International Arbitration Proceedings

Unchallenged grounds during arbitration proceedings

Certainly, the New York convention1 provides for grounds that can be objected during the

arbitration process.2 Firstly, an obvious ground that could lead to an objection is when an

arbitration agreement is described as legally invalid.3 Secondly, contravening the due process

could render the agreement null and void.4 Thirdly, the ability of the arbitration process to

correspond to the agreement entered into by the participating parties.5 Fourthly, if the tribunal

tasked with arbitration is wrongly constituted, it could provide a fertile ground to raise

objections.6 While taking these objections into consideration, the courts have always pre-

empted the notion that parties who had not raised objections on the above-mentioned grounds

during the arbitration process should desist from doing so during the arbitral enforcement

proceedings. Therefore, this doctrine of prohibiting arbitrating parties from raising these

remonstrations is called the doctrine of estoppel.7

The doctrine of estoppel was applied against a party in the case of China Nanhai Oil Joint

Service Corporation Shenzlien Branch v Gee Tai Holdings Co Ltd8 who had attempted to

invoke the ground of invalidity as a conduit to challenge the enforceability of an a arbitration

award. Uniquely the party to the dispute had not attempted to challenge the jurisdiction of the

arbitral tribunal, when the arbitration process was ongoing. The court in rejecting the ground

of invalidity as raised by the party of arbitration noted that that party was fully aware that the

tribunal was acting beyond its jurisdiction but opted not to raise the ground during arbitration.
1
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) 1958
effective on 7 June 1959
2
Sec 207 Federal Arbitration Act,9 U.S.C. § 201-208 (1980)
3
Matthias Scherer and Sam Moss, ‘Resisting Enforcement of aForeign Arbitral Award under the New York
Convention’ (2008) 51 INTER-PACIFIC BAR ASSOCIATION JOURNAL 17, 21
4
Ibid
5
Ibid
6
Ibid
7
Ibid
8
[1995] HKLR 215 (Supreme Court of Hong Kong, 1994), YBCA, vol XX (1995), p 671

[1]
Identically, The Higher Court of Appeal of Bavaria also arrived at a similar decision in the

dispute involving K Trading Company v Bayerische Motoren Werke AG9 where BMW

contended that whoever signed the agreement containing the arbitral clauses did not possess

the requisite powers needed to sign the arbitration agreement. Despite being fully aware of

this fact, BMW did not raise or object this fact during the arbitral process. In affirming the

doctrine of estoppel, the court stated that this doctrine is necessary to forestall incidences of

mala fides by rejecting any presented objection that had not been raised during the arbitration

process. It is important to note that the doctrine of estoppel has not been denotatively outlined

within the New York Convention and thus its application has to be impliedly derived

especially from the interpretation of Article II which as a legal principle interdicts application

of a contrasting conduct. Notably, this principle is only applicable to all mentioned

objections grounds raised under Article V of the New York Convention and party raising it

must have taken such opportunity during the arbitral proceedings as further depicted in the

case of Hainan Machinery Import and Export Corporation v Donald & McArthy Pte Ltd.10

Therefore, a well-timed objection during the arbitration process is regarded as sine qua non

condition necessary for articulating objections as outlined in the New York Convention

necessary for dissenting enforcement. Additionally, courts tasked with enforcement

jurisdiction often consider raising objections as against the doctrine of uberrimae fidei and

thus obliged to reject such claims.

Legal invalidity

As noted above, only grounds that are sufficiently raised and objected during the arbitration

process are the ones that would be entertained during the enforcement proceedings. One of

the commonly raised objections during the arbitral proceedings is the invalidity in the

9
[2005] 1⁄4 YCA XXX, 568 (at 571)
10
[1996] 1 Singapore Law Reports 34 (High Court, 1995), YBCA, Vol XXII (1997), P 771

[2]
applicability of the legal parameters as anticipated by the disputing parties. Under article V(1)

(a) of the New York Convention the court is under the obligation to refuse enforcement if the

agreement subjected to the arbitration process is found to be contravening the law.11 This

ground is based on the doctrine of due process as illustrated in the Paklito Investment Ltd v

Klöckner East Asia Ltd12case where an award delivered in China based on China International

Economic and Trade Arbitration Commission (CIETAC) was denied because one of the

parties disputing the award was denied an opportunity to point out to the reports concerning

the expert appointed by the tribunal.

