This chapter examines issues relating to the finality of international arbitral awards and the mechanisms for challenging that finality, particularly annulment of awards. First, the chapter examines the presumptive finality and res judicata effects of awards under both the New York Convention and most national arbitration statutes. Second, the chapter considers the functus officio doctrine and the correction, interpretation and supplementation of awards. Third, the chapter examines the substantive grounds that are available for annulling (or setting aside) awards in the arbitral seat, in particular under national arbitration legislation, together with the international limitations on these grounds for annulment. Fourth, the chapter considers the consequences of a judicial decision in the arbitral seat annulling an international award.
A. PRESUMPTIVE FINALITY AND PRECLUSIVE EFFECTS OF INTERNATIONAL ARBITRAL AWARDS
One of the fundamental objectives of international arbitration is to provide a final, binding resolution of the parties’ dispute.1 Essential to achieving this objective is the preclusive effect of arbitral awards: if parties are not bound by the results of the awards made against them—either dismissing or upholding their claims or declaring their conduct wrongful or lawful—then those awards do not achieve their intended purpose and are of limited practical value.
Consequently, res judicata and related principles of preclusion are widely accepted as applying to the awards of international arbitral tribunals.2 As formulated by one award, “[t]he sanctity of res judicata attached to a final decision of an international tribunal is an essential and settled rule of international law.”3 The same principle has been acknowledged, in the inter-state context, by the International Court of Justice.4
Although it is widely recognized that arbitral awards have binding, res judicata effects, the precise nature of those effects (and of their legal sources) is debated. Internationally, Article III of the New York Convention provides that “[e]ach Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles [particularly Article V].”5 Comparable provisions apply in other international commercial arbitration conventions.6 Despite this, it is unclear what preclusive effects are mandated by Article III, or cognate provisions, with relatively few authorities having addressed the preclusive effects of either the New York Convention or other international instruments.
Instead, rules of preclusion in international commercial arbitration have been developed almost entirely as a matter of national law, typically by reference to rules of preclusion developed for judicial judgments in national court proceedings. As the materials excerpted below illustrate, in most legal systems, awards made in international commercial arbitrations are accorded the same preclusive effects that national court judgments receive under national law. This is implied under Article 35(1) of the UNCITRAL Model Law and express under parallel provisions of the German and Japanese arbitration statutes, excerpted below. Compare the provisions of the ICSID and 1907 Hague Conventions, which adopt broadly similar, but not identical, approaches in the investment and inter-state contexts.
The arbitral award has the same effect between the parties as a final and binding court judgment.
JAPANESE ARBITRATION LAW
An arbitral award (irrespective of whether or not the place of arbitration is in the territory of Japan …) shall have the same effect as a final and conclusive judgment.
CERTAIN UNDERWRITERS AT LLOYD’S v. ARGONAUT INSURANCE CO.
264 F.Supp. 2d 926 (N.D. Cal. 2003)
FERTILIZER CORP. OF INDIA v. IDI MANAGEMENT, INC.
517 F.Supp. 948 (S.D. Ohio 1981)
Spiegel, District Judge. [The facts of the case are excerpted above at pp. 1094–95.] … IDI’s fourth defense is that the [Award] is not enforceable because it is not binding within the Convention’s meaning. The Convention covers this point in Article V(1)(e) which provides for a refusal to enforce if: “(e) the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.” IDI argues that the award is not binding until it has been reviewed by an Indian court for errors of law. The award is presently before the Indian courts for a ruling, among other things, on whether the arbitrators could award consequential damages despite an express contract clause to the contrary. While [IDI contends that] American courts review arbitration awards only for errors which are totally irrational or in manifest disregard of law, Indian courts review “speaking awards” for any error of law. IDI contends that this kind of review is one on the merits and that it prevents any meaningful binding effect or finality.
FCI counters that under Indian law, both statutory and decisional, as well as under the ICC Rules and under the parties’ contract, an arbitral award is final and binding. They argue that merely because an award has been challenged in an Indian court, its binding effect is not destroyed, just as a district court decision is binding on the parties, even though it is appealable, and a judgment may be executed unless the loser posts an appeal or supersedeas bond. FCI maintains that the Convention itself distinguishes, in Article V and Article VI, between a successful challenge and one that is merely pending….
[The district court reviewed the parties’ agreement (which provided that all disputes will be “finally” settled by arbitration), the 1955 and 1975 ICC Rules (which provided that arbitral awards “shall be final”), and Indian law (which it understood to provide, albeit not unequivocally, that “an award is binding on the parties when made”).] We find that the [Award] is final and binding, for purposes of the Convention. Therefore, Article V(1)(e) does not apply to prevent enforcement. We note the comment of Professor Gerald Aksen, General Counsel of the [AAA]: “The award will be considered ‘binding’ for the purposes of the Convention if no further recourse may be had to another arbitral tribunal (that is, an appeals tribunal). The fact that recourse may be had to a court of law does not prevent the award from being ‘binding.’” … Aksen, American Arbitration Accession Arrives in the Age of Aquarius, 3 Sw. U. L. Rev. 1, 11 (1971)….
[The court continued, quoting] Article VI [of the Convention and then holding that] this appears to be an unfettered grant of discretion; the Court has been unable to discover any standard on which a decision to adjourn should be based, other than to ascertain that an application to set aside or suspend the award has been made. Here, it is undisputed that IDI has made such an application in India..
We believe it is important … to consider the purpose of the Convention. The primary thrust of the Convention is to make enforcement of arbitral awards more simple by liberalizing enforcement procedures, limiting defenses, and placing the burden of proof on the party opposing enforcement.… [The court noted that IDI had obtained an award in a related arbitration against FCI, but that the award was also on appeal in India and that IDI had not been able to recover.] [I]n order to avoid the possibility of an inconsistent result, this Court has determined to adjourn its decision on enforcement of the [Award] until the Indian courts decide with finality whether the award is correct under Indian law. FCI, of course, may apply to this Court for suitable security, as provided by Article VI. When we are informed that the Indian courts have reviewed the [Award] and rendered a decision, we will proceed to either grant or deny enforcement based on that decision.…
1. Divergent approaches to preclusion under national legal systems. Civil and common law legal systems adopt different rules of preclusion, both in the context of national court judgments and otherwise. These differences are complex, and vary from jurisdiction to jurisdiction.
Most common law jurisdictions recognize two basic types of preclusion: res judicata (or “claim preclusion”) and issue estoppel (or “collateral estoppel” or “issue preclusion”). The doctrine of res judicata provides that a judicial judgment accepting or rejecting a particular “claim” is binding upon the parties to the proceeding that produced the judgment. That is, a party that has asserted a claim unsuccessfully will be precluded from attempting to assert that claim again against the same defendant, while a party which has had a claim adjudicated against it will be precluded from asserting the non-existence of the claim against the successful plaintiff. In general, the notion of a “claim” or “cause of action,” which is subject to preclusion, is defined to include all rights of legal action that arise out of a single set of facts or a single transaction: this has the effect of extending the preclusive effects of a res judicata [bar] beyond those claims that were actually litigated concerning a particular transaction in a prior litigation, to also reach claims that might have been litigated (even if they were not). See P. Barnett, Res Judicata, Estoppel and Foreign Judgments 120-121 (2001); G. Born, International Commercial Arbitration 3735 (2d ed. 2014).
Distinct from the doctrine of res judicata in common law jurisdictions is that of issue preclusion. Issue preclusion prevents a party from relitigating, against a counter-party, an issue of fact or law that was previously contested and decided in a litigation between the same parties. The issue in question must have actually been litigated between the parties and must have been significant to the court’s decision in the earlier judgment; issues that were not litigated or that were merely obiter dictum (not decisive) in the earlier judgment will ordinarily not be subject to issue preclusion. See P. Barnett, Res Judicata, Estoppel and Foreign Judgments 137 (2001); G. Born, International Commercial Arbitration 3736 (2d ed. 2014).
