I. Arbitral Awards envisaged under NYC
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "New York Convention" or "NYC" or the "Convention") is one of the most important and successful United Nations treaties in the area of international trade law and is considered to be the cornerstone of the international arbitration system1. The NYC lays down several guidelines for enforcement and recognition of the arbitral awards, subject to the national laws of the country in which enforcement is sought. The scope of New York Convention in terms of the awards falling within its ambit has been a conversational topic and has been widely discussed in the international arbitral community.
Primarily, it is Article I(1) of the NYC which provides for the foundation for scope of enforcement and the rest of the Convention rests upon this one Article as this Article specifies the types of arbitral awards which fall within the Convention's field of application.2 Article I, like the rest of the Convention, was drafted with the aim of "going further than the Geneva Convention in facilitating the enforcement of foreign arbitral awards".3 By making the reciprocity requirement optional and doing away with the nationality or residence requirement, Article I ensures that the New York Convention has a broader scope of application.
Essentially, the Convention applies to foreign awards and non-domestic awards, the first sentence of Article I(1) recognises foreign awards as being those awards which are made in the territory of a State other than the State where recognition or enforcement of such awards is sought. On the other hand, non-domestic awards are envisaged in the second sentence of Article I(1) of the Convention as those awards that are not considered as domestic awards in the state where their recognition or enforcement is sought.
However, owing to the wide scope of the territorial approach provided in the first sentence of Article I(1), certain interpretational concerns, pertaining to the Convention's scope of application, arise. One such question which deserves consideration is whether a domestic award passed in a domestic-seated arbitration between parties of the same nationality can be enforced in another jurisdiction as a foreign award under the NYC. In this Article, an attempt has been made to answer that question by analysing the scope of Article I(1) while referring to relevant precedents and interpretations offered by various international authors in this regard.
II. Scope of "Foreign Award" under Article I(1) of NYC
Even though, the term "foreign award" does not find a specific meaning in the Convention, the first sentence of Article I(1) has been construed to understand the meaning of what consists of a foreign award. The scope of Article I(1) of NYC has been widely discussed in order to determine the applicability of NYC and the same has been interpreted by Mr. Gary Born, in the following manner:
"Article I(1) provides that a "foreign" award is an award made in State A, which is sought to be recognized in State B: in these circumstances, the award is "foreign" in State B. Importantly, the character of an award as "foreign" varies depending on the state where this question is presented: in the foregoing example, the award is "foreign" in State B, but it is not "foreign" in State A. Simply put, an award is "foreign" in a particular state when the award is "made" in a different state (where it will not be "foreign")
The most important interpretative question raised by this definition is determining where an award is "made".. an award is "made" at the seat of the arbitration."4
In line with the text of the Convention, a uniform interpretation has been provided to Article I, so as to make it applicable to all awards made outside the enforcement forum. It becomes abundantly clear that the "location" of where the award was made is the dominant criterion and both sufficient and necessary to attract the application of the Convention. As long as an award is passed in a state other than the enforcing state, factors such as whether the subject matter of the arbitration is international, or the law applied is a foreign one, or nationality the parties become irrelevant in determining whether the award is a foreign award under the Convention.
Quite interestingly, the broad scope of Article I(1) is not an inadvertent effect and the same is clear from the drafting history of the Convention which evidences that the ICC Draft contemplated a treaty on the enforcement of "international arbitral awards."5 Pursuantly, ECOSOC constituted an ad hoc "Committee on the Enforcement of International Arbitral Awards" to review the ICC draft.6 However, the Committee prepared a new draft called the "Convention on Foreign Arbitral Awards," thereby avoiding to limit the scope of application of the Convention to international awards.7
As guided by the drafting history and commentaries on the Convention, it appears that the NYC under Article I(1) foresees a territorial approach and wider view of the term foreign award. By virtue of that, the Convention encompasses within its purview all arbitral awards made in a State other than where the enforcement is sought, thus making such an award which is sought to be enforced, a foreign award.
III. Distinction between "Foreign Award" and "International Commercial Arbitration"
In order to appreciate the scope of "foreign award", it is important to distinguish the concept of foreign award from international commercial arbitration and understand as to how NYC merely envisages compliance with the requirement of a "foreign award" – which is not mandatorily limited to such awards resulting from international commercial arbitrations. An award rendered in a foreign country may concern a purely domestic transaction there, between parties of the same country, or it may involve parties of different nationalities, or call for performance in another country or under another national law. In the latter case, it is likely that the matter will be referred to as involving an "international" arbitration. However, in the former situation, the award if sought to be enforced in another country would take the color of a foreign award in the enforcing state.
