU, which remains a topic of significant interest in Europe.  She discussed the possible implications of the judgment, which are still very unclear – as arbitral tribunals and national courts have so far adopted different approaches.    Ms. Schröder pointed out that, even though all EU Member States have declared in January 2019 that they will terminate all their intra-EU BITs by the end of the year, they had not done so yet.  Ms. Schröderalso highlighted the significant questions that remain to be resolved with respect to the recent judgment issued by the General Court of the CJEU in the Micula v. EC case (T-624/15, T-694/15 and T-704/15) annulling the Commission’s 2015 decision, which declared that any implementation or execution of the Micula v. Romania award rendered by an arbitral tribunal on December 11, 2013 would constitute illegal State aid. 

Ms. Schrödersummed up by explaining that all  current uncertainties relating to the enforcement of intra-EU arbitral awards leave open significant questions as to parties’ rights and obligations under pre-existing BITs, especially because national courts have come to varying and divergent conclusions when faced with enforcement issues of arbitral awards rendered on the basis of an intra-EU BIT.

Ms. Dahlberg then stressed the absence of a clear definition of public policy, as a general matter, and particularly under the New York Convention.  Even though there is increasing awareness of important public policy issues, including money laundering and corruption, and although countries are seeking to bring arbitration in line with high-profile public policy initiatives, in practice, the use of this ground is exceptional, interpreted very narrowly and applied to only the fundamental principles of a country.  Ms. Dahlberg illustrated the challenge using two cases, one in which the Singapore High Court set aside, on public policy grounds, parts of an award rendered against children who were between the ages of 3-8 years old when the offending events occurred.  She cited a second award that was rendered in favor of a Latvian businessman who acquired a bank that was subsequently confiscated by the government on the grounds that it was being used for money laundering purposes.  The arbitral tribunal in that case ruled that several provisions of Kyrgyzstan – Latvia BIT (2008) were breached and the award ordered the state to pay compensation.  However, on annulment, the Paris Court of Appeals set aside the award on public policy grounds, re-affirming the government’s initial finding of money laundering.

Last but not least, Dr. Kozmenko addressed the difficulties of getting a State to comply with an award, focusing on the highly relevant topic of State immunity. She described the differences between jurisdictional immunity and immunity of enforcement as well as absolute and non-absolute immunity. She stressed that, although a waiver could be implemented into an arbitration agreement, national and even international law would determinate its effectiveness.

After the close of the second panel, participants continued to discuss post-award remedies with the faculty at a cocktail reception on the grounds of the Liechtenstein Palace. 

The workshop was organized by Ms. Bilanováand Mr. Kudrna, together with Mr. Panos Chalkias (Associate, White & Case (Geneva) and Young ICCA Co-Chair), and Mr. Matthew Morantz (Associate, Curtis, Mallet-Prevost, Colt & Mosle (NY) and Young ICCA Events Coordinator).  Logistical support was provided by KPMG Czech Republic.  A video of the event is available online: Panel 1 and Panel 2.

Following the workshop, Young ICCA members were invited to attend the 9th Annual Investment Treaty Arbitration Conference hosted by KPMG and the Ministry of Finance of the Czech Republic.

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