“Court Review of Arbitral Awards for excès de pouvoir” June 4, 2010 Dirk Pulkowski - Legal Counsel dpulkowski@pca-cpa. org
Introduction According to Article 34(2)(a)(iii), An arbitral award may be set aside by the court specified in article 6 only if … the party making the application furnishes proof that … the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration … According to Article 36(1)(a)(iii), Recognition or enforcement of an arbitral award, irrespective of the country in which it was made, may be refused only … at the request of the party against whom it is invoked, if that party furnishes to the competent court where recognition or enforcement is sought proof that … the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration …
A Typology of Situations of Excess of Competence of Arbitral Tribunals • Tribunal awarded more than requested • Tribunal addressed matters not raised by parties • Tribunal granted relief excluded in arbitration agreement • Tribunal decided matters not provided for in arbitration agreement • Other constellations of excess of powers
Degree of Deference Accorded to the Tribunal’s Interpretation De novo review Binding Kompetenz provided that parties • intended such deference; or • can be deemed to have agreed to such deference Presumption (in statute or case law) that tribunal has correctly determined its competence Final and binding Kompetenz of the tribunal
The International Law Standard of Excess of Competence Three established propositions: • The scope of review for excès de pouvoir is limited • Arbitral tribunals are vested with Kompetenz-Kompetenz • A tribunal’s interpretation deserves deference as long as that interpretation is reasonable
Case concerning the Arbitral Award Made by the King of Spain on 23 December 1906 “[T]he Court will observe that the Award is not subject to appeal and that the Court cannot approach the consideration of the objections raised by Nicaragua to the validity of the Award as a Court of Appeal. The Court is not called upon to pronounce on whether the arbitrator’s decision was right or wrong. These and cognate considerations have no relevance to the function that the Court is called upon to discharge in these proceedings, which is to decide whether the Award is proved to be a nullity having no effect. ”
Case concerning the Arbitral Award of 31 July 1989 The Court noted that it “has simply to ascertain whether by rendering the disputed Award the Tribunal acted in manifest breach of the competence conferred on it by the Arbitration Agreement, either by deciding in excess of, or by failing to exercise, its jurisdiction”. “By its argument set out above, Guinea-Bissau is in fact criticizing the interpretation in the Award of the provisions of the Arbitration Agreement which determine the Tribunal’s jurisdiction, and proposing another interpretation. ” Rejecting Guinea-Bissau’s position, the Court held that it “does not have to enquire whether or not the Arbitration Agreement could, with regard to the Tribunal’s competence, be interpreted in a number of ways, and if so to consider which would have been preferable”.
CDC Group plc v. Republic of the Seychelles “ 34. As the ordinary meaning of the terms of Article 52(1) indicates, the ICSID annulment procedure is concerned with determining whether the underlying proceeding was fundamentally fair: Article 52(1) looks not to the merits of the underlying dispute as such, but rather is concerned with the fundamental integrity of the tribunal, whether basic procedural guarantees were largely observed, whether the Tribunal exceeded the bounds of the parties’ consent, and whether the Tribunal’s reasoning is both coherent and displayed. To borrow Caron’s terminology, annulment is concerned with the “‘legitimacy of the process of decision” rather than with the “substantive correctness of decision. Because of its focus on procedural legitimacy, annulment is “an extraordinary remedy for unusual and important cases. ” That annulment is not the same thing as appeal is a principle acknowledged, although applied unevenly, in the various decisions of ad hoc Committees. Additionally, the Convention specifically recognizes this distinction by rejecting, in Article 53, any right to appeal. ”
CDC Group plc v. Republic of the Seychelles “ 35. Two early decisions of ad hoc Committees have been widely criticized for reviewing the propriety of the underlying tribunals’ factual and legal determinations (and thus appearing to exercise more of an appellate function). Since those two Decisions, Klöckner I and Amco Asia I, ad hoc Committees consistently have taken a much more restrictive view of the role of the ad hoc Committee and the annulment process. The so-called “second” and “third” generation annulment decisions (MINE, Vivendi, and Wena Hotels are the published examples) have further crystallized the now apparently generally accepted proposition that “annulment is not a remedy against an incorrect decision” alone. Thus there has been an evolution in the ICSID annulment case law and scholarship away from Klöckner I and Amco Asia I that has culminated, in our view correctly, in ad hoc Committees reviewing arbitral proceedings only to the extent of ensuring their fundamental fairness, eschewing any temptation to “second guess” their substantive result. ”
Conclusion The practice of international courts and tribunals, while not relevant as legal authority in any formal sense, can assist national courts in appreciating their specific role under Articles 34(2)(a)(iii) and 36(1)(a)(iii) of the Model Law.
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