It is pertinent to understand that awards rendered abroad flow from either a national/domestic or international arbitration and the text of Article I(1) does not limit the scope to awards made pursuant to international arbitrations only.8 Summarily, all the foreign awards need not arise out of an international commercial arbitration and similarly, every award made in an international commercial arbitration does not necessarily have to be a foreign award. Therefore, in the context of arbitrations comprising of an international element, it is possible to ascribe classifications on the following two basis:
i. Classification on the basis of nationality of the parties (i.e. international or national arbitration)
ii. Classification on the basis of the seat of arbitration (i.e. arbitrations resulting in a "foreign" and "domestic" award).
At this juncture, it is important to note that it is the latter classification that has a bearing on the enforcement of arbitral award and would essentially play a role in determining the nature of the award i.e. whether it would be a domestic or foreign award.As such, the award if enforced in a country other than where it was passed, it would be considered as a foreign award and enforced under the NYC (as adopted by the national legislation of the enforcing state), whereas if the same award is enforced in the country where it was passed, it would constitute a domestic award which would be enforced as per the national arbitration law of that country. Although the nationality of the parties has an impact on the characterisation of the arbitration, what is noteworthy is that the nationality of the parties or nature of arbitration has no impact in categorising the nature of the award. It is merely the place where the award is made that would be the deciding factor to understand the character of the award.
This feature of NYC is further evidenced by drawing a comparison to the European Convention on International Commercial Arbitration of 1961 which provides a definition of an international arbitration while setting out its scope of application.9 However, to the contrary, the NYC confines its application to foreign awards and makes no provision for requirement of an international commercial arbitration. At this point, it is pertinent to refer to the UNCTAD Commentary on International Commercial Arbitration, which succinctly draws a distinction between foreign arbitration and international arbitration in the following manner:
"1.4.1 Foreign arbitration and international arbitration are not the same. An arbitration that takes place in State A is a foreign arbitration in State B. It does not matter whether the arbitration is commercial or non-commercial or whether the parties are from the same country, from different countries or that one or all are from State A. Since even a domestic arbitration in State A is a foreign arbitration in State B, the courts of State B would be called upon to apply the New York Convention to enforcement of a clause calling for arbitration in State A and to the enforcement of any award that would result.
Therefore, when the NYC itself doesn't provide for the requirement of an international commercial arbitration, introducing such an additional criterion to the NYC would essentially be contrary to the intention and purpose of the Convention. This view is supported by the ruling of England and Wales, High Court in IPCO v. Nigeria (NNPC).10 In this case, IPCO (Nigeria) Ltd ("IPCO") was the Nigerian subsidiary of a Hong Kong company. It agreed to construct a petroleum export terminal for the State-owned Nigerian National Petroleum Corp. ("NNPC"). The contract contained a clause providing for arbitration in Nigeria under Nigerian law. Disputes arose under the contract and were referred to arbitration. The tribunal made an award in favour of IPCO. NNPC applied to the Nigerian courts to have the award set aside. Meanwhile, IPCO sought enforcement of the award in the England and Wales High Court. The relevant excerpt of the ruling of England and Wales High Court is reproduced hereinbelow:
".. It is pertinent to underline that the New York Convention contains no nationality condition (unlike the Geneva Convention of 1927) and is thus applicable, as here, when an award is made abroad in an arbitration between parties of the same nationality: Van den Berg, at pp. 15-19. While primarily the New York Convention was undoubtedly intended to facilitate international arbitration rather than the enforcement in a foreign country of a domestic arbitration award, the benefits of the New York Convention are available to a party seeking enforcement in the latter case also. Such cases are necessarily rare but it would be wrong to introduce a nationality condition into the New York Convention by the backdoor. So, for example, the fact of a party's nationality would (by itself) be irrelevant to the availability of a ground for resisting enforcement under s.103(2) or (3) of the Act..."
Furthermore, United States District Court, District of Columbia, in the case of Continental Transfert Technique Limited (Nigeria) v. Federal Government of Nigeria11 had the chance to decide upon an argument that an award rendered in England between two Nigerian parties, under Nigerian substantive and procedural law was "domestic" and thus did not fall under the NYC. However, it is noteworthy that the Court dismissed the contention as being "implausible" and held the following:
"Nigeria advances the implausible argument that the arbitral award Continental obtained and seeks to enforce does not fall under the New York Convention because the Convention applies only to "international" agreements, and the contract between Continental and Nigeria was not "international" because it was formed between Nigerian citizens and governed by Nigerian law. Nigeria misunderstands the purpose and effect of the Convention. The Convention applies to any arbitration award "made in the territory of a State other than the State where the recognition and enforcement of [the] award[ is] sought." New York Convention, art. I. Thus, "[u]nder the Convention, the critical element is the place of the award: if that place is in the territory of a party to the Convention, all other Convention states are required to recognize and enforce the award, regardless of the citizenship or domicile of the parties to the arbitration." In this case, the arbitration award in question was rendered the United Kingdom by arbitrators applying Nigerian law. It is undisputed that both Nigeria and the United Kingdom are parties to the Convention. Since the award was rendered in a participating country other than the United States, the Convention applies.
