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07 June 2018
The Hague Court of Appeal recently ruled that its decision on an application for the enforcement of a foreign arbitral award would not be stayed solely on the basis of pending setting aside proceedings at the place of arbitration.(1) Further, the court ruled that the party requesting leave for enforcement (exequatur) need not submit Dutch translations of the award and that the English versions sufficed. The 17 April 2018 decision is notable, and arguably desirable, as the appeal court explicitly acknowledged the pro-enforcement bias of the New York Convention on the Enforcement of Foreign Arbitral Awards 1958 – something that several Dutch courts have failed to do in recent years. Given that the New York Convention operates at a supranational level and must be interpreted autonomously, this recent Dutch decision has relevance for other European courts and may provide useful guidance.
Dunav Re, a Serbian entity, entered into a reinsurance agreement with Dutch Marine Insurance BV (DMI). When DMI refused any payment under the insurance, Dunav Re invoked the contract's arbitration clause as a means to enforce the payment that it had requested. The Serbian arbitral award that followed ordered DMI to pay Dunav Re $313,505. This caused the Dutch insurer to initiate setting aside proceedings before the Serbian courts. On 1 December 2017 the Belgrado first-instance court denied the claim for setting aside the award. DMI started appeal proceedings and this annulment claim is currently pending.
In the proceedings before The Hague Court of Appeal,(2) Dunav Re requested exequatur of the Serbian award in the Netherlands. Under the New York Convention, the Dutch courts must grant such leave if all of the New York Convention's requirements are met. DMI claimed that this was not the case and that exequatur should be refused.
First, DMI put forward a formal objection on the basis that Dunav Re had not submitted Dutch translations of the award and arbitration agreements.
In this respect, Article IV(2) of the New York Convention reads:
If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.
Dunav Re had submitted the original documents in English only. According to DMI, the court therefore had to find Dunav Re's request inadmissible or deny exequatur.
The Hague Court of Appeal did not penalise Dunav Re for failing to provide Dutch translations. Rather, it took a practical approach by considering that the arbitration proceedings had been conducted in English and by asking DMI's counsel whether its defence had been harmed without the Dutch documents, to which the answer was no. The appeal court determined on that basis that DMI had not needed the Dutch translations to be able to understand the arbitral agreements and the arbitral award. The court also held that it had not required the Dutch translations for its examination of the case. Thus, the court ruled that the Dutch translations were unnecessary and rejected DMI's formal objections.
Next, The Hague Appeal Court dealt with the refusal grounds in Article V of the New York Convention. DMI had relied on Articles V(1)(b) and (c) and V(2)(b).
In short, the appeal court ruled that DMI had insufficiently stated that it had been unable to present its case or that the award contained decisions on matters beyond the scope of the submission to arbitration, let alone proven this. In this respect, the court also considered the fact that a Serbian court had already looked into these claims in detail and denied DMI's claim for setting aside.
Lastly, DMI relied on Article VI of the New York Convention.
When confronted with parallel setting aside proceedings pending at the place of arbitration – as was the case here – Article VI of the convention grants the authority before which the award is sought to be relied on a certain discretion: it may adjourn the decision on the enforcement of said award if it considers it proper to do so.
Article VI of the New York Convention reads:
If an application for the setting aside or suspension of the award has been made to a competent authority referred to in Article V (1) ( e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.
The Hague Court of Appeal considered that it would be improper to adjourn the exequatur decision. The sole ground that DMI had brought forward for adjourning the decision on enforcement was the fact that setting aside proceedings were pending in Serbia. This, in the eyes of the appeal court, was not justification to use its discretionary power under Article VI of the New York Convention. Notably, the court acknowledged the presumption of enforcement (the so-called 'pro-enforcement bias') in the New York Convention, which would not justify any adjournment based solely on the fact that setting aside proceedings were pending. Therefore, the court had to dismiss DMI's request for adjournment.
The Dutch courts are increasingly taking a practical approach when confronted with formal objections in exequatur proceedings, such as a failure to provide a Dutch translation of the arbitral award or arbitration agreements. This is a welcome trend, as these translations often result in large and unnecessary costs. In this case, the documents were submitted in English; if documents are submitted in other languages, the Dutch courts will likely ask for a Dutch translation.
The Hague Court of Appeal's decision is especially notable and welcome because it reverses a trend that has been identified in the Netherlands in recent years. The courts, especially preliminary relief judges in Amsterdam, have seemed hesitant to grant exequatur pending setting aside proceedings and have often decided to stay the proceedings.(3)
In these cases, it seemed that adjournment of exequatur had become the basic rule, rather than the exception, which is arguably not in line with the text and policy objectives of the New York Convention.
The New York Convention is the most important instrument in international arbitration. Contracting states have committed themselves to respect and enforce arbitration clauses where necessary, as well as to respect and enforce arbitral awards. Therefore, Article III of the convention provides that each contracting state must recognise arbitral awards as binding and enforce them. International literature and case law refers in this regard to the strong pro-enforcement bias of the convention or the strong presumption in favour of enforcement. It is only in exceptional circumstances that the courts should deviate from this by refusing or adjourning exequatur.
The Hague Court of Appeal's decision has set a good example. It is hoped that other courts will follow shortly.
For further information on this topic please contact Jeroen van Hezewijk or Sandra Coelen at Freshfields Bruckhaus Deringer LLP by telephone (+31 20 485 7000) or email (email@example.com or firstname.lastname@example.org). The Freshfields Bruckhaus Deringer LLP website can be accessed at www.freshfields.com.
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