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      Proskauer on International Litigation and Arbitration:
       Managing, Resolving, and Avoiding Cross-Border Business or Regulatory Disputes
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  1. Overview

    In order to combat the uncertainty inherent in having the issue of enforceability of an award depend on each country’s national law, a significant number countries have entered into international treaties aimed at standardizing the legal environment in which international arbitral agreements and awards are enforced. Below are a list of the most important of these treaties and conventions and their main characteristics.

  2. The New York Convention
    1. The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, or the “New York Convention” as it is more commonly referred to, is the basis for the entire international arbitration system as it exists today. Since its creation, over 140 nations have ratified the Convention. Signatory nations include the United States, all members of the European Union, all other major trading states around the globe, as well as many Latin American, African, Asian, and Middle Eastern states. There is no comparable convention for the recognition of foreign judgments.
    2. The New York Convention serves two general purposes: it requires the recognition and enforcement of arbitration awards entered in foreign states, giving them power across national borders, and it requires national courts of signatory states to recognize and enforce arbitration agreements.
    3. First and foremost, the Convention thus requires each contracting state to recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of its territory. However, the Convention sets out the following exceptions that allow a court to refuse recognition or enforcement of an award: (a) the arbitration agreement is invalid; (b) the arbitration award itself violates due process of the party against whom the award is invoked; (c) the arbitrator exceeded his or her authority; (d) there was an irregularity in either the composition of the arbitral tribunal or in arbitral procedure; or (e) the award is not yet binding or suspended or set aside in the country of origin. Further, enforcement may be refused where the subject matter is not capable of settlement by arbitration or where it violates the public policy of the country where recognition is sought.
    4. The other essential component to the New York Convention focuses not on arbitration awards, but on the arbitration agreements themselves. It requires the courts of signatory nations to recognize the validity of arbitration agreements. Similarly, the Convention provides that a court of a Contracting State, when faced with an action where the parties have entered into an arbitration agreement must, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
  3. The Panama Convention
    1. Modeled after the New York Convention, the 1975 Inter-American Convention on International Commercial Arbitration, called the “Panama Convention,” provides for the general enforceability of arbitration agreements and arbitral awards in the Latin American countries that are signatories to the Convention. Currently, over a dozen nations ratified the Convention, including the United States, Brazil, Mexico, Venezuela, and Argentina.
    2. Before the Panama Convention, the arbitration laws in a number of Latin American states did not recognize the enforceability of arbitration clauses. Instead, once a dispute arose, the parties to a transaction were required to execute a submission agreement, agreeing to submit the disagreement to arbitration. The Panama Convention changed this, giving validity to arbitration clauses governing future disputes, as well as submission agreements for existing disputes. But like the New York Convention, for an agreement to be recognized and enforced, it must be in writing.
    3. Also, prior to the Panama Convention, some Latin American nations placed limitations on how arbitrators were chosen or did not allow foreigners to act as arbitrators. This is no longer the law, as the Panama Convention allows for the appointment of arbitrators “in the manner agreed upon by the parties” and specifies that “arbitrators may be nationals or foreigners.”
    4. Another important component of the Panama Convention is that it provides that in the absence of an express agreement between the parties, the arbitral procedure is to be governed by the Rules of Procedure of the Inter-American Commercial Arbitration Commission (IACAC).
    5. Finally, the Panama Convention sets forth the grounds for refusal of enforcement of an arbitral award, which are almost identical to those defined in the New York Convention. The Panama Convention does not, however, require that courts of contracting states stay their proceedings and refer the parties to arbitration.
  4. The European Convention on International Commercial Arbitration of 1961
    1. This Convention was ratified by most countries in Europe with the notable exceptions of the United Kingdom and the Netherlands, and by some countries outside Europe. It applies only where parties are located in different contracting states. The convention contains a set of procedural rules for an arbitration, including rules on the appointment of arbitrators where the parties cannot come to an agreement and procedures for determining applicable law.
  5. Bilateral Investment Treaties
    1. Major trading nations—including the United States, most of Western Europe, and Japan—have entered into bilateral investment treaties or investment protection agreements with countries in developing regions. In 2004, more than 2,000 such treaties were in effect. Generally, these treaties serve as a means of encouraging capital investments in developing markets.
    2. The typical investment treaty focuses on a scenario where an investor from one party state enters into a contract providing for an investment with the other member state. These investment treaties generally serve a number of purposes, such as ensuring that investments receive fair and equitable treatment as compared to domestic investors and investments; giving full protection and security to foreign investments; guaranteeing that investments will not be expropriated by the government except for a public interest, and even then only after adequate compensation; and other reasons, all meant to encourage further investments.
    3. Another key objective of the majority of bilateral investment treaties is to arrange for international arbitration by allowing for disputes to be submitted to arbitration pursuant to, depending on the bilateral investment treaty at issue, the arbitration rules of ICSID, the ICC Arbitration Rules or the UNCITRAL rules. As long as the bilateral investment treaty is in place, the host state essentially consents to the jurisdiction of the arbitral body, and the investor is free to bring an arbitration in any of the arbitral fora mentioned in the treaty.

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