assignment of arbitral awards the what how and why

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Assignment of arbitral awards: The what, how and why

• International arbitration
• Monetization

25 November 2022

After spending crucial time and resources to secure an award, companies are often facing the uphill battle of enforcement. Assigning arbitral awards to third parties may enable companies to accelerate payment.

Join speakers from Freshfields, Airbus and Burford Capital as they discuss the growing trend of award monetization in the EU, review the process to do so, reflect on the complexities of navigating assignment in different jurisdictions and discuss legal and business opportunities to extract value from awards.

Attendees will learn:

• What makes assignment an attractive option for businesses
• The market, pricing and options for assignment
• Issues and defenses raised in different jurisdictions
• Alon Gordon, Partner, Freshfields
• Vasuda Sinha, Counsel, Freshfields
• Alma Forgó, Head of Arbitration, Airbus
• Philipp Leibfried, UK/European Corporate Counsel, Burford Capital
• Jörn Eschment, Senior Vice President, Burford Capital
• Olga Sendetska, Associate, Freshfields (moderating)

Register to watch the recording!

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Practical Law

Arbitration blog, assignment of arbitral awards.

• by Grigori Lazarev
• Senior Associate

You have won an award, and you are now facing the prospect of enforcing it. Perhaps the award debtor is a special purpose company, with no assets of its own, or it is located in a “difficult” jurisdiction . It might be that the award debtor is a sovereign state that refuses to pay for political or similar reasons. There may be many other reasons why you would shudder at the thought of having to spend another small fortune and months, if not years, on enforcing your award, potentially without success. It is at this point that some award creditors might consider cutting their losses and “selling” their award.

The market for “trading” awards seems to be quite opaque, especially insofar as purely commercial arbitration is concerned. In recent years, only a handful of examples of assigned awards appear to have come to light, all of which concerned investment arbitration awards. Those examples provide some interesting illustrations of potential issues that might arise when enforcing an assigned award.

In FG Hemisphere v DRC , two International Chamber of Commerce (ICC) awards had been assigned from EnergoInvest, a Bosnian state company, to FG Hemisphere, a US fund, which then sought to enforce the awards in a number of jurisdictions, including the US , Jersey and Hong Kong . It is interesting to note that in the Hong Kong proceedings the judge was initially “concerned that the assignment of the awards might constitute maintenance or champerty ”. However, he subsequently accepted that, “on the authorities, it is highly arguable that the assignments here do not constitute maintenance and champerty”. No such issue appears to have arisen in the US and Jersey proceedings.

In Euler Hermes v PJSC Odessa Fat and Oil Plant , Euler Hermes (the assignee) sought to enforce a Federation of Oils, Seeds and Fats Associations (FOSFA) award in Ukraine . The application was refused on the basis that only the original party to the arbitration had the standing to seek enforcement of the award. Whilst the Ukrainian Cassation Court set aside the lower courts’ decisions, the case illustrates a potential hurdle in enforcing an award in certain jurisdictions.

Interestingly, a similar point was raised, unsuccessfully, by Argentina before the US court in Blue Ridge Investments v Argentina . That case concerned enforcement in the US of an International Centre for the Settlement of Investment Disputes (ICSID) award in the CMS Gas v Argentina case. The benefit of the award had been assigned to Blue Ridge, the petitioner in the case. Argentina argued, amongst other things, that “as an assignee, Petitioner lacks authority to seek recognition and enforcement of the Award”, and “only a party to the underlying arbitration can seek recognition or enforcement of the award under Article 54(2) [of the ICSID Convention ], a transferee or assignee cannot.”

The judge carried out a detailed textual analysis of the use of the term “party” in the ICSID Convention and concluded that it “[did] not always refer to a ‘party to the arbitration’”. As New York law recognised assignment of judgments, the court found that “nothing in the ICSID Convention, in Congress’s legislation implementing ICSID, or in New York law prevents an assignee from seeking recognition and enforcement of an ICSID Convention award.”

A further interesting feature of the Blue Ridge case is that Blue Ridge used non-judicial avenues to force Argentina to honour the award. Blue Ridge successfully petitioned the US Trade Representative to suspend Argentina from the US Generalized System of Preferences, and lobbied the US government to block World Bank loans to Argentina.

The CMS Gas/Blue Ridge award was eventually settled by Argentina in 2013, along with four other awards: Vivendi, Azurix, National Grid and Continental Casualty . The latter two awards had also been assigned, reportedly to the US fund Gramercy. It seems that the assignment of those awards was part of the settlement structure, and it was not intended that the assignee companies would seek recognition and enforcement through courts.

More recently, in October 2016, a further two ICSID awards against Argentina were settled: BG Group and El Paso. Both awards had been assigned to what appears to be special purpose vehicles, and, as with the National Grid and Continental Casualty awards, it does not seem that the assignees intended to seek enforcement through the courts.

It is worth noting that the Argentine settlements in 2013 and 2016 were reported to have had over a 25% discount to the nominal value of the awards. This gives an indication as to the likely level of discount that the assignors agreed with the assignees which, in the circumstances, must have been significantly deeper than the 25% agreed by Argentina.

This brief overview suggests a few conclusions. First, the market for arbitral awards seems to be fairly limited, with most, if not all, of the publicly available information relating to investment arbitration awards.

Secondly, enforcement of assigned awards may give rise to certain legal issues, such as champerty and maintenance, or standing of the assignee. Whilst the likelihood of such issues arising might be limited, particularly in arbitration-friendly jurisdictions, the examples above suggest that it is worth bearing such risks in mind.

Thirdly, it seems that awards are “sold” at a deep discount. As noted above, the Argentine awards settled at over 25% to the nominal value, implying an even deeper discount on assignment. Thus, in  FG Hemisphere , the underlying award for US $11.7 million was reportedly sold for US $2.6 million.

Finally, it seems that the success in enforcing an assigned award may depend to a significant extent on the political leverage (and financial clout) of the assignees, and take place in the context of broader political and economic processes, as the Argentine settlements acutely demonstrate. This naturally limits the number of parties potentially interested in purchasing awards.

In short, whilst the idea of selling an award might sound appealing in principle, it seems that in practice the opportunities to do so might be limited mainly to large awards in investment arbitration cases.

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Arbitral Awards – How Final Are They?

The finality of arbitral awards is often considered a primary benefit of arbitration compared to resolution before national courts. Arbitration agreements and institutional rules may well contain express wording that the award is final and binding. In this article we consider how final an award actually is, and the circumstances in which an award can be appealed or challenged. We will see that even when arbitral awards are said to be final they are, in fact, rarely absolutely so with the possibility of some form of challenge always being open, which is both sensible and desirable. 

The Benefits of Finality

There are many reasons why parties may opt for arbitration to resolve their disputes, including the flexibility and degree of control that the arbitral process offers to parties in selecting their arbitral tribunal. Parties can choose an arbitral tribunal who have the requisite qualifications and experience for their particular dispute. Having done so they will not want the tribunal’s decision to be subject to appeal and possibly overturned by a judge they have not chosen.

The finality of an arbitral award also ensures a swift and efficient resolution to the dispute without the time and expense usually experienced in national courts where a first instance decision may be subject to at least one and possible two levels of appeal. This is so particularly in jurisdictions such as France and Italy where there is an automatic and almost sacred right to appeal and the appeal proceedings are effectively a re-trial of the merits of the case, rather than confined to specific points of law.

Justice v Finality

Despite the parties’ desire for an award to finally resolve a dispute, there are some circumstances in which being able to challenge an award is desirable or even necessary. These challenges predominantly fall into four groups:

Substantive grounds

Where an arbitral tribunal has made an error of fact or law (or both) in reaching its decision on the merits of the dispute. This could also include rare situations where a party obtains a favourable award through fraud (such as using forged documents), or further evidence is discovered after the award has been rendered which would have impacted on the arbitral tribunal’s decision.

Jurisdictional grounds

Where the arbitral tribunal did not have proper jurisdiction to hear the arbitration and render the award (either because there was no jurisdiction to begin with or because there was jurisdiction, but the tribunal exceeded that jurisdiction by determining issues that the parties had not agreed should go to arbitration).

Procedural grounds

Where due processes were not followed and respected by the arbitral tribunal or some other procedural irregularity took place.

Public policy grounds

Where the award violates the public policy of the jurisdiction in which the winning party is seeking to enforce it. There is no agreed list of what might violate the public policy as this is dependent on the norms and culture of each jurisdiction.

