Arbitration is a method of dispute resolution outside the court where the parties refer to one or more persons appointed as an arbitrator(s) who reviews the case and imposes a decision which is legally binding on all parties. It is a quasi-judicial method. It is a preferred dispute resolution tool in both domestic as well as international trade.
Due to the main features of arbitration, it gained popularity and the number of cases where it was referred kept on increasing. It was easy when both the parties belonged to the same country but things got a little complicated when the award was to be enforced in a different country. A conference was held in the United Nations where the New York Convention was adopted. This convention provided recognition for enforcement to an award in one country which has been awarded in another. The first draft Convention on the recognition and enforcement on International arbitral awards to the United Nations Economic and Social Council was given by The International Chamber Of Commerce in 1953.
The international arbitral award or the United Nations Convention on the recognition and Enforcement of the Foreign Arbitral Awards (The New York Convention) was promulgated on June 10, 1958 and came into force on June 7, 1959. It has been adopted by 164 countries and by signing on this resolution a country consents to enforce the awards issued in any other nation[1]. This convention is also considered to be the foundation of international arbitral awards as it provides recognition and validation for enforcement to the arbitral awards which are not of domestic nature.
This convention is adopted by the countries with two reservations. First is Reciprocity Reservation by which the signatory countries will only accept the award coming from another signatory country only. The second is Commercial Reservation by which the signatory countries can only enforce the foreign arbitral award which is of commercial nature.
The two basic actions which are contemplated by the New York Convention are:
The first action relates to the recognition and enforcement of foreign arbitral awards. This field of application is defined in Article I[2]. There is an obligation to recognize and enforce awards issued by another signatory country. The award should however, be in accordance with their rules of procedure laid down in Article III[3]. A party which is seeking enforcement of a foreign award needs to give the court (a) the arbitral award and (b) the arbitration agreement (Article IV).
The party against whom enforcement of award is sought can object to the enforcement by resorting to one of the grounds for refusal of enforcement which are listed in Article V(1). The court can also on its own motion refuse enforcement for reasons of public policy as provided in Article V(2).
If the award is subject to an action for setting aside in the country in which, or under the law of which, it is made (“the country of origin”), the foreign court before the enforcement of the award may sought to adjourn its decision on enforcement (Article VI).
Finally, if a party that is seeking enforcement of the arbitral award wants to base its request for enforcement on the court’s domestic law on enforcement of foreign awards or treaties in force in the country where it seeks enforcement, can do so by virtue of the more-favourable-right provision of Article VII(1).
The second basic action which is contemplated by the New York Convention is the Referral by a court to arbitration. Article II(3) provides that the court of the contracting nation, while hearing a matter where the parties have made an arbitration agreement, on the request of even one party has to refer them to arbitration. In both actions the arbitration agreement must satisfy the requirements of Article II(1) and (2) which clearly states that the agreement should be in writing.
The Geneva Treaties of 1923 and 1927 was the predecessor of the New York Convention. In the Geneva Treaty it was required that the parties were subject to the jurisdiction of the States Party to the Treaties. Such a condition for an application is not required by the New York Convention under which it states that the award is made in the territory of another Contracting State or in the enforcing State if it is considered as non-domestic[4].
However, within the framework of the question of non-domestic awards (Article I(1), second sentence) and the reciprocity reservation (Article I(3)), nationality may play a role in the sense that a court may be prepared to consider an award as non-domestic for the purposes of the Convention only if the parties (or at least one of them) comes from a Contracting State.
The New York Convention has enabled the parties not only from one country but from the countries around the globe to refer to arbitration in a situation of commercial dispute rather than referring to traditional courts.
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