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Convention on the Recognition and Enforcement of Foreign Arbitral Awards
The Convention on the Recognition and Execution of Foreign Arbitral Awards signed in New York on 10 June 1958, is of great practical importance for the legal effectiveness of international arbitration. The convention is adhered to by more than 110 States and continues to attract new signatories.
This treaty replaces two older multilateral conventions: the Geneva Protocol of 1923 relating to the enforcement of arbitration agreements and the Geneva Convention of 1927 for the execution of foreign arbitral awards. These two conventions no longer have effect in the states which are bound by the New York Convention.
Despite its title, the New York Convention does not only apply to the recognition and enforcement of foreign arbitral awards, but also to arbitration agreements. Arbitration agreements are agreements between parties (to a contract) to submit their dispute to arbitration, most often in the form of a clause in their original contract. As concerns the arbitration agreement, the New York Convention lays down the general principle that the arbitration agreement must be in writing and that a tribunal in one contracting State must refer the parties back to arbitration when it is served with an arbitration agreement which indicates that the subject of the dispute must be referred to arbitration.
As concerns the recognition and execution of foreign arbitral awards, the New York Convention sets the principle that the holder of an award must merely produce the award and the arbitration agreement under which the award was made, for it to be recognized and be enforceable. The party who opposes enforcement of the award must establish the existence of grounds to deny recognition and enforcement. In this regard, the Convention provides a limited series of grounds for refusal of recognition and enforcement of foreign arbitral awards. However, no review of the merits of an award to which the Convention applies are allowed.
The grounds are as follows, with the burden of proof resting on the party who wishes to make the exception: incapacity of the party or invalidity of the arbitration agreement; denial of a fair hearing; excess of authority or lack of jurisdiction; procedural irregularities.
There are two other circumstances in which an award may be deemed invalid and which can be considered ex officio by the judicial authority requested to recognize or enforce the decision: if the subject matter which formed the basis of the arbitration was not capable of settlement by arbitration according to the law of that country; or recognition and enforcement of the award would be contrary to the public policy of that country.
Two reservations exist to the Convention as a whole. The first, described as the reciprocity reservation, declares that a State need only apply the Convention to other contracting States. The second, described as the commercial reservation, declares that a State may not apply the convention to matters which are not considered commercial under its laws. Several countries have adhered to the Convention without these reservations.
