1958 Convention: Relationship with domestic law and other treaties (Article VII)

1958 Convention: Relationship with domestic law and other Treaties (Article VII)

 

Article VII(1) of the New York Convention addresses the relationship between the Convention and national laws of the forum and other international Treaties binding upon the State where enforcement is sought in the following terms:

“The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.”

 

More favourable law

Article VII(1) is called the more-favourable-right provision, since it allows a party seeking recognition and enforcement to rely on rules that are more favourable than those of the Convention. More favourable rules may be found: (i) in the national law of the forum or (ii) in treaties applicable in the territory were recognition and enforcement are sought. In practice, treaties or national law will be more favourable than the New York Convention if they permit recognition and enforcement by reference to less demanding criteria, whether in terms of procedure or of grounds for non-enforcement. By now it is a widely (though not universally accepted) understanding that the provisions of Article VII(1) also apply to the recognition and enforcement of the arbitration agreements addressed in Article II. Article VII(1) is mostly invoked in order to overcome the formal requirements applicable to the arbitration agreement by virtue of Article II(2) (the writing requirement, see Chapter II at IV.2.1). In a Recommendation adopted by the United Nations Commission on International trade law (UNCITRAL) on 7 July 2006 (see Annex III) it is recommended that

“also article VII, paragraph 1 of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards , done in New York, 10 June 1958, should be applied to allow any interested party to avail itself of rights it may have, under the law or treaties of the country where an arbitration agreement is sought to be relied upon, to seek recognition of the validity of such an agreement” .

The history of the Convention also supports this view. The provision on the enforcement of arbitration agreements was included on the last day of the negotiations. The Other provisions were not amended to take account of this last-minute addition. Article VII should thus not be construed as excluding arbitration agreements from its scope.

 

The New York convention and other international treaties

The first part of Article VII provides that the Convention does not affect the validity of other international treaties on the recognition and enforcement of arbitral awards which are in force in the enforcement State. The second part of the same provision specifies that the parties are entitled to seek recognition and enforcement of an award pursuant to either the New York Convention or another treaty or national laws, whichever is more favourable. The more-favourable-right principle derogates from the classical rules of international law on conflicting treaties (lex posterior and lex specialis). Pursuant to the more-favourable-right principle, it is the more favourable one that prevails.

 

The New York convention and national law

With respect to the relationship between the New York Convention and national law of the State in which enforcement is requested, three situations must be distinguished:

– The New York Convention and national law both have rules on the same issues. In this case, the Convention supersedes national law, unless the national law is more favourable. In some cases the court will have to refer to legislation implementing the Convention (case (i) below);

– The New York Convention contains no rule on a given matter. In this event, courts will apply their national law to supplement the New York Convention (case (ii) below);

– The New York Convention refers explicitly to national law. In this case, the courts must apply national law to the extent permitted by the Convention (case (iii) below).

Case (i) The Convention supersedes national law

Case (ii) National law supplements the Convention

The New York Convention does not establish a comprehensive procedural regime for the recognition and enforcement of foreign awards. With regard to the procedure, the Convention only provides rules on the burden of proof and the documents to be submitted by the requesting party. It is silent on other procedural matters. Article III provides that Contracting States shall recognize and enforce arbitral awards in accordance with the rules of procedure of the State where the award is relied upon. Thus, the procedure for recognition and enforcement of foreign awards is governed by national law, except for the issues of burden of proof and the documents to be submitted (see Chapter III). Without being exhaustive, the following procedural issues are governed by national law:

– The time limit for filing a request for recognition or enforcement;
– The authority competent to recognize or enforce awards;
– The form of the request;
– The manner in which the proceedings are conducted;
– The remedies against a decision granting or refusing exequatur;
– The availability of a set-off defence or counterclaim against an award.

An issue may arise if a State poses stringent jurisdictional requirements to accept that its courts rule on an enforcement request. In conformity with the purpose of the Convention and its strong pro-enforcement bias, the presence of assets in the territory of the enforcement State should suffice to create jurisdiction for enforcement purposes. In spite of this, certain United States courts have required that they have personal jurisdiction over the respondent and award debtor.

Case (iii) The Convention refers expressly to national law Certain provisions of the New York Convention refer expressly to national law. This is the case for example of Article I (in connection with the commercial reservation), Article III (in connection with the procedure for recognition and enforcement) and Article V (certain grounds of nonenforcement refer to national law). This is not necessarily the law of the forum but the law under which the award was made.

Source: ICCA’S Guide to the interpretation of the 1958 New York convention. Not changes allowed.

Conclusion

Notes

See Also

References and Further Reading

About the Author/s and Reviewer/s

Author: international