In terms of how to appeal or challenge an award, this will be dependent on any appeal procedure in the arbitration agreement (which is rare), the laws of the seat of the arbitration, and the rules of the arbitral institution under which the arbitration is conducted.

Appealing an Arbitral Award

It can happen that the parties do not in fact want the arbitral award to be final and instead set out an appeal process in their agreement to arbitrate, although this is very rare. It can also be problematic and there have been instances where national courts have declared that appeal rights are statutory and cannot be provided by agreement. There have also been instances where it has been held that because the law of the seat sets out exclusive grounds for setting aside an arbitral award (of which more below), it is not open to parties to grant national courts a more expansive jurisdiction.

Parties may appeal an arbitral award if they are granted the right to do so by national law, but again this is rare. The English Arbitration Act 1996 provides perhaps the most well-known statutory right to appeal, although it is restricted to points of law and parties may elect to exclude it (and usually do). Other jurisdictions such as Hong Kong require parties to opt-in to the possibility of appealing arbitral awards. However most jurisdictions (including those who adopt UNCITRAL’s Model Law such as Germany, Singapore and Denmark) do not permit any appeal on the merits.

Lastly, some arbitral institutions have introduced appeal mechanisms within the arbitral process itself. For example, JAMS, AAA and ICDR all offer appeal procedures within the arbitration, but it remains optional for parties. It is important to note, however, that the appeal tribunal would be appointed for the appeal and would be different from the first level arbitral tribunal.

Challenging an Arbitral Award

Even where the parties decide that the award is final or where the arbitral institution excludes appeal, the national law of the seat of arbitration may allow a certain forms of challenge. The right to have an arbitral award annulled or set aside is widespread and it is arguably a necessity to avoid awards being enforced that have been issued on the basis of some procedural or jurisdictional irregularity, thereby maintaining the integrity of the arbitration process.

The UNCITRAL Model Law (which forms the basis for many national arbitration laws) and the New York Convention (which has been adopted by many countries to govern how they enforce foreign arbitral awards) set out an exhaustive but narrow list of procedural grounds on which parties can challenge an arbitral award and have it annulled or set aside, including:

• The invalidity of the arbitration agreement;
• A lack of due process and procedural fairness;
• The arbitral tribunal exceeding its jurisdiction when rendering the award;
• The arbitral tribunal being constituted in a way that is not in accordance with the arbitral agreement;
• The subject matter of the dispute cannot be arbitrated (for example, a criminal allegation);
• The award violates the seat state’s public policy.

The exact grounds of each national law vary. For example, in the United States a court may set aside and annul an arbitral award if (amongst other things) it was procured by corruption, fraud or undue means, or there was arbitral bias or corruption. France’s Code of Civil Procedure prescribes grounds that are more limited than the grounds set out in the Model Law. Even though the grounds to set aside an award are generally limited by the national law of the seat of arbitration, the mere existence of such right to apply for annulment affects the finality of the award.

Tension can be caused where the courts of the seat annul an arbitral award, but the winning party nonetheless seeks to enforce the award in a secondary jurisdiction. The courts of that secondary jurisdiction are required to choose between recognising and enforcing the award (and thus upholding its finality) or following international comity and upholding the seat-court’s annulment. Which decision a secondary jurisdiction’s court takes might depend on their attitude to international arbitration and whether they wish to take a pro-arbitration approach or not.

A recent decision by the English High Court has demonstrated the importance of the right of the losing party to challenge a final award. In Nigeria v P&ID [2023] the English Court set aside a USD11 billion arbitration award against Nigeria on the grounds that P&ID had provided knowingly false information to the tribunal to cover up the fact that it had paid bribes to secure the underlying contract with Nigeria, and that P&ID had also made corrupt payments to a witness to ensure she did not inform the tribunal of the bribes. This evidence of this corruption was only discovered by Nigeria after the final award had been issued, and so could not have been taken into account by the tribunal when determining the merits of the case. Had the award been truly ‘final’ and beyond challenge, Nigeria would have been unjustly compelled to pay USD11 billion of public money to fraudsters.

Opposing Enforcement

In addition to actively seeking to annul or set aside an award, the losing party may wait until the winning party takes action to enforce the award and then oppose enforcement. Unless it is the court of the seat, the court’s power usually only extends to determining whether or not to recognise and enforce the arbitral award in its own jurisdiction, and not whether or not the arbitral award should be set aside. The grounds on which an award may be refused enforcement are usually the same narrow procedural grounds that apply when seeking to challenge an award (this is certainly the case under the UNCITAL Model Law).

There is no limit on where the winning party may seek to enforce the award, so it is possible for multiple enforcement actions to be commenced simultaneously numerous jurisdictions. The process of opposing enforcement applications in each of the relevant jurisdictions can be a costly, lengthy and laborious one, and may prompt the losing party to seek annulment at the seat in the hope that if successful most foreign courts will likewise refuse enforcement.

The above discussion shows that arbitral awards are not completely final, and nor should they be. The losing party may have good reasons for challenging an arbitral award, and a national court may determine that the award is against public policy or relates to an issue which is not capable of being arbitrated in the first place.  However it remains the case that, when compared to a court judgment, arbitral awards are generally less susceptible to appeals and challenges. Arbitration therefore remains an attractive option for parties wishing to minimise the likely time (and by extension the cost) involved in resolving a dispute.

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With offices in many of the world’s major arbitration centres, including London , Paris , Geneva , Dubai , Hong Kong and Singapore , we are ideally placed to work with you both to prevent and to resolve disputes as they arise, whatever the law, language, rules, industry sector, or subject matter of that dispute may be. Our dedicated multicultural and multilingual specialists conduct arbitrations under both civil and common law systems and regularly act in arbitration-related domestic court proceedings.

Whether you are a state, a state-owned entity, a sovereign wealth fund, a corporate, a sports federation or authority, private business or individual, our strategically focused specialists will work alongside you through every aspect of any arbitration. Please contact Thomas Snider or your usual Charles Russell Speechly LLP contact if you would like to get in touch. 

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Assignment of arbitral awards | Practical Law

Assignment of arbitral awards

Practical law uk practice note w-034-2865  (approx. 18 pages).

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Assignment of arbitral claims and arbitral awards: uncertain legal landscape in France

Introduction Facts Decision Comment

Introduction

The assignment of arbitral claims and arbitral awards is a fast-growing market practice. When entering into agreements for such assignments, it is crucial to ensure that they comply with all the applicable legal requirements. In this context, the assignee should carefully assess the risks that may arise out of the award debtor's rights pursuant to the provisions of the law applicable at the seat of arbitration and/or at the place(s) of enforcement of the award.

Under French law there is a specific mechanism called the right of " retrait litigieux " ("disputed withdrawal"). In accordance with this singular legal mechanism, which is designed as a tool to fight against speculation, when a disputed claim is assigned to a third party in the course of any judicial or arbitral proceedings, the debtor is entitled to discharge its debt by paying the assignee the actual price of the assignment, plus interest and costs, instead of the full amount of the original debt (article 1699 of the French Civil Code ). (1)

As has been seen in the FG Hemisphere v Democratic Republic of the Congo saga, the conditions and requirements for exercising the right of retrait litigieux in the context of assignment of arbitral claims or arbitral awards are uncertain under French law.

In this case, the company Energoinvest initiated two arbitration proceedings against the Democratic Republic of Congo (DRC) and the Société Nationale d'Electricité for the recovery of outstanding payments under two credit agreements. During these arbitration proceedings, Energoinvest assigned its receivables against the DRC to FG Hemisphere, a US-based investment management fund.

On 30 April 2003, two arbitral awards were issued in Paris and Zurich, respectively, ordering the DRC to pay damages. It was only after these awards were rendered that FG Hemisphere notified the DRC of the assignment of receivables that had taken place during the arbitration proceedings.

The DRC started two challenge proceedings against the awards before the International Division of the Paris Court of Appeal:

• an action to set aside the award issued in France; and
• an appeal against the enforcement order of the award rendered in Switzerland.

In both these proceedings, the DRC applied to exercise its right of retrait litigieux pursuant to article 1699 of the French Civil Code (ie, to extinguish its debt by paying FG Hemisphere the actual price of assignment plus interest and costs).