The basic principle of preclusion in civil law states is that of res judicata (or claim preclusion). This principle is statutorily expressed in the French Code of Civil Procedure (which parallels that in a number of other civil law jurisdictions) in the following terms:
“The judgment which decides in its holdings all or part of the main issue, or one which rules upon the procedural plea seeking a peremptory declaration of inadmissibility or any other incidental application, shall from the time of its pronouncement, become res judicata with regard to the dispute which it determines.” French Code of Civil Procedure, Art. 480.
Additionally, “[i]t is necessary that the thing claimed be the same; that the claim be based on the same grounds; that the claim be between the same parties and brought by them and against them in the same capacity.” French Civil Code, Art. 1351. Consistent with these provisions, most civil law states apply a relatively restricted doctrine of res judicata (in comparison to common law jurisdictions). A “triple identity” requirement—of the same claim, same legal grounds and same parties—must generally be satisfied before an action will be precluded by a prior judgment. See G. Born, International Commercial Arbitration 3738 (2d ed. 2014); De Ly & Sheppard, ILA Interim Report on Res Judicata and Arbitration, 25 Arb. Int’l 35, 48-51 (2009).
It is frequently said that there is no doctrine of issue preclusion in civil law jurisdictions. ILA International Commercial Arbitration Committee, Interim Report: Res Judicata and Arbitration 14 (Berlin 2004) (“There is no notion of issue estoppel or preclusion (as in the Common Law)”). That conclusion has surface appeal, but appears to ignore the way in which principles of res judicata give preclusive effect in civil law jurisdictions to aspects of a judgment’s (or an award’s) reasoning: as one authority puts it, “the reasons for a decision may partake of the res judicata effect that applies to the operative part, whenever such reasons are a necessary adjunct to such operative part.” B. Hanotiau, Complex Arbitrations ¶534 (2006). This rule is similar, in most respects, to principles of issue estoppel or collateral estoppel as applied in common law jurisdictions.
2. Practical importance of preclusive effects of awards. As a practical matter, how important are the preclusive effects of awards? Recall the reasons that commercial parties agree to arbitrate their international disputes—including the desire to finally and efficiently resolve their disputes in a single, centralized forum, without the jurisdictional disputes and multiplicitous proceedings that characterize international litigation. See supra pp. 109, 111–12. To what extent would these objectives be achievable if arbitral awards did not have preclusive effects? What if an award had no res judicata effect between the parties—what would be the practical consequence? What if an award had no collateral estoppel or issue estoppel effects—again, what would be the practical consequences?
3. Finality and preclusive effects of awards under UNCITRAL Model Law. Article 35(1) of the UNCITRAL Model Law, excerpted at p. 95 of the Documentary Supplement, provides that “[a]n arbitral award, irrespective of the country in which it was made, shall be recognized as binding….” The drafting history of the Model Law explains that, under Article 35(1), “an award shall be recognized as binding, which means, although this is not expressly stated, binding between the parties and from the date of the award.” Report of the Secretary-General on the Analytical Commentary on Draft Text of A Model Law on International Commercial Arbitration, U.N. Doc. A/CN.9/264, Art. 35, ¶4 (1985). What does it mean to “recognize” an award as “binding”? Does this mean that the parties are legally prohibited from challenging the award? Consider the provisions of Articles 33 and 34. Does Article 35 preclude a party’s exercise of its rights under Articles 33 and 34?
Is an award “binding” under Article 35(1) before the time period required for seeking a correction or annulment (under Articles 33 and 34) has expired? What if an award is annulled under Article 34—is it still “binding”? Why not?
If an award is “binding” under Article 35(1), what precisely does that mean? Does it mean that the award has preclusive effects—often referred to as having “res judicata” and “collateral estoppel” (or issue estoppel) effects? Compare the text of Article 35(1) with the German and Japanese arbitration statutes. What meaning—other than the preclusive effects of an award—could be ascribed to the term “binding” in Article 35?
4. Finality and res judicata effects of awards under other national arbitration legislation. Consider the provisions of the German and Japanese arbitration laws. What do the excerpted sections provide with regard to the legal consequences of an award? See Belgian Judicial Code, Art. 1713(9) (“The award shall have the same effect as a court decision in the relationship between the parties.”); Netherlands Code of Civil Procedure, Art. 1059(1) (“Decisions relating to the legal relationship which is in dispute and are comprised in a final arbitration award, have the force of res judicata in other legal proceedings between the same parties from the day on which they are rendered.”).
Why should awards have the same res judicata and other preclusive effects as a national court judgment? Are there not vital differences between the arbitral and litigation processes (e.g., public court proceedings, institutional judiciary, appellate review)? Do these differences argue for less extensive preclusive effects for awards? Why or why not?
Conversely, consider the objectives that lead parties to agree to arbitrate their disputes—including the desire to obtain a single, centralized dispute resolution mechanism and to avoid multiplicitous litigation in multiple forums. See supra pp. 109, 111–12, 527–28. Do these objectives argue in favor of narrower—or broader—rules of preclusion in arbitration than in national court litigation?
From when exactly do arbitral awards have res judicata effect? From when the tribunal decides the dispute? From when the tribunal completes its award? Signs its award? Delivers the award to the parties? Deposits the award with a local court? See supra p. 1069. From when any challenge to annulment is rejected? See infra pp. 1125–34, 1134–73.
5. Finality and preclusive effects of awards under Inter-American Convention. Consider Article 4 of the Inter-American Convention, excerpted at p. 9 of the Documentary Supplement. How does Article 4 compare with Article III of the New York Convention? Which approach is preferable?
6. Finality and preclusive effects of awards under Article III of New York Convention. Do the provisions of the New York Convention expressly address the finality or other legal consequences of an award? Consider Article V(1)(e) of the Convention. Note that one of the grounds for non-recognition of an award is that it “has not yet become binding on the parties” (discussed below at pp. 1120–22). Note that, as with other exceptions to recognition under Article V, the burden of proving that an award has not yet become binding is on the party resisting recognition.
Consider Article III of the Convention. Does Article III require Contracting States to grant awards res judicata or other preclusive effects? How clear is Article III’s text? Would Article III leave Contracting States free to afford arbitral awards no (or de minimis) preclusive effect—for example, by treating awards as having no res judicata effect and instead as allowing relitigation of disputes without regard to the results of prior arbitral proceedings? Would this not frustrate the purpose of the Convention? Note that Article V of the Convention enumerates a limited number of exceptions to the obligation, under Article III, to recognize awards. See infra pp. 1189–90, 1195–97. Would it not frustrate the purpose of Articles III and V if Contracting States were free to define their recognition of awards as essentially meaningless—permitting relitigation of disputes which had already been decided in the award?
Assuming that the Convention requires Contracting States to accord awards some measure of res judicata or other preclusive effect, what defines the character and scope of that effect? Does Article III prescribe any particular res judicata or preclusion standards? What does it mean for an award to be recognized as “binding” under Article III? To what sources might one look in defining the preclusion standards of Article III? Consider the following:
“If the New York Convention is understood as requiring Contracting States to afford some measure of preclusive effect to arbitral awards, the decisive issue is determining the content of this preclusion principle. Article III of the Convention should not be interpreted to prescribe particular rules of preclusion, but instead to provide a constitutional statement of principle—mandating recognition of the “binding” effects of arbitral awards—that must be elaborated over time by national courts and arbitral tribunals.
Most clearly, Article III would forbid the courts of a Contracting State from denying any preclusive effect to arbitral awards, permitting litigants to relitigate claims or issues that were rejected in arbitral proceedings and awards between the same parties. This result … would make a mockery of the Convention’s requirement that Contracting States “recognize” the “binding” effect of arbitral awards, permitting states to say that awards have binding effect, but that the effects which are binding are non-existent. That is contrary to both the language and fundamental purposes of the Convention.
