assignment of arbitral award

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

The Arbitral Award: Form, Content, Effect

17 May 2023

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

Introduction

Each jurisdiction has its own sovereign power to determine the elements of an arbitral award that is rendered within its territory or in accordance with its laws. Even those jurisdictions that have adopted an arbitration law that is enacted according to the Model Law on International Commercial Arbitration [2] (the Model Law) may have different perceptions of what constitutes an arbitral award, particularly where and when the jurisprudence shapes the development of the law. Therefore, not only is it impossible to cover in one chapter the requirements on the form, content and effect of an arbitral award for all relevant jurisdictions, it is not necessary, thanks to the individual and specific reports on national jurisdictions in Part II of this guide.

Nevertheless, it is helpful to have an essential understanding of what should and could constitute an arbitral award, specifically on the basis of the most important legal instruments in this regard – the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention (NYC)) and the Model Law. Although in many respects there is a core understanding of what constitutes an arbitral award, it is interesting to note the differences, particularly at the boundaries. Furthermore, for a more comprehensive and systematic view, we have approached the arbitral award from different perspectives. This chapter therefore covers the definition of ‘award’, types of awards, governing law, the content of an arbitral award, the form of the award and the effects of an arbitral award.

Definition of ‘award’

Because the common legal sources, in particular the NYC and the Model Law, do not provide a definition of ‘award’, it is useful to describe what qualifies as an award and what does not.

First, an award is a decision that is rendered by an arbitral tribunal and not by an arbitration institution or by a court. Sometimes, uncertainties could arise if the name of the respective institution could be confused with that of the arbitral tribunal [3] or if the name of a state court includes a reference to arbitration. [4] In this context, it should be noted that where the institution makes certain decisions as to prima facie jurisdiction of either the institution or the arbitral tribunal yet to be constituted, those decisions are not to be considered as arbitral awards, as the actual decision on jurisdiction is usually reserved for the competence of an arbitral tribunal.

Another issue that might be controversial is whether an emergency arbitrator qualifies as an arbitral tribunal and, if so, whether his or her decisions would then also qualify as arbitral awards. Although the Singaporean legislator has now clarified that an emergency arbitrator falls under the definition of an arbitral tribunal, so that his or her decisions are enforceable, [5] other legal commentators would be more hesitant to equate an emergency arbitrator with a proper arbitral tribunal in instances where the legislator has not explicitly answered that question. Since the legal remedy that an emergency arbitrator grants is, by definition, of an interim nature, there are views that – subject to specific language in the arbitration law – an arbitral award is a decision of a proper arbitral tribunal and not of an emergency arbitrator. [6]

Second, an award is a decision addressing a specific request by the parties to the arbitration (usually the parties’ requests for specific relief). A tribunal may also issue a procedural order (e.g., dealing with procedural provisions to be applied in the arbitration), and that order is not necessarily based on a request by one of the parties. Thus, an arbitral award is a tribunal’s decision about a specific request that a party has put to it.

Third, an award should be final and binding on the parties to the arbitration; in other words, it has res judicata effect. Therefore, once an award is rendered and, with the exception of the procedures on correction of an award or rendering an additional award, the award may not be later revised by a tribunal, which is in contrast to a procedural order or an interim measure issued by a tribunal. Furthermore, the arbitral award is also binding on the arbitrators themselves and they may not – except for the correction of specific errors – amend or revise the award on their own initiative.

Fourth, an arbitral award may be subject to court review in setting-aside and enforcement proceedings. There might also be other court proceedings in which an arbitral tribunal’s decision is reviewed (e.g., a tribunal’s decision whether or not to uphold the challenge of one of the arbitrators or a tribunal’s interim measure), but these usually do not qualify as setting-aside or enforcement proceedings.

Finally, one should note that the distinction between procedural questions and substantive questions (or questions on the merits) is not decisive, as an arbitral tribunal may rule by an award on purely procedural questions, such as on its jurisdiction.

In conclusion, one may say that an arbitral award is a decision of an arbitral tribunal which, upon a specific request by one of the parties, rules on the question in a final and binding manner and is subject to court review in setting-aside or enforcement proceedings.

Types of awards

Different stages of the arbitration.

The most common award is the final award that a tribunal renders at the end of an arbitration. A final award should resolve all open questions, both as to procedure and as to merits, and usually also contains a decision on costs. [7] Typically, one of the orders in the dispositive section of the award would state that ‘all other requests are rejected’ or ‘. . . denied’. By such an order, the tribunal would formally cover all outstanding requests that a party might have raised in the arbitration. However, whether or not the tribunal has also dealt with it on the substance is a different question and would have to be answered by way of interpreting the entire award.

Subject to specific remedies provided for under the applicable arbitration rules, such as on correction of the award or on an additional award, a final award marks the end of the arbitration.

In contrast to that, an interim [8] award or a partial award deals – as indicated by the term – only with a specific issue in arbitration. An interim award [9] usually deals with a question that is then considered final and binding for the remainder of the arbitration (e.g., the question of jurisdiction over the entire matter or certain issues in arbitration). Accordingly, an interim award could also deal with questions of the applicable law or the statute of limitations. However, there is no common consensus on a clear terminology and thus, the term ‘interim award’ might also be used in instances where the decision of the tribunal is indeed of a merely interim nature, such as interim relief of an arbitral tribunal or of an emergency arbitrator. [10]

Although there is no strict distinction between an interim award and a partial award, the latter will typically be rendered when the parties put a number of claims to the tribunal, which then decides on certain claims at an earlier stage and on the remaining claims at a later stage, unless the parties settle regarding the remaining claims, which is often the underlying purpose or intention of having a partial award.

Whether or not a tribunal may render more than one final award (i.e., to decide certain issues in separate awards such as an interim or partial award) is usually subject to party agreement. If the parties have not agreed otherwise, the tribunal’s right to do so would normally be derived from the rules and laws governing the arbitration or, ultimately, from the tribunal’s general power to conduct the proceedings as it deems appropriate.

Article 47 of the UK Arbitration Act 1996 explicitly stipulates that, where the parties have not agreed otherwise, ‘the tribunal may make more than one award at different times on different aspects of the matters to be determined’. Article 188 of the Swiss Private International Law Act (PILA) contains a similar provision. Many other arbitration laws are silent on this question. However, arbitration rules [11] do include a provision on the tribunal’s power to resolve the matter in more than one (final) award. [12] In any event, if the parties have agreed that the tribunal should decide all claims in one final award because they want to have expeditious proceedings or, conversely, if the parties agree on a bifurcation of the proceedings, the tribunal should comply with the parties’ agreement if it does not want to risk a setting aside of the award (or awards) or a refusal of enforcement, in particular in accordance with Article V(1)(d) of the NYC. In arbitration proceedings under the Arbitration Rules of the International Chamber of Commerce (ICC Rules), drawing up the terms of reference pursuant to Article 23 of the ICC Rules is often an opportunity for the tribunal to include the provision that it has the discretion to render separate awards.

Content of the award

Although arbitration laws are often silent on different types of awards (particularly with regard to an interim award or partial award), various arbitration laws do refer to an arbitral award that decides on jurisdiction. Articles 186(3) and 190(3) of PILA and Section 592(1) of the Austrian Code of Civil Procedure provide that an arbitral tribunal may decide on its own jurisdiction by way of an arbitral award. The tribunal’s power to make an award on the issue of jurisdiction stems from the principle of Kompetenz-Kompetenz generally acknowledged in inter­national arbitration. According to this principle, a tribunal has the ‘competence’ to say whether it has the ‘competence’ to decide a matter (which would normally be reserved for the courts).

In contrast to such explicit statutory provisions, the Model Law and jurisdictions following this specific concept of the Model Law merely provide that the tribunal may rule on its own jurisdiction ‘either as a preliminary question or in an award on the merits’. [13] Irrespective of whether a tribunal decides the issue of jurisdiction by way of a separate ‘award on jurisdiction’ or in a different form, this decision is subject to court review. Parties should be aware of the kind of legal remedy that they have against such a decision of the tribunal, in particular where time limits for raising the legal remedy are relatively short (e.g., Section 1040(3), sentence 2 of the German Code of Civil Procedure provides for a deadline of one month to challenge a decision of the tribunal that it has jurisdiction over a certain matter).

Another type of award that is explicitly recognised in arbitration laws or arbitration rules is that of the ‘consent award’ or ‘award on agreed terms’. [14] Where parties to an arbitration settle their dispute without the need for the arbitral tribunal to rule on the parties’ specific requests, they may consider jointly requesting the tribunal to render an award on agreed terms. [15] As the term itself indicates, an award on agreed terms is an arbitral award rendered by the tribunal; not merely a settlement agreement approved or recorded by the tribunal. As a consequence, a tribunal must review the content of the ‘agreed terms’ submitted by the parties and make its own assessment. The tribunal may not render an award in breach of the law or public policy at the place of arbitration, or where there are other doubts as to the correctness of the requested award on agreed terms. After all, by transforming the parties’ agreed terms into an arbitral award, the parties’ agreement becomes final and binding and is an enforceable title (particularly under the NYC). [16]

Although there should be no discussion that a tribunal’s final decision on costs, if it is not included in the award on all remaining issues, may also be included in a cost award, there has been debate concerning the correct form of the decision in another scenario relating to costs: if one party is in default of paying its share of the advance on costs and the other party substitutes that payment. In such a case, the party who has advanced both shares could immediately request the tribunal to order the defaulting party by way of an award [17] to reimburse the defaulting party’s share without waiting until the end of the arbitration when the tribunal would render the final award, including the tribunal’s decision on costs. [18]

A term that might sometimes arise and create (legal) confusion is the ‘default award’. As in court proceedings, it may happen that the respondent does not participate in the proceedings. According to many civil procedural laws, the judge may, or might even be required to, render a default judgment by which he or she considers the factual allegations or legal grounds (or both) of the plaintiff to be correct and thus awards the relief requested by the plaintiff without any further review or with only a limited review. In arbitration, this ‘automatism’ is generally not accepted, as the arbitral tribunal usually has the duty to examine whether it has jurisdiction over the matter and whether the relief as requested by the claimant may be granted based on the claimant’s factual and legal assertions.