Paris Court of Appeal In two decisions handed down on 12 April 2016, the Paris Court of Appeal dismissed the DRC's application as inadmissible. The Court held that it could not rule on the DRC's claim seeking its right of retrait litigieux because its powers were limited to reviewing the awards' compliance with the five exclusive grounds laid down by French law for setting aside or refusing enforcement of the award – namely, that:

• the arbitral tribunal has wrongly retained or denied jurisdiction;
• the arbitral tribunal was improperly constituted;
• the arbitral tribunal ruled without complying with the mandate conferred upon it;
• the principle of due process was not complied with; or
• recognition or enforcement of the award is contrary to international public policy.

French Supreme Court The French Supreme Court quashed these decisions on 28 February 2018. (2)

According to the Supreme Court, an award debtor's application to exercise its right of retrait litigieux is admissible in the context of such challenge proceedings, since this mechanism "affects the enforcement of the award".

Interestingly, the Court relied on article 1699 of the French Civil Code without providing any explanation as to why French law should be applicable to the issue and while the assignment of the disputed receivables was governed by Swiss law.

Second Court of Appeal In accordance with French rules of procedure, when a decision is quashed by the Supreme Court, the case is referred to a second court of appeal composed of different judges to the ones who issued the quashed decision. Usually, the second court of appeal will follow the solution dictated by the Supreme Court.

In this case, however, the Paris Court of Appeal ruled against the position of the Supreme Court. By two decisions dated 7 December 2021, (3) the Court of Appeal held that even if "exercise of the right of retrait litigieux is likely to indirectly affect the enforcement of the award in that it directly affects the amount of the claim fixed by the award", it cannot have "the effect of modifying and extending the powers [of the court in charge of reviewing the arbitral award] beyond the cases provided for by law".

Therefore, despite the decision issued by the Supreme Court in 2018, the Paris Court of Appeal held that it does not fall within the powers of the court in charge of reviewing an arbitral award to rule on an award debtor's application to exercise its right of retrait litigieux .

Thus the Court once again dismissed the DRC's application to exercise its right of retrait litigieux , ruling that such an application "cannot lead to annulment of an award" or "prevent the enforcement of the award in France".

The Paris Court of Appeal specified that the retrait litigieux may nevertheless be invoked before the judge in charge of enforcement matters, after the award has been recognised as valid or granted exequatur in France, provided that French law is applicable to the assignment of the disputed receivables.

In this respect, the Court dismissed the DRC's argument that the right of retrait litigieux is akin to a French mandatory rule that should apply whenever the enforcement of an award is sought in France, notwithstanding the law applicable to the assignment of the receivables.

The Court also rejected the DRC's argument that the assignment of the arbitral claims had been fraudulently concealed in order to deprive it of its right of retrait litigieux , noting that:

it has not been shown that the exercise of this withdrawal right was applicable, in circumstances where the original contract was governed by Swiss law, which does not recognize this mechanism, and therefore, it cannot be found that there was an attempt to evade the application of French law, which was not applicable to the assignment of the claim .

On this point, the Paris Court of Appeal's reasoning could be construed as being a departure from that of the Supreme Court in the decisions issued on 28 February 2018. Indeed, since the Supreme Court provided no justification or reasoning for the applicability of French law, some commentators had opined that, in view of the express reference to article 1699 of the French Civil Code, the right of retrait litigieux might be applicable as a mandatory rule whenever the enforcement of an arbitral award is sought in France. (4)

It is now up to the Supreme Court, before which two appeals have been lodged against these two decisions, to clarify the conditions and requirements for this right of retrait litigieux in the specific context of international arbitration.

The Supreme Court should issue its judgment in 2023. In any event, third-party funders would be well advised to avoid specifying French law as the applicable law when they enter into assignment agreements for disputed claims, such as arbitral awards and arbitral claims.

For further information on this topic please contact Sarah Monnerville Smith and Valentin Lévêque at Eversheds Sutherland LLP by telephone (+33 1 55 73 40 00) or email ( [email protected] and [email protected] ). The Eversheds Sutherland LLP website can be accessed at www.eversheds-sutherland.com .

(1) Article 1699 of the French Civil Code:

A person against whom a disputed right exists may, when that right has been assigned, discharge himself from any liability to the assignee by reimbursing to the assignee the actual price of the assignment together with costs and interest running as from the day on which the assignee paid the price of the assignment.

(2) Civ 1st, 28 February 2018, No. 6-22 112 and Civ 1st, 28 February 2018, No. 16-126, Dalloz actualité, 20 March 2018, obs J-D Pellier; D 2018, page 1934, obs S Bollée; D2018, page 2448, obs T Clay; AJ Contrat 2018, page 187, obs J Jourdan-Marques; RTD civ 2018, p 411, obs H Barbier; RTD civ 2018, page 431, obs P-Y Gautier; Rev arb 2018, page 389, note M Laazouzi; Procédures 2018, No. 5, obs L Weiller; JCP G 2018, 1111, note P Casson; RDC September 2018, No. RDC115k7, note R Libchaber; JDI 2018, page 1202, note P Pinsolle.

(3) Paris, Pôle 5, Chapter 16, 7 December 2021 No. 18/10217 and No. 18/10220, Dalloz actualité, 21 January 2022, obs J Jourdan-Marques and Gaz Pal, No. 15 - page 4, 3 May 2022, obs L Larribère.

(4) On this issue, see M Laazouzi, "Pour un cantonnement plus strict de la recevabilité du retrait litigieux lors du contrôle de la sentence internationale, note sous Cass civ 1re, 28 février", Rev arb 2018, pages 390-400.

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• The Guide to Challenging and Enforcing Arbitration Awards - Second Edition

Awards: Form, Content, Effect

08 June 2021

This is an Insight article, written by a selected partner as part of GAR's co-published content. Read more on Insight

Introduction

Arbitral awards have a special status under international law by reason of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). [2]

Pursuant to the New York Convention, arbitral awards made in the territory of one contracting state shall be recognised as binding and enforced in another contracting state, subject only to the limited grounds for refusal of recognition and enforcement set out in Article V of the Convention.

Given this special status, the form and content of an arbitral award is clearly important. This chapter considers the following issues:

• the form of an arbitral award – types of arbitral awards and formal requirements under the New York Convention and selected national laws;
• the content of an arbitral award – best practice regarding the contents of arbitral awards, as compared with mandatory requirements under selected national laws and arbitration rules; and
• the effect of an arbitral award – finality, the possibility of challenges to arbitral awards, the limited possibility of appeals to arbitral awards, and enforcement.

The form of an arbitral award

Arbitral award or arbitration award.

To start with, which term is more appropriate – arbitral award or arbitration award? The New York Convention uses ‘arbitral award’, as do the United Nations Commission on International Trade Law (UNCITRAL) Model Law and the UNCITRAL Arbitration Rules. However, many sets of arbitration rules, including those under the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA), the International Centre for Dispute Resolution (ICDR), the Stockholm Chamber of Commerce (SCC) and the Singapore International Arbitration Centre, simply use the term ‘award’. The English Arbitration Act also mainly uses the term ‘award’, although the long title of the Act refers to ‘arbitration awards’ and the term ‘arbitral award’ appears in Sections 2(b) and 81(c).

Thus, the correct term is ‘arbitral award’, but the terms ‘arbitration award’ and ‘award’ may also be used.

Types of arbitral awards

As is stated in Article 1(1), the New York Convention applies 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’. Article 1(1) adds that the Convention also applies to ‘arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought’. Further, Article 1(2) provides that the term ‘arbitral awards’ ‘shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted’.

Thus, distinctions can be made between several different types of awards, including the following:

• A ‘domestic award’ is an arbitral award made within the territory of a state.
• A ‘foreign award’ is an arbitral award made – or deemed to be made – in the territory of another state. For example, if the legal place (or seat) of arbitration is London, the arbitral tribunal may nevertheless decide to sign the award in another country for reasons of convenience. Nevertheless, the award will be treated as having been made at the seat pursuant to Section 53 of the English Arbitration Act 1996. [3]
• An ‘interim award’ (or ‘provisional award’) is an award that is subject to a final determination at a later stage (see, for example, Section 39 of the English Arbitration Act). Since Article V(1)(e) of the New York Convention requires an arbitral award to have become binding, an interim award is generally considered to be unenforceable. However, some US courts have held that an interim order by an arbitral tribunal, or even by an emergency arbitrator, could be enforced as an award if it finally and definitely disposed of a self-contained issue. [4]
• A ‘partial award’ determines only part of the claims in dispute between the parties.
• An ‘agreed award’ is an arbitral award entered into by agreement of the parties and the arbitral tribunal, recording the result of a settlement.