It is inherent in the nature of an agreement to arbitrate, and the concept of an arbitral award, that such an award will have binding, and thus preclusive, effects. Equally, it would be inherently contrary to the obligations to recognize an arbitration agreement and an arbitral award for a state to deny preclusive effects to a valid award and instead to entertain litigation of disputes that the parties had both agreed to arbitrate and arbitrated. That would contradict the obligation to recognize agreements to finally resolve disputes by arbitration, as well as the obligation to recognize awards setting forth such resolutions.
Beyond this, the Convention’s objectives of ensuring the final, binding resolution of international disputes, and the effective recognition of arbitral awards, argue in favor of presumptively affording at least the same preclusive effects to arbitral awards as accorded national court judgments: where the parties have agreed to resolution of their disputes in a single, centralized forum, specifically to avoid the costs and delays of multiplicitous litigations in national courts, the Convention’s requirement that Contracting States recognize such agreements, and the resulting awards, imply at least equally broad principles of preclusion as those applicable to national court judgments, which rest on a structural premise of multiple possible forums and proceedings. Indeed, a substantial argument can be made that presumptively broader preclusion rules are required, as between the parties, for international arbitral awards than for national court judgments.
The precise contours of the international preclusion rules, mandated by the New York Convention, which are applicable in particular cases is to be developed by national courts in light of general principles of international law and the parties’ expectations in particular cases. Fundamental to this analysis, however, is the obligation presumptively to treat arbitral awards no less favorably, insofar as preclusive effects are concerned, than national court judgments and to give effect to the terms and objectives of the parties’ agreement to arbitrate. As discussed below, most developed jurisdictions have applied rules of preclusion to international arbitral awards which are consistent with this analysis, generally treating such awards as identical for preclusion purposes to national court judgments.
More controversially, principles of preclusion mandated by the New York Convention should generally prevent parties from relitigating a dispute that has been resolved by an arbitral award—regardless whether particular claims arising out of that dispute were or were not asserted in earlier arbitral proceedings. So long as claims were within the scope of the parties’ arbitration agreement, and were related to affirmative claims that the party asserted, a party should not be permitted to hold back claims for relitigation in subsequent proceedings: permitting this to occur contradicts the parties’ objective of a speedy, final resolution of their disputes in a single forum, and instead rewards, and thereby encourages, technical pleadings and multiplicitous dispute resolution proceedings.
The better view of the Convention is that it should permit parties only “one bite at the cherry” (or apple), as required in developed common law preclusion systems. This analysis would entail a broader view of res judicata principles than ordinarily taken in some civil law jurisdictions, but that is appropriate in light of the New York Convention’s requirements and the objectives of the arbitral process.” G. Born, International Commercial Arbitration 3746 (2d ed. 2014).
Is that persuasive? Are some of these conclusions more persuasive than others? Which ones?
7. Consequences of parties’ arbitration agreement for preclusive effects of award. To what extent are the preclusive effects of awards affected by the terms of the parties’ arbitration agreement? For example, suppose the arbitration agreement provides that the award will be binding only if neither party objects to it, and commences proceedings in a state court, within 30 days after it is made. Will the award be binding before the 30 day period has expired? After the 30 day period has expired, without either party objecting?
8. Finality of awards under ICSID Convention. Consider Article 53(1) of the ICSID Convention. How does that provision compare with the New York Convention? Which instrument provides more clearly for finality? Which instrument more clearly provides a uniform international rule of finality? Which approach is preferable?
9. Finality of awards in inter-state arbitration. Consider Article 81 of the 1907 Hague Convention, excerpted at p. 49 of the Documentary Supplement. Again, how does this provision compare with the New York Convention (and the ICSID Convention)? Is there any reason that inter-state awards should enjoy greater finality and preclusive effects than commercial awards?
10. Non-recognition of awards that are not “binding” under Article V(1)(e) of New York Convention. Consider Article V(1)(e) of the New York Convention, excerpted at p. 2 of the Documentary Supplement, which permits Contracting States to deny recognition of awards that “have not yet become binding on the parties.” What exactly does it mean for an award to be “binding” under Article V(1)(e)? Consider the analysis of the “binding” award requirement in Fertilizer Corp. Why is it that the award in Fertilizer Corp. was “binding” under Article V? Was it because that is what the parties agreed, either expressly or by reference to ICC Rules? Is it because Indian law, as the law of the arbitral seat, provided that the award was binding? Is it because U.S. law deemed the award binding? Or is it for some other reason?
Consider the following possibilities—an award is “binding” for purposes of Article V(1)(e) when: (a) it is made by the arbitral tribunal, without regard to possible judicial or other review; (b) it is made by the tribunal, provided that no internal appellate review within the arbitral institution has been invoked; (c) it is made by the tribunal, and the time for seeking de novo judicial review of the merits of the award under local law (in an action to annul) in the arbitral seat has expired, or any application for such review has been denied; (d) it is made by the tribunal, and the time for seeking limited judicial review under local law in the arbitral seat has expired, or any application for such review has been denied; (e) it is made by the tribunal, and the award has been confirmed by a local court in the arbitral seat; or (f) it is made by the tribunal, and appellate review of any of the avenues of judicial review in paragraphs (a)-(e) has been exhausted, or the time for doing so has expired. Which of these interpretations is most consistent with the Convention’s purposes? Which interpretation reflects the approach of the Geneva Convention (which, as noted above, the New York Convention rejected, supra pp. 32–39 & infra pp. 1195–97)?
11. Authorities holding awards “binding” under Article V(1)(e) even if they are subject to annulment action in arbitral seat. Suppose an award is potentially subject to an action to annul in the jurisdiction where it was made; alternatively, suppose an action to annul the award has been filed and is pending. Can the award still be “binding”? What did Fertilizer Corp. hold? See Judgment of 8 January 1995, XXII Y.B. Comm. Arb. 789 (1997) (Swiss Fed. Trib.) (“Nor is it decisive that a request to have the award set aside or suspended, even if it has suspensive effect, is pending,” citing Article VI); Aksen, American Arbitration Accession Arrives in the Age of Aquarius, 3 Sw. U. L. Rev. 1, 11 (1971) (“The fact that recourse may be had to a court of law does not prevent the award from being binding.”).
Consider Article VI of the Convention. What does it suggest about the effects of an annulment action on an award’s status as “binding” under Article V(1)(e)? Does it make sense for an award to be subject to recognition when a court in the arbitral seat may still annul it?
12. Authorities holding awards “binding” under Article V(1)(e) if they are not subject to judicial review of merits of arbitrators’ decision. Some authorities conclude that only the availability of judicial review on the merits of the arbitrator’s decision in its country of origin prevents an award from being binding:
In most cases, an award can be deemed binding and enforceable under the Convention as soon as it is rendered. Those cases where it would not be binding would include specific cases where the law of the home jurisdiction permits judicial appeal on the merits or the rules of the arbitral institution permit review within the institution.
Craig, Uses and Abuses of Appeal From Awards, 4 Arb. Int’l 174, 187 (1988). See also Judgment of 12 July 1984, X Y.B. Comm. Arb. 487 (1985) (Amsterdam Recht-bank) (“An arbitral award is not binding if it is open to appeal on the merits before a judge or an appeal arbitral tribunal”).
Note that these authorities apparently distinguish between de novo judicial review of the merits of an award under local law—which will prevent the award from being “binding”—and more limited judicial review (for example, along the lines permitted in an action to annul under Article 34 of the UNCITRAL Model Law), which will not. Is this a sensible distinction? Is there any basis for it in the text of Article VI? Given the pro-enforcement bias of the Convention, is it unusual for judicial review of the merits of the arbitral decision to block enforcement abroad, while more limited review does not?
13. Authorities suggesting that awards are “binding” under Article V(1)(e) if they are not subject to review by another arbitral tribunal. Some institutional rules provide for the possibility of appeal from an award to an appellate arbitral tribunal (for example, as under the ICSID Convention). As the quotation excepted above from Mr. Aksen in Fertilizer Corp. suggests, some authorities have concluded that an award is “binding” unless it is subject to appellate review by another arbitral tribunal. Is this a sensible rule? Note that in the vast majority of cases, no “appellate” review by another arbitral body is provided for.
