Can you still enforce awards in the UK that have been set aside?

This is the third article in Clyde & Co’s international arbitration series covering the possibility of enforcing arbitral awards that have been set aside by a court in the seat of arbitration. In this piece, associate Robin Bandar from our London office provides the English law perspective.

The UK has agreed to recognise and enforce foreign awards under the New York Convention

The United Kingdom is a signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (“the New York Convention”). This means, in effect, that the United Kingdom has agreed (subject to certain very limited exceptions) to recognise and enforce awards made in the territories of other signatory states of the New York Convention. It has been incorporated into English domestic law in the form of Sections 100 to 104 of the Arbitration Act 1996 (the “AA 1996”).

Whilst there are several ways of enforcing a foreign award in England, the regime enshrined in Sections 100 to 104 AA 1996 is generally accepted as the most favourable route to the recognition and enforcement of any New York Convention award in England. This is, in part, because there are only very limited grounds upon which enforcement can be refused by the English courts.

The limits of the agreement to enforce: Section 103 of the Arbitration Act 1996

Section 103(2) provides that recognition or enforcement of an award ‘may be refused’ upon proof that one of six specific grounds for refusal is met. The focus of this article is the last ground for refusal, in sub-section (f), which covers circumstances in which ‘the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.’

The wording ‘may be refused’ mirrors the language of the New York Convention itself and appears to provide some discretion to domestic courts when deciding whether to refuse enforcement or not. It does not appear to require enforcement to be refused, even where a ground is made out.

So, how has this wording been interpreted and applied by the English courts? Is it possible in England to enforce a New York Convention award that has been set aside, and, if so, in what circumstances?

Guidance from the English courts: Is there any discretion to enforce set aside awards?

As for the word ‘may’ in Section 103(2) AA 1996 (and the New York Convention), and whether it affords some form of discretion, the English courts consider that the intention of the wording must be ‘to cater for the possibility that, despite the original existence of one or more of the listed circumstances, the right to rely on [the ground] had been lost, by for example another agreement or estoppel’ (Yukos Capital SARL v OJSC Rosneft Oil Company [2014] EWHC 1288 (Comm)).

In the specific context of an award that has been set aside, the English courts clarified that it is sometimes necessary for the court to consider and apply the legal principles ‘of honesty, natural justice and domestic concepts of public policy’ when making a determination on refusal to enforce an award (Yukos Capital SARL v OJSC Rosneft Oil Company [2014] EWHC 1288 (Comm)).

Those principles are relevant in cases where there are allegations of bias, or any other violations of due process, against the foreign court that rendered the set aside decision.

In such cases, an award can be enforced in England notwithstanding the decision of a foreign court to set aside that award, provided the English court is satisfied on the evidence that the foreign decision offends recognisable principles of due process. In such a case, the right to rely on Section 103(2)(f) is effectively lost.

In Malicorp Ltd v Government of the Arab Republic of Egypt and ors [2015] EWHC 361(Comm), the judge confirmed the ‘preferred approach’, and summarised that the decision of the competent court should be upheld unless it offended basic principles of honesty, natural justice and domestic concepts of public policy. There must be ‘positive and cogent evidence’ of the alleged violations of due process.

The judge also explained that the English courts do not retain any discretion to enforce an award if the foreign decision setting aside the award is entitled to recognition when applying English conflict of law rules.

In Nikolay Viktorovich Maximov v. OJSC ‘Novolipetsky Metallurgichesky Kombinat’ [2017] EWHC 1911 (Comm), the English High Court provided further guidance. The English High Court stated that it must be satisfied:

1. that the foreign court’s decisions were ‘wrong or manifestly wrong’; and
2. the relevant decisions ‘are so perverse as for it to be concluded that they could not have been arrived at in good faith or otherwise than by bias’.

It was acknowledged that meeting this test imposed a ‘heavy burden’ on any party seeking to persuade the English court to exercise its discretion.

Indeed, whilst the English court has recognised its discretion on multiple occasions, there are no known cases in which the English courts have enforced an award set aside by the courts at the seat of the arbitration, at the time of writing.

The English courts continue to preserve the international principle of comity of foreign judgments.

In summary, the answer to the question posed by this article is no, you cannot enforce an award that has been set aside, unless you have ‘positive and cogent evidence’ that the foreign decision setting aside the award clearly offends recognisable legal principles of due process.

What happens where a set aside application is pending in a foreign court?

Finally, what if there is a set aside application pending in a foreign court, but no set aside decision has been made yet? Can Section 103(2)(f) AA 1996 still be relied upon to stop enforcement proceedings in England?

In short, it would appear not. Where there is an application to set aside a foreign award pending (with no decision yet granted), the English courts consider the relevant arbitral award to be binding. For this reason, Section 103(2)(f) AA 1996 cannot be relied upon to provide the same protection from enforcement (Dowans Holding SA and another v Tanzania Electric Supply Co Ltd [2011] EWHC 1957 (Comm)).

A more appropriate solution in these circumstances may be to apply, under Section 103(5) AA 1996, for an adjournment of any enforcement proceedings, pending the outcome of annulment proceedings.

This series will continue next week with the German law position on enforcing arbitral awards that have been set aside.