The Model Law, most arbitration laws and most arbitration rules provide for the possibility to render an additional award, which is actually rendered after the final award. As a principle, an additional award may be rendered only upon the application of a party where the tribunal has omitted a decision on a claim, or a request raised by one party. [19]

Law governing the award

When making an arbitral award, a tribunal should make sure that it complies with the various legal sources that might be applicable to the award. First, it is the law at the place of arbitration, the lex arbitri , that governs certain important aspects of an award. The law at the place of arbitration would usually not only explicitly stipulate the requirements as to the form and content of the award. From a wider perspective, the law at the place of arbitration sets the framework for the setting-aside regime. Since there should be no uncertainty as to the law at the place of arbitration, it is fair to say that a tribunal has the task and the duty to render an award that should withstand the scrutiny of setting-aside proceedings. In contrast, it is not necessarily possible for a tribunal to foresee the jurisdiction in which enforcement will be sought, and thus a tribunal may not necessarily be aware of all national-specific requirements that would render an arbitral award universally enforceable.

Within the mandatory framework of the arbitration law at the place of arbitration, parties in arbitration usually enjoy a high degree of autonomy to agree on procedural and substantive aspects. Where they have done so, the tribunal should observe any party agreements even though it depends on the jurisdiction as to whether non-compliance with a specific agreement of the parties would lead to a successful challenge of the award.

The law applicable to the merits of the dispute is equally relevant to understand the reasoning and, most importantly, the specific orders of the award in the dispositive section.

It has been widely debated whether arbitrators should apply the NYC since the NYC is addressed to the contracting states and provides mainly for the legal requirements at the enforcement stage, thus after an arbitral award has been rendered. Although this chapter is not a suitable place to continue this debate, it is generally advisable for arbitrators to take into consideration certain grounds for refusal. The most frequent instance that arbitrators might encounter and a situation that is explicitly governed under the NYC is the question of what law governs the substantive validity of the arbitration agreement (Article V(1)(a)). When the arbitrators must determine whether they have jurisdiction over the matter (and the lex arbitri does not provide otherwise), the answer of the conflict-of-law provision under the NYC is clear: it is the law designated by the parties [20] or, failing any such designation, the law at the place of the arbitration. [21]

Content of an arbitral award

Both arbitration laws and commonly used arbitration rules require that an arbitral award states the date on which it is made. [22] The exact date an arbitral award was made has legal implications in various respects.

First, arbitration rules often prescribe that the tribunal should render its award within a certain time limit. [23] Although time limits are generally seen as being of a purely ‘administrative’ nature and extensions are granted for specific reasons (by the arbitration institution), the rendering of the award outside a prescribed time limit may be used by an unsatisfied party to challenge the award. Apart from such legal aspects in a narrow sense, calculating the amount of time taken by the tribunal to render an award may have an effect on the financial remuneration of the arbitrators or at least serve as a useful tool for evaluating the efficient conduct of the arbitration.

Second, the date of the award may be the starting point for calculating the time limit for a correction or interpretation of the award. Although Section 57(4) of the UK Arbitration Act applies this starting point to both applications by a party and the tribunal’s own initiative, other rules count from the date of the award only if the tribunal adopts a correction on its own initiative. [24]

Third, when a party intends to raise a legal remedy, the starting point for the calculation of the relevant time limit is usually not the date of the award but the date of notification to that party. This applies to applications for correction, interpretation and an additional award as well as to setting-aside claims.

Another important substantive requirement is indicating the place of arbitration. Although there might be arbitrations without a place of arbitration, [25] the common perception is that either the parties have agreed on a place prior to the dispute (in particular in the arbitration agreement) or after the dispute has arisen. Agreement on the place of arbitration may also be reached by reference to where the chosen arbitration rules have a default provision in the event that the parties do not explicitly designate a place of arbitration. [26] Alternatively, if the parties cannot agree on the place of arbitration, not even by a default mechanism, in institutional arbitration it is either the institution (e.g., the court in proceedings under the ICC Rules pursuant to Article 18(1)) or the tribunal (e.g., under Article 22.1 of the DIS Rules [27] ) that determines the seat. Arbitration laws commonly provide for the tribunal’s competence to decide this question absent any agreement of the parties. The place of arbitration thus determines which law is applicable to arbitration and consequently the mandatory rules for any setting-aside claim (or other legal remedies against the award).

Furthermore, under the concept of the NYC, a contracting state has the obligation to recognise and enforce a foreign award; that is, an award that has been rendered or that has been made under the laws of a country other than the jurisdiction of enforcement. [28] Therefore, indicating the place of arbitration entails important legal implications particularly with regard to the determination of the legal provisions for setting-aside and enforcement proceedings.

Another substantive mandatory requirement that is regularly mentioned in arbitration laws and arbitration rules is the reasoning. [29] The reasoning is not limited to the legal reasons for the decision on the parties’ requests, but should also include an overview of the procedure and the tribunal’s finding of the relevant facts based on the taken evidence. In comparison to other arbitration laws, Articles 1481 and 1482 of the French New Code of Civil Procedure indicate in some detail the various items that should be included in an award. Arbitrators should pay attention to whether parties are allowed to waive the reasoning [30] or whether even in the case of an award on agreed terms, the reasoning must be included unless otherwise agreed by the parties.

Although, in general, the ‘wrong’ finding of facts or a simple ‘wrong’ application of the law would not lead to a successful challenge of the award (be it in setting-aside or enforcement proceedings), the lack of the entire reasoning or an insufficient reasoning might lead to the conclusion that the proceedings were not conducted in a fair manner or that a party’s right to be heard has been violated. Thus, based on the NYC, a flawed reasoning of the award might constitute a ground for refusal under Article V(1)(b) [31] or the corresponding ground for setting aside under Article 34(2)(a)(ii) of the Model Law.

Many institutions in the arbitration community have developed helpful tools for arbitrators to draft proper and complete awards. [32] Even though it is rarely explicitly mentioned in arbitration laws and arbitration rules, one part of an award that is of essential relevance to the parties is the dispositive section, in which the arbitrators phrase the actual orders regarding what a party must do or should refrain from doing. The dispositive section is usually the most relevant part, or at least the starting point for the enforcement court and for any measures of execution to be taken in that country. The most common order is the order for payment of a specific amount of money. However, questions may arise if the award orders payment in a specific currency and if and how that currency may or should be converted if it is not the official currency in the country of enforcement or not even recognised in that country. In recent times, an enforcement creditor might also face – be it practical or legal – challenges if the award orders the payment or transfer in a cryptocurrency.

Another aspect in the dispositive section is the order that the debtor should pay interest. Particularly in countries where Islamic law is relevant, interest could be an issue, and it may be advisable to make a distinct separation in the award so that a partial enforcement would be an option for the enforcement creditor.

In general, both the parties when phrasing their final requests for relief (for instance in the post-hearing briefs) and the arbitrators when writing the award should pay particular attention to the language of the dispositive section. In a recent decision of the Swiss Federal Court as the final instance in enforcement proceedings, the enforcement of a cost decision against two award debtors was denied, as it was unclear whether the debtors were jointly and severally liable. [33]

Form of the award

Under most arbitration laws and particularly under the NYC (as well as under the Model Law), an arbitral award should be in writing. [34] In other words, an oral announcement of the tribunal’s decision would – other than with court judgments in many jurisdictions – not qualify as an award. If a tribunal is empowered to render an oral award, that award would not be enforceable under the NYC, although it might be enforceable under applicable domestic provisions. [35]

Although the ‘writing requirement’ may be undisputed in a theoretical sense, and having hard copies of the arbitral award has been the rule until recently, digitalisation of the legal industry can lead to new technical possibilities that entail new legal challenges: particularly during the covid-19 pandemic, the electronic signing and transmission of documents has become a vital part of conducting proceedings. Although modern arbitration laws and rules have adopted explicit language to include electronic communication, explicit provisions regarding the electronic or digital condition or transmission of arbitral awards are still rare. For instance, Article 36(5) of the Vienna Rules [36] allows the Secretary General of the Vienna International Arbitral Centre to send a copy of the award in electronic form ‘if it is not possible or feasible to send the award in hardcopy form within a reasonable time’. Article 26.7 of the Arbitration Rules of the London Court of International Arbitration (the LCIA Rules) [37] goes one step further and considers electronic notification to be the rule and even to prevail in the event of any disparity between the electronic and hard copy of the award.

Although the NYC does not explicitly mention that an arbitral award needs to be signed by the arbitrators, Article IV(1)(a), which stipulates the ‘duly authenticated award’ as a requirement for enforcement, implies the assumption that the award must bear the arbitrators’ confirmation in some manner. All relevant arbitration laws and arbitration rules explicitly require the signatures of the arbitrators. Until recently, this has been understood as a wet-ink signature on a paper hard copy. It is interesting to note that Article 26.2 of the LCIA Rules provides that the award may also be signed electronically.

In this context, there is also the eIDAS Regulation of the European Union, [38] which regulates technical requirements and legal effects of electronic signatures. More specifically, Article 25.2 stipulates that a qualified electronic signature (QES) has the ‘equivalent legal effect of a handwritten signature’. This provision may be relevant where arbitration laws and arbitration rules refer to the ‘signature’ of the arbitrators as a requirement of an arbitral award. There are good reasons to assume that a QES fulfils the signature requirement under the various provisions in any event, but that other forms of electronic signing, such as an ‘advanced electronic signature’ under Article 26 of the eIDAS Regulation would be subject to interpretation by the relevant state authorities.

Effects of an arbitral award

An arbitral award must be notified to the parties to the arbitration in order to become final and binding on them. Both arbitration laws and arbitration rules usually stipulate that an arbitral award must be notified to the parties. When an institution administers the arbitration, the rules usually provide that the institution notifies the award. In ad hoc proceedings, this is the duty of the arbitrators. Where a party has not participated in the arbitration, or the factual delivery of documents, including the arbitral award, faces difficulties, it might be questionable whether the notification can be effectuated by the application of (legal) fictions of notification. Questions could also arise when an award orders that the debtors are jointly and severally liable but the award cannot be notified to all award debtors.

An arbitral award is binding not only on the parties but also on the arbitrators. Thus, with the exception of the limited grounds for a correction of the award, which may also be performed on the tribunal’s own initiative, the arbitrators may not amend or revise the award.

