Refusing Recognition and Enforcement of the New York Convention in Kuwait - Case Study Example

Incapacity of Parties and Invalidity of Arbitration Agreement as Grounds for Refusing Recognition and Enforcement of the New York Convention in Kuwait [Student’s Name] [Affiliated University] Abstract The New York Convention of 1958 on the Recognition and Enforcement of Foreign arbitral Awards has been deemed as being the most successful legal instrument for the resolution of disputes in the context of international trade. Even as this convention obligates signatory states to recognise and enforce arbitral awards, it also makes provisions for non-recognition and enforcement. Article V (1) (a) of this convention permits non-recognition on the basis that one of the parties was incapacitated in one way or the other to sufficiently enter into an arbitral agreement. Additionally, the convention also contemplates non-recognition on the grounds of invalidity of the arbitration agreement. Non-recognition is subject to the laws applicable to the parties’ place of domicile and the laws of the place where the arbitration is to be conducted. In determining the validity of the arbitration agreement, the principle of lex arbitri becomes crucial. To this respect, the UNCITRAL Model Law covers formal validity of arbitration agreements. However, the provisions of this convention have to be incorporated in the national legislations of signatory states for implementation. Kuwait has accomplished this through its Code of Civil and Commercial Procedure whereby Chapter 7 of this code covers matters on commercial arbitration. Provisions have been made in this code to eliminate the uncertainty arising from the intervention of Islamic law in business decisions. Incapacity of Parties and Invalidity of Arbitration Agreement as Grounds for Refusing Recognition and Enforcement of the New York Convention in Kuwait The continuous opening up of global markets has been critical in encouraging transnational trade. This phenomenon has translated into foreigners entering into business partnerships with locals to form commercial entities. Given the fact that the parties entering commercial contracts come from countries with divergent legal systems, it became necessary to develop a legal mechanism to address commercial disputes that are always eminent in any partnership. It is thus against such a backdrop that commercial arbitration was solely developed as a private means for parties to resolve their disputes without resorting to the courts for resolution of the same (Cushman and Myers, 1999). In the realm of commercial arbitration, many are the commercial commentators that have deemed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) as being one of the most successful accords on arbitral agreements in the milieu of international commerce. In essence, the convention covers both the enforcement and the jurisdiction facets of arbitration in international commerce (Buhring-Uhle, Kirchhoff and Scherel, 2006). The New York Convention presents the legal basis for putting into effect a majority of international commercial arbitration awards by making provisions for a mutual recognition and implementation of arbitral awards by signatory states (Legum, 2005). To this end, Buhring-Uhle, Kirchhoff and Scherel (2006) have appraised this convention as having been instrumental in representing a remarkable success in the struggle to achieving a universal system for resolving commercial disputes. Inasmuch as the New York Convention deduces that awards by international arbitration must be recognized, it however contemplates non-recognition of the same under specified grounds (Gary, 2001). In this respect, the convention generally requires courts of signatory nations to acknowledge and put in force foreign arbitral awards under certain limited exemptions. Additionally, the convention requires these courts to recognize the legality of arbitral agreements subject to restricted exclusions. This includes the courts referring parties to arbitration when these parties resolve to enter into valid arbitration agreements rather subject to the convention’s provisions (Asbill and Goldman, 2001). The New York Convention has thus established grounds upon which recognition and enforcement may be denied following a request by the party against whom the award has been invoked. Such grounds may include parties’ incapacity, invalidity of the arbitral agreement, and failure of the arbitral tribunal to follow due process as well as the jurisdiction issues of the arbitral tribunal. In addition to these, The New York Convention permits a court to refuse the enforcement of arbitral award where the subject of the dispute is not arbitrable subject to the laws of the enforcement jurisdiction. Non-recognition may also arise in cases where the enforcement of the award will contravene the public policy of the enforcement country (United Nations Commission on International Trade Law, 2008). Article V (1) (a) of the New York Convention permits non-recognition of an arbitral award on the basis that one of the party may be under some incapacity to enter into the arbitration agreement. In the light of party incapacity, this Article makes proposals for a choice-of-law-rule incorporated in the phrase “law applicable to them” but does not however define how that law has to be selected (Gary, 2001). These