Why is this important? Is an arbitration award useless if it has been set aside at the seat? Not necessarily. An award that has been set aside may still be enforceable in certain jurisdictions. A recent decision by the Singapore High Court reinforces this position.
Key things you should know:
Whether an award can be enforced after it has been set aside (“annulled award”) has significant strategic implications:
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From the perspective of a party who lost an arbitration:
- Where an enforcing court takes the view that an annulled award cannot subsequently be enforced, it may make sense for the focus to be on a full-bodied setting aside application at the seat.
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From the perspective of a party who won an arbitration:
- Where the enforcing court takes the view that an annulled award may still be enforced, this could allow for a second bite at the cherry at the enforcement stage.
A quick summary of the positions taken in several jurisdictions
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Enforcement Jurisdiction |
Can an award be enforced if set aside by the seat? |
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Singapore |
HIGHLY LIKELY There is Singapore precedent that an award can be enforced immediately in Singapore even with ongoing setting aside proceedings at the seat.
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Hong Kong |
UNLIKELY There is Hong Kong precedent which defers to the seat court’s decision to set aside an award.
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England |
UNLIKELY English law respects the seat court’s decision to set aside an award, unless the decision is contrary to fundamental principles of English law.
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France |
YES An arbitral award is considered to have force in an autonomous, free standing body of international law.
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Russia |
LIKELY A Russian court would review the seat court’s decision for consistency with international principles.
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Singapore – The position in Singapore is that even if there are ongoing proceedings to set aside an award in the seat (in this case, Denmark), that will not prevent a successful party from proceeding with immediate enforcement proceedings in Singapore (Man Diesel Turbo SE v IM Skaugen Marine Services Pte Ltd [2018] SGHC 132). The decision shows the Singapore courts’ inclination towards the swift enforcement of arbitral awards, consistent with the principles of international comity and finality of awards. This should come as welcome news for parties with matters in which Singapore is the enforcing court.
Hong Kong – The position in Hong Kong differs from Singapore. In U v S [2018] HKCFI 2086, there were ongoing proceedings in the Beijing seat to set aside the award. The Hong Kong court held that if the award has been set aside by the Beijing seat court, Hong Kong Courts may follow suit to refuse enforcement. Even if the award was not set aside, the Hong Kong Court could still exercise its discretion to refuse enforcement.
The Hong Kong court’s approach shows deference to the seat court when faced with a situation of contemporaneous setting aside and enforcement proceedings. Minimally, the Hong Kong courts will wait for the final disposal of the setting aside proceedings before passing its enforcement decision.
England – Where enforcement proceedings are sought in England, the English courts will generally respect the decision of the seat court, unless respecting the decision of the seat court would offend against England’s basic principles of honesty, natural justice, and domestic public policy (Diag Human SE v The Czech Republic [2014] EWHC 1639 (Comm), and Yukos Capital SARL v OJSC Rosneft Oil Company [2014] EWHC 2188 (Comm)).
France – An award is generally enforceable in France even if it has been set aside at the seat, as French jurisprudence takes the view that an international arbitral award exists in an autonomous free-standing body of law (Hilmarton Ltd v Omnium de traitement et de valorisation (1995) XX Yearbook Comm Arb 663-665).
Russia – An award is enforceable in Russia if the Russian courts take the view that a seat court’s decision to set aside an award was not consistent with international standards (see Ciments Français v. Open Joint Stock Company Sibirskiy Cement Holding Company, Case No. A27-781/2011, 8 Ul. Krasnaya, Kemerovo, 650000).
What this means for parties:
It is important to know that your international arbitration award can still be enforced even if set aside by the seat, depending on where the enforcement jurisdiction is. The successful party would want to carefully analyse its chances of successfully enforcing the award, having in mind where the seat and enforcement jurisdictions are.
For an unsuccessful party, the main concern would be to refuse the enforcement of an award. If the enforcement jurisdiction is one that is likely to respect the seat court’s decision, it would be worth considering dedicating resources to a setting aside application at the seat.
Eversheds Harry Elias regularly provides advice on different types of dispute resolution strategies to suit the client’s needs. We have extensive experience advising and successfully representing commercial enterprises with respect to international dispute resolution and the conduct of commercial and investment arbitration. We also have full rights of audience before all tiers of Singapore courts, and are thus uniquely placed to assist with Singapore law issues in cross-border disputes
Authors:
Francis Goh
Head, International Arbitration
Partner, Eversheds Harry Elias
Shaun Leong
Of Counsel, Eversheds Harry Elias
Janice Lee
Foreign Legal Associate, Eversheds Harry Elias