Introduction
In order for an arbitral award to be enforced, it must first be recognised as binding. In Oman (and in other GCC countries), after arbitration proceedings have concluded and a tribunal has rendered its award, the winning party needs to apply to the Oman courts to have the award ratified by the courts.Ratification (also known as execution) is a process before the courts that “confirms” an arbitral award as being binding and, consequently, capable of enforcement. A comparable process also exists for the enforcement of court judgments in Oman.
The moment that an award becomes binding on the parties is not uniform across countries. This article will focus on when an award becomes binding on the parties, and when it becomes enforceable.
Why a binding award is so important
Recognition of an award as being binding is essential for the enforcement of the award in the country where it is rendered. Under Article V(1)(e) of the New York Convention, an award may be refused enforcement by the courts in a foreign country if the award has not become binding on the parties.Article V(1)(e) of the New York Convention states:
“Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: 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.”
Article V(1)(e) above indicates that courts have the discretion to refuse enforcement of an award that is not binding on the parties. In contrast, if an award is considered binding on the parties, courts may only refuse the enforcement of a foreign award on a very limited number of grounds. Thus, having an award recognised as “binding” is a critical first step for a party seeking to enforce an arbitral award in a foreign court under the New York Convention.
When is an award binding?
As mentioned above, the time that an arbitral award is considered binding on the parties varies from country to country. The approach that is followed in Oman is that an award is only binding on the parties once it has been executed by the Omani courts, which in turn can only take place after the time limit to challenge an award has lapsed.In some countries, in particular those that adopt the UNCITRAL Model Law, awards become binding on parties at the time that the award is rendered (see Article 34 of the Model Law), even though in practice awards are still ratified by a court.
Practicalities
It is worth mentioning that, even if an award has not been ratified in a country that is a signatory to the New York Convention, under limited circumstances the award may still be enforced by the courts in another jurisdiction that is a signatory to the New York Convention.Article III of the New York Convention sets out the conditions for such ratification:
“Each 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. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.”
So, while the recognition and enforcement of foreign arbitral awards under the Convention must be conducted “in accordance with the rules of procedure of the territory where the award is relied upon,” the “conditions” under which recognition and enforcement of foreign awards can be granted are exclusively governed by the Convention.
National rules of procedure governing the recognition and enforcement of foreign arbitral awards in each Contracting State shall not impose substantially more onerous conditions than those imposed on the recognition or enforcement of domestic arbitral awards.
Finally, while Article III grants Contracting States the freedom to apply their own national rules of procedure at the recognition and enforcement stage, courts have applied Article III in accordance with the Convention’s policy of promoting recognition and enforcement to the greatest extent possible.
For the above reasons, it is very important that you select lawyers specialised in arbitration and enforcement of arbitral awards at the time of selecting your legal team. Curtis has an industry-leading team of arbitration lawyers with experience in enforcement of arbitral awards before the Omani courts and most major international legal jurisdictions.
In a future issue, Part 2 of this blog post will discuss in greater detail how awards may be enforced.