In some jurisdictions, an award may be deposited, or perhaps must be deposited, with a competent authority. Although this may have legal implications for the domestic legal effects of the award, it is generally recognised that the fulfilment of any such requirement is not relevant under the NYC. [39] In other jurisdictions, the arbitral award requires a declaration of enforceability in order to have the same, or at least comparable, legal effects as a court judgment in that jurisdiction. In any event, the intention of the NYC was clearly to facilitate the enforcement of foreign awards. Thus, whatever might be necessary for a domestic award to become final and binding or enforceable may not be construed as an additional legal impediment that is not provided under the NYC. [40]

Whether an award is truly ‘final’ and only subject to setting-aside proceedings at the place of arbitration is a matter of party agreement and the law at the place of arbitration. Although it is conceivable that parties could agree on an ‘appeal tribunal’ that reviews the award as an appellate body, this is rarely the case and would undermine the advantages of arbitration proceedings.

[1] Venus Valentina Wong and Dalibor Valinčić are partners at Wolf Theiss Rechtsanwälte GmbH & Co KG.

[2] Adopted by the United Nations Commission on International Trade Law in 1985, with amendments adopted in 2006.

[3] For example, the previous name of the Vienna International Arbitral Centre (VIAC) was – in the German version of the 2013 edition of the rules – Schiedsgericht der Wirtschaftskammer Österreich, a literal translation of which is ‘arbitral tribunal of the federal chamber of commerce Austria’.

[4] For example, until 2014, the Supreme Arbitrazh Court, often translated as ‘Supreme Arbitration Court’, of the Russian Federation was a (state) court and not an arbitration institution.

[5] See Section 2(1) of the Singapore Arbitration Act, which includes the ‘emergency arbitrator’ in its definition of ‘arbitral tribunal’ and includes an ‘interim, interlocutory or partial award’ (on the substance of the dispute) in the definition of ‘award’.

[6] See Ehle in Wolff (ed.), New York Convention (2nd ed., 2019), Article I, para. 71a.

[7] Blackaby, Partasides, et al., Redfern and Hunter on International Arbitration (7th ed., OUP, 2023), para. 9.19.

[8] Some older terminology might also refer to ‘interlocutory’ or ‘preliminary’ awards.

[9] References to the term ‘interim award’ can be found in the Arbitration Rules of the International Chamber of Commerce (ICC Rules), at Article 2(v); VIAC Rules of Arbitration 2021 (Vienna Rules), at Article 6(1.8); and Swiss Rules of International Arbitration (Swiss Rules), at Article 34(1).

[10] See, for example, Swiss Rules, Article 29(2): ‘Interim measures may be granted in the form of an interim award.’

[11] See, for instance, Swiss Rules, Article 34(1); and the Arbitration Rules of the London Court of International Arbitration (LCIA Rules), Article 26.1.

[12] Poudret and Besson, Comparative Law on International Arbitration (2nd ed., 2007) paras. 721–22.

[13] cf. Model Law, Article 16(3), sentence 1.

[14] In the following, the authors refer only to ‘award on agreed terms’, which shall also include the meaning of ‘consent award’.

[15] cf. Model Law, Article 30.

[16] See Haas and Kahlert, in Weigand and Baumann (ed.,) Practitioner’s Handbook on International Commercial Arbitration (3rd ed., 2019), (Chapter 21) ‘New York Convention’, para. 21.110.

[17] See Vienna Rules, Article 42(10), which states that the tribunal may order the non-paying party ‘by way of an award or other appropriate form’; see, also, LCIA Rules, Article 24 at 24.6 and 24.7.

[18] For further discussion, see Ehle in Wolff, op. cit. note 6, Article I, paras. 72 and 73.

[19] See, among many others, Model Law, Article 33(3).

[20] It should be noted that ‘designation’ may include both an express choice as well as an implied choice; e.g., by designating the law applicable to the main contract.

[21] See, for further discussion, Wilske and Fox, in Wolff, op. cit. note 6, Article V, para. 111 et seq.; Haas and Kahlert, in Weigand and Baumann, op. cit. note 16, para. 21.442 et seq.

[22] Poudret and Besson, op. cit. note 12, para. 755.

[23] The most well-known time limit is probably that as described in the ICC Rules at Article 31.

[24] See Model Law, Article 33(2); and Vienna Rules, Article 39(3).

[25] ‘Delocalised’ arbitration: see, e.g., Poudret and Besson, op. cit. note 12, paras. 125–30.

[26] See, e.g., LCIA Rules, Article 16.2 or Vienna Rules, Article 25(1).

[27] 2018 Arbitration Rules of the German Arbitration Institute (DIS).

[28] For the purpose of this chapter, the authors discuss only the territorial concept under the NYC and do not engage further in the ‘procedural’ concept of the NYC, which is practically no longer relevant; for further discussion, see Haas and Kahlert, in Weigand and Baumann, op. cit. note 16, para. 21.30 et seq.

[29] Poudret and Besson, op. cit. note 12, paras. 746–50.

[30] For example, Article 32(2) ICC Rules does not allow the parties to waive the reasoning.

[31] See Scherer in Wolff, op. cit. note 6, Article V, para. 185.

[32] See, e.g., the ‘ICC Award Checklist’ ( https://cms.iccwbo.org/content/uploads/sites/ 3/2016/04/ICC-Award-Checklist-English.pdf (last accessed 28 Feb. 2023)) or the International Bar Association’s ‘Toolkit for Award Writing’ ( https://www.ibanet.org/MediaHandler?id=C2AF46AA-5D7A-4DF3-817E-F94149004219 (last accessed 28 Feb. 2023)).

[33] Decision of 19 July 2022, 5A_335/2021.

[34] As an exception to the ‘in writing’ requirement, the English Arbitration Act, at Section 52, and the Stockholm Chamber of Commerce Rules, Article 42(1), allow the parties to agree on a different form from a written award.

[35] Poudret and Besson, op. cit. note 12, para. 744.

[36] In force since 1 July 2021.

[37] In force since 1 October 2020.

[38] Regulation (EU) No. 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC.

[39] Poudret and Besson, op. cit. note 11, para. 759; Redfern and Hunter , op. cit. note 7, para. 9.177.

[40] See in particular Article III, which obliges the contracting states of the NYC that there may not be ‘substantially more onerous conditions or higher fees or charges’ for foreign awards than for domestic awards.

Venus Valentina Wong

Wolf Theiss

Dalibor Valinčić

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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 , Volume 40, Issue 2, June 2024, Pages 157–168, 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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Assignment of arbitral awards: The what, how and why

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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
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International Arbitration Law Firm

Assignment of Arbitration Agreements

23/01/2023 by Aceris Law LLC

The assignment of a contract containing an arbitration agreement to a third party raises several questions. [1] The first question is whether the arbitration agreement is automatically transferred. [2] If so, what is the legal basis for such a transfer ? [3] Other issues concern the validity of the assignment of the main contract itself and whether evidence of the intent of the various parties is required to validate the assignment of the arbitration agreement. [4]

In this post, we will explore some of the issues that commonly arise in the contractual assignment of arbitration agreements.

The Applicable Law to the Question of the Assignment of Arbitration Agreements

The assignment of an arbitration agreement begs the question of the applicable law to its assignment. Such a determination may be made by the pertinent State court or the arbitral tribunal. Depending on whether the case is brought before a State judge or arbitrators, the conflict of law analysis may vary. [5] The most typical laws considered for the issue of the assignment of arbitration agreements are the following: [6]

• the law of the court where the proceeding is brought (i.e., the lex fori );
• the law of the seat of the arbitration (i.e., the lex loci arbitri );
• the law governing the underlying contract (i.e., the lex causae ); and
• the law applicable to the arbitration agreement (i.e., the lex compromissi ).

Unlike State courts, arbitrators do not have a lex fori , as their jurisdiction is based on the parties’ consent or, to some extent, on the lex arbitri . [7]

Some authors suggest that State courts will determine the law applicable to the assignment by way of their own conflict of law rules. [8] For instance, in Switzerland, the question of whether the parties are bound by the assignment is determined by the law governing the arbitration agreement under the Swiss conflict of laws rules. [9]

On the other hand, the lex fori  may encourage forum shopping in a search to find a more favourable legal framework for the assignment. [10] In addition, the judicial forum will not necessarily have a real connection with a dispute that would justify the application of its own law. [11]

Lex Loci Arbitri

The lex arbitri is understood as the law of the seat of arbitration. It should not be confused with the law establishing the framework of the arbitral proceedings, known as the lex arbitri. [12]

The New York Convention and the UNCITRAL Model Law give the lex loci arbitri a prominent role. Therefore, it is sometimes argued that it shall govern questions pertaining to the arbitration, including the question of the assignment of the arbitration agreement. [13]

Nevertheless, the lex loci arbitri does not govern the arbitration agreement itself. It is also difficult to understand the connection between the seat of the arbitration and the issue of assignment. Moreover, parties usually seek a neutral seat for their arbitration, considering, among other factors, the proximity, convenience, and pro-arbitration reputation of one jurisdiction. It is difficult to see how these factors would be relevant to determine the law governing the assignment of the arbitration agreement. [14] Thus, the lex loci arbitri may not be seen as the deciding law governing the assignment of an arbitration agreement.

It may be argued that issues concerning the assignment of arbitration agreements should be regulated by the law governing the underlying contract or the lex causae .

Indeed, the use of the lex causae ensures that questions arising out of the assignment of the arbitration agreement and the underlying contract will be treated by the same legal framework. Additionally, only this rule ensures the parties’ typical expectation that the arbitration agreement will be transmitted in the same conditions as the underlying contract. [15]

This also avoids the difficulties associated with dépeçage , which can be defined as the use of different legislations to address various issues of the same contract. [16]

Lex Compromissi

A traditional rule is to subject the assignment to the law governing the arbitration agreement itself. Today, it is widely accepted that the arbitration agreement is governed by its own law, which may be chosen by the parties or defined by rules of conflict of laws. [17]

The advantages of applying the lex compromissi to the question of the assignment are: [18]

• it is in line with other general approaches in private international law; and
• it provides a clear answer to the question of which law applies to the assignment of arbitration agreements.

The applicability of the lex compromissi , on the other hand, may lead to a situation where the arbitration agreement and the underlying contract are governed by different laws giving rise to the problems associated with dépeçage. [19]

Substantive Law Governing the Assignment of the Arbitration Agreement

French courts have created a substantive rule, or a “ règle matérielle ”, whereby the arbitration agreement binds the assignee and the obligor based on the parties’ intent. Arbitral tribunals applying this rule need not rely on any national law, as the assignment will be transmitted based on the consent of the parties to the assignment. [20] Consequently, the validity of the assignment cannot be challenged on the ground that the assignment of the main contract is invalid.