It is important to differentiate between an arbitral award and other decisions or orders within an arbitration since it is only awards that can be enforced internationally under the New York Convention, and domestically under national arbitration laws. Although arbitral awards are generally clearly indicated as being awards, it should be noted that the nomenclature used by the arbitral tribunal is not determinative.

Formal requirements for an arbitral award

International conventions generally do not set out any formal requirements in relation to awards. However, the New York Convention imposes an implied written requirement by providing in Article IV that ‘the party applying for recognition and enforcement shall . . . supply: (a) [t]he duly authenticated original award or a duly certified copy thereof’.

Requirements in relation to formalities are primarily set out in national arbitration laws or in applicable arbitration rules. Thus, for example:

• many national arbitral laws, including the UNCITRAL Model Law (Article 31), provide that the award shall be made in writing, shall be signed by the arbitrator or arbitrators, and shall state the date of the award and the place of arbitration; [5] and
• it is also often provided that the arbitral tribunal must state the reasons on which the award is based. [6] This matter is considered in more detail below.

Some national arbitration laws, such as the English Arbitration Act 1996 (Section 52(1)), expressly provide that the parties are free to agree on the form of the award.

Although not strictly necessary under the New York Convention, in practice it is a fundamental requirement that an award should be signed.

In the case of a three-person tribunal with arbitrators in different countries, it is necessary to allow sufficient time for the final agreed award to be couriered between the respective arbitrators to obtain their respective signatures. The arbitrators should also ensure that there is a sufficient number of originals – generally, one original per party, one for each of the arbitrators, and one for the arbitral institution, where applicable.

Although it is usual for all the arbitrators to sign the award – and that is so even when there is a dissenting opinion – it can happen that a dissenting arbitrator refuses to sign the award. The solution in such a situation is usually for the majority to sign the award, or at least the chair or presiding arbitrator, provided an explanation is given for the missing signature. [7]

The place of the award should be stated as being the legal place, or seat, of arbitration, even if the award is actually signed in a different place. This is important, since the legal seat determines the nationality of the award for the purposes of the New York Convention.

As noted above, many arbitration laws and rules require arbitrators to state the reasons on which an award is based. [8]

However, note, for example, that the Swedish Arbitration Act of 1999 does not require any reasons to be given, although the SCC Rules do impose this requirement.

The requirement to give reasons is generally stated to be non-mandatory, but where there is such a requirement and the parties agree to dispense with it, it is important for there to be clear evidence of such an agreement and for this to be clearly recorded in the award itself.

See further below, under ‘Minimum requirements’, for further discussion on what may be regarded as sufficient reasoning.

Other formal requirements under some national laws

In addition to the above-mentioned requirements, some national laws impose others that are required to be followed for arbitral awards made in that particular seat of arbitration. For example:

• if the award concludes the proceedings without a determination on the merits; and
• as regards challenges to the amount of compensation awarded to the arbitrators (see Sections 36 and 41 of the Act); and
• in Scotland, Rule 51 of Schedule 1 to the Arbitration (Scotland) Act 2010 provides as a default rule that the award should state whether any previous provisional or part award has been made (and the extent to which any previous provisional award is superseded or confirmed).

It is always important for arbitrators to check for any specific rules that may apply in the applicable seat of arbitration or under the applicable arbitration rules.

Time limits

National arbitration laws usually do not set out a time limit for rendering an award in international arbitrations.

However, some arbitration rules provide for time limits. For example, the 2021 ICC Rules provide that the arbitral tribunal shall render its final award within six months of the date of the terms of reference (Article 31(1)). However, the ICC Court may extend the time limit on its own initiative or following a reasoned request for an extension from the arbitral tribunal. The 2017 SCC Rules have a similar provision, setting out a time limit of six months from the date when the case was referred to the arbitral tribunal (Article 43).

The 2014 ICDR Rules state that the arbitral tribunal shall make every effort to deliberate and prepare the award as quickly as possible after the hearing and, unless otherwise agreed by the parties, specified by law, or determined by the ICDR administrator, no later than 60 days after the closing of the hearing (Article 30(1)).

A time limit from the outset of the proceeding has the advantage of putting time pressure not only on the arbitral tribunal but also on the parties, for the award to be rendered within a reasonable time. This can be coupled with a general obligation on all participants to act efficiently, with potential costs consequences on a party that fails to do so. [9] Nevertheless, it is common for the six-month time limit under both the ICC and SCC Rules to be extended, at least in larger cases.

The purpose of a time limit between the closing of a case and the issue of an award is to impose efficiency and discipline on the arbitrators. It also helps to ensure that the parties will not have to wait too long after the hearing to receive the award, and that the arbitrators will consider the evidence and arguments while the case is still fresh in their minds. Some institutions penalise arbitrators for delays in issuing an award.

On the other hand, institutions are generally careful to ensure that time limits are extended where necessary, either at the request of the arbitral tribunal or on the institution’s own initiative, since there is a clear risk that an award that is issued after such a deadline would be liable to be set aside.

In the rare circumstances that the arbitration agreement provides a deadline without the possibility of an extension, the arbitral tribunal needs to ensure that it complies with the respective deadline. However, national arbitration laws may provide a statutory possibility for a time limit to be extended. For example, Section 50(1) of the English Arbitration Act provides that ‘[w]here the time for making an award is limited by or in pursuance of the arbitration agreement, then, unless otherwise agreed by the parties, the court may in accordance with the following provisions by order extend that time’.

Delivery of the award to the parties

National arbitration laws usually require that an arbitral award should be communicated to the parties without delay. For example, Section 31 of the Swedish Arbitration Act provides that ‘[t]he award shall be delivered to the parties immediately’.

Section 55(2) of the English Arbitration Act provides that, in the absence of any other agreement between the parties, ‘the award shall be notified to the parties by service on them of copies of the award, which shall be done without delay after the award is made’. Similar provisions can be found in most institutional rules.

In most cases, it is the chair of the arbitral tribunal that delivers the award to the parties. However, under some institutional arbitration – notably under the ICC, LCIA and ICDR Rules [10] – it is the institution that delivers the award.

Traditionally, arbitral awards have been delivered to the parties by courier, but this can give rise to the unfortunate situation that one party might receive the award several days in advance of another party, if the parties are situated on different continents. To avoid such a situation, it is common for arbitral tribunals to deliver the award to the parties initially by email, with the originals to follow by courier.

It is good practice for arbitral tribunals to ask parties to acknowledge receipt of the award. This is important not only to ensure that the award has been duly delivered, but also for the purpose of calculating time limits for any corrections, or for possible applications to set aside the award.

Under English law, the arbitral tribunal has the power to withhold delivery of the award pending full payment of its fees and expenses, although a party can ask the English court to intervene in this situation. [11] Conversely, Section 40 of the Swedish Arbitration Act expressly states that the arbitrators may not withhold the award pending payment of compensation. In institutional arbitration, the arbitral institution invariably ensures that the requisite fees and costs have been paid in good time prior to the delivery of the arbitral award.

Correction of the award

Arbitration laws and rules generally provide that either a party may apply to the arbitral tribunal for correction of any clerical, computational or typographical error within a set time limit, typically within 30 days from the date of the award. It is also generally possible for a party to ask for an interpretation of a specific part of the award within the same time limit. Moreover, if the arbitral tribunal has failed to rule on any claim presented to it, a party may ask for an additional award in respect of that claim. These powers can also generally be exercised by the arbitral tribunal on its own initiative. [12]

It should be noted, however, that the powers of the arbitral tribunal to correct or supplement the arbitral award cannot be used to alter the substance of the award to any extent.

The content of an arbitral award

In considering the content of an arbitral award, it is important to distinguish between international best practice on the one hand and, on the other hand, the minimum content that may be deemed necessary for the award to be considered to be valid and enforceable pursuant to the applicable arbitration law at the seat of arbitration.

Since there are good policy reasons for arbitral awards to be enforceable, the minimum requirements are generally set at a very low level. Nevertheless, international arbitration would not be acceptable as a system of international dispute resolution if arbitrators and arbitral institutions were content to abide by such minimum requirements.

International best practice

International arbitration is inherently flexible, and it is right and proper that there should also be flexibility in relation to the style of drafting of arbitral awards.