14. Effect under Article V(1)(e) of agreement that award shall be “final.” Should Article V(1)(e) be interpreted to provide that awards are “binding” when that is what the parties agreed? That is, even if an award was subject to various forms of judicial or appellate review, if the parties agreed that the award was binding (or final) and could be enforced, then the award would be treated as “binding” for purposes of Article V(1)(e). Note that many institutional rules provide that awards are final and binding upon the parties as soon as they are made. See, e.g., 2010 UNCITRAL Rules, Art. 34(2) (“shall be final and binding on the parties”); 2012 ICC Rules, Art. 34(6) (“Every award shall be binding on the parties…. the parties undertake to carry out any award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made.”). As Fertilizer Corp. illustrates, contractual provisions sometimes say the same thing. What effect should such contractual provisions have? Do they mean that the award is binding, regardless of what the law of the arbitral seat provides? Why or why not?
15. Drafting history of Article V(1)(e). The drafting history of the New York Convention sheds some light on the meaning of a “binding” award. First, as discussed above, the Convention’s drafters plainly wished to dispense with the double exequatur requirement. See supra pp. 35–36. Second, a working party responsible for the language that became Article V(1)(e) thought that an award would not be binding if “ordinary means of recourse” were available against it. 22 U.N. ESCOR 13, U.N. Doc. E/CONF.26/SR.17 (1958). That formulation is unclear, but arguably suggests that some sort of de novo judicial review on the merits (and not merely the review in an annulment action) must be available to preclude an award from being binding, while not clearly specifying the character of the judicial review that would have this effect. On the other hand, the formulation could suggest merely that any “ordinary” process of seeking to annul an award—through whatever means are available—would render it non-binding, while extraordinary actions to reopen or set aside awards (such as actions based on after-discovered evidence) would not. Which view is more consistent with the Convention and its purposes?
16. Article VI’s provision for suspending enforcement proceedings pending conclusion of action to annul in arbitral seat. Suppose an award is made in Switzerland, under Swiss law, and is subject to an annulment action brought by the losing party in Swiss courts; suppose further that, while the action to annul is pending, the prevailing party seeks to enforce the award in Singapore. Can the award properly be recognized in Singapore, and, if so, should it be? Under the Convention, must it be?
Article VI of the Convention grants courts the power to adjourn enforcement proceedings pending the resolution of actions to set an award aside in its country of origin. As Fertilizer Corp. suggests, many courts have found this an attractive alternative and have granted Article VI stays. Rive, SA v. Briggs of Cancun, Inc., 2000 WL 98127 (E.D. La.) (staying enforcement, but requiring security); Caribbean Trading & Fidelity Corp. v. Nigerian Nat’l Petroleum Corp., 1990 U.S. Dist. LEXIS 17198 (S.D.N.Y.)
Does the desirability of an Article VI adjournment depend on the likelihood that the foreign court will annul the award? Consider: A. van den Berg, The New York Convention of 1958 380-81 (1981) (Article VI “implies that the respondent has the burden of giving some summary proof that the award is tainted by a defect which is likely to cause its setting aside in the country of origin”). Does the wisdom of adjournment depend on the balance of hardship suffered by each of the parties as a result of a stay?
Does the wisdom of granting an Article VI stay depend on what bases are available in the arbitral seat for annulling the award? Suppose a State A and a State B party arbitrate, with the seat in State B; after the State A party prevails, State B courts begin de novo review of the merits of the arbitrators’ decision. Should foreign courts postpone enforcement against the State B entity while the State B court retries the substance of the parties’ dispute?
17. Role of judicial precedent in international arbitration. The role of judicial precedent varies in different legal systems, with courts in some states according substantial weight to the statements of law in prior judicial decisions and other legal systems according less weight to prior decisions. Thus, common law states are frequently said to recognize prior judicial decisions as “binding precedent,” adopting a firm rule of stare decisis, derived from the notion of stare decisis et non quieta movere—“to stand by and adhere to decisions and not disturb what is settled.” In contrast, civil law states are said to afford less weight to judicial precedent (and greater importance to codified statutory authority): “The conventional view in continental Europe is that the courts are bound by statutory laws only, not however by precedents.” P. Forstmoser, Einfiih-rung in das Recht 411-14 (2003). Despite this, many commentators conclude that the differences between the treatments of precedent in civil and common law systems are overstated, and that both systems afford substantial weight to prior decisions. G. Born, International Commercial Arbitration 3810-17 (2d ed. 2014) (citing authorities).
What role should precedent have in international arbitration? Suppose that an arbitral tribunal, seated in a common law state and applying the substantive law of that state, is presented with judicial decisions from that common law system. What weight should the arbitrators accord to the judicial decisions? Does it depend on what weight the courts of the arbitral seat would accord to the decisions? Suppose the same tribunal, applying the same (common law) substantive law, is seated in a civil law state. Should that affect the weight to be accorded to the common law authorities?
Suppose an arbitral tribunal, seated in a civil law state and applying the substantive law of that state, is presented with judicial decisions of that civil law system. What weight should the arbitrators accord to those judicial authorities? Should they accord the same weight to those authorities as would a court in the arbitral seat? More or less weight?
Consider the following remarks:
“By its whole nature and constitution, an arbitral tribunal is far more ready, and far freer than a conventional judicial tribunal to deal with the actual case in front of it. An arbitral tribunal is usually established to deal with a particular case. Once it has pronounced its decision, its function is over. In such cases, there is less need to be concerned with consistency of decisions. There is more scope for tailoring the award to the particular merits of the dispute….” Redfern, International Commercial Arbitration: Winning the Battle, Private Investors Abroad 11-1, 11-12 (1989).
“the arbitrators should be entitled to go a step further than the foreign judge and disregard even long-standing case-law of the highest court if the result does not conform with the needs of international trade and commerce, provided there is sufficient support in foreign doctrine for the result he endeavors to achieve in the case before him.” Berger, The International Arbitrators’ Application of Precedents, 9(4) J. Int’l Arb. 5, 15 (1992).
Are these views consistent with the objectives of the arbitral process? Recall that, save where parties have agreed to arbitration ex aequo et bono, the arbitrators’ mandate is to resolve the parties’ dispute in an adjudicative manner, in accordance with applicable law. If a national legal system accords judicial decisions binding precedential weight, then shouldn’t arbitrators give those decisions the same effect as would a court in that system? Is it acceptable to permit arbitrators to disregard applicable substantive law, based on their assessment of “the needs of international trade and commerce”?
18. Role of arbitral precedent in international arbitration. What role should the decisions of previous arbitral tribunals have in defining the applicable substantive law in later arbitrations? It is sometimes said that arbitral awards have no role as precedent: “[I]n both [Common and Civil law] systems, the prior decision of an arbitral tribunal on a question of law has no precedential value.” Sheppard, Res Judicata and Estoppel, in B. Cremades & J. Lew (eds.), Parallel State and Arbitral Procedures in International Arbitration 219, 222 (2005).
Recall that many arbitral awards are confidential and, therefore, are never published or otherwise made available to non-parties. In these instances, it is obvious that an award can have no precedential effects. But assume an award is made public—why should it not have similar precedential effects to those of a national court? For example, if a three-person tribunal, composed of respected English (or Singaporean) arbitrators, carefully considers an issue of English (or Singaporean) commercial law and unanimously makes a reasoned award, should that award have the same precedential weight as a decision by an English (or Singaporean) court? Recall that one of the reasons parties agree to arbitrate is to obtain an expert, commercially-sophisticated decision; why should those decisions not have broader precedential authority?
Reliance on prior arbitral decisions, as a form of decisive precedent, can be observed in the context of maritime and international construction arbitrations, where awards are not only followed, but often published in industry circles for precisely this purpose. O’Brien, Maritime Arbitration, 14 Forum 222, 227 (1978-1979); Berger, The International Arbitrators’ Application of Precedents, 9 J. Int’l Arb. 5, 20 (1992). Why shouldn’t the same approach apply more broadly?