In practice, French courts or arbitral tribunals will ascertain whether the assignor and assignee have consented to the transfer of the arbitration clause. [21] Under this approach, the validity of the assignment of the arbitration agreement will be analysed apart from the underlying contract. This may lead to a peculiar situation where the assignee becomes bound by the arbitration agreement but does not acquire rights or obligations under the underlying contract if the assignment of the main contract is deemed invalid. [22]

The Principle of Automatic Transfer of Arbitration Agreements

Most international instruments, such as the New York Convention and the UNCITRAL Model Law, are silent to the question of assignment. [23] However, many scholars, courts, and arbitral tribunals advocate for the principle whereby the assignee of the underlying contract becomes bound by the arbitration agreement once the assignment takes place. [24]

This ensures predictability and fulfils the expectation of the original obligor, who expects that disputes will be resolved by arbitration. In this regard, many scholars support the view that the fact that the assignee may be unaware of the existence of the arbitration agreement should be of no relevance in the context of an assignment. [25]

Nevertheless, some courts have departed from the principle of automatic transfer. In Bulgaria, for instance, the Supreme Court of Cassation set aside an arbitral award on the ground that the sole arbitrator lacked jurisdiction to decide a dispute arising out of a rental agreement where the debtor did not expressly agree to the assignment of the arbitration agreement. [26]

In Switzerland, the Supreme Court found that a sole arbitrator correctly declared himself incompetent over a dispute arising from an assigned contract. Interestingly, this contract expressly prohibited the assignment of the agreement without the other party’s written consent. [27] Thus, whereas under Swiss law, an arbitration clause is transferred to the assignee without the need for the consent of the debtor, in this specific case the arbitration agreement suggested that the arbitration clause was intended to be effective between the original parties only. [28]

The Principle of Separability in the Context of an Assignment of an Arbitration Agreement

Separability is a theory in which the arbitration clause is an independent agreement from the underlying contract itself. In the context of an assignment, this would mean the transfer of an arbitration agreement would not operate automatically in case of an assignment of the main contract.

Many authors suggest that the separability principle is not absolute, however. In this respect, it has been accepted that the arbitration clause is separated from the underlying contract to the extent that it helps to ensure and promote the effectiveness of arbitration. [29] In other words, the arbitration agreement does not need to be treated separately from the main contract for the purpose of a contractual assignment.

[1]             J. Waincymer, Chapter 7: “Part II: The Process of an Arbitration: Complex Arbitration” in Procedure and Evidence in International Arbitration (2015), pp. 517-518.

[2]             Garnuszek, “The Law Applicable to the Contractual Assignment of an Arbitration Agreement” in Michael O’Reilly (ed), The International Journal of Arbitration, Mediation and Dispute Management , 82(4), p. 349.

[3]             Ibid.

[4]             Waincymer, supra fn. 1, pp. 517-518.

[5]             See , Garnuszek, supra fn. 2, p. 350.

[6]             Id. , 349.

[7]             Id. , 350.

[8]             I. Chuprunov, “Chapter I: The Arbitration Agreement and Arbitrability: Effects of Contractual Assignment on an Arbitration Clause – Substantive and Private International Law Perspectives” in C. Klausegger, P. Klein, et al. (eds), Austrian Yearbook on International Arbitration 2012 (2012), p. 54.

[9]             Garnuszek, supra fn. 2, p. 352.

[10]            Chuprunov, supra fn. 8, p. 54.

[11]            Ibid.

[12]            Garnuszek, supra fn. 2, p. 354.

[13]            Chuprunov, supra fn. 8, p. 56.

[14]            Id. , p. 56.

[15]             Id ., p. 59.

[16]             Ibid .

[17]             Id. , p. 57.

[18]             Ibid .

[19]             Id. , p. 58.

[20]            Garnuszek, supra fn. 2, p. 351.

[21]            Chuprunov, supra fn. 8, p. 52.

[22]             Id. , pp. 52-53.

[23]            Id. , p. 39.

[24]            Id ., p. 31 .

[25]            Id. , p. 61.

[26]           V. Hristova, Bulgaria: Assignment of an Arbitration Clause – Is Debtor’s Consent Required? (Kluwer Arbitration Blog, 17 August 2019).

[27]            J. Werner, Jurisdiction of Arbitrators in Case of Assignment of an Arbitration Clause: On a recent decision by the Swiss Supreme Court J. of Intl. Arb. 8(2), pp. 14-15.

[28]            Id. , pp. 16-17.

[29]            Chuprunov, supra fn. 8, pp. 40-41.

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In Quest of Collection: Assignment of Arbitral Awards under Turkish Law

Congratulations! You prevailed in arbitration. All of your blood, sweat, and tears paid off. But keep in mind as you savor victory that, unfortunately, the time for real celebration hasn’t yet arrived. Why? Because the losing party likely has no intention of voluntarily honoring the award and, therefore, the adventure isn’t over. A second and uphill battle waits for you: Enforcement .

Enforcement proceedings are likely to be lengthy, possibly contentious, and certainly costly. On the other hand, you may be in quest for a quick cashflow for your business or you may not have sufficient funds, human resources or even energy to allocate for enforcement proceedings. In such a case, the question which usually pops up is: Would it be possible to assign the benefits of the arbitral award to a third party in return for a payment? Answers to this question usually come with several reservations varying depending on jurisdiction in which assignment and enforcement are sought [1] . What follows is a discussion of the matter under Turkish Law.

1. Validity and Effects of Assignment

Turkish law does not specifically regulate assignment of arbitral awards. We therefore turn for guidance to general principles of Turkish law governing the assignment of receivables codified in the Turkish Code of Obligations (the “ TCO ”).

Article 183 of the TCO allows a creditor, pursuant to a written assignment agreement satisfying the requirements of TCO Article 184, to assign receivables to a third party without debtor’s consent.

Article 189 of the TCO provides that upon assignment all rights pertaining to assigned receivable, including the right to sue, are transferred to assignee together with any secondary rights. Accordingly, under a valid assignment agreement, assignee as a matter of law stands in the shoes of assignor.

The assignment may be performed before the receivable is made subject to a lawsuit or after a lawsuit has been initiated. Accordingly, the assignee will have right ( i.e. standing to sue) to initiate a lawsuit against the debtor.

Further, pursuant to Article 125 of the Code of Civil Procedure (the “ CCP ”), where a claim is assigned prior to judgement the assignee replaces the claimant and the lawsuit will proceed without interruption.

2. Assignee’s Standing to Sue for Enforcement of Arbitral Award

As to recognition and enforcement of arbitral awards, in principle, the claimant can only be one of the parties to the arbitration award [2] . Otherwise, the recognition and enforcement lawsuit initiated by the third parties shall be dismissed on procedural grounds due to lack of standing to sue which is a mandatory procedural condition under Article 114 of the CCP.

An exception to this principle is deemed to be the event of succession. It is accepted by the Turkish authorities that successors of the parties to the arbitration award should have right to initiate or continue recognition and enforcement proceedings against the counterparty. Accordingly, any party which have succeeded to rights under the arbitration award as a result of an assignment should have right to file a lawsuit for recognition and enforcement of the award in Turkey.

While it is reasonable to argue that a valid arbitral award assignment agreement confers upon the assignee standing to sue, absent specific statutory grounds to that effect, counterparties may have colorable arguments to disrupt the recognition and enforcement proceedings before the Turkish courts. Notably, it would not be surprising that the counterparty challenges standing to sue of the assignee in the proceedings and enforceability of the award by invoking that the assignee was not a party to the arbitration agreement.

Nevertheless, recent Turkish court decisions [3] recognize a valid assignee’s standing to enforce an assigned arbitral award.

3. Potential Drawbacks of Assignment of Arbitral Awards

Neither statute nor judicial precedent specifically prohibit the assignment of arbitral awards. But such a possibility does not necessarily guarantee a successful enforcement. Further, any failure in the enforcement may backfire on not only the assignee but also the assignor.

The most challenging issue for an assignee is the fact that it did not participate in the arbitral proceedings; in particular, the arbitral hearings. Naturally, an award assignee having not been a party to the underlying arbitration will rely on the support of the assignor to overcome a challenge implicating the underlying proceedings. In principle, following the assignment, the assignor shall delivery to the assignee all documents, including bills of debt, necessary for the documentation and assertation of the claim as per Article 190 of the TCO. Accordingly, an assignor should deliver to the assignee the complete arbitration file as well as any necessary documents for a successful enforcement. However, depending on the grounds of the challenge, documents alone may be insufficient. Especially, in the event that the respondents’ arguments go to the core of factual details of arbitral proceedings, any explanation made by the assignee may fall factually short. Therefore, that assignment agreements usually require assignor’s full support and cooperation in all proceedings.

Where assignor’s external support is insufficient to enable assignee to overcome the respondent’s arguments, the assignor can intervene [4] upon assignee’s request or or by filing an intervention motion on the grounds that a ruling unfavorable to assignee will negatively impact assignor by ripening claims of assignee against it. Accordingly, it is advisable to include in assignment agreements a release sufficient to prevent recourse to the assignor where same provided all reasonable support and cooperation – provided that such a release does not contravene applicable law.

Third-party claims, particularly from assignor’s creditors, challenging the assignment on grounds of collusion between assignor and assignee are not unknown in Turkish courts. Accordingly, assignment agreements should always be the product of arm’s length negotiations, and proof of an actual assignment should be readily presentable in court

Winning your case does not necessarily result in a quick collection of the awarded amounts. As the arbitration award creditor, you are faced with a choice: initiate enforcement proceedings which are likely to be challenging, or assign the award to a third party, in exchange for immediate payment of an agreed amount less than the original award and likely in line with what you would have been realized on your own after litigation costs, who will seek enforcement on its own time at its own expense.

Such a transaction is not prohibited under Turkish law, but concerns and limits usually derive from the issues encountered in practice. Therefore, a careful drafting of the assignment agreement in accordance with potential challenges which may occur in the future is of utmost importance; and a particular attention should be paid to, inter alia, ongoing cooperation between assignor and assignee, limits to and conditions of recourse right, and arm’s length principle.