Guidelines on the proper drafting of arbitral awards

Nevertheless, it has become increasingly common for arbitral institutions and other organisations to publish guidelines for arbitrators on the proper drafting of arbitral awards. These guidelines include:

• ICC Award Checklist;
• IBA Toolkit for Award Writing;
• Chartered Institute of Arbitrators Practice Guideline on Drafting Arbitral Awards – Part I (General), Part II (Interest); and
• many private initiatives from law firms and other bodies in different jurisdictions.

It can be suggested that an arbitral award should, at the very least, include the following sections:

• details of the parties and their counsel;
• the procedural history;
• details of the applicable contract, including the arbitration agreement;
• details of the background facts and circumstances;
• the claims and arguments advanced by each party;
• a list of issues, where appropriate;
• the arbitral tribunal’s detailed reasoning regarding jurisdiction, where applicable;
• the arbitral tribunal’s detailed reasoning regarding the substantive merits of the case, dealing with each disputed issue in turn; and
• the operative part of the award.

Minimum requirements

Formal requirements.

As noted above, there are various formal requirements under most national laws and arbitration rules that generally need to be complied with.

If an award does not follow the applicable formal requirements, it may be subject to annulment at the seat of the arbitration since these requirements are usually mandatory. Arguably, it could also be an argument for non-recognition in other jurisdictions, although Article V of the New York Convention does not set out such a basis for non-recognition. In practice, however, these formal requirements rarely create any problems – and when errors do occur, it is generally possible for the errors to be corrected as noted above (see ‘Correction of the award’).

If there is a requirement under the arbitration law or the applicable arbitration rules, or both, to give reasons, the question arises as to whether a failure to give reasons for all or part of the decision constitutes a valid ground for seeking to set aside the award.

Courts generally set a rather low standard for the requirement to give reasons, partly because of the general policy requirement to ensure that arbitral awards are generally enforceable, and partly because it is recognised that arbitrators are not required to be legally trained and it would therefore be wrong to impose the same standards as may be required of a judge.

In the English case Bremer Handelsgesellschaft mbH v. Westzucker GmbH (No. 2) , [13] Lord Justice Donaldson stated:

All that is necessary is that the arbitrators should set out what, in their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. Where [an] . . . award differs from a judgment is that the arbitrators will not be expected to analyse the law and the authorities. It will be quite sufficient that they should explain how they reached their conclusion.

Similarly, in Navigation Sonamar Inc v. Algoma Steamships Limited , [14] an attempt to set aside an arbitral award for lack of reasons was refused, taking account not only what was expressly stated but also what was implicit in the award. The court held that the arbitrators could not be criticised for expressing themselves as commercial men and not as lawyers.

In the Soyak II case, [15] the Swedish Supreme Court decided that only a total lack of reasons would be sufficient to constitute grounds to set aside an award. This was a case under the SCC Rules in which one of the parties sought to set aside the award on the basis of a lack of reasons. The Supreme Court stated, inter alia , as follows:

There can be different reasons for a provision in the arbitration agreement that the award should contain reasons. In the absence of more precise provisions concerning what should be included in the reasons, the parties can also have more or less extensive expectations regarding how the arbitral tribunal should explain its decision-making. However, the question of what the parties with or without justification expected and what can be said to be good practice among arbitrators must be distinguished from whether the arbitral tribunal’s reasoning is so lacking that it constitutes a ground for setting aside the award.

The provision of sufficient reasoning in an arbitral award constitutes a guarantee of legal certainty, since it forces the arbitral tribunal to analyse the legal issues and the evidence. However, the value of having full reasoning for the outcome must be balanced, as regards set-aside grounds, against the interest of having finality. Determination of a challenge to an arbitral award does not provide room to judge the substance of the arbitral tribunal’s decisions. For that reason, and since a qualitative judgment of the reasoning would give rise to significant difficulties in drawing the line between procedure and substance, it follows that only a total lack of reasons, or reasons that in the circumstances must be considered to be so insufficient that they can be equated with a lack of reasons, can be sufficient to constitute a procedural irregularity. On the other hand, where there is such a serious procedural irregularity, it can be presumed that the lack of reasons has affected the outcome of the award. [16]

It is one of the main distinguishing features of ICC arbitration that the ICC Court scrutinises the award as to form before it is issued. Article 34 of the 2021 ICC Rules provides that ‘[b]efore signing any award, the arbitral tribunal shall submit it in draft form to the Court’.

Article 34 goes on to state that ‘[t]he Court may lay down modifications as to the form of the award and, without affecting the arbitral tribunal’s liberty of decision, may also draw its attention to points of substance’.

Thus, the purpose of the scrutiny process is to ensure that the award follows the formal requirements set out in the ICC Rules. In practice, the ICC Court makes proposals for modifications to the award in almost every case. In 2012, the Court approved 483 of 491 awards after making some amendments. Only eight awards were approved without any comment from the Court. In 59 cases, the Court requested that the award be resubmitted to the Court for potential approval. [17]

Other institutional rules

Other institutional rules have taken inspiration from the ICC scrutiny. The China International Economic and Trade Arbitration Commission (CIETAC) has a light form of scrutiny; Article 51 of the 2015 CIETAC Rules provides that CIETAC ‘may bring to the attention of the arbitral tribunal issues addressed in the award on the condition that the arbitral tribunal’s independence in rendering the award is not affected’. Thus, CIETAC may raise issues for the arbitral tribunal to consider, but the arbitral award is not formally subject to approval.

The Danish Institute of Arbitration also has a light form of scrutiny. Article 28 of the 2013 Rules provides that the Secretariat ‘may propose modifications as to the form of the award and without affecting the Arbitral Tribunal’s jurisdiction, draw its attention to other issues, including issues of importance to the validity of the award and its recognition and enforcement’, but it is stressed that the responsibility for the contents of the award lies exclusively with the arbitral tribunal.

The German Arbitration Institute’s 2018 Arbitration Rules also include provision for scrutiny of the award (Article 39.3).

The effect of an arbitral award

One of the main features of arbitration as opposed to domestic litigation is that arbitration is generally a single-instance procedure, without recourse to any substantive appeal on the merits.

England provides a notable exception, since Section 69 of the English Arbitration Act allows for an appeal on a point of law subject to leave of the court. However, it should be noted that this provision is generally applicable only in ad hoc arbitration; institutional arbitration, such as under the ICC or LCIA Rules, generally excludes any appeal on the merits. [18]

All awards that finally decide either some or all of the issues referred to the arbitral tribunal by the parties are ‘final’ in relation to those issues. However, the term ‘final award’ is reserved for those awards that conclude the arbitration proceeding by finally deciding on all the outstanding issues. A final award in that sense renders the arbitral tribunal functus officio . In other words, the final award completes the mandate of the arbitral tribunal.

It is common that the parties set out in the arbitration agreement that the award shall be ‘final and binding’. Further, Article III of the New York Convention provides that ‘[e]ach Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon’. National laws and arbitration rules also generally provide that the award will be final and binding on the parties.

What ‘finality’ really means will depend on the grounds for setting aside awards at the seat of arbitration, and on the enforcement regime at any place where the arbitral award is sought to be enforced. If the state where the award is made and the state where enforcement is sought have ratified the New York Convention, finality usually entails that enforceability of the award may be refused only if there is a serious procedural irregularity or if the award is contrary to public policy. The arbitration laws of New York Convention contracting states generally replicate the rules for recognition and enforcement of foreign arbitral awards as set out in the Convention. [19]

[1] James Hope is a partner at Advokatfirman Vinge KB.

[2] The New York Convention has been described as the most successful treaty in private international law, having been ratified, at the time of writing, by 168 countries (see www.newyorkconvention.org ).

[3] Where the award is actually signed is, under most modern arbitration laws, irrelevant. Section 53 of the English Arbitration Act 1996 negates the effect of the English case Hiscox v. Outhwaite [1992] 1 AC 562, in which the UK House of Lords came to the unfortunate conclusion that an award in an English arbitration was a French award merely because the arbitrator happened to sign the award in France.

[4] See Island Creek Coal Sales Company v. City of Gainesville Florida (1985), 729 F2d 1046, USCA, 6th Circuit; Yahoo! v. Microsoft Corporation , 983 FSupp 2d 310 (SDNY 2013).

[5] See, for example, the 2013 UNCITRAL Rules (Article 34), the 2020 LCIA Rules (Article 26), the 2017 SCC Rules (Article 42) and the 2014 ICDR Rules (Article 30).

