On 17 July 2019 Papua New Guinea (PNG) became the 160th state to accede to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Convention, which will come into force in PNG on 15 October 2019. While this is a welcome move, it is of consequence in relatively limited circumstances and further reform is to be encouraged.
What is the New York Convention?
Each contracting state to the New York Convention agrees to recognize arbitration agreements and enforce arbitral awards of other contracting states. A contracting state can only refuse to enforce a foreign arbitral award from another contracting state on a limited number of grounds set out in the Convention.
The country which is the 'seat' or 'place' of arbitration is therefore important in determining whether it is an award from another contracting state.
What has changed?
Under PNG's existing Arbitration Act 1951, an Award that arose from any recognised submission (i.e. written agreement to submit disputes to arbitration) involving a PNG party or property in PNG should already be enforceable in PNG. Awards made in arbitrations whose seat or place is in foreign states that are or are not signatories to the New York Convention can already be enforced in PNG, and to that extent the accession does not advance matters substantially.
However, until now, if a party to a PNG seated arbitration wanted to enforce an award in a foreign jurisdiction without PNG being party to the New York Convention, it would be entirely dependent on the foreign jurisdiction's local law recognising the PNG award and providing for its enforcement – which could be procedurally difficult or even impossible. This difficulty is compounded by the fact that at least 45 percent of contracting states to the New York Convention only recognise and enforce arbitral awards of other contracting states.
What it means
PNG acceding to the New York Convention means that PNG seated arbitral awards can now be recognised and enforced in 159 other contracting states, and particularly in contracting states which only recognize and enforce arbitral awards from other contracting states. This is a substantive legal improvement but perhaps of limited current practical effectiveness as there are relatively few PNG-seated arbitrations, and fewer again where enforceability in a wide range of foreign jurisdictions is a key factor – though over time it might encourage more domestic arbitrations.
What comes next?
The next step for PNG to ensure its accession to the New York Convention makes a practical impact is to update its currently outdated domestic legislation, preferably by adopting the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Arbitration. The UNCITRAL Model Law on Arbitration is the recommended legislative text for contracting states to enact as part of domestic law to give effect to the New York Convention.
The adoption of the UNCITRAL Model Law on Arbitration has the added advantage of readily accessible international jurisprudence on its provisions. UNCITRAL maintains a database called 'Clout' (Case Law on UNCITRAL Texts) allowing users to quickly find foreign jurisprudence on a common provision – a particularly useful tool for PNG which has very little case law on arbitration and enforcement of awards.
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