Similarly, enforcement was denied in a German case because the respondent who was

participating in the proceedings felt that his role was limited to submitting documentations

related to the contract in dispute and nominating an arbitrator. Conversely, the respondent

was kept in the dark concerning the arguments articulated by the plaintiff. Certainly, the court

decided that denial of such an opportunity to further one's claims without being furnished the

arguments of your opponents’ amounts to a contravention of the doctrine of due process.

Further, the ground of excess of jurisdiction though limitedly applied can also be relied upon

as put forward by article V (1) (c) of New York Convention.13 Expressively, in Tiong Huat

Rubber Factory v Wah-Chang International Company Ltd ,14 where the court overturned an

enforcement ruling citing that the award rendered by the arbitrators due to the fact that they

acted beyond their jurisdiction and thus the award could not be enforced.

Likewise, as preponderated by article V (1) (d) of New York Convention, provides that

enforcement can be turned down on the basis that the composition of the arbitral tribunal was

11
Gerold Herrmann, The Role of the Courts under the UNICITERAL model law script in Julian Lew (ed.),
Contemporary Problems in International Arbitration (Springer Science & Business Media, 2013) 173
12
[1993] (High Court of Hong Kong) YBCA, Voi XiX (1994), P 664
13
Herbert Kronke, Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the
New York Convention (Kluwer Law International, 2010) 259
14
[1990] (Hong Kong Court of Appeal), YBCA,Voi XVII (1992), P 516, at para 19.

[3]
improperly constituted. For instance, a court in Germany declined to enforce an arbitral

award because the award was delivered by an inadequate number of arbiters. The law

provided for three but it was delivered by two arbiters. Although the outcome seemed similar,

that award had been set aside for annulment by another arbitral tribunal in another

jurisdiction namely, Belarus.15

Correspondingly, as provided for under article V (1) (e) of New York Convention, the award

will be un-enforceable if it has been set aside.16 As enunciated in the case of Termorio v

Electranta,17where the US Court of Appeals for the District of Columbia, rejected to enforce

such an arbitration award because it had been set aside in another forum. Furthermore, the

court stated that the appellants had no cause of action because the award had been rightfully

annulled.

Public policy

Identically, the public policy ground as cited by Article V (2) of the New York Convention

sets up the basis where an arbitration award can remain un-enforcement if the award

contravenes the public policy doctrine.18 Markedly, this doctrine is intertwined with the

jurisdiction in which the arbitral award could be legally enforced. As instanced in Cour d'

appel de Paris19 case and SNF SAS v. Cytec Industries B.V,20 where the courts reasoned that

enforcement of an arbitral award could only be turned down if such a contravention cited is

real, blatant and tangible. Equally as represented in Hebei Import and Export Corporation v

Polytek Engineering Co Ltd21 denial to enforce an arbitration award due to the fact that it

15
PT Putrabali v Rena Holding [2007] 25 ASA Bull4/2007, P 826
16
Joseph McLaughlin and Laurie Genevro, ‘Enforcement of Arbitral Awards under the New York Convention -
Practice in U.S. Courts’ (1986), 3:249 INTERNATIONAL TAX & BUSINESS LAWYER 249, 267
17
[2007] 487 F2d 928 (US Court of Appeals for the District of Columbia Circuit), note Goldstein, 25 ASA
BulL. 3/2007, p 643
18
Georgios Zekos, International Commercial and Marine Arbitration (Routledge, 2008) 44
19
[2006] (Paris Court of Appeal) (Ire Ch C), Rev Arb 2007,p 100, note S Bollée.
20
[2006] Court of Appeal of Paris, XXXII Y.B. COM ARB 282
21
[2000] 3 Intl Arb LR 185 at187

[4]
violates public policy must be restrictively applied and whatever is relied upon must be

significantly offensive to warrant such a decision.

Despite the proposition set forth by Hebei Import and Export Corporation v Polytek

Engineering Co Ltd case, it should be noted that public policy is an effective argument to

deny enforcing an arbitration award. As exemplified in COSID Inc v Steel Authority of India

Ltd22enforcement of an arbitral award was declined after one party cited force majeure that

limited its powers to satisfy its contractual obligations which was paramount to the dispute.

