Enforcement of foreign arbitration judgement
Often, undertakings in different countries agree that their disputes will be solved in an arbitration court; this ensures the fastest way to solve any differences, among other benefits. The arbitration court that solves the dispute may be located at the same time in a third country. How is it then ensured that an arbitration court’s judgement made in e.g. one country can be enforced in the place of debtor`s habitual residence?
Arbitration judgements can be enforced in all Member States of the 1958 New York Convention
Recognition and enforcement of foreign arbitration courts’ judgements is regulated by the 1958 New York Convention (1) to which 149 countries have acceded by now, including all the EU Member States (2). Thus, a decision made in an Estonian arbitration court can be enforced in e.g. Finland, in the United States of America, Russia or China. And vice versa, a decision made by an arbitration court in Finland or China can be enforced in Estonia. Such regulation ensures that the result is not a mere decision of the arbitration court (a right per se), but debt collection can be factually initiated in the foreign country.
The creditor must take into account that an arbitration court’s decision is not automatically enforceable in another country – a national court of the place of enforcement must declare the arbitration court`s decision enforceable. It is not a complex procedure, being more a formality. The court cannot assess the substance of the arbitration court’s decision.
The creditor shall file an application
The creditor must file an application to declare a foreign arbitration court’s decision enforceable. The application must be sent to the court of the country where the decision is intended to be enforced. The following must be enclosed to the application: 1) the original or a certified copy of the arbitration court’s decision; 2) a written contract between the parties stating the agreement that the dispute is to be solved in an arbitration court, or a certified copy thereof; and 3) certified translations of the documents. If it is known that the arbitration court’s decision shall be enforced in another country, it would be preferable to ask the arbitration court immediately for a certified copy of the decision and a certificate of the decision’s entry into force.
The procedure and duration of the proceedings depend on whether or not the debtor challenges the recognition of the arbitration court’s decision as being enforceable. The criteria for when a court can refuse recognition of a foreign arbitration court’s decision as enforceable are listed in Article 5 of the New York Convention. Accordingly, the debtor has a right to challenge the arbitration court’s decision as being enforceable in cases where, for example, the arbitration court’s procedural rules have been violated or the arbitration court’s decision violates the public order of the country in which the recognition of the arbitration court’s decision as being enforceable is being applied for.
On average, the proceeding of recognising a foreign arbitration court’s decision as enforceable in Estonia takes a couple of months. For example, a recent proceeding where a Russian business association applied for recognition of a Russian arbitration decision as enforceable in Estonia took ca. 2.5 months. The debtor (an Estonian business association) objected to recognition of the Russian arbitration decision as enforceable in Estonia but the court still found that the decision of a foreign arbitration court was to be enforced in Estonia.
The regulation for reimbursement of the procedural costs is not fair
According to Estonian law the state fee for an application to recognise a foreign arbitration court’s decision as enforceable is 50 euros. This will be supplemented by the expenses for forwarding and translation of documents, and for legal aid. The law in force permits a court to order the procedural expenses to be covered by the parties themselves even if the application is satisfied and the foreign arbitration court’s decision is recognised as enforceable in Estonia. This is the court’s right of discretion. Courts have also made decisions to that effect. On the other hand, a question arises here: why should the creditor incur additional expenses for collecting a debt in a situation where the debtor is not voluntarily paying its debt? This is not a just solution. All procedural expenses should be covered by the debtor who refrains from voluntarily submitting to the arbitration court’s decision.
(1) 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. See more about the Convention: https://www.riigiteataja.ee/akt/13142474
(2) See more about Contracting States of the Convention: https://treaties.un.org/Pages/ViewDetails.aspx?src=TREATY&mtdsg_no=XXII-1&chapter=22&lang=en