[6] See, for example, the 2021 ICC Rules (Article 32(2)), the 2013 UNCITRAL Rules (Article 34(3)), the 2020 LCIA Rules (Article 26.2), the 2017 SCC Rules (Article 42(1)), the 2014 ICDR Rules (Article 30(1)).

[7] See, for example, the 2013 UNCITRAL Rules (Article 34(4)), the 2020 LCIA Rules (Article 26.6), the 2017 SCC Rules (Article 42(3)), the 2014 ICDR Rules (Article 30(2)).

[8] See, for example, UNCITRAL Model Law, Article 31(2).

[9] See 2017 SCC Rules, Articles 2, 49(6) and 50.

[10] See Articles 35(1), 26.7 and 30(4) of those Rules, respectively.

[11] English Arbitration Act, Section 56.

[12] See, for example, UNCITRAL Model Law (Article 33).

[13] [1981] 2 Lloyd’s Rep 130 and 132.

[14] (1994) XIX YCA 256, Superior Court of Quebec ( Rapports Judiciaires de Québec 1987, 1346).

[15] NJA 2009, page 128.

[16] Unofficial translation from the original Swedish.

[17] Webster and Bühler, Handbook of ICC Arbitration, 2014, at 33–1.

[18] See, e.g., 2020 LCIA Rules, Article 26.8, which provides that ‘the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other legal authority, insofar as such waiver shall not be prohibited under any applicable law’. See also 2021 ICC Rules, Article 35(6), which states that the parties ‘shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made’.

[19] For more information regarding enforcement of awards, see Chapter 9.

Head of  international arbitration

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To reason or not to reason: arbitral awards—the conflict between conciseness and the duty to provide reasons under national laws and international rules

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Noam Zamir, Neil Kaplan, To reason or not to reason: arbitral awards—the conflict between conciseness and the duty to provide reasons under national laws and international rules, Arbitration International , 2024;, aiae009, https://doi.org/10.1093/arbint/aiae009

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The duty to give reasons in arbitral awards has a mixed history. While it can be traced back to the second part of the 20th century in England, it has been part of accepted practice in civil law countries for a long period. It has become the norm in international arbitration, both in commercial disputes and in investment disputes. While the duty to give reasons is, in general, positive, this article suggests that many international awards tend to be too long. This prolongs the arbitration proceedings and increases costs—both in terms of the arbitrators’ fees and the costs that the parties to dispute must bear while waiting for the award to be issued. To tackle this problem, the article examines the required scope of reasoning in international awards; it then discusses why many international awards tend to be too long. Finally, it suggests ways in which awards can and should be shorter .

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Types of Final Arbitration Awards: Why the Choice Matters ADR Advisor 

Arbitration is a well-accepted form of alternative dispute resolution (ADR) when parties wish to avoid litigation. Although arbitration may be court-ordered, it frequently occurs because the parties have agreed by contract to resolve disputes using arbitration. The parties are free to agree on the powers that the arbitral tribunal (typically either a sole arbitrator or a panel of three arbitrators) may exercise during the proceedings. When parties are drafting a contract and agree upon arbitration to resolve disputes arising under that contract, one of the characteristics of the arbitral proceeding to be defined is the type of final arbitration award that the tribunal will issue. (The related procedure by which the tribunal issues a tentative or draft award to give the parties an opportunity to comment before issuance of the final award is beyond the scope of this article.) Unfortunately, many parties neglect to make a conscious choice about the type of final award they want.

A. What is a final arbitration award?

The award is the determination on the merits (i.e., the decision) by the tribunal in an arbitration. The decision is called an “award” even though all the claims may fail, and thus neither party pays any money, or the award is nonmonetary in nature. The award is almost always, although not necessarily, given to the parties in writing (rather than orally) and is typically just as final and binding as a court judgment. Therefore, the award is critically important; it resolves the dispute.

B. What types of final awards are available?

Broadly, parties may choose among three types of awards:

• A “standard” award that simply states the decision or announces the result in a conclusory manner and does not provide any insight into or details about how the tribunal viewed the evidence and arguments and applied the law;
• a “reasoned” award in which the tribunal sets out the bases or reasoning for its decision; and
• an award that includes detailed findings of fact and conclusions of law (a relatively exacting standard familiar to the courts and lawyers).

The varying types of awards may be considered along a spectrum of increasingly detailed documents, with a standard award requiring the least explanation and findings of fact and conclusions of law requiring the most. The parties may contract to receive from the tribunal one of these three types or any other specific type of award that might be imagined. Silence will result in a standard award. If parties to a contract that includes an arbitration clause wish for a more detailed final arbitral award, they should clearly state in the contract the degree of specificity required.

C. Why does the choice of award type matter?

The type of award may impact the parties in a number of significant ways, and therefore the type of award matters. Arguably, the more detailed the award, the more likely the tribunal will have carefully considered the evidence, arguments and law and issued an objectively “correct” award. More detailed awards also enable the parties to better understand the award and may give them “ammunition” should they choose to challenge an adverse award in a subsequent court action. On the other hand, more detailed awards often take longer and cost the parties more money. They also risk unwanted court challenges to the award based both on the substantive analysis reflected in the award and on the form of the award itself. Each of these potential impacts is grouped into three factors favoring more detailed awards and three countervailing factors against more detailed awards, as discussed more fully below.

Perhaps the most important factor favoring more detailed awards, at least in the author’s experience, is the very practical point that more detailed awards force the tribunal to put pen to paper (or fingers to keyboard). For many writers, including the author, a good sense of what the writer is writing about comes through the actual writing process. The writer might begin with a concept of what will be written (i.e., a certain analysis and outcome), but often that concept changes and molds into a coherent analysis — and sometimes a different outcome — as the author writes. This factor is encompassed by the statement, “That opinion won’t write.” Whether the author’s view is correct may not be all that important, for it is undeniable that parties typically believe that if a tribunal must render a reasoned award or find facts and state conclusions of law, then the tribunal will be more likely to base the award on the evidence presented, coupled with applicable legal principles, and less likely to ignore evidence, arguments or the law.

Another factor favoring more detailed awards may be less important, but warrants mention. More detailed awards enable the parties to better understand the award. Having a better understanding of the award increases the parties’ faith and trust in the arbitration process. It is one thing for a party to learn that it has lost a case; it is perhaps a better thing for that party to understand why it has lost.

There is a third, and even less important factor favoring more detailed awards. Some parties might request a reasoned award or an award that contains specific findings of fact and conclusions of law as a “hedge” against an award that rules against them. The losing party might be able to use the substantive details of a more expansive award in a later court proceeding attempting to vacate the award. Thus, by agreeing to have the tribunal issue a more detailed award, the parties may be setting the stage for a later court challenge of the award. (The parties should understand, however, that the courts will usually uphold and enforce an arbitration award because the grounds for vacating an arbitration award are very limited. Absent a “manifest disregard” of the law, courts will not heighten their otherwise deferential review of arbitral awards even if the tribunal were to misapply the law or reach what the court views as an incorrect or even unjust result.)

On the other hand, several factors counsel against more detailed awards and suggest that parties think twice before they agree to something other than issuance of a standard award. One practical downside of requesting a detailed award is that the tribunal must spend more time drafting the award. A request that the tribunal issue a reasoned award or, worse, provide findings of fact and conclusions of law can significantly increase costs to the parties and can delay the issuance of the final award. The process of drafting detailed awards can be time-consuming, especially in large, complex cases such as the intellectual property cases within the author’s experience. For example, when faced with a request for findings of fact and conclusions of law, the tribunal will typically ask each party to submit individually their proposed findings of fact and conclusions of law for the tribunal to consider. The tribunal will then use these submissions as a guide to facilitate deliberations and drafting of the findings of fact and conclusions of law. If the submissions are made after the conclusion of the evidentiary hearing, the tribunal will not officially close the hearing until after the submissions are received. That process will delay the final award because the deadline to issue the award is generally fixed by the date the hearing is officially closed. In short, more details increase costs and take longer to write.

There is also a risk that having a more detailed award will invite a later court challenge to the award by the losing party. More details may give a party more “ammunition” for a request that a court substantively overturns the award as manifestly unjust. Although it may be very unlikely that a reasoned award or an award that contains specific findings of fact and conclusions of law will result in judicial vacatur, a subsequent attempt to vacate the award adds time, significant cost to the arbitration process and threatens the finality of the process. Thus, the third factor favoring more detailed awards for some parties (discussed above) might actually be a negative factor disfavoring such awards for other parties. In other words, this factor can cut both ways, depending on the case and parties.