19. Role of arbitral precedent in investment arbitration. Note that many awards in investment arbitrations are public. See supra p. 869. Does this argue for according them greater precedential effect than might be the case in commercial arbitrations? Consider the following refusal, by a tribunal in an investment arbitration, to accord precedential authority to prior awards:
“there is no doctrine of precedent in international law, if by precedent is meant a rule of the binding effect of a single decision. There is no hierarchy of international tribunals, and even if there were, there is no good reason for allowing the first tribunal in time to resolve issues for all later tribunals.” SGS Société Gen. de Surveillance SA v. Repub. of Philippines, Decision on Jurisdiction in ICSID Case No. ARB/02/6 of 29 January 2004, 8 ICSID Rep. 515, 545 (2004).
Is this appropriate? Compare the following:
“The decisions of these tribunals [addressing jurisdiction over non-signatories] progressively create case-law which should be taken into account, because it draws conclusions from economic reality and conforms to the needs of international commerce, to which rules specific to international arbitration, themselves successively formulated should respond.” Interim Award in ICC Case No. 4131, IX Y.B. Comm. Arb. 131, 136 (1984).
What are the various arguments for and against according precedential authority to arbitral awards? Which view prevails? In commercial arbitration? In investment arbitration? If arbitrators should afford precedential authority to prior awards, what about national courts?
B. CORRECTION, INTERPRETATION AND SUPPLEMENTATION OF INTERNATIONAL ARBITRAL AWARDS
Human fallibility guarantees that virtually all arbitral awards will have mistakes, omissions, or ambiguities. These will range from typographical errors, to inaccurate references to evidence or legal authorities, to non sequiturs or unpersuasive analysis, to outright confusions of parties or mathematical miscalculations of amounts; they also may involve failures by the arbitrators to address particular arguments, claims, or evidence. These errors usually concern minor or incidental issues and have little or no relevance to the tribunal’s ultimate awards of damages or other relief. In some cases, however, errors can concern very fundamental points that lie at the heart of the tribunal’s reasoning or award.
Most obviously, an award’s damage calculations may contain arithmetic mistakes or an undisputed fact relevant to a damages award may be erroneously recorded (e.g., the number of lost sales in a particular year, the cost of purchasing replacement goods);7 alternatively, it may be clear that the tribunal failed to address one of the claims presented by the parties. In these instances, a party may wish to seek correction or supplementation of the award in order to change the quantum of monetary damages that were awarded or to address the neglected issue(s).
Historically, there were significant reservations about permitting arbitrators to correct, supplement, or interpret their awards. Immediately upon making their award (which was, as discussed above, final and binding), arbitrators became “functus officio,” and lost the capacity to take further steps, including to correct or interpret their award.8 Accordingly, many modern arbitration statutes provide mechanisms that allow parties to request (and arbitrators to make) “corrections” to, “interpretations” of, or “supplementations” to an award. In most states, the circumstances in which these types of changes can be made are very narrowly circumscribed. Nonetheless, as the materials excerpted below illustrate, the existence of these powers provide grounds for addressing obvious slips or miscalculations, omissions, or uncertainties that could otherwise cause injustice or lead to annulment of the award.
LA VALE PLAZA, INC. v. R.S. NOONAN, INC.
378 F.2d 569 (3d Cir. 1967)
FREEDMAN, Circuit Judge…. Appellant, La Vale Plaza, Inc., contracted for the construction of a shopping center by R.S. Noonan, Inc. Because a dispute arose regarding the amount due it, Noonan filed with the [AAA] a demand for arbitration under the provisions of the contract.9 … [T]he arbitrators rendered an award in favor of Noonan in the amount of $30,861.64. Their award expressly declared that it was “in full settlement of all claims submitted to this arbitration one against the other.” Two months later, La Vale brought the present action to recover the amount of $25,568.02 which it alleged was due it as the difference between the award and a deposit of $56,429.66 which it had delivered to Noonan during the pendency of the arbitration proceedings in order to obtain a continuance of one of the hearings. Noonan in its answer alleged on the contrary that the $56,429.66 was a partial payment on account and left a balance in dispute which was decided by the award. Curiously enough, Noonan filed no counterclaim for the recovery of the amount of the award.
The district judge held that the dispute whether the sum of $56,429.66 was a deposit or a payment of account raised a material question of fact and … denied Noonan’s motion for summary judgment. In doing so, however, he ordered sua sponte that the award be re-submitted to the arbitrators for clarification of its meaning. For his power to do this the district judge relied on §11 of the [Pennsylvania] Arbitration Act of April 25, 1927, which authorizes a court on the application of any party to an arbitration to modify and correct an award or resubmit it, “where the award is imperfect in matter of form not affecting the merits of the controversy.”10 The court held that the Act of 1927 was applicable because the arbitration clause of the contract provided that it was to be enforceable under the “prevailing arbitration law.” Appellant contends that this was error because this was a common law arbitration and that under it the court has no power to resubmit an award to arbitrators for clarification.…
In 1927 Pennsylvania adopted with some modifications the Uniform Arbitration Act.… The Act provides in general for the enforcement of a provision in any written contract, except a contract for personal services, to settle by arbitration a controversy which may thereafter arise out of the contract and for the enforcement of an agreement in writing to submit an existing controversy to arbitration. Because the Act of 1927 makes a number of changes in the earlier practice in arbitration and prescribes grounds for the vacation and modification and correction of awards by the court it has become increasingly important to determine whether a particular arbitration proceeding is subject to the provisions of the Act of 1927 or is to be deemed a common law arbitration.… The present contract contains no reference to the Act of 1927, and the language of Article 40 that disputes under the contract should be arbitrated in accordance with the existing practice of the [AAA] does not indicate the intention of the parties that the provisions of the Act should apply. Nor does the further language that the contract “shall be specifically enforceable under the prevailing arbitration law” bring the arbitration under the Act of 1927…. Since it is clear that the Act of 1927 does not apply and that this was a common law arbitration, the question is whether in such a case the district judge had power to order the award resubmitted for clarification by the arbitrators.
The general principle in a common law arbitration is that the arbitrators are the final judges for both the facts and the law and their decision will not be disturbed for a mistake of fact or of law. This is one of the fundamental distinctions between common law and statutory arbitration under the Act of 1927. It is presumed that in not providing affirmatively for the application of the Act of 1927 the parties to an arbitration intend the common law principle to prevail. It is equally fundamental common law principle that once an arbitrator has made and published a final award his authority is exhausted and he is functus officio and can do nothing more in regard to the subject matter of the arbitration. The policy which lies behind this is an unwillingness to permit one who is not a judicial officer and who acts informally and sporadically, to re-examine a final decision which he has already rendered, because of the potential evil of outside communication and unilateral influence which might affect a new conclusion. The continuity of judicial office and the tradition which surrounds judicial conduct is lacking in the isolated activity of an arbitrator, although even here the vast increase in the arbitration of labor disputes has created the office of the specialized professional arbitrator. This policy of finality, founded on practical considerations, is nourished by the primitive view of the solemnity of all judgments. From it, reinforced by the enormous fines which King Edward I levied to replenish his treasury on his judges for erasing or altering their records, came the ancient common law rule that a judgment, once enrolled on parchment, was unalterable even for the correction of a manifest mistake. [3 Blackstone Commentaries, *409-410.]
