1958 Convention: Territorial scope of application

Article I(1) defines the territorial scope of application of the New York Convention with regard to arbitral awards in the following terms: “This Convention shall apply 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, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.” Accordingly, the Convention deals only with the recognition and enforcement of foreign and non-domestic arbitral awards (see this Chapter below at III.1). It does not apply to the recognition and enforcement of domestic awards. The Convention contains no similar provision with regard to arbitration agreements. However, it is established that the Convention only applies to “foreign” or international arbitration agreements (see Chapter II).

Any award made in a State other than the State of the recognition or enforcement court falls within the scope of the Convention, i.e., is a foreign award. Hence, the nationality, domicile or residence of the parties is without relevance to determine whether an award is foreign. However, these factors may be important when determining if an arbitration agreement falls within the scope of the Convention (see Chapter II and Chapter III). Moreover, it is not required that the State where the award was made be a party to the Convention (unless of course the State where recognition or enforcement is sought has made the reciprocity reservation; see this Chapter below at IV.1). Where is an award made? The Convention does not answer this question. The vast majority of Contracting States considers that an award is made at the seat of the arbitration. The seat of the arbitration is chosen by the parties or alternatively, by the arbitral institution or the arbitral tribunal. It is a legal, not a physical, geographical concept. Hearings, deliberations and signature of the award and other parts of the arbitral process may take place elsewhere

The second category of awards covered by the Convention are those which are considered as non-domestic in the State where recognition or
enforcement is sought. This category broadens the scope of application of the Convention. The Convention does not define non-domestic awards. Very rarely, it is the parties that indicate whether the award to be rendered between hem is non-domestic. Each Contracting State is thus free to decide which awards it does not regard as domestic and may have done so in the legislation implementing the Convention. 1 In the exercise of this freedom, States generally consider all or some of the following awards as non-domestic:

– Awards made under the arbitration law of another State;
– Awards involving a foreign element;
– A-national awards.

The first type of awards will only arise in connection with an arbitration having its seat in the State of the court seised of the recognition or enforcement but which was governed by a foreign arbitration law. This will be a rare concurrence because it implies that the national law of the recognition or enforcement court allows the parties to submit the arbitration to a lex arbitri other than that of the seat.

The second category refers to awards made within the State of the recognition or enforcement court in a dispute involving a foreign dimension, such as the nationality or domicile of the parties or the place of performance of the contract giving rise to the dispute. The criteria for an award to be considered non-domestic under this category are usually established by the States in their implementing legislation (see at fn. 7 for the example of the United States). Very rarely, the parties indicate that their award is non-domestic.

The third type refers to awards issued in arbitrations that are detached from any national arbitration law, for example, because the parties have explicitly excluded the application of any national arbitration law or provided for the application of transnational rules such as general principles of arbitration law. Although there has been some discussion as to whether a-national awards fall within the scope of the New York Convention, the prevailing view is that the Convention does apply to such awards. These cases are extremely rare.

The New York Convention does not define its scope of application with respect to arbitration agreements. However, it is well established that the New York Convention does not govern the recognition of domestic arbitration agreements. It is equally accepted that the Convention is applicable if the future arbitral award will be deemed foreign or nondomestic pursuant to Article I(1). Some courts reason that the Convention applies if the arbitration agreement is international in nature. The internationality of the agreement results either from the nationality or domicile of the parties or from the underlying transaction.

When determining whether an arbitration agreement falls within the scope of the Convention, courts should distinguish three situations:

– If the arbitration agreement provides for a seat in a foreign State, the court must apply the New York Convention;

– If the arbitration agreement provides for a seat in the forum State, the court

• must apply the Convention if the future award will qualify as non-domestic pursuant to Article I(1), second sentence;
• may apply the Convention if the arbitration agreement is international due to the nationality or domicile of the parties or to
foreign elements present in the transaction;

– If the arbitration agreement does not provide for the seat of the arbitration, the court must apply the Convention if it is likely that the future award will be held to be foreign or non-domestic in accordance with Article I(1). In addition, it may apply the Convention if the court deems the agreement to be international.

1. For example, the United States Federal Arbitration Act (Title 9, Chapter 2) has made the following provision with respect to a “non-domestic award: “Sect. 202. Agreement or award falling under the Convention An arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract, or agreement described in section 2 of this title, falls under the Convention. An agreement or award arising out of such a relationship which is entirely between citizens of the United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states. For the purpose of this section a corporation is a citizen of the United States if it is incorporated or has its principal place of business in the United States.”

Author: international