Marc J. Goldstein Arbitrator & Mediator NYC
January 28, 2011

“[U]nder the law of which the award was made.” The Citadel of Article V(1)(e) Survives Another Assault

Article V(1)(e) of the New York Convention has withstood another attempted assault in the U.S. court system.   A federal district judge in Washington, D.C. last week rejected the proposition that a court of the country whose substantive contract law but not its arbitral procedural law applied to the arbitration could, by the consent or stipulation of the parties, become a “competent authority” whose purported vacatur of an award may furnish a basis for a judicial refusal to grant recognition and enforcement of an award under Article V(1)(e).  (International Trading and Industrial Investment Co. v. DynCorp Aerospace Technology, 2011 U.S. Dist. LEXIS 5954 (D.D.C. Jan. 21, 2011). 


Credit the creativity of U.S. counsel for the arbitration loser for affording the Court the opportunity for a resounding reaffirmation of first principles in the application of Article V(1)(e).  Their client, a U.S. military contractor, DynCorp, operating in Qatar, lost an ICC arbitration in Paris to its Qatari business partner, concerning the minimum duration of their contract and the right to terminate.   DynCorp took its case to the Qatari courts, and argued that the Arabic language version of the arbitration agreement did not provide that the arbitration would be final and binding, and therefore the Qatari courts could review de novo the arbitrator’s application of Qatari contract law.  At the appellate level in Qatar, DynCorp prevailed.  It then raised the Qatari vacatur in the U.S. court as a defense to the arbitration winner’s motion to confirm the award. And, seeking to bolster its position, DynCorp tried to have the courts in France, where the award had beenmade, give effect to the Qatari set aside judgment. The Paris Court of Appeal said “non.


The U.S. judge rejected the proposition, advanced by DynCorp, that the Qatari court could become a “competent authority” under Article V(1)(e) by consent of the parties. (Consent in any event had not been explicit; DynCorp argued this based on its adversary’s participation on the merits in the Qatari courts.) The court reasoned that to decide an issue of U.S. federal arbitration law that depends upon whether a foreign court had subject matter jurisdiction, the court would apply the U.S. law principle that subject matter jurisdiction cannot be conferred by consent of the parties. (This choice of law solution is not very explicitly acknowledged as such in the opinion.)  The Court went on to reject DynCorp’s argument that the Qatari courts were competent because the award was non-final under the Arabic version of the arbitration clause, holding that the agreement to arbitrate under ICC Rules made the award final and binding by operation of those Rules.


It is so well understood in American arbitration law that Article V(1)(e) refers to vacatur orders issued either by the court at the seat, or, much less frequently, by a court in the place whose lex arbitri applied by agreement even though that place was not the seat, that judges do not any longer find it necessary to explain fully where that understanding originates. The phrase “or under the law of which, the award was made,” is not self-evidently limited to arbitral procedural law to the exclusion of the law applicable to the merits. Yet the court here writes that “the plain language of Article V(1)(e) is unambiguous” in referring to “the country in which, or under the [arbitral] law of which, that award was made.” But if the matter is unambiguous, why does the court insert the bracketed word “[arbitral]” in what appears to be an effort to compensate for the possible ambiguity?


The understanding reflected in that bracketed word “[arbitral]” can be traced back through U.S. jurisprudence to the original understanding of the drafters of the New York Convention. The U.S. Second Circuit Court of Appeals in Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15 (2d Cir. 1997) “note[d] that Article V(1)(3) specifically contemplates the possibility that an award could be rendered in one State, and under the arbitral law of another state,” and cited in support of that interpretation Professor Van den Berg’s seminal 1981 work, The New York Arbitration Convention of 1958: Toward a Uniform Judicial Interpretation (at p. 355).  Seven years before Yusuf , a federal district judge in Manhattan was asked to decide specifically that “under the law of which” embraced the substantive law that applied.  In rejecting that position in favor an interpretation limited to the agreed lex arbitri, the district court in International Standard Electric Corp. v. Bridas Sociedad Anonima Petrolera, Industrial YT Comercial, 745 F. Supp. 172  (S.D.N.Y. 1990) also cited Professor Van den Berg’s 1981 treatise, and usefully quoted what he had to say there, i.e.


The phrase “or under the law of which“ the award was made refers to the theoretical case that on the basis of an agreement of the parties the award is governed by an arbitration law which is different from the arbitration law of the country in which the award is made.


The Bridas court also traced Professor van den Berg’s interpretation to the commentary of the Soviet delegate to the 1958 U.N. Conference who offered the amendment embracing the language at issue.  That comment can be found today in the Travaux Preparatoires of the Convention on the UNCITRAL website.  Even further, the Bridas court on this point had received an affidavit from Professor Bermann  discussing a series of foreign judicial decisions that had so construed the relevant language.


So there is indeed a rich jurisprudential history underlying the shorthand “under the [arbitral] law of which the award was made.” In the interest of clarity and consistency of outcomes, it would be useful for judges facing this issue to carry forward this legacy in specific and precise terms.


Leave a Reply