In a similar vein, Professor Van Den Berg has commented that international enforceability of arbitral awards purely domestic to the place of their seat was a 'harmless "side-effect" of the broad definition of the scope of the NYC.12 He noted in 1981 that it 'scarcely occurs in practice' and had 'not occurred in any of the reported cases'.13 Furthermore, scholars while discussing the applicability of NYC to arbitral awards foreign to the enforcement jurisdiction but domestic to the seat of arbitration, have stated that the NYC applies to 'foreign' arbitral awards, but they need be foreign only to the jurisdiction in which recognition or enforcement is sought. Whether the parties are foreign to each other, or foreign to the seat of the arbitration, does not affect the application of the New York Convention.14
It is noteworthy that there is nothing in the text or structure of the NYC which can be interpreted as putting limitations on the forums in which an award maybe recognised or enforced. Instead, one of the most fundamental objectives of the NYC is to ensure the broad enforceability of arbitral awards. Consistent, with this objective, NYC should not be construed as limiting the forums in which a party may seek to enforce an award in its favour, but should instead be read to facilitate the maximum enforceability of awards in all available forums.
It is further pointed out that the NYC contains no nationality condition (unlike the Geneva Convention of 1927). So, whilst the NYC was primarily intended to facilitate the enforcement of awards against foreign parties, where an award is made abroad between parties of the same nationality, the NYC will also be available to a party seeking to enforce against assets of the other party in other convention countries.
The primary purpose of the Convention is to contribute towards the effectiveness of international commercial arbitration. However, the text and its judicial application demonstrate that arbitral awards - purely domestic to the seat of arbitration - do fall within the Convention's scope. It is likely that this widened scope of application of the Convention perhaps flows from the perception that there was no reason why valid domestic awards should not benefit from the cross-border effects of this widely recognised and significant Convention.15
2. Article I (1) of the New York Convention:
"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."
3. Travaux préparatoires, Report of the Committee on the Enforcement of International Arbitral Awards, E/2704, E/AC.42/4/Rev.1., p. 5.
4. G. Born, International Commercial Arbitration 2941-79 (2d ed. 2014)
5. The ICC Draft, p. 32.
6. Convention on the Recognition and Enforcement of Foreign Awards, Travaux Preparatoires – Comments received from Governments regarding the Draft Convention on the Enforcement on International Arbitral Awards, at 2, U.N. Doc. E/AC.42/1 (Jan. 21, 1955), (Committee on the Enforcement of International Awards).
7. It should be mentioned that the Committee did so because the ICC: "[N]ormally referred to arbitration between States. Since this Draft Convention does not deal with arbitration between States, but with the recognition and enforcement in one country of arbitral awards made in another country, the Committee adopted the title 'Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards' which reflects more accurately the object of the Convention: Convention on the Recognition and Enforcement of Foreign Awards," Travaux Preparatoires – Report of the Committee on the Enforcement of International Arbitral awards, at 5, U.N. Doc. E/2704 and U.N. Doc./E/AC.42/4/Rev.1 (Mar. 28, 1955) (comment of Mr. Herment (Belgium)).
8. Chapter 4: The Obligation to Enforce Awards', in Marike R. P. Paulsso, The 1958 New York Convention in Action, (Kluwer Law International 2016) pp. 97 - 136
9. Article I(1)(a) it states that this Convention shall apply:
- to arbitration agreements concluded for the purpose of settling disputes arising from international trade between physical or legal persons having, when concluding the agreement, their habitual place of residence or their seat in different Contracting States;...
10.  EWHC 726 (Comm).
11. US No. 696, Civil Action No. 08- 2026 (PLF), 23 March 2010
12. AJ van den Berg, The New York Arbitration Convention of 1958: Towards a Uniform Judicial Interpretation (TMC Asser Institute 1981) 18 and more generally at 17-19
13. ibid 18.
14. The International and Comparative Law Quarterly , APRIL 2014, Vol. 63, No. 2 (APRIL 2014), pp. 477-490
15. Supra note 8.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.