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A Detailed Guide To Enforcement Of Arbitral Award

2.1. Domestic Arbitral Award

2.2. Foreign Arbitral Award

5.1. Restrictions On The Execution Of Domestic Awards

5.2. Restrictions On The Execution Of Foreign Awards 

6.1. Case1: Jindal Exports Ltd. v. Fuerst Day Lawson Ltd. (2001)

6.2. Case 2: National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. (2004)

6.3. Case 3: Western Geco International Ltd. v. ONGC Ltd. (2014)

You may have come out on top in an Arbitration-Based Legal Battle, only to wonder, "What Now?" The triumph is only complete once the Arbitral Award is put into effect. However, how does that occur? Is it as easy as it looks, or are there challenges to face?

This Article will walk you through the steps, potential obstacles, and crucial elements of enforcing an arbitral award. You'll obtain a thorough grasp of what it takes to make that Award a Reality, even though you're New to Arbitration or Just reading up on the topic.

What Is An Arbitral Award

The ultimate and legally binding ruling rendered by a single Arbiter or an Arbitral Tribunal that settles all or a portion of the issue brought before him or her is known as an Arbitral Award. It resembles a Ruling from a Court of law. The proceedings will end when the Arbitrator determines that all of the parties have submitted their facts and Arguments. This Implies that no additional justifications or proof will be accepted.

Types Of Arbitral Award

Among the categories for Arbitral Awards are:

Domestic Award

Foreign Award

Domestic Arbitral Award

Part 1 of the Arbitration and Conciliation Act of 1996 addresses Domestic Awards. One can differentiate between a Domestic Award and an International or Foreign honour. The Country in which an International Award is made may consider it to be local.

When India serves as the venue for both International and Domestic Arbitration, Part 1 of the Act is applicable to both types of Arbitration. Section 34 of the Act permits a challenge to a Domestic Award; however, no "Challenge" action is considered in relation to a Foreign Award. 

An exception exists in that a Domestic Award encompasses an International Arbitration Award rendered on Indian Territory even if one of the parties is not an Indian Citizen or the Government. 

Foreign Arbitral Award

Conversely, An Award made in An Arbitration or other Procedure with a seat outside of India is referred to as a Foreign Award. Typically, the term "Foreign Award" only becomes important when it comes to enforcement in a Nation other than the one where it was originally made.

Article V of the New York Convention is relevant to section 48 of the legislation. A party may file an application under certain conditions listed in section 48 of the Act to have a Foreign Award enforced. Therefore, even if Indian Law Governs the contract, no "Challenge" actions to annul the award may be undertaken against a Foreign Award in India under the Act. 

Indian Courts will not consider merit-based challenges to Foreign Awards that are requested to be implemented in India. The Court may refuse to enforce the Foreign Award in an enforcement action if the party challenging the execution of the decision gives the Court enough "Proof" of any of the Grounds Specified in Section 48(1).

The Defences available to a party opposing the implementation of a Foreign Award are outlined in the aforementioned section.   

Implementation Of An Arbitral Award

The Arbitral decision shall be enforceable as a Court Judgment complies with the Code of Civil Procedure 1908, provided that an application under Section 34 is submitted after the deadline. The execution of the Arbitral Award is contingent upon both its finality and legitimacy. The winning party cannot submit a valid claim after the award becomes final. 

Additionally, it keeps the losing side from bringing up a lost case because they think they can get a better Counsel, a more accommodating Judge, or credible witnesses in the second place. Thus, the Award of Arbitration shall be final and binding on the parties and those making claims under them, respectively, according to section 35 of the Act.

The Initiation of the Arbitration Procedure does not mean that the option to make an Award is Permanent, nor does it constitute an Award when the parties enter into an Agreement outside of the manner specified under section 35 of the 1996 Act.

A question of Jurisdiction other than an Arbitration agreement may be raised in the case, and the Award becomes final and a Court Judgment under section 35 of the Act if it is not disputed.

Grounds And Conditions For Challenging The Enforcement Of Arbitral Awards

If a party chooses to contest the Arbitral Award, they may do so for any of the following reasons:

There was a degree of inability among the parties to the Arbitration Agreement.

The Arbitration agreement in question does not follow the law of the Nation where the Arbitral decision was issued, particularly in the Case of a Foreign Award, or the relevant law selected by the Parties.

Either the party seeking the Award failed to present its Case Convincingly Enough, or there was insufficient notification provided on the Arbitrator's appointment or the commencement of the Arbitral Procedures. 

The Arbitral Panel's Authority goes beyond the Award agreement's terms.

Decisions on issues not covered by the Arbitration Agreement or the Tribunal's Jurisdiction. 

Despite the rules of the Arbitration Agreement and Local Laws, the formation of the Arbitral Tribunal and the Arbitration Process are Unlawful.

The Arbitral Ruling is obviously unlawful or goes against Indian National Policy.

Because of an application for its suspension or revocation submitted to the appropriate Authorities of the Nation where the Arbitral Award was formed, or because of the laws of that Nation, the Arbitral Award, especially a Foreign Award has not yet been enforceable against the parties.

Limitation For Enforcement Of Arbitral Awards

The time constraints must be understood in order to enforce Arbitral Rulings. To Guarantee that the Enforcement Procedure Complies with the Limitation Act of 1963, the Supreme Court has made clarifications on the statute of limitations for both Domestic and Foreign Awards.

The most important deadlines for implementing both Local and International Arbitral rulings are outlined here:

Restrictions On The Execution Of Domestic Awards

The Supreme Court held that, for the purposes of enforcement, an Arbitral Award is regarded as a decree. Thus, Arbitration is likewise subject to the 1963 Limitation Act. Consequently, the 12-year Statute of Limitations that extends to implementing any decision is also applicable to enforcing Domestic Awards.

Restrictions On The Execution Of Foreign Awards 

The Supreme Court has decided that the statute of limitations for the execution of a Foreign Award should be three years in Compliance with the residuary condition under Article 137 of the Schedule of the Limitation Act. As soon as the applicant's Right to Seek Enforcement was established, the Limitation would go into place.

Cases Related To The Enforcement Of Arbitral Awards

Some significant instances related to the enforcement of Arbitral Awards are as follows:

Case1: Jindal Exports Ltd. v. Fuerst Day Lawson Ltd. (2001)

In this instance, the New York Convention's application to a Foreign Arbitral decision's Adoption was in question.

The Arbitration and Conciliation Act, of 1996 allows International Arbitral Awards to be enforced in India, according to a Court Decision. The Court affirmed the notion of finality in International Arbitration and Stressed that there is little chance of contesting the application of such a decision.

Case 2: National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. (2004)

In this case, the Arbitral decision was being implemented in Compliance with Section 34 of the Arbitration and Conciliation Act, 1996, following an attempt by the losing party to challenge the outcome.

The Supreme Court Ruled that after the time for disputing an Award given under Section 34 has elapsed, it becomes a Court Judgment and is legally binding.  The request by the losing party to postpone enforcement was denied, confirming the binding character and finality of Arbitral Rulings.

Case 3: Western Geco International Ltd. v. ONGC Ltd. (2014)

In this Case, the ONGC contended that enforcing a Domestic Arbitral Ruling was against Public Interests.

The Interpretation of "Public Policy" as specified in Section 34 of the 1996 Arbitration and Conciliation Act was broadened by the Supreme Court. It states that an Award can only be nullified in cases where it contradicts Fundamental Legal principles, India's Interests, Equity, or Ethics. The Ruling strengthened the enforcement of verdicts by highlighting the few grounds for contesting an Arbitral Award.

To sum up, one of the most important ways to Guarantee that the results of Arbitration are honored and put into practice is to enforce the Arbitral Ruling. Comprehending the Legal Structure and deadlines is crucial while handling both local and Foreign Awards.

The procedure preserves the idea of finality and offers both parties closure and clarity. The Arbitration Process is a potent instrument for settling conflicts since an Arbitral Ruling may be successfully enforced by following the Correct Legal Procedures.

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Prior to the publication of the first four volumes of the United Nations Reports of International Arbitral Awards, there existed no systematic collection of such decisions. Yet the need of one had been felt for a long while by the various national and international bodies concerned with international law and by all those interested in its development. Accordingly, the Secretariat of the United Nations and the Registry of the International Court of Justice together considered what steps could be taken to prepare such a collection.

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Rights under an arbitral award are assignable

惠州市東方聯合實業有限公司 v Wong Wai Tsang HCCT 73/2010, 28 February 2012

The Court had granted惠州市東方聯合實業有限公司 ("the Applicant") leave, pursuant to sections 40B and 2GG of the old Arbitration Ordinance (Cap 341), to enforce an arbitration award ("the Award"). The original claimant in the arbitration, Shenzhen Development Bank Foshan Branch ("the Bank") had obtained the Award against a debtor ("the Debtor") on the basis of a written guarantee signed by the Debtor. The Bank then purported to assign the outstanding sums under the Award by deed of assignment to another party, who in turn purported to assign the same by deed of assignment to the Applicant.

The Debtor now applied to set aside the enforcement order, arguing that the Applicant, as an assignee and not one of the persons between whom the Award was made, did not have locus standi to enforce the Award.

The Court held that as long as a person has obtained the benefit of an award (say by assignment), the award can be enforced even though he was not the original party to the award or not a "beneficiary" of an award. The rights under an award, the Court said, are a chose in action and therefore assignable. The assignment of the benefits of the Award was effective, the Court held, and the Applicant was a successor to the rights of the Bank under the Award. The Debtor's application was therefore dismissed.

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In Quest Of Collection: Assignment Of Arbitral Awards Under Turkish Law

Contributor.

Congratulations! You prevailed in arbitration. All of your blood, sweat, and tears paid off. But keep in mind as you savor victory that, unfortunately, the time for real celebration hasn't yet arrived. Why? Because the losing party likely has no intention of voluntarily honoring the award and, therefore, the adventure isn't over. A second and uphill battle waits for you: Enforcement .

Enforcement proceedings are likely to be lengthy, possibly contentious, and certainly costly. On the other hand, you may be in quest for a quick cashflow for your business or you may not have sufficient funds, human resources or even energy to allocate for enforcement proceedings. In such a case, the question which usually pops up is: Would it be possible to assign the benefits of the arbitral award to a third party in return for a payment? Answers to this question usually come with several reservations varying depending on jurisdiction in which assignment and enforcement are sought 1 . What follows is a discussion of the matter under Turkish Law.

i. Validity and Effects of Assignment

Turkish law does not specifically regulate assignment of arbitral awards. We therefore turn for guidance to general principles of Turkish law governing the assignment of receivables codified in the Turkish Code of Obligations (the " TCO ").