laws are essentially those that cover the laws of the parties’ place of abode and assimilation or the laws of the place where the arbitration is to be conducted. It therefore becomes incumbent for the courts conducting the enforcement procedure to determine what it regards as the law applicable to commercial arbitration practice. In practice, these laws are established by the courts through the adoption of their own conflicts of laws rules (Jenkins and Stebbings, 2006). Invalidity of arbitration agreement on the other hand has been provided for under Article V (1) (a) of the convention. This Article contains conflict of laws rules that are employed for the purposes of selecting the law aimed at governing the validity of the parties’ arbitration agreement. Under this Article, an award need not be enforced if the parties’ arbitration agreement “is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made” (Redfern and Hunter, 2004, p. 129). It is this law provision choice that Redfern and Hunter (2004) have considered as the reason as to why many commentators of commercial arbitration have considered as the ultimate achievement of the 1958 New York Convention. In essence, the country where the award has been made is generally deemed to be the country which is the seat of arbitration. This implies that under the New York Convention, an arbitration agreement is valid if it is judged to be so either by the law chosen by the parties to govern that agreement or by the law of the place of arbitration if the first choice fails (Redfern and Hunter, 2004). Critical to the validity of the arbitration agreement are the laws that govern the validity of arbitration agreement. According to Moses (2008), arbitral proceedings are essentially governed by the principle of lex arbitri which refers to the law of the place of arbitration. A perfect example of a country’s lex arbitri is the UNCITRAL Model Law on International Commercial Arbitration that covers the formal validity of the arbitration agreement unless such an agreement is void. The Model Law accomplishes this by limiting the court’s interference in arbitration matters in order to permit parties to seek interim relief from a court without losing the right to arbitrate. Ideally, the Model Law addresses a number of issues that are crucial to the arbitration proceedings. These issues include the composition of the arbitral tribunal, challenging of the arbitrators, jurisdiction of the tribunal and the powers of the arbitration tribunal to order interim measures. Additionally, the Model Law regulates arbitration proceedings by making provisions for the parties to concur on how arbitral proceedings are to be conducted. For those countries that are yet to adopt the provisions of the Model Law, they may have their own very detailed arbitration laws (Moses, 2008). Countries signatory to the New York Convention have implemented the convention through the incorporation of the convention’s provisions in their national legislation. This incorporation thus makes the manner of implementation dependent on this national legislation and its judicial interpretation. The Kuwaiti Law makes provisions for the parties to refer disputes to arbitration and Kuwaiti courts are under obligation to generally honour the choice that parties make to have their disputes referred to arbitration (Campbell and Netzer, 2009). Fundamental to arbitration in Kuwait is Chapter VII of The Kuwaiti Code of Civil and Commercial Procedure inclusive of Articles 173-188 that deals with arbitration matters. Although the Kuwaiti Civil Code shows a great deal of Sharia influence in its make-up, Article 3 of the law issues special laws to take precedence over general laws. One special law is the Kuwaiti Commercial Code that adjudicates specifically in the modern commercial context. In doing so, Kuwait has been able to develop a Commercial Code that is independent of the Islamic law consequently eliminating the uncertainty that comes with Sharia being able to intervene in a commercial decision (Ballantyne, 2000). References Asbill, R. and Goldman, S. (2001). Fundamentals of international franchising. Chicago, IL: American Bar Association. Ballantyne, M. (2000). Essays and addresses on Arab laws. London: TJ International. Buhring-Uhle, C., Kirchhoff , L. and Scherel, G. (2006). Arbitration and mediation in international business. The Hague: Kluwer Law International. Campbell, D. and Netzer, A. (2009). International joint ventures (vol. 30). The Hague: Kluwer Law International. Cushman, R. and Myers, J. (1999). Construction law handbook (vol. 1). New York, NY: Aspen Publishers. Gary, B. (2001). International commercial arbitration: Commentary and materials (2nd ed.). TheHague: Kluwer Law International. Jenkins, J. and Stebbings, S. (2006). International construction arbitration. The Hague: Kluwer Law International. Legum, B. (2005). International litigation strategies and practice. Chicago, IL: American Bar Association. Moses, M. (2008). The principles and practice of international commercial arbitration. Cambridge: Cambridge University Press. Redfern, A. and Hunter, M. (2004). Law and practice of international commercial arbitration, (4th ed.). London: Sweet and Maxwell. United Nations Commission on International Trade Law. (2008). Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York, NY: United Nations Publication. Read More