A third factor disfavoring more detailed awards is that such awards risk unwanted court challenges to the award based on the form of the award itself (as opposed to the substance of the award). The requirement of a more detailed award increases the risk that a court might vacate the award, or at least remand it to the tribunal, as insufficient to meet the level of detail required by the parties. See , e.g. , Western Employers Ins. Co. v. Jefferies & Co ., 958 F.2d 258 (9th Cir. 1992). In Jefferies , the parties had agreed that a statement of findings of fact and conclusions of law would be included in the arbitration award. The final award did not include any findings of fact or conclusions of law. Accordingly, the appellate court held: “By failing to provide Western with findings of fact and conclusions of law, the . . . panel clearly failed to arbitrate the dispute according to the terms of the arbitration agreement. In so doing, the panel exceeded its authority . . . .” Id . at 262. The appellate court reversed the district court and vacated the award.

The issue involved in Smarter Tools, Inc. v. Chongqing SENCI Import & Export Trade Co ., 2019 U.S. Dist. LEXIS 50633 (S.D.N.Y. Mar. 26, 2019) was whether the arbitral award was sufficiently reasoned. Smarter Tools, Inc. (STI) sought to vacate an arbitration award on the ground that the arbitrator exceeded his authority by failing to provide a reasoned award as requested by the parties. The district court summarized the six-page award, stated the applicable legal standards and denied the motion to vacate, but it remanded the case to the arbitrator so that he could issue a reasoned award in accordance with the parties’ agreement. (Of course, this remand is problematic as a matter of arbitral law because the arbitrator is without continued authority once the final award is issued; that problem was apparently not argued to the court.)

According to the court, reasoned awards are not required in arbitration: “If the parties have not requested a specific form of award, the arbitrator may issue an award that does nothing more than ‘announce[] the result.’” Id . at 6 (citation omitted). The parties are free, however, to contract for a more detailed award, and if they do, they are entitled to receive such an award. A reasoned award “requires ‘something more than a line or two of unexplained conclusions, but something less than full findings of fact and conclusions of law on each issue raised before the panel.’ In other words, ‘[a] reasoned award sets forth the basic reasoning of the arbitral panel on the central issue or issues raised before it’ but ‘need not delve into every argument made by the parties.’” Id . (citations omitted). The district court held that the arbitrator’s award did not meet the standard for a reasoned award because the award contained no rationale for rejecting STI’s claims.

Despite the Jefferies case, and consistent with the Smarter Tools case, courts have generally been reluctant to vacate awards challenged on the ground that their form was improper. The case law warrants the conclusion that if the tribunal addresses the issues raised by the parties in some fashion, even if not in excruciating detail, then the tribunal is much less subject to a credible motion to vacate. This conclusion is supported by many cases, including, for example, Rain CII Carbon, LLC, v. ConocoPhillips Company , 674 F.3d 469 (5th Cir. 2012). Following an arbitration involving parties to a long-term supply agreement, which resulted in the arbitrator adopting Rain’s price formula, ConocoPhillips moved to vacate, and Rain moved to confirm the arbitration award. The Fifth Circuit Court of Appeals affirmed the district court’s decision to confirm the award. ConocoPhillips asserted that the arbitrator exceeded his powers by failing to render a reasoned award as requested by the parties. The Fifth Circuit defined a reasoned award with reference to Sarofim v. Trust Co. of the W. , 440 F.3d 213, 215 n.1 (5th Cir. 2006) (“[A] reasoned award is something short of findings and conclusions but more than a simple result.”). Id . at 473. The court then framed the question to be decided: “[I]t is clear that, in eight pages, the arbitrator rendered more than a standard award, which would be a mere announcement of his decision. Thus, the remaining question is whether the arbitrator’s award is sufficiently more than a standard award so as to be a reasoned award.” Id . at 474. The court answered yes to that question, stating, “Given the deference employed when evaluating arbitral awards, and as all doubts implicated by an award must be resolved in favor of the arbitration, the award in this case is sufficient to withstand Conoco’s request for vacatur.” Id . Regardless of the ultimate outcome of a judicial review of the form of the award, the risk of having to endure such a review merits avoidance.

In summary, a more detailed award may delay a final determination of the claims and counterclaims, which will increase the fees of the tribunal and may provide the basis for embroiling the parties in post-award court proceedings. But a more detailed award may also be more likely to reach the “correct” result, will enable the parties to better understand the award, and may give them grounds should they choose to challenge an adverse award in a subsequent court action.

D.  Conclusion

On balancing the factors outlined above, many parties who consciously elect a type of award choose a reasoned award as opposed to the default standard type of award or the most detailed “findings-conclusions” type of award. One or more of those factors might prompt parties to elect a different type of award in a particular case, however, and such election should be carefully considered and reflected in the agreement to arbitrate.

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

Copyright © 2020 Stradley Ronon Stevens & Young, LLP. All rights reserved.

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Enforcing International Arbitration Awards: US Courts Achieve Prompt and Efficient Enforcement, With Safeguards

Timothy G. Nelson

Recent U.S. court decisions demonstrate that international arbitration remains a widely used and potentially attractive method for resolving international business disputes, largely due to the relative ease of enforcing awards under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. U.S. courts, however, are sensitive to cases where a purported foreign “award” was not genuine and will refuse enforcement where serious questions exist.

Companies entering into cross-border transactions often include a clause in their contracts providing for international arbitration of disputes that may arise. These clauses typically provide for arbitration before a three-person tribunal in a neutral seat ( e.g. , New York, London, Singapore or Hong Kong), conducted under the rules of a major international arbitral institution, such as the International Chamber of Commerce (ICC), the International Centre for Dispute Resolution of the American Arbitration Association or the London Court of International Arbitration.

Companies often choose international arbitration because awards granted by an international arbitral tribunal may be enforced worldwide through the New York Convention. This treaty, which has been ratified by 158 countries, including the major trading nations, rests on two key principles: (i) a written “agreement to arbitrate,” including as contained in a contractual arbitration clause, is generally enforceable; and (ii) subject to certain narrow exceptions, an arbitral award may be recognized and enforced as a final judgment in each contracting country. In the United States, the New York Convention has been enshrined in federal law through the Federal Arbitration Act (FAA).

To enforce a foreign commercial arbitral award in the U.S. courts (assuming the losing party is subject to the jurisdiction of the U.S. courts), an award holder need only present an authentic copy of the award to the court, at which point it will be recognized and enforced unless the losing party can establish a basis for nonrecognition under Article V of the New York Convention. Article V allows recognition to be declined if (i) the arbitration agreement was invalid; (ii) the losing party was not properly notified of the arbitral proceedings; (iii) the award “deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration”; (iv) the tribunal composition was improper; (v) the award “has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made;” (vi) the “subject matter” of the dispute is not “capable of settlement by arbitration” under that country’s law; or (vii) award enforcement would be contrary to “public policy.”

Recent Cases

Federal case law makes clear that the enumerated grounds in Article V are to be read narrowly. As a result, the U.S. courts frequently reject attempts by losing parties to resist enforcement of foreign arbitral awards. Two recent examples include:

KG Schifffahrtsgesellschaft MS Pacific Winter MBH & CO. v. Safesea Transport, Inc. , U.S. District Court for the District of New Jersey: A German ship owner obtained a $122,367.86 award against a U.S. company for breach of a charter party agreement and sought enforcement in the United States. The losing party argued that the award should be denied as being contrary to “public policy,” claiming that the arbitrator ignored a time bar applicable under maritime law. Rejecting this argument, the court noted that “courts have strictly applied the Article V defenses and generally view them narrowly,” and held that “the Convention does not sanction the second guessing of an arbitrator’s interpretation of the parties’ agreement as this type of judicial review frustrates the basic purpose of arbitration.”

De Rendon v. Ventura , U.S. District Court for the Southern District of Florida: Various parties entered into a settlement agreement concerning the share ownership in a Colombian pharmaceutical company, which provided for arbitration of disputes before an ICC tribunal in Bogota, Colombia. After a dispute arose, one of the parties obtained an arbitral award of $900,000 for breach of the agreement’s confidentiality provisions. The losing party opposed enforcement of the award on a variety of grounds under Article V of the New York Convention, including that the arbitration clause, as applied, had become “invalid” because the ICC had improperly treated the case as an international (rather than domestic) arbitration. These and other challenges were rejected, with the court emphasizing “its ‘extremely limited’ review of arbitral awards” and “the powerful presumption that the arbitral body acted within its powers.”