Article 183 of the TCO allows a creditor, pursuant to a written assignment agreement satisfying the requirements of TCO Article 184, to assign receivables to a third party without debtor's consent.

Article 189 of the TCO provides that upon assignment all rights pertaining to assigned receivable, including the right to sue, are transferred to assignee together with any secondary rights. Accordingly, under a valid assignment agreement, assignee as a matter of law stands in the shoes of assignor.

The assignment may be performed before the receivable is made subject to a lawsuit or after a lawsuit has been initiated. Accordingly, the assignee will have right ( i.e. standing to sue) to initiate a lawsuit against the debtor.

Further, pursuant to Article 125 of the Code of Civil Procedure (the " CCP "), where a claim is assigned prior to judgement the assignee replaces the claimant and the lawsuit will proceed without interruption.

ii. Assignee's Standing to Sue for Enforcement of Arbitral Award

As to recognition and enforcement of arbitral awards, in principle, the claimant can only be one of the parties to the arbitration award 2 . Otherwise, the recognition and enforcement lawsuit initiated by the third parties shall be dismissed on procedural grounds due to lack of standing to sue which is a mandatory procedural condition under Article 114 of the CCP.

An exception to this principle is deemed to be the event of succession. It is accepted by the Turkish authorities that successors of the parties to the arbitration award should have right to initiate or continue recognition and enforcement proceedings against the counterparty. Accordingly, any party which have succeeded to rights under the arbitration award as a result of an assignment should have right to file a lawsuit for recognition and enforcement of the award in Turkey.

While it is reasonable to argue that a valid arbitral award assignment agreement confers upon the assignee standing to sue, absent specific statutory grounds to that effect, counterparties may have colorable arguments to disrupt the recognition and enforcement proceedings before the Turkish courts. Notably, it would not be surprising that the counterparty challenges standing to sue of the assignee in the proceedings and enforceability of the award by invoking that the assignee was not a party to the arbitration agreement.  

Nevertheless, recent Turkish court decisions 3 recognize a valid assignee's standing to enforce an assigned arbitral award.

iii. Potential Drawbacks of Assignment of Arbitral Awards

Neither statute nor judicial precedent specifically prohibit the assignment of arbitral awards. But such a possibility does not necessarily guarantee a successful enforcement. Further, any failure in the enforcement may backfire on not only the assignee but also the assignor.

The most challenging issue for an assignee is the fact that it did not participate in the arbitral proceedings; in particular, the arbitral hearings. Naturally, an award assignee having not been a party to the underlying arbitration will rely on the support of the assignor to overcome a challenge implicating the underlying proceedings.  In principle, following the assignment, the assignor shall delivery to the assignee all documents, including bills of debt, necessary for the documentation and assertation of the claim as per Article 190 of the TCO. Accordingly, an assignor should deliver to the assignee the complete arbitration file as well as any necessary documents for a successful enforcement.  However, depending on the grounds of the challenge, documents alone may be insufficient. Especially, in the event that the respondents' arguments go to the core of factual details of arbitral proceedings, any explanation made by the assignee may fall factually short. Therefore, that assignment agreements usually require assignor's full support and cooperation in all proceedings.

Where assignor's external support is insufficient to enable assignee to overcome the respondent's arguments, the assignor can intervene 4 upon assignee's request or or by filing an intervention motion on the grounds that a ruling unfavorable to assignee will negatively impact assignor by ripening claims of assignee against it. Accordingly, it is advisable to include in assignment agreements a release sufficient to prevent recourse to the assignor where same provided all reasonable support and cooperation - provided that such a release does not contravene applicable law.  

Third-party claims, particularly from assignor's creditors, challenging the assignment on grounds of collusion between assignor and assignee are not unknown in Turkish courts. Accordingly, assignment agreements should always be the product of arm's length negotiations, and proof of an actual assignment should be readily presentable in court

Winning your case does not necessarily result in a quick collection of the awarded amounts. As the arbitration award creditor, you are faced with a choice: initiate enforcement proceedings which are likely to be challenging, or assign the award to a third party, in exchange for immediate payment of an agreed amount less than the original award and likely in line with what you would have been realized on your own after litigation costs, who will seek enforcement on its own time at its own expense. 

Such a transaction is not prohibited under Turkish law, but concerns and limits usually derive from the issues encountered in practice. Therefore, a careful drafting of the assignment agreement in accordance with potential challenges which may occur in the future is of utmost importance; and a particular attention should be paid to, inter alia, ongoing cooperation between assignor and assignee, limits to and conditions of recourse right, and arm's length principle.

1. In common law jurisdictions, maintenance or champerty arguments are often discussed in relation with assignment of benefits of arbitral awards ( See, decision of the High Court of the Hong Kong Special Administrative Region Court of First Instance in FG Hemisphere Associates LLC vs Democratic Republic of Congo, Miscellaneous Proceedings No. 928 of 2008); as well as standing to sue of the assignee. ( See, decision of Ruling of Prymorskyi District Court of Odessa City dated 20 March 2013 in Euler Hermes v PJSC Odessa Fat and Oil Plant)

2. Turkish Court of Cassation (" CoC "), 11th Civil Chamber, 18.05.1999, No. 2159/4122; CoC, General Assembly of the Civil Chambers, 23.02.2000, No. 11/121-139

3. 13 th Civil Chamber of the Istanbul Regional Court of Appeals, File No: 2020/33, Decision No: 2020/908, 21.09.2020; 43 rd Civil Chamber of the Istanbul Regional Court of Appeals, File No: 2020/291, Decision No: 2021/528, 22.04.2021; Istanbul 8 th Commercial Court of First Instance, File No. 2018/44, Decision No. 2018/944,11.10.2018; Istanbul 17 th Commercial Court of First Instance, File No. 2019/23, Decision No. 2019/406,09.10.2019

4. Under Article 61, et seq. of the CCP, a party, considering a subsequent recourse action to be filed by or against a third party in case of an unfavorable result in the case, may request the court to notify the proceedings to that third party.

Even if there is no notification, a third party may request leave from the court to intervene in the ongoing proceedings as an intervening party if the decision to be rendered may affect its rights and/or lead to a recourse action. An intervening party can choose the party whom he/she will side. The intervening party is bound by all actions performed, claims, defenses and evidence submitted by that party.

At the end of the proceedings, the court shall render its decision for the main parties of the case. Accordingly, the effect of the intervention shall occur between the intervening party and the related party in the case of a recourse action wherein the intervening party cannot challenge the decision rendered in the main case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Kluwer Arbitration Blog

Assignment of benefits of arbitral awards: problematic enforcement in ukraine.

Assignment of benefits of arbitral awards is a standard business practice worldwide, undertaken by companies involved in international trade and supported by credit insurers. However, this practice may face some obstacles in Ukraine considering contradictory and poorly developed court practice of granting leave for enforcement upon an application submitted by any person other than a person who was the party to arbitration. Courts are rather formalistic in deciding on that matter as Ukrainian laws do not directly envisage the possibility to an application for leave to enforce an international arbitration award to be submitted by any person other than a creditor (the meaning of this term is sometimes narrow, so that it is understood as a synonym to a party to arbitration). Actually, until recently there are not so many court cases, if any at all, in which the matter of assignment of benefits of arbitral award was clearly addressed.

Recent Euler Hermes case gave some reason to be worried. On 7 September 2011, FOSFA arbitration tribunal in London issued an award by which PJSC Odessa Fat and Oil Plant (Ukraine) was required to pay the debt to Pontus Trade S.A. (Switzerland). However, by a deed of assignment dated 27 November 2009, Pontus Trade S.A. assigned its claims against PJSC Odessa Fat and Oil Plant to Euler Hermes Services Schweiz AG (Switzerland) (‘Euler Hermes’). Euler Hermes made an application to a competent court of Ukraine seeking leave to enforce FOSFA arbitration award. The court dismissed the application having reasoned the dismissal as follows:

‘…an application for leave to enforce foreign court judgment shall be submitted by the creditor (his representative), or according to an international treaty which was granted with mandatory legal force by Verkhovna Rada of Ukraine – by other person (his representative). In this case the term “creditor” cannot be interpreted broadly… Thus, the judge finds that the effective civil procedure legislation of Ukraine envisages in this case that only Pontus Trade S.A. as a creditor under FOSFA arbitration award No. 4219 dated 7 September 2011 can submit the respective application…’ (Ruling of Prymorskyi District Court of Odessa City dated 20 March 2013, full text in Ukrainian available here ).

The court of appeal supported that ruling (Ruling of the Court of Appeal of Odessa Region dated 5 June 2013, full text of the ruling in Ukrainian is available here ). However the Court of Cassation – High Specialized Court of Ukraine for Civil and Criminal Cases – set aside the ruling of the court of appeal as

‘having mentioned that granting the leave for enforcement of an award which had been issued in favor of one person to a different person that had no right of claim under a contract (main obligation), would contradict public policy of Ukraine and could be harmful to a Ukrainian enterprise, the court of appeal did not invoke any legal reasoning for that finding’ (Ruling of the High Specialized Court of Ukraine for Civil and Criminal Cases dated 20 November 2013).

Formally, the Court of Cassation did not state that the assignee had the right to apply for enforcement, it only set aside the ruling of the court of appeal because of the wrongful interpretation of public policy, and returned the case for a new full hearing. The Court of Appeal of Odessa Region considered the case in a new hearing and ruled against Euler Hermes again. This time the court excluded findings related to public policy violation, and used only the core reasoning of the court of first instance (Ruling of the Court of Appeal of Odessa Region dated 22 January 2014, full text of the ruling in Ukrainian is available here ).

It is worth mentioning that the courts in that case found that the contract between the debtor and the initial creditor (Pontus Trade S.A.) contained a non-assignment clause. Though this was a secondary argument taken into account by the courts, it is the only one which might be considered sound. Ukrainian law and court practice clearly distinguish between substitution of a creditor in substantive (contractual) relations and procedural succession in arbitral or court proceedings, and the assignment of creditor’s rights in substantive relations might be considered as a necessary condition for an application for enforcement to be filed by an assignee.