Uniquely, public policy although limited in its use it is such an effective conduit to limit

enforcement of an arbitral award. In recognition of its repercussions during enforcement of

the arbitration award, enforcement courts have adopted the concept of extraordinary

circumstances in deploying of the doctrine of public policy. Notably, a fraudulent conduct is

considered an extraordinary circumstance. As deliberated by the French court in European

Gas Turbines SA v Westman International Ltd,23 where a decision was arrived at stating that

fraudulent financial submission constituted an extraordinary circumstance and thus against

public policy. In addition, in arbitral award enforcement where there are claims and

counterclaims, the disputing parties can elect to invoke the concept of set off as illustrated in

the case of Mangistaumunaigaz Oil Producton Association v United World Trade Inc.24

Consequently, set-offs are equally considered an extraordinary circumstance under a public

policy that affects the enforceability of arbitral awards.

Bibliography

A. Primary sources
22
[1986] (High Court of New Delhi), YBCA,Voi XI, P 502, at 506-07
23
[1995] YBCA, Voi XX, P 198 at 206
24
[1997] Civil Action No 96-WY-1290-WD (US District Court, District of Colorado) at para 1-2, YBCA, Voi
XXIVa (1999), p808

[5]
 a. Cases

China Nanhai Oil Joint Service Corporation Shenzlien Branch v Gee Tai Holdings Co Ltd

[1995] HKLR 215 (Supreme Court of Hong Kong, 1994), YBCA, vol XX (1995), p 671

COSID Inc v Steel Authority of India Ltd, [1986] (High Court of New Delhi), YBCA,Voi XI,

P 502, at 506-07.

Cour d' appel de Paris [2006] (Paris Court of Appeal) (Ire Ch C), Rev Arb 2007,p 100, note

S Bollée.

European Gas Turbines SA v Westman International Ltd [1995] YBCA, Voi XX, P 198 at

206

Hainan Machinery Import and Export Corporation v Donald & McArthy Pte Ltd, [1996] 1

Singapore Law Reports 34 (High Court, 1995), YBCA, Vol XXII (1997), P 771

Hebei Import and Export Corporation v Polytek Engineering Co Ltd [2000] 3 Intl Arb LR

185 at187

K Trading Cov Bayerische Motoren Werke AG [2005] 1⁄4 YCA XXX, 568

Mangistaumunaigaz Oil Producton Association v United World Trade Inc [1997] Civil

Action No 96-WY-1290-WD (US District Court, District of Colorado) at para 1-2, YBCA,

Voi XXIVa (1999), p808

Paklito Investment Ltd v Klöckner East Asia Ltd, [1993] (High Court of Hong Kong) YBCA,

Voi XiX (1994), P 664

PT Putrabali v Rena Holding [2007] 25 ASA Bull4/2007, P 826

[6]
SNF SAS v. Cytec Industries B.V. [2006] Court of Appeal of Paris, XXXII Y.B. COM ARB

282

Termorio v Electranta [2007] 487 F2d 928 (US Court of Appeals for the District of Columbia

Circuit), note Goldstein, 25 ASA BulL. 3/2007, p 643

Tiong Huat Rubber Factory v Wah-Chang International Company Ltd,[1990] (Hong Kong

Court of Appeal), YBCA,Voi XVII (1992), P 516, at para 19.

b. Statutes and statutory instruments

Federal Arbitration Act,9 U.S.C. § 201-208 (1980)

c. Treaties

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York

Convention) 1958 effective on 7 June 1959

B. Secondary sources

a. Books

Kronke, H., Recognition and Enforcement of Foreign Arbitral Awards: A Global

Commentary on the New York Convention (Kluwer Law International, 2010)

Zekos, G., International Commercial and Marine Arbitration (Routledge, 2008)

b. Contributions to edited books

Herrmann, G., The Role of the Courts under the UNICITERAL model law script in Julian

Lew (ed.), Contemporary Problems in International Arbitration (Springer Science &

Business Media, 2013)

c. Journal articles

[7]
McLaughlin, J. and Laurie Genevro, ‘Enforcement of Arbitral Awards under the New York

Convention - Practice in U.S. Courts’ (1986), 3:249 INTERNATIONAL TAX & BUSINESS

LAWYER 249-272

Scherer, M. and Sam Moss, ‘Resisting Enforcement of a Foreign Arbitral Award under the

New York Convention’ (2008) 51 INTER-PACIFIC BAR ASSOCIATION JOURNAL 17-26

[8]