REUTERS | Jean-Paul Pelissier

Breaking the waivers? Defences to enforcement

Can a New York Convention defence to enforcement of an award be waived or contracted out of in advance of any dispute arising? And if so, might institutional arbitration rules incorporate provisions which (intentionally or otherwise) have the effect of precluding reliance on the New York Convention defences to enforcement? For example, Article 35(6) of the International Chamber of Commerce (ICC) Arbitration Rules (2017) states that “by submitting the dispute to arbitration under the Rules, the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.” Does this waiver include defences to enforcement? This is a tricky issue which has received surprisingly little consideration, at least as a matter of English law.

The starting point must be the terms of the New York Convention itself, enacted in English law in sections 100-103 of the Arbitration Act 1996 (AA 1996). Article III provides that the contracting states “shall recognise arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied on”. Article V (and section 103 of the AA 1996) sets out the so-called defences to enforcement. Article V(1) (and section 103(2)) provides that recognition and enforcement “may be refused at the request of the party against whom it is invoked” in five situations. This provision appears to contemplate that the court’s discretion to refuse recognition or enforcement will arise only where the party against whom enforcement is sought “furnishes… proof” of the relevant defence.

Further “defences” (non-arbitrability and public policy) are stipulated in Article V(2) and section 103(3). Here, there is no express requirement that the party against whom enforcement is sought should “request” the court to refuse enforcement, nor that proof should be furnished. The provision simply states that recognition and enforcement may be refused if enforcement would be contrary to public policy, or that the dispute was not arbitrable.

These differences in formulation perhaps throw some light on the issue of the extent to which parties may validly waive or contract out of the defences. The New York Convention, and AA 1996, seek to give effect to the concept of party autonomy – but as a matter of principle, parties are generally not entitled to exempt themselves from the application of mandatory rules of law such as rules reflecting national public policy. Article V(1) and section 103(2) proceeds on the basis that the raising of the defences is a matter primarily within the parties’ control, in the sense that the award debtor must plead and prove the defence in order to enable the court to consider whether to exercise its discretion to refuse enforcement or recognition. By contrast, Article V(2) and section 103(3) appears to allow the court to proceed to the discretionary phase if it makes a finding of its own motion that enforcement would involve a breach of public policy, or that the dispute was not arbitrable. This analysis would suggest, broadly, that defences under Article V(1) could be waived by agreement, but defences of public policy and arbitrability under Article V(2) could not.

On one level, this makes some sense: Article V(2) is concerned with serious matters of public policy in which states clearly have an interest. Article V(1), by contrast, might be seen as raising defences which operate as between the parties and which could, therefore, be waived or contracted out of if the award debtor so intended. Some jurisdictions have, on this basis, accepted the general principle that the parties may waive the defences set out in Article V(1), but are not entitled to contract out of the application of national mandatory rules of public policy and arbitrability.

But further consideration reveals some potential anomalies here, at least as far as English law is concerned. The grounds of defence set out in Article V(1) correspond substantially with grounds that, as a matter of English law, would entitle the award debtor to challenge the award under sections 67 (substantive jurisdiction) of AA 1996 or 68 (serious irregularity). Sections 67 and 68 are mandatory provisions – that is, they cannot be contracted out of by parties to an arbitration, at least where the AA 1996 applies. The rationale behind this is that these provisions are considered of such fundamental importance that a procedure that does not comply with them could not properly be characterised as “arbitration”. If that is right, why should parties be entitled to contract out of such fundamental matters where they potentially give rise to defences to enforcement? There is arguably a lack of logic in insisting upon the availability of such grounds of objection in one context but not the other. Perhaps one answer, albeit not a complete answer, is provided by the fact that the section 67-68 grounds (prima facie) apply only where the arbitration is seated within England and Wales, whereas the New York Convention grounds set out in section 103 apply (in most cases) in the context of the enforcement of foreign-seated awards.

Assuming it is possible to contract out of, or waive, the Article V(1) defences, then the next issue is whether, as a matter of contractual construction, provisions in institutional rules could reasonably be understood as having that effect. It is a principle of English contract law that the clearest words are required to waive accrued legal rights. Are the provisions in institutional rules sufficiently clear for these purposes? I would suggest not. For example: Article 35(6) of the ICC rules waives “recourse” against awards. Similarly, Article 26.8 of the London Court of International Arbitration (LCIA) Arbitration Rules (2014) waives “appeal, review or recourse”. It is doubtful whether these formulations are sufficiently broad to exclude the raising of defences to enforcement: much clearer words, probably including an express reference to enforcement, would be required to achieve this result.

In conclusion: there is no clear answer to these questions as a matter of English law, but it seems to me that in principle it would be very difficult to persuade a court that institutional arbitration rules have the effect of destroying all defences to enforcement.

20 Essex Street Karen Maxwell

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