According to Ukrainian civil law (Article 512 (1) of the Civil Code of Ukraine) the assignment of creditor’s rights is one of the ways of substitution of a creditor in civil relations. The creditor’s rights can be assigned unless otherwise is determined by the law or contract (Art.512 (3) of the Civil Code) or the relations are closely connected with the creditor’s persona (e.g. in case of personal injury) (Art. 515 (1) of the Civil Code). Ukrainian law also requires the assignment to be done in the same form as the main obligation (i.e. if a contract was in writing an assignment deed must be in writing as well). Such kind of assignment is stable practice in Ukraine. Once assignment took place, it serves as a ground for procedural assignment which means that the assignee obtains the right to apply for enforcement of an arbitral award.

However, there was no ground for the courts to state that an assignee cannot apply for enforcement purely on procedural grounds. The procedure of granting the leave for enforcement being one of the civil court procedures should be considered as regulated by general rules of civil procedure, in particular by Article 37 of the Civil Procedural Code of Ukraine which allows legal succession and substitution of a party with its legal successor or, in case of assignment of rights in disputable relations, with an assignee. This rule is most certainly applicable to proceedings of recognition and enforcement of foreign and international arbitration awards. Hypothetically, if an application for leave for enforcement of an arbitral award was initially submitted by a party to arbitration that applicant could be substituted with the assignee upon a respective application and furnishing the court with evidence of assignment of rights in contractual or other relations which were subject of arbitration proceedings. Thus, as substitution of an applicant is possible during the court proceedings, we do not see any legal obstacle to that substitution to take place before submission of an application for enforcement. At least Ukrainian procedural law does not prohibit that.

Although in Euler Hermes case appellate courts repeatedly stated that only a creditor to whom an arbitration award had been issued should have the right to apply for its recognition and enforcement , we shall emphasize the following: – rulings of appellate courts as well as those of the High Specialized Court of Ukraine for Civil and Criminal Cases do not constitute law; – those rulings do not constitute any kind of jurisprudence constante and cannot be considered as binding unified court practice by other courts in other proceedings; – the High Specialized Court of Ukraine for Civil and Criminal Cases did not finally rule on the issue of assignment in this case; – finally, the approach of the court of first instance and that of the appellate court was not consistent with the procedural rules.

Thus, although the main purpose of this article was to warn of possible obstacles which an assignee of benefits of an arbitral award may face while applying for its enforcement in Ukraine, we also want to point out that there is no purely procedural ground for refusing the leave for enforcement in that kind of cases.

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One comment

I was tempted to say that there are other obstacles in Ukraine but I won’t! My question is: should an arbitral panel take any account of the possible assignment of the benefit of the Award?

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CZI v Mbatha (HC 8795 of 2014) [2015] ZWHHC 125 (10 February 2015)

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CONFEDERATION OF ZIMBABWE INDUSTRIES

RITA MARQUE MBATHA

HIGH COURT OF ZIMBABWE

HARARE, 29 January 2015 and 11 February 2015

Opposed Application

T Mpofu , for the applicant

The respondent in person

MATHONSI J: This application is made in terms of Art 34 of the Uncitral Model Law which is a schedule to the Arbitration Act [ Chapter 7:15 ] for the setting aside of an arbitral award issued by the arbitrator, K. Segula, on 29 July 2014 in terms of which she quantified the respondent’s damages in lieu of reinstatement as $87 640-00 made up of $1 400-00 May 2003 salary, $50 400-00 damages, $35 000-00 pension contributions and $840-00 cash in lieu of leave.

The applicant employed the respondent as a Personal Assistant to its President and Chief Executive Officer from 2 September 2002. The relationship between the parties deteriorated when the respondent complained of sexual harassment by her immediate superior. The employment contract was terminated giving rise to a labour dispute which eventually went to arbitration.

On 24 March 2014, the arbitrator issued an arbitral award the import of which was that the respondent had been unfairly dismissed. It is not clear from the papers why the matter took almost 10 years to finalise if indeed the respondent had been dismissed on 19 June 2003. Whatever the case, the applicant did not reinstate the respondent necessitating a second hearing before the arbitrator for purposes of quantification of damages due to the respondent.

The quantification hearing occurred on 10 June 2014, but not before the applicant had, on 17 April 2014, noted an appeal against the initial award to the Labour Court. At the conclusion of oral submissions the parties agreed to make written closing submissions. The applicant’s legal practitioner undertook to submit his on 16 June 2014 after which the respondent was to submit hers. The period was later extended by the arbitrator as a result of which the applicant’s submissions were to be filed by 25 June 2014 with the respondent obliging on 30 June 2014.

The closing submissions were, eventually filed by both parties and the arbitrator, quantified the damages and delivered her award aforesaid on 29 July 2014. Problems started again. The applicant appealed against the second award to the Labour Court. The applicant also launched this application for the setting aside of the award.

In its founding affidavit deposed to by its Finance Manager McShaman Kembo, the applicant stated that the award ought to be set aside on 2 grounds; namely that it deals with a dispute not contemplated by or not falling within the terms of the arbitration, or contains decisions on matters beyond the scope of the arbitration in that while the arbitrator was only seized with the issue of damages in lieu of reinstatement she had gone beyond her mandate by dealing with and awarding a sum of $35 000-00 in respect of pension contributions.

The second ground is that the award is in conflict with the public policy of Zimbabwe in the sense that there was a breach of the rules of natural justice, in particular the audi alteram partem rule in that after the parties had made oral submissions the arbitrator allowed the respondent to produce further evidence which she went on to rely upon without according the applicant an opportunity to respond. The evidence was in the form of a lengthy document with the title “Application in support of quantification of damages.” The write up itself is 10 pages to which is attached another 8 paged document called “Zimbabwe All Industry Salary Survey.”

The applicant complains that the documents contains evidence which was not made available at the oral hearing of 10 June 2014 and that as a result it did not respond to it. Significantly the arbitrator went on to rely on that unrebutted evidence in awarding the respondent damages in lieu of reinstatement and $35 000-00 as pension contributions.

The respondent opposed the application and in her lengthy opposing papers she complained about the non-joinder of the arbitrator in the proceedings and disputed having introduced new evidence to the prejudice of the applicant. According to her all that is contained in her submissions dated 30 June 2014 which I have already cited, was available at the hearing on 10 June 2014. If the applicant had chosen not to address those issues in its closing written submissions, that should certainly not be her problem. To the respondent the application is another ruse being employed by the applicant to deny her justice and to wear her down.

At the hearing, the respondent however conceded that the issue of pension contributions was not only outside the scope of the arbitration, it had also not been brought up at the hearing on 10 June 2014. That notwithstanding, the arbitrator made an award for it.

Let me deal first with the point raised in limine relating to the non-joinder of the arbitrator. Mr Mpofu conceded that the arbitrator should have been cited in the application as it is her award which is being impugned. While regretting the non-joinder he submitted that it is not fatal to the application especially as there is nothing in Art 34 of the Model Law, in terms of which the application was filed, requiring the citation of the arbitrator. Mr Mpofu also submitted that the application cannot be defeated by reason of the non-joinder of the arbitrator considering the provisions of r 87(1) of the High Court of Zimbabwe Rules, 1971 that:-

“No cause or matter shall be defeated by reason of the misjoinder or non-joinder of any party……………”

After we had exchanged a few “war stories” Mr Mpofu conceded that r 87 does not apply to application procedure, falling as it does under Order 13 dealing with actions. He however, robustly submitted that I must take a cue from that rule especially given that there is no rule whatsoever providing for joinder in applications. I agree. In fact the issues before me are capable of determination in the absence of the arbitrator. I will therefore, allow the matter to proceed without the citation of the arbitrator.

Regarding the existence of an appeal to the Labour Court I agree with Mr Mpofu that an art 34 application is available to a litigant outside the appeal procedure and now that s 171 (1) (a) of the Constitution of Zimbabwe has reinstated the jurisdiction of this court on labour matters which had been ousted by the provisions of s 89 (6) of the Labour Act [ Chapter 28:01 ] there is nothing stopping me from exercising jurisdiction.

Section 171 (1) (a) of the new Constitution provides:-

“The High Court has original jurisdiction over all civil and criminal matters throughout Zimbabwe.”

To the extent that the Constitution overrides any Act of Parliament, there can scarcely be any doubt that s 171 (1) (a) overrides s 89 (6) of the Labour Act. What this means is that by clear constitutional provision this court has original jurisdiction over all matters including those of a labour nature where prior to the new constitutional order, the Labour Court enjoyed exclusivity.

Considering that this matter has been set down and argued before me while the appeal is still pending in the Labour Court, it is expedient that I indulge the parties and determine the matter.

In terms of Art 34(2) (a) (ii) of the Uncitral Model Law:

“An arbitral award may be set aside by the High Court only if the party making the application furnishes proof that the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decision on matters submitted to arbitration can be separated from those not submitted, only that part which contains decisions on matters not submitted to arbitration may be set aside.”

That article allows a severance of the offending part of the award where appropriate. It is therefore apparent that this court is empowered to set aside a portion of an award and uphold another portion in appropriate circumstances. The respondent has conceded that the issue of pension fell outside the terms of reference of the matter to arbitration, the arbitrator having only been requested to determine the respondent’s damages in lieu of reinstatement.

Indeed, pension contributions cannot, by any measure, be regarded as falling within the ambit of damages, which VAN WINSEN J (as he then was) in Myers v Abramson 1952 (3) SA 121 (C) 127 C-E (quoted with approval by GUBBAY CJ in Gauntlet Security Services (Pvt) Ltd v Leonard 1997 (1) ZLR 583 (S) 586 F-G) defined as:-

“The measure of damages accorded such employee (a wrongfully dismissed one) is, both in our law and in English law, the actual loss suffered by him represented by the sum due to him for the unexpired period of the contract less any sum he earned or could reasonably have earned during such latter period in similar employment.”

In my view, the concession made by the respondent in respect of the award for pension contributions was proper. I would otherwise set aside only that part of the award but there is also merit in the submissions made by Mr Mpofu regarding the evidence which was allowed by the arbitrator post hearing of the matter.

As I have said, after the parties had agreed to make written closing submissions the respondent went on to submit further evidence including documentation attached to the written submissions. There was really nothing wrong with that considering that she was self-acting and a lay person. It was however, incumbent upon the arbitrator, having taken such evidence, to allow the applicant to respond. She did not.

