Enforcement of Foreign Arbitral Awards

In one line

The New York Convention of 1958 requires every Contracting State to recognise arbitral awards as binding and to enforce them, and permits refusal only on five grounds the resisting party must prove and two the court may raise itself.

Why the Convention exists

An award is worth nothing where the loser has no assets. The tribunal in [UNCITRAL and International Commercial Arbitration] may be impeccably constituted and its award final, and if the assets are in another country the winner must persuade that country's courts to enforce it. Before 1958 that depended on the Geneva Protocol of 1923 and the Geneva Convention of 1927, under which the winner had to prove the award was final in the country where it was made, which in practice meant obtaining a judgment there first, the double exequatur.

The New York Convention solved that by reversing the burden and abolishing the double requirement. The winner produces two documents; the loser must then prove one of a short list of defects.

This is why arbitration is used across borders at all. There is no comparable treaty for the enforcement of foreign court judgments with anything like the same participation, so a foreign arbitral award is easier to enforce than a foreign judgment. That single fact explains the growth of international commercial arbitration.

Scope: article I

Article I(1). The Convention applies to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, arising out of differences between persons, whether physical or legal. It applies also to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.

Two limbs, and the second is not redundant. The first is territorial: an award made abroad. The second catches an award made in the enforcing State which that State's own law does not treat as domestic, for example because the procedure of a foreign law was applied.

Article I(2). Arbitral awards include not only awards by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted. So both ad hoc and institutional arbitration are covered.

Article I(3), the two reservations. On signing, ratifying or acceding, any State may:

on the basis of reciprocity, declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State; and

declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the national law of the State making such declaration.