The principle that an award once rendered is final contains its own limitation, however, and it therefore has been recognized in common law arbitration that the arbitrator can correct a mistake which is apparent on the face of his award. Similarly, where the award does not adjudicate an issue which has been submitted, then as to such an issue the arbitrator has not exhausted his function and it remains open to him for subsequent determination. In such a case the arbitrator is not exposed to any greater risk of impropriety than would normally exist during the pendency of the arbitration proceedings, a risk which is inherent in the submission of disputes to non judicial determination. The Pennsylvania courts therefore have recognized that an arbitrator may complete a common law arbitration if the award is not complete, even over the objection of one of the parties. Thus, in Frederick v. Margwarth, 221 Pa. 418 (1908), plaintiff sued on an award in his favor made by an arbitrator.… The court sustained the defense that the award was invalid because it was not coextensive with the submission, since the arbitrator had failed to pass on a number of disputed matters that had been submitted to him. Thereupon the arbitrator, on notice to the parties, went forward with the completion of his award, on which the plaintiff brought a new action. The Supreme Court of Pennsylvania rejected the defense that the arbitrator’s authority ended with the making of the first award …:
“The rule undoubtedly is that, when an arbitrator has made and delivered his award, the special power conferred upon him ends. But an award must be final, complete, and coextensive with the terms of the submission. The arbitrator, through mistake, failed to consider and decide a part of the dispute submitted to him, and the award was invalid because incomplete. But the agreement as still in force, and it was competent for the arbitrator to finish his work by making a full and complete award….”
Where the award, although seemingly compete, leaves doubt whether the submission has been fully executed, an ambiguity arises which the arbitrator is entitled to clarify. The resolution of such an ambiguity is not within the policy which forbids an arbitrator to re-determine an issue which he has already decided, for there is no opportunity for redetermination on the merits of what has already been decided. Instead, the clarification of an ambiguity closely resembles the correction of a mistake apparent on the face of the award and the determination of an issue which the arbitrators had failed to decide. Thus, in the present case the arbitrators will act only to remove the cloud of doubt as to whether they considered the payment of $56,429.66 in making their award and will in no way reopen the merits of the controversy.
The remaining question is whether the court in which the arbitrator’s award is offered to sustain a claim or defense may take cognizance of the dispute over its finality, and finding that its clarification would not in any way violate any policy relating to arbitration and would be within the arbitrators’ power to pursue on their own motion, may resubmit it to the arbitrators for such purpose. When awards are made under a rule of court, the decisions in Pennsylvania sustain the power of the court to order resubmission to the same referee for the correction of an informality or even an ambiguity. In Refowich v. Rice, 4 Pennypacker 449 (Pa. 1883), the Supreme Court of Pennsylvania held that the court below could not alter the award of arbitrators based on their subsequent testimony of their intention to award full costs in a slander action, rather than the nominal costs prescribed by a colonial statute. Justice Paxton said, however, that “had the award been recommitted to the arbitrators, and amended so as to give full costs, there would have been no difficulty. But there was no action by the arbitrators as such. Their award could only be amended by themselves, acting in their official character as arbitrators, upon a recommittal of it to them by the court.” What was involved in that case apparently as not a common law arbitration, but the procedural vehicle should be as equally applicable in a common law arbitration as in a statutory one…. [There] is no indication that Pennsylvania intends that the common law of arbitration should be frozen as it was prior to 1836 and that the common law is to be deprived of its traditional capacity for development and growth. Indeed, there is no reason why we may not look to Pennsylvania’s statutes, which explicitly permit resubmission of an award, for their reflection of a public policy on which courts may properly draw in administering the gradualist development of the common law. If the common law of arbitration should be fixed as it was a century or more ago and incapable of growth, the increasing body of arbitrations on commercial contracts and on construction contracts like the one before us, establishing arbitration under the auspices of the [AAA], would be condemned to stagnation, beyond the reach of progressive judicial development.… Moreover, it would be strange if a court which finds an ambiguity in an award should be powerless to order its resubmission to the arbitrators although the arbitrators themselves admittedly have the authority to clarify the ambiguity and if necessary to complete their action under the submission. [The court affirmed the trial court’s decision re-submitting the award to the tribunal.]…
JAPANESE ARBITRATION LAW
The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings. Provided, the acts prescribed in the provisions of articles 41 through 43 may be made [concerning corrections, interpretations and supplementations].
JUDGMENT OF 12 JANUARY 2005
DFT 131 III 164 (Swiss Fed. Trib.)
[This case concerns] a pending arbitration … subject to the [ICC Rules] between company B as claimant and company A as defendant…. On 24 March 2004, the arbitral tribunal, composed of three arbitrators acting unanimously, rendered a partial award which fixed the price of the 49 shares of company C to an amount of 73,100,000 US$ which A was ordered to pay to B, provided a deduction of 27,000,000 US$ as payment on account on 28 February 2002 and provided a transit account of 855,556.17 US$ which corresponds to the defendant’s claim for compensation…. [A applied to annul the award, citing Arts. 190(2)(a), (d) and (e) of the SLPIL. The Swiss Federal Tribunal dismissed the application.]…
On 7 April 2004, B lodged a request for amendment to the ICC regarding the partial award.… On 18 August 2004, the arbitral tribunal, acting unanimously, notified to the parties an addendum dated 27 July 2004, whereby [the arbitrators] partially admitted the above request, fixed the price of C’s 49 shares to 107,500,000 US$ and consequently amended … the partial award’s operative part. In order to justify this amendment, the arbitrators conceded that, as the result of a twofold inadvertence, they, on the one hand, took into consideration C and D’s consolidated expenses twice, and on the other hand, used the plus sign instead of the minus sign at the time of the valuation of D’s minor shareholders’ participations. [A applied to annul the addendum to the award dated July 27, 2004, under Articles 190(2)(a), (d) and (e).]..
Contrary to [an] additional award [which supplements the original award], [a] corrective award does not add anything to the initial award. Because it is accessory to [the initial award], it has the same fate and will be null and void ipso facto if the initial award is annulled. Thus it is not a new award, but a decision which forms an “integral part of the award,” according to the [ICC Rules] … Thus it goes without saying that the successful party in the arbitration proceedings will not proceed to total enforcement of the pecuniary sanctions imposed by the initial and the corrective awards, which would amount to claim twice the amount of the allotment.…
In accordance with its accessory nature, the corrective award complies with the legal status of the initial award. Like in the present case, when the [corrective] award is not the final one, the admissibility of an immediate appeal to the Federal Tribunal against this award is subject to the same conditions as the … complaint brought against the partial award.… Awards rectifying a final or a partial award stricto sensu will be [subject] to immediate appeal in all the cases provided for in [Article 190(2) … in the same manner as other awards].
