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Dáil Éireann debate -
Tuesday, 29 Apr 1980

Vol. 320 No. 1

Arbitration Bill, 1980: Second Stage.

I move: "That the Bill be now read a Second Time."

The object of the Bill is to enable two international conventions dealing with arbitration to be ratified. The first is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It was drawn up under the auspices of the United Nations and adopted by the United Nations Conference on International Commercial Arbitration in 1958. The second is the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States. This convention was sponsored by the International Bank for Reconstruction and Development—the World Bank—and was opened for signature in 1965. The Bill also contains an amendment of the Arbitration Act, 1954, in relation to the power of a court to stay proceedings in a matter which is the subject of an arbitration agreement, domestic or foreign.

I would like to deal first with the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Before doing so perhaps I could refer briefly to the present law. There is a right of enforcement of foreign arbitral awards at common law by instituting proceedings on the basis of the foreign award. In addition, the Arbitration Act, 1954, which gave effect to the 1923 Geneva Protocol on Arbitration Clauses and the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards, contains detailed statutory rules for the enforcement of foreign awards.

Ratification of the New York Convention has also EEC implications. Article 220 of the Treaty establishing the European Economic Community obliges member states to enter into negotiations to bring about the simplification of formalities governing the reciprocal enforcement of arbitration awards. The member States decided that this obligation could best be met by all members acceding to the New York Convention. As a result, arbitration awards were specifically excluded from the scope of the 1968 EEC convention dealing with the enforcement of judgments. Ratification of the New York Convention, therefore, will have the incidental effect of enabling this country to comply with the obligation imposed, in relation to arbitration awards, by Article 220. All other member states of the Community, with the exception of Luxembourg, are already parties to the convention.

The New York Convention was designed to replace the 1923 Geneva Protocol and the 1927 Geneva Convention to which I have already referred. The 1927 convention was the first multilateral treaty dealing with the enforcement of foreign arbitration awards. Certain features of that convention gave rise to dissatisfaction which eventually led to the drawing up of the New York Convention in 1958. As compared with the earlier convention, the 1958 convention applies to a wider range of awards, reduces and simplifies the formalities with which the person seeking enforcement must comply and makes obstruction by the other party more difficult. The convention has received general international acceptance to the extent that to date 56 countries have ratified it.

Part III of the Bill deals with the New York Convention. Article I of the convention provides that the convention will apply to awards made outside the state in which recognition and enforcement is sought. That article however permits any contracting state to restrict enforcement, on the basis of reciprocity, to awards made in the territory of another contracting state. The definition of award in section 6 of the Bill takes advantage of this latter provision by restricting the application of the Act to awards made in another contracting state. It is appropriate that we should undertake to enforce only awards arising in a country which, in its turn, will enforce Irish awards. As I have mentioned, the New York Convention applies to a wider range of awards than does the Geneva Convention. To be eligible for enforcement under the earlier convention an award had to be made between persons subject to the jurisdiction of different contracting states. This restriction, which brings in questions of the nationality or habitual residence of the parties, is not repeated in the New York Convention.

Section 7 provides that an award shall be enforceable either by action or in the same manner as the award of an arbitrator is enforceable under section 41 of the 1954 Act. Under that section an award may be enforced in the same manner as a judgment or order of the High Court to the same effect. In accordance with subsection (2) of section 7, an enforceable award will be recognised for all purposes.

Section 8 sets out the documents which must be produced by a person wishing to enforce an award in accordance with Article IV of the convention.

Section 9 sets out the grounds on which enforcement of an award may be refused pursuant to Article V of the convention. These grounds are broadly similar to the existing grounds for refusal of enforcement under the Geneva Convention as set out in Article 56 of the 1954 Act. In some instances they are restated in a simpler and clearer fashion. The New York Convention makes important changes in the burden of proof imposed on each party. Under the Geneva Convention it is for the person seeking enforcement to prove that the arbitration agreement is valid, that the award was made by the agreed tribunal and in conformity with the law governing procedure, that the award has become final and that the award was in respect of a matter which may lawfully be referred to arbitration. Under the New York Convention once the party seeking to enforce an award has furnished to the court the duly authenticated award or a certified copy and the original arbitration agreement or a certified copy, together with translations if required, the burden passes to the other party to prove the existence of any of the specified grounds on which enforcement may be refused. The Geneva Convention was considered to place an excessive burden on the party seeking enforcement.

The New York Convention also allows a court before which enforcement is sought to adjourn the proceedings and order the party opposing enforcement to give security if he has applied for the setting aside or suspension of the award. This power to order security to be given has no counterpart in the Geneva Convention.

Sections 10 and 11 of the Bill implement Article VII of the convention. The effect of section 10 is that the Geneva Protocol and Convention will no longer apply to an award to which the New York Convention relates but will remain applicable between Ireland and countries which have not ratified the New York Convention but are parties to the earlier protocol and Convention. The effect of section 11 is to preserve the right of enforcement of foreign arbitration awards which exists at common law.

I should now like to deal with the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. The purpose of this convention is to promote the flow of private investment into underdeveloped countries by providing a means of resolving disputes between foreign investors and the countries in which they have invested. It represents the culmination of efforts over previous decades to promote investment in countries needing it and at the time same to ensure protection of such investment. One of the problems was the absence of an international facility specifically designed to resolve disputes between private investors and sovereign states. Because a private investor had no status in international law, he had no direct access to an international institution, such as the International Court of Justice, in a claim against a sovereign state. The private investor would therefore have to pursue his claim before the municipal courts of the state in question, which he might not always wish to do, or seek diplomatic assistance from his own state. Tribunals set up by private organisations such as the International Chamber of Commerce where frequently unacceptable to Governments in disputes with private interests. An effort was made in 1962 to adapt the rules of the Permanent Court of Arbitration in The Hague to permit that body to deal with disputes between foreign investors and states, but this was not successful. The Washington Convention therefore fills a lacuna in international law by providing an international facility—the International Centre for the Settlement of Investment Disputes, ICSID—before which private investors and states can deal with each other as equals. Because the private investor is thus given direct access to an international institution, the convention provides in Article 27 that he must forego diplomatic assistance from his own state in relation to the particular dispute unless of course the state with which he is in dispute fails to comply with an award made under the convention.

Debate adjourned.
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