The limits of the courts’ pro-arbitration policy, however, were demonstrated in 2019 in Al-Qarqani v. Chevron Corporation in the U.S. District Court for the Northern District of California. Saudi Arabian nationals brought a petition to recognize and enforce a purported arbitral award of approximately $18 billion that had been rendered against numerous individuals and companies under the auspices of the International Arbitration Centre in Cairo, Egypt. The case involved unique facts and myriad questions regarding the source of the award and the conduct of the purported arbitration in Egypt. In response to the petition, the U.S. respondents (two Chevron affiliates) argued that:

[T]he Award was the product of sham proceedings engineered to produce an award in Petitioners’ favor, that there was never an agreement to arbitrate between the Petitioners and Respondents, that the arbitral proceedings violated the plain terms of the arbitration agreement the tribunal purported to rely upon, that the claims fell outside the arbitral agreement, and that the arbitral process was riddled with gross irregularities and criminal misconduct.

The court focused on whether there was an arbitration clause between the Saudi individuals and the U.S. companies, noting that the sole basis for arbitration had been a 1933 concession agreement between the government of Saudi Arabia and a Standard Oil affiliate. The Saudi claimants, however, had never been parties to the 1933 concession and, therefore, could not invoke the arbitration clause against Chevron. With no agreement to arbitrate, the court dismissed for lack of jurisdiction.

The court added that had there been an agreement between the parties to arbitrate, recognition still would have been denied, on the grounds that the tribunal’s composition had not been “in accordance with the agreement,” and that the arbitral tribunal had decided matters outside the scope of the arbitration agreement.

Cases like this may prompt some to rethink whether their disputes clauses should instead specify litigation in an agreed forum, rather than arbitration. Indeed, for decades, efforts have been made to enact a treaty that will facilitate enforcement of court judgments in a similar manner as arbitration awards are subject to enforcement under the New York Convention. A multilateral treaty, the 2015 Hague Convention on Choice of Court Agreements allows for recognition and enforcement of litigation forum selection clauses, and has been ratified by five countries plus the European Union. A more comprehensive mutual judgment recognition treaty, the 2019 Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, was opened for signature in July 2019 at the Hague Conference on Private International Law. Neither treaty, however, has gained widespread adherence.

Because of the unique facts involved, Al-Qarqani does not signal a trend against enforcement of commercial awards generally. Nevertheless, the case illustrates the basic threshold requirements that must be met in order to enforce a foreign arbitration award, including that the award must arise from a genuine arbitration agreement. Where there are questions about the integrity of the foreign arbitral proceeding, U.S. courts may decline to enforce the resulting award.

This memorandum is provided by Skadden, Arps, Slate, Meagher & Flom LLP and its affiliates for educational and informational purposes only and is not intended and should not be construed as legal advice. This memorandum is considered advertising under applicable state laws.

Dodgers designate Jason Heyward for assignment to clear roster spot for Chris Taylor

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On Tuesday night, Jason Heyward hit a go-ahead home run that manager Dave Roberts described “as probably the highlight of the season for me thus far.”

Some 24 hours later, however, the Dodgers informed their highly respected, veteran clubhouse leader that he no longer had a place on the team.

As the odd man out of the team’s anticipated roster crunch, Heyward was designated for assignment to clear a roster spot for returning utility man Chris Taylor, the team announced Thursday.

Not even a dramatic pinch-hit, three-run homer in the eighth inning of Tuesday night’s 6-3 victory over the Seattle Mariners could save Heyward’s job, as the Dodgers chose to keep four-time Gold Glove Award-winning center fielder Kevin Kiermaier, versatile utility man Kiké Hernández and Taylor on the bench.

The decision was significant, even if it wasn’t all that unexpected.

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Heyward hit just .208 with a .682 on-base-plus-slugging percentage, six homers and 28 RBIs in 63 games in a platoon role this season, but his playing time took a significant hit when Mookie Betts moved from shortstop back to right field upon returning from a left-hand fracture last week.

“I think [the decision] is going to be what it’s going to be, no matter what,” Heyward said after Tuesday night’s game. “Years like this, when a team is all-in, I think they always have to put their best foot forward, and whatever happens, happens.”

A day later, Heyward learned of his fate, with the Dodgers informing him of the impending roster move after Wednesday’s game, according to a person with knowledge of the situation who wasn’t authorized to speak publicly.

“This roster is gonna look, on the position player side, a little different on Friday,” Roberts told reporters during his postgame news conference Wednesday.

Indeed, in the end, cutting Heyward appears to have been a matter of personnel fit for the Dodgers, who have dramatically altered their roster since he re-signed with the club on a one-year, $9-million deal in December.

At the start of the season, the Dodgers had Betts at shortstop. They had two rookies, James Outman and Andy Pages, patrolling center. And in Heyward, they had an experienced left-handed hitter who could play right field against right-handed pitching, making him a regular presence at the bottom of the Dodgers lineup.

Since then, however, Miguel Rojas emerged as the Dodgers’ top shortstop, prompting Betts’ transition back to being an everyday right fielder. Teoscar Hernández has thrived in an everyday role in left. And, most consequentially, the club also added two new center-field options at the trade deadline, acquiring Kiermaier from Toronto and switch-hitting utilityman Tommy Edman from St. Louis .

As a result, Heyward — who has 192 career starts in center field, but posted subpar defensive metrics there last season — was left without a position or clear role on the roster.

And while his bat might have been of value off the bench over the stretch run of the season, the Dodgers instead opted to keep the more defensively skilled Kiermaier, as well as the more defensively versatile duo of Hernández and Taylor.

Heyward, 35, first joined the Dodgers on a minor-league contract two offseasons ago, making the 2023 opening-day roster after being released by the Chicago Cubs near the end of the 2022 campaign.

Freddie Freeman, Heyward’s old Atlanta Braves teammate and close longtime friend in the sport, initially vouched for the outfielder to Dodgers officials, extolling Heyward’s veteran track record and steadying clubhouse presence while urging the club to take a flier on him.

“I put Jason’s name on the radar, then I put it on again and just kept going and going and going,” Freeman said in March 2023. “I just made sure to let Andrew [Friedman, president of baseball operations] know how wonderful of a man that guy is.”

During Heyward’s first season with the team, those traits quickly became clear. Not only did the outfielder have a resurgence at the plate, batting .269 with 15 home runs and a .813 OPS in 124 games, but he also became one of the most respected voices on what was a new-look team, taking on an important leadership role that transcended his status as a part-time platoon player.

“You see him every day coming in working, helping the younger guys out, his whole routine, how professional he is,” catcher Will Smith said last year. “That rubs off on guys.”

This season, however, was more of a grind for the 15-year veteran.

Heyward landed on the injured list during the opening week of the season, ultimately missing more than 40 games with lower back tightness.

Though he batted .261 with a .929 OPS in his first 26 games back from the injury — including a pinch-hit grand slam in the Dodgers’ five-run, ninth-inning comeback against the Colorado Rockies on June 18 — his performance at the plate eventually waned.

Since June 19, Heyward was batting just .172 with a .552 OPS. He missed another three weeks in July with a left knee bone bruise. And his playing time had been steadily slashed, having started only once in the Dodgers’ last 11 games following Betts’ return from the IL.

Heyward had displayed some ability to contribute off the bench, going six for 15 with three home runs in the 14 contests he entered as a mid-game sub.

His go-ahead home run Tuesday stirred speculation he might be able to survive this week’s roster crunch, too.

“He does things the right way,” Roberts said that night. “He was ready when called upon, and he came up with a huge hit.”

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However, Roberts stopped short of guaranteeing Heyward’s safety, acknowledging that a “tough” decision was nonetheless looming upon Taylor’s return.

Heyward still checked a lot of boxes for the Dodgers, from his role in the clubhouse to occasional pop at the plate.

But for a team that is now back at full strength offensively, and clearly placing a premium on defense as they begin to formulate their potential October plans, he no longer fit into the roster as he once did.

In what became a game of musical chairs, it was Heyward who was left without a seat.

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Mike DiGiovanna has been covering Major League Baseball for the Los Angeles Times since 1995 and spent 19 years as the Angels beat writer and two seasons on the Dodgers. He won Associated Press Sports Editors awards for game-story writing in 2001, feature-story writing in 2017 and breaking news in 2019. A native of East Lyme, Conn., and a graduate of Cal State Fullerton, he began writing for The Times in 1981.

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