When determining which grounds for complaint may be invoked against a corrective award [under Article 190(2)], one must not ignore the limited scope of the amendment procedure, as well as the fact that an award has already been rendered. Indeed, for this purpose a preexisting award is a matter of particular importance. Because it acquires the authority of res judicata from the moment it is issued to the parties, this initial award may only be challenged through a specific legal ground, for reasons exhaustively listed [in Article 190] and within a [reasonable] deadline which cannot be extended. The purpose of the amendment procedure is not to modify this system and provide the parties with an alternative to challenge the initial award. It must not be interpreted as an additional means of appeal. It is only designed to correct a substantive error (error in calculation, clerical mistake, misprint, etc.) which affects the initial award, in contrast to an error in reasoning or a mistake in law, without infringing on the res judicata authority of this award. Restricting in the same manner the possibility to challenge the corrective award, complies with the purpose of this procedure. Thus, the … complaint against this award may only be aimed at the rectification in itself.…
When a … complaint is lodged against a corrective award … the claimant can claim that the corrective award was rendered in irregular terms [Art. 190(2)(a)]); that the tribunal unjustly accepted or declined jurisdiction to correct the initial award, or that it exceeded jurisdiction in the matter and amended the actual content of the award [Art. 190(2)(b)]; that by issuing a corrective award, [the tribunal] adjudicated ultra petita or omitted to decide on a count of the request for amendment [Art. 190(2)(c)]; that the amendment procedure infringed on the equality of the parties [principle] or their right to be heard [Art. 190(2)(d)]; finally, that the corrective award is incompatible with substantive (theoretical assumption) or procedural (more probable) public policy [Art. 190(2)(e)]. However, if one party neglected to challenge the initial award in due time or if his claim was unsuccessful, it is impossible for him to challenge this initial award, for the first time or on another ground, by means of a … complaint … against the corrective award.…
As a general rule, [the] procedures [for correcting an award and seeking annulment of an award] must not interfere with one another. Thus, an application for [correction] of the initial award will not adjourn the deadline for challenging such award.… In the absence of appeal or if the … complaint lodged against the initial award is set aside or declared inadmissible, the corrective award will substitute to the initial award. If the request for amendment is not accepted, the first award will continue to have effect. In any event, the corrective award lato sensu will be subject to a … complaint pursuant to the conditions mentioned above. Assuming that this recourse is admitted and the corrective award is annulled, the initial award will revive. If the … complaint against the initial award is admitted and the said award is annulled, the corrective award—where the request for annulment is admitted—will be null and void ipso facto because it formed an integral part of an award which was annulled.…
Because the addendum of 27 July 2004 is of the same nature as the award rendered on 24 March 2004, it also constitutes a partial award subject to immediate appeal to the Federal Tribunal pursuant to [Article 190(2)].… The claimant mainly resumes the grounds previously raised in [an] appeal against the initial award, [an appeal that was rejected] by the Federal Tribunal in its decision of 6 October 2004…. To that extent, i. e. for most of the criticisms which were expressed in the present appeal, such appeal is inadmissible. Regarding the award of 24 March 2004, it goes without saying [that the present appeal is inadmissible] because the time limit for appeal was passed when it was lodged; for that matter, the claimant attempted—with no success—to have the said award annulled by challenging it separately before expiry of the time limit. But the present appeal is also inadmissible because it attacks the addendum of 27 July 2004 with identical grounds to those raised in the first appeal. Indeed, for the reasons mentioned above, it is impossible to call into question the res judicata effect of the initial award through an appeal against the corrective award. The purpose of such appeal can only be the corrective award and the admissible objections can only relate to the procedure for amendment and/or to the content of the said award.
[Here, it] seems that a good many of the alleged new objections expressed in the second appeal consist in reality only of a slightly different presentation from those previously submitted to the Federal Tribunal. In these conditions, the … court will not get involved in all the objections which, even remotely, relate to the way to determine the value of the company of which 49 shares were sold by the respondent to the claimant and as a result of this evaluation…. The only genuinely new ground of the claimant is to reproach the arbitral tribunal for admitting an error in the addendum, the rectification of which led to a 34,400,000 US$ (i.e. 47%) increase of the sold shares’ price compared to the one which was fixed in the first award. However, the extent of the rectification made by the arbitrators to the prejudice of the claimant does not involve violation of the safeguards which result from [Article 190(2)]. The omission of one figure in the allocated amount could therefore lead to a major rectification of the amount at issue. [The court cited a case where the omission of a “0” from the sums awards resulted in a 900% error, requiring correction.]
Therefore, it was for the claimant to specify why the rectification made in the present case fell under the scope of one of the reasons for appeal listed in [Article 190(2)]. He did not do so.… [T]he present appeal is entirely inadmissible.
1. “Functus officio” doctrine. It was historically the case, in many states, that an arbitral tribunal lost its capacity to act—including its power to correct, interpret, or supplement an award it had made—after the arbitrators had rendered their final award. In the phrase used in some jurisdictions, the tribunal became “functus officio.” See, e.g., U.S. Life Ins. Co. v. Superior Nat’l Ins. Co., 591 F.3d 1167, 1178 n.11 (9th Cir. 2010); Judgment of 2 May 2012, DFT 4A_14 2012 (Swiss Fed. Trib.) (“once the final award is issued, the arbitral tribunal sees its jurisdiction disappear and becomes functus of-ficio, with some exceptions”); Webster, Functus Officio and Remand in International Arbitration, 27 ASA Bull. 441,441 (2009) (“The principle that an arbitral tribunal is functus officio when it renders its final award is sacrosanct, subject to limited exceptions for correction and interpretation of awards and in some cases to remedial action with respect to awards.”).
In one court’s words: “The term [functus officio] is Latin for ‘office performed’ and in the law of arbitration means that once an arbitrator has issued his final award he may not revise it.” Glass Molders, Pottery, etc. v. Excelsior Foundry Co., 56 F.3d 844 (7th Cir. 1995). The functus officio doctrine is distinguished from an arbitrator’s premature resignation or removal prior to conclusion of the arbitration, thereby terminating his or her mandate before it has been completed. See supra pp. 775–76. The term functus officio refers instead to a tribunal’s completion of its mandate at the end of an arbitration, by making an award with res judicata effect. See supra pp. 1113–25.
2. Rationale for functus officio doctrine. Why does it make sense for the arbitrators to become functus officio after they have made their final award? A national court judge does not cease to hold office after he or she renders a judgment; why should an arbitrator? Are there policies that argue for limiting the arbitrators’ competence in this manner? Consider the rationale in La Vale Plaza. Is this persuasive? Some U.S. courts have questioned whether the functus officio doctrine serves any continued purpose. Glass, Molders, etc., 56 F.3d 844 (questioning functus officio doctrine; “perhaps the time has come to discard the rule”).
Compare how modern arbitration statutes deal with the arbitrators’ completion of their mandate and subsequent authorities (for example, UNCITRAL Model Law, Art. 32; Japanese Arbitration Law, Art. 40(3)). Do these statutes provide for effectively the same results as the functus officio doctrine? Compare also Article 81 of the 1907 Hague Convention.
3. Arbitrators’ inherent authority to correct or interpret award. Suppose neither the arbitration legislation of the arbitral seat nor the parties’ arbitration agreement (including any institutional rules) addresses the question of the arbitrators’ authority to correct or interpret awards. Do the arbitrators have the authority to make such corrections or interpretations? Or does the functus officio doctrine forbid a tribunal from taking such actions, after it has made its final award? For a traditional view, see United Mine Workers of Am. v. Island Creek Coal Co., 630 F.Supp. 1278 (W.D. Va. 1986) (“Once an arbitrator has issued his final … award, [it] then becomes functus officio and lacks power to reconsider or amend.”).
More recently, courts in the United States have held that the functus officio doctrine is subject to exceptions for: (a) correcting obvious mistakes; (b) deciding issues deliberately left open by an interim or partial final award; and (c) clarifying ambiguities. In addition to La Vale Plaza, see Martel v. Ensco Offshore Co., 449 F.Appx. 351, 356 (5th Cir. 2011) (three recognized exceptions to the functus officio doctrine: “An arbitrator can (1) correct a mistake which is apparent on the face of his award; (2) decide an issue which has been submitted but which has not been completely adjudicated by the original award; or (3) clarify or construe an arbitration award that seems complete but proves to be ambiguous in its scope and implementation.”); Glass, Molders, etc., 56 F.3d 844 (applying, generously, exception to functus officio rule permitting arbitrator to clarify or complete award within reasonable period after award); Saxis S.S. Co. v. Multifacs Int’l Traders, Inc., 375 F.2d 577, 581 n.4 (2d Cir. 1967). Compare Danella Const. Corp. v. MCI Telecomm. Corp., 1992 U.S. Dist. LEXIS 4952 (E.D. Pa.) (where institutional rules contain no authorization for arbitrator to modify awards, FAA does not permit such modifications).
Is La Vale Plaza well-reasoned? What is the basis for the conclusion that arbitrators had the power to correct or interpret an award? Is that what the parties intended? Is it the result of an inherent adjudicative authority?
4. National arbitration legislation granting arbitrators competence to correct awards. Consider Article 33 of the UNCITRAL Model Law, excerpted at pp. 93–94 of the Documentary Supplement. What does the provision permit? See also Article 40(3) of the Japanese Arbitration law.
Suppose an arbitral tribunal makes an obvious error of fact, incorrectly concluding that a party delivered goods of a particular quality (which satisfied the parties’ contractual specifications), when it in fact delivered goods of a different quality (which clearly did not satisfy the specifications). If this error is pointed out under Article 33, does the tribunal have the authority to “correct” its award, holding that the seller breached its delivery obligations (instead of holding that the seller satisfactorily performed its obligations)? Is the tribunal’s mistake an error in “computation” or a “clerical or typographical error”?