Instead, the arbitrator went on to rely upon such evidence in determining the matter. A whole array of correspondence was thrown in after the hearing including allegations of publication of the matter in the Daily News of 6 September 2002 and other issues relating to outstanding leave. I do not agree with the respondent that all this information was already available at the time of the hearing. If it was, there would have been no need to re-submit it via the written closing submissions.

Article 34(5) of the Model Law seeks to clarify what would be regarded as being in conflict with the public policy. It provides:-

“For the avoidance of doubt, and without limiting the generality of paragraph (2) (b) (ii) of this article, it is declared that an award is in conflict with the public policy of Zimbabwe

the making of the award was induced or effected by fraud or corruption; or

a breach of the rules of natural justice occurred in connection with the making of the award.”

One of the basic tenets of the rules of natural justice is the audi alteram partem rule, which enjoins every adjudicating authority to hear the other side before determining the matter. There can be no doubt that the arbitrator fell foul of that rule. To that extent there is no alternative but to interfere with the award.

I must however express my profound disappointment at the unacceptable delays that have occurred in this matter. This dispute started more than 10 years ago and is still simmering now. Surely there can be no excuse for delaying a labour dispute for such a lengthy period of time. The respondent, who I must add, presented very sound and reasoned arguments which on any day may turn a lot of legal practitioners green with envy, complains bitterly about the delay which she says has been orchestrated by the employer to frustrate her into abandoning her claim. She has drawn my attention to the sentiments made in Khoza v Sasol Ltd where court stated:-

“I am satisfied that Mr Hinds and his office were grossly remiss, and that the employee, who all of this time was wallowing in poverty and in unemployment, was more than justified in approaching this court for relief rather than wait for the rusty old train of Sasol that takes its own time in its delivery of justice. I have yet to encounter a worse case where there is a more callous disregard of the prejudice that an employee suffers when the wheels of justice are deliberately slowed down by a resort of obfuscation by those who flaunt their financial muscle in what appears to be an obscene game of cat and mouse in which the only loser can be the employee. In the unequal contest between a multibillion rand empire that the employer is, and an unemployed person, as was submitted by Mr Spoor, all you have to do is to wear down the resolve of your less endowed opponent, tire him out and hope that he will go away, his quest for justice abandoned. Delay the day when he can get justice, and you can then thereby deny him justice.

I disagree. As long as the courts are open and as long as they purport to be the arbiters of fairness and justice, between the powerful and the relatively powerless, so long will they not allow the sort of conduct displayed by the employer in this case to go without consequences.”

I associate myself fully with those remarks. This matter ought to be brought to finality without further delay. The respondent has done everything within her power to achieve that including the binding of the record, the application for set down and payment of security for service of the notices of set down as if she was the applicant. Throughout all that process the applicant remained unconcerned giving credence to the view that the applicant would like to perpetuate the matter endlessly.

The basis of setting aside of the award cannot be blamed on the respondent. She therefore cannot be visited with costs. The arbitrator, who is to blame, was not cited.

In the result IT IS ORDERED THAT:-

The arbitral award issued by the arbitrator K Segula dated 17 July 2014 is hereby set aside.

The quantification of damages in lieu of reinstatement is hereby remitted to the same arbitrator for a hearing de novo within fourteen days of this order.

Each party shall bear its own costs.

Gill, Godlonton & Gerrans, Applicant’s Legal Practitioners

• Submission Guidelines

Assignment in Arbitration: Scope and Issues in India

[ Krishan Singhania is Managing Partner and Alok Vajpeyi an Associate at Singhania & Co]            

Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties. It can broadly be divided into three stages, first being the pre-arbitration stage (prior to the time when the dispute arises), second is during the course of arbitration proceeding and last is following the passing of arbitral award.

The term ‘assignment’ is defined as the transfer by a party of all its rights to some kind of property, usually intangible property such as rights in a lease, mortgage, agreement of sale or partnership. The arbitration clause/agreement provides the right to arbitrate to the concerned parties of that agreement. Therefore, the question arises as to whether such right can be transferred through assignment to some other party. The authors in this post have discussed the scope of assignment in arbitration and the issues that arise in making such assignment.

Assignment in Arbitration: An Overview

Arbitration is a separate contract by the separability principle as envisaged under section 16(1)(b) of the Arbitration and Conciliation Act, 1996. An assignment of a contract might result from a transfer either of the rights or of the obligations thereunder. As a result, obligations under a contract cannot be assigned except with the consent of the promisee and then it is a novation resulting in substitution of liabilities. On the other hand, rights under a contract are assignable unless a contract is personal in nature or the rights are incapable of being assigned. This view has been upheld in DLF Power Limited v. Mangalore Refinery & Petrochemicals Limited & Ors. , 2016 SCC Online Bom 5069. The Bombay High Court in its judgment stated that the arbitration clause does not take away the right of assignment of a party to a contract if it is otherwise assignable. The Court noted that there is a clear distinction between assignment of rights under a contract by a party who has performed its obligations thereunder and the assignment of a claim. The latter is a mere claim which cannot be assigned in law. It was further held in this case that once the other party has accepted the assignment and had insisted for compliance of rights, duties and obligations, the assignee steps into the shoes of the assignor and will be entitled to all rights, obligations and benefits including the arbitration agreement forming part of the said agreement.

Alternatively, parties may expressly prohibit assignment. The benefits of the contract are not then assignable. In such a case, a purported assignment by one party of the contract is invalid as against the other party, but it is valid and enforceable between the assignor and the assignee. The terms of a contract could be expressed, or may be implied as it is legitimate to take the surrounding circumstances into account. 

Taking into consideration the general principles relating to the concept of assignment in arbitration, it is to be considered whether the situation for assignment remains same throughout different stages of arbitration (pre-arbitration, during the course of the arbitral proceedings and following the passing of arbitral award).

Pre-Arbitration

The Calcutta High Court in Hindustan Steel Works Construction Ltd. v. Bharat Spun Pipe Co. , AIR 1975 Cal 8, while deciding the application for setting aside an arbitral award, discussed the scope of assignment and held that the correct position in law seems to be that whether the contract is assignable or not depends upon the nature of the contract. A contract in the nature of a personal covenant cannot be assigned. Secondly, the rights under a contract can be assigned, but the obligations under a contract lawfully cannot be assigned. Thirdly, the intention about assignability would depend upon the terms and the language used in a contract. Lastly, existence of an arbitration clause per se does make neither the contract non-assignable or assignable.

The Delhi High Court in Kotak Mahindra Bank v. S. Nagabhushan & Ors. , 2018 SCC OnLine Del 6832, while deciding the application under section 34 was faced with the question whether there was valid assignment of arbitration agreement or not. The arbitrator decided that since the claimant is not signatory to the arbitration agreement the matter cannot be decided through arbitration. However, the Court held that the loan agreement by its very nature was assignable. The Court viewed that once the rights under the loan agreement are assigned in favour of the petitioner, the rights under the arbitration agreement, being only in the nature of a remedy for enforcement of such rights, are equally assignable and have been duly assigned in favour of the petitioner in the present case by way of the assignment agreement. The Court followed Bestech India Private Ltd. v. MGF Developments Ltd. (2009) 161 DLT 282 and held that if a contract is assignable, an arbitration clause will follow the assignment of the contract.         

During the Course of the Arbitral Proceedings

The Bombay High Court in Agri Marketing Co. SARL v. Imperial Exports Ltd. , (2002) 2 Bom CR 646, while deciding the enforcement application of an arbitral award, stated that the right under an arbitration clause is assignable even after arbitration proceedings have commenced and that the assignee may simply take over the assignor’s proceedings without the need to start afresh. However, the right was subject to two important qualifications:

(i) the notice to the arbitrator must be given within a reasonable time;

(ii) absolute assignment of clause:

(a)  in writing.

(b) with notice to the other party (and the arbitrators).

Following the Passing of Arbitral Award

By virtue of section 36 of the Arbitration and Conciliation Act, 1996, on expiry of the period for an application of setting aside, an arbitral award shall be enforceable in accordance with the provisions of Civil Procedure Code, 1908 in the same manner as a decree of a court. Therefore, the award is assignable according to the provisions of the Civil Procedure Code, 1908 dealing with assignment of decree.

Champerty & Assignment

A claim for damages for breach of contract, after breach, is not an ‘actionable claim’, within the meaning of section 3 of the Transfer of Property Act, 1882, but a mere right to sue within the meaning of section 6(e) of that Act, and it cannot therefore be assigned. Rights of action arising out of or incidental to rights of property can be assigned with the property transferred. An assignment of a bare right of action may also be upheld if the assignee has a genuine commercial or financial interest in taking the assignment; but a step towards the sale of bare cause of action to a third party who had no genuine commercial interest in the claims will be void as champertous since it involves trafficking in litigation.

The Privy Council has generally held that champertous agreements are void in England as it violates the statute of champerty. However, it also recognized that this principle is inapplicable in India. The courts have looked the champertous agreements with caution as they may violate the public policy of the country. But the Indian courts have not faced any situation where the issue involved the funding arrangement with any party to the arbitration proceedings.

The concept of assignment in arbitration is based on the principles of transfer of contractual rights. Assignment can be undertaken during any of the stages and this is beneficial to the parties involved in arbitration. Assignment may be beneficial in various ways. Prior to the dispute if there is some acquisition which occurs or the party does not want to further invest in the project then it can assign the contractual rights (including right to arbitrate to the other parties). During the proceedings, the stressed companies with no real assets but pending arbitration claims can assign their claim to the party whom the debt is own. However, all of this will depend on the agreement of the concerned parties.

It is to be noted that Indian courts have held that assignment of claim is not allowed. However, assignment has been allowed during the arbitral proceedings. This is contradictory, since the pending arbitration proceeding will be considered as a claim only. The courts or the legislature should address this issue.

Therefore, Indian courts may have taken the view that assignment in arbitration is permissible. However, its scope is not clarified and therefore it should be included in the Arbitration and Conciliation Act, 1996 as well, so that the unaddressed issues can be settled and assignment becomes a right in the hand of a party having a legitimate claim. Such a statutory recognition will introduce certainty in the arbitral regime of the country and will help India in its stride to become a hub for international arbitration.

– Krishan Singhania & Alok Vajpeyi

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