Why are there such narrow limits under Article 33 on the circumstances in which an award may be corrected? Would a broader power to “correct” awards be consistent with the parties’ objective of obtaining a speedy, final resolution of the parties’ disputes, without the costs and delays of litigation? Is this objective sufficient to override the parties’ (and society’s) interest in correcting a patently “incorrect” result?
Compare Article 83 of the 1907 Hague Convention, excerpted at p. 49 of the Documentary Supplement. In what circumstances may a tribunal correct an award under the Convention? Compare Articles 50 and 51 of the ICSID Convention, excerpted at pp. 23–24 of the Documentary Supplement. How do these provisions compare to Article 33 of the Model Law?
5. National arbitration legislation granting arbitrators competence to interpret or supplement awards. Consider Article 33(1)(a), 33(1)(b) and 33(3) of the UNCITRAL Model Law, excerpted at pp. 93–94 of the Documentary Supplement. Why are there differences between how these three types of post-award functions are treated? What do Articles 33(1)(b) and 33(3) mean when they provide that an award may be interpreted or supplemented “if so agreed by the parties” and “unless otherwise agreed by the parties”? Are these differences appropriate?
Suppose an arbitral tribunal fails to decide one of the parties’ claims. What consequences can this have for the award? Can the award be annulled (for example, under Article 34)?
6. Institutional arbitration rules granting arbitrators competence to correct, interpret, or supplement awards. Consider Articles 37-39 of the UNCITRAL Rules, excerpted at pp. 174–75 of the Documentary Supplement. How do they compare to Articles 33-35 of the ICC Rules and Article 27 of the LCIA Rules? Which approach to the subject is preferable? Would it be wiser for parties not to make any agreement regarding corrections, interpretations, or supplementations?
7. Authority of national courts to correct, interpret, or supplement award. Does anything in the UNCITRAL Model Law permit a national court—including a court in the arbitral seat—to correct, interpret, or supplement an international arbitral award? Compare the Swiss Law on Private International Law and the Japanese Arbitration Law. Would it be desirable for courts to have this power? Even if this power were limited in the manner that Article 33 of the Model Law limits the authority of arbitrators? Are there respects in which a court might be better suited than the arbitrators that made the award? Are there respects in which a court would be less well-suited?
8. Authority of U.S. courts to correct, interpret, or supplement award under FAA. Consider §11 of the FAA, excerpted at p. 106 of the Documentary Supplement. What power does it give to arbitrators to correct or interpret their awards? What power does the FAA give to U.S. courts? Is this wise? Why or why not?
9. Character of corrections, supplementations and interpretations. Suppose an arbitral tribunal issues a correction, supplementation, or interpretation of an award. What is the character of that instrument? Is it a new award, that can be challenged (i.e., in an annulment action) in the same way as other awards? Does the new instrument supersede the initial award? Consider the issues addressed in Judgment of 12 January 2005. Note the concerns with narrowly limiting the departure from principles of res judicata and finality in dealing with corrections and interpretations.
What grounds may be raised to annul or deny recognition of a correction or interpretation? For example, suppose a party claims it was denied an opportunity to present its case: must that denial have occurred in the proceedings relating to the correction or may it have arisen in proceedings leading to the original award?
Note the magnitude of the arbitrators’ error that was “corrected” by the tribunal in Judgment of 12 January 2005. Is it not unsettling that arbitrators could make a mistake of this magnitude? Does this affect the question whether the arbitrators should be permitted to correct their own award? Whether the initial arbitration was conducted fairly and regularly?
C. GROUNDS FOR ANNULMENT OF INTERNATIONAL ARBITRAL AWARDS
Award-debtors frequently comply voluntarily with arbitral awards against them. Nonetheless, there are cases where a party concludes, either for tactical reasons or because of a genuinely-held sense of injustice, that an award against it is fundamentally wrong. In these instances, where a correction or interpretation does not address their real complaints, parties may seek to annul or set aside the awards against them.
In the context of international commercial arbitrations, if an annulment action can be properly brought in a particular forum, then the New York Convention imposes no express international limits on the grounds available for annulment: these grounds are almost exclusively matters of local law.11 Nonetheless, as discussed below, many national arbitration regimes have adopted broadly similar approaches to the available grounds for annulment of international awards—generally, but not always, limiting such review to bases roughly paralleling those applicable to non-recognition of awards in Article V of the Convention.
Most national arbitration legislation permits the annulment of international commercial arbitration awards if: (a) there was no valid arbitration agreement; (b) the award-debtor was denied an adequate opportunity to present its case; (c) the arbitration was not conducted in accordance with the parties’ agreement or, failing such agreement, the law of the arbitral seat; (d) the award dealt with matters not submitted by the parties to arbitration; (e) the award dealt with a dispute that is not capable of settlement by arbitration; or (f) the award is contrary to public policy. In addition, many arbitration statutes also provide for the annulment of awards if: (g) the tribunal lacked independence or impartiality; (h) the award was procured by fraud; or (i) in some states, the arbitrator’s substantive decision was seriously wrong on the merits.
Outside the context of commercial arbitration, the grounds for annulling or setting aside awards are equally limited. In investment arbitrations, Article 52 of the ICSID Convention enumerates limited grounds (broadly paralleling the New York Convention) for annulment of an ICSID award; at the same time, as described above, annulment applications are decided exclusively by annulment committees, also appointed by ICSID.12 In inter-state arbitration, although no universal instrument comparable to the New York and ICSID Conventions exists,13 the available grounds for annulment of an award are also very limited.
BELGIAN JUDICIAL CODE
Article 1717(4) (pre-1999 amendments)
Courts of Belgium may hear a request for annulment only if at least one of the parties to the dispute decided by the award is either a physical person having Belgian nationality or residence, or a legal entity created in Belgium or having a Belgian branch or other seat of operation.
BELGIAN JUDICIAL CODE
Article 1717(4) (pre-2013 amendments)
The parties may, through an express declaration in the arbitration agreement or through a later agreement, exclude any action for the annulment of an arbitrator’s award when neither of them is either a natural person with a Belgian citizenship or a residence in Belgium, or a legal person having its main establishment or having a branch there.
BELGIAN JUDICIAL CODE
Article 1718 (as amended in 2013)
By an explicit declaration in the arbitration agreement or by a later agreement, the parties may exclude any application for the setting aside of an arbitral award, where none of them is a natural person of Belgian nationality or a natural person having his domicile or normal residence in Belgium or a legal person having its registered office, its main place of business or a branch office in Belgium.
CHINESE ARBITRATION LAW
A party may apply for setting aside an arbitration award to the Intermediate People’s Court in the place where the arbitration commission is located if he can produce evidence which proves that the arbitration award involves one of the following circumstances: (1) There is no arbitration agreement; (2) The matters decided in the award exceed the scope of the arbitration agreement or are beyond the arbitral authority of the arbitration commission; (3) The formation of the arbitration tribunal or the arbitration procedure was not in conformity with the statutory procedure; (4) The evidence on which the award is based is forged; (5) The other party has withheld the evidence which is sufficient to affect the impartiality of the arbitration; or (6) The arbitrators have committed embezzlement, accepted bribes or done malpractice for personal benefits or perverted the law in the arbitration of the case. The Peoples Court shall rule to set aside the arbitration award if a collegial panel formed by the Peoples Court verifies upon examination that the award involves one of the circumstances set forth in the preceding paragraph. If the Peoples Court determines that the arbitration award violates the public interest, it shall rule to set aside the award.
ARGENTINE CODE OF CIVIL AND COMMERCIAL PROCEDURE
All means of recourse available against court decisions can be raised against an arbitral award, if not waived in the arbitration agreement.
FIRST OPTIONS OF CHICAGO, INC. v. KAPLAN
514 U.S. 938 (1995)
BG GROUP PLC v. REPUBLIC OF ARGENTINA