When I was asked to speak to you this morning on this subject my first thought was “why should a practicing arbitrator be concerned or indeed have any knowledge of enforcement maters in various and eclectic jurisdictions?” Assuredly an international law firm skilled in securing enforcement of arbitration awards in the jurisdictions in which they operate would provide more insight and value to the audience? When I saw the details of the related subjects and the speakers chosen to present it was still not immediately clear why an arbitrator should be in a position to offer any advice on enforcement. I can of course understand why an eminent practitioner (Mr Rajendra) and senior administrators (Dr Li Hu and Mr Umar) would be abreast of developments in enforcement.
Arbitrators tend to view (with some justification) their role as conducting the arbitration and producing the award. Their authority begins on appointment whether by individual or institution and ends on delivery of the final award. Save for various arbitration rules and enabling laws providing a short period of time in which arbitrators under slip rules can correct errors and computations arbitrators become functus officio the moment their award is issued. Rather like the May Fly (Order Ephemeroptera) we have a short ephemeral life cycle and die as soon as we deposit our ‘eggs’.
That attitude, probably shared by a large proportion of practicing arbitrators is most undoubtedly part of the problem and therefore cannot currently be part of the solution to enforcement issues. In our training and accreditation we are taught to make our awards enforceable by employing core principle of fairness, transparency and natural justice. We are implored to write in plain English and deal only with the weight of facts presented as evidence. Whilst appointed for our technical or commercial expertise we cannot produce or rely on our own evidence. As a group we are encouraged not to push the boundaries of liberal thought and expand the jurisprudence of any particular jurisdiction but simply to find the facts and apply the contract provisions to the disputes in question. Where issues of law simply cannot be avoided the most palliative solution is sometimes adopted. Sometimes it is both appropriate and convenient for a foreign tribunal to take expert advice from local practitioners. This is perhaps an example of the Star Trek principle primum non nocere employed in arbitration technique. Every tribunal is aware that a serious irregularity will give rise to grounds for setting aside while English trained arbitrators are aware in certain jurisdictions including their own appeal is available on a point of law . Tribunals will always exercise natural caution in dealing with issues of legal interpretation of laws foreign to their training.
Is it enough for arbitrators to look at issues of enforceability solely in relation to their current case or seat or should they consider enforcement elsewhere issues? As an example I was recently Chairman of Tribunal in a case where the corporate identity of one of the parties was unclear. The Tribunal asked for Dubai trade and other licences to confirm the identity. The party turned out to be a branch of a German registered GmbH. The case instantly became an international rather than domestic arbitration which raised questions in my mind at least. My colleagues on the tribunal accepted my view that we should write our award allowing for the possibility it would be seen by a German Enforcement Court. How far should arbitrators go in the general conduct of cases to delve into issues which may affect enforcement of awards both in their chosen professional jurisdiction and more widely?
Arbitrators who habitually practice in the jurisdiction of their domicile or legal training will have a detailed knowledge and experience of the sorts of issues which may affect enforcement of their domestic awards. Accordingly domestic tribunals who render domestic awards should have no need to take additional precautions. What about arbitrators who sit in a multitude of jurisdictions or an arbitrator sitting in a new jurisdiction for the first time? Invariably the award itself is the cause of complaint. If one looks for a moment at the Model Law Article 34 in paraphrase the award can be set aside for reasons of incapacity of either of the parties, the arbitrators or the issues, the arbitrators acting ultra vires or failing to observe principles of natural justice in relation to both the place of arbitration and the place of enforcement. As mentioned above English trained arbitrators live with the additional fear that they may be appealed on a point of law . Surely arbitrators can get the basics right even where sat in foreign seats?
Certain august institutional arbitration bodies carefully check each arbitration award before release to the Parties in dispute. In relation to the ICC the Court of Arbitration scrutinises and quality checks the award using their lawyers and (anecdotally) a check list of points to remember in relation to particular jurisdictions. Not every institution gives out these check lists and I pose the question today whether individual institutions could be encouraged to publish guidance to foreign arbitrators on appointment in their jurisdictions.
This morning I propose to look at four jurisdictions with which I have a close connection having either lived or worked there in my arbitral or commercial career. These are alphabetically Dubai, Indonesia, Malaysia and Thailand. With some assistance I have briefly researched reasons which give rise to enforcement issues and in some cases have resulted in foreign and domestic awards failing enforcement. Thailand is of course not presently a member of APRAG but is a close regional neighbour and an economic dynamo.
In relation to each jurisdiction I look at some examples of cases where enforcement issues have arisen and review any lessons learned. The overall theme of this morning is an update. My preliminary conclusions are that enforcement is governed not only by the relevant law but also by political or cultural issues. My research indicates that arbitrators can make a difference in some things. In others events or circumstances may be beyond the control of the Tribunal. Whilst an arbitrator can do something about getting legal and cultural issues right the politics is best left to the diplomacy of others.
My thanks to the following colleagues and friends who provided updates and contextual background information:
Karen Mills of Karim Syah Law Firm Jakarta
Alastair Henderson of Herbert Smith Bangkok and Singapore
Paul P. Subramaniam and Sabarina Samadi of Zaid Ibrahim& Co Kuala Lumpur
Dubai
Dubai is one of the seven Emirates of the United Arab Emirates. It has its own court system outside the Federation but enforces Federal and Dubai law. It has two international arbitration institutions:
• The Dubai international Arbitration Centre (DIAC)
• The DIFC/LCIA Arbitration Centre
DIAC is a member of APRAG. The CIArb also has a branch located in Dubai which has around 476 members and of which I currently serve as Vice Chairman. I am appointed fairly regularly by both Institutions.
It is important for anyone not familiar with arbitration in Dubai or indeed the wider Middle East to understand the importance of religion and the role it plays in Middle Eastern Law and Society. Islam is a complete way of life, a religion, an ethic and a legal system. We don’t have time to day to discuss the origins and nuances of the UAE legal system. May it suffice to say we work under a Shari’a inspired Civil Code system. Arbitration Law (and enforcement of foreign awards) is set out in Articles 203 to 218 of the Civil Procedure Law [Law 11 of 1992]. A new federal law has been in the making for many years and there are high (but unofficial hopes) for an announcement at the International Bar Association congress in Dubai in November this year.
The UAE (and hence Dubai) signed the New York Convention in 2006 and it came into law in November 2006. How has enforcement been approached to date?
The Bechtel Case: International Bechtel V Department of Civil Aviation of the Government of Dubai 2004.
This is perhaps the most notorious example of procedural failure leading to failure of Enforcement and the nadir of enforcement issues in UAE. Here an arbitration award of some US$25 million was set aside by the Dubai Cassation Court on the grounds that the arbitrator had failed to properly swear a witness in accordance with Article 41(2) the Civil Procedure Law. The case is also famous for being an example of how a French Court enforced the award in circumstances where enforcement was dismissed in the jurisdiction of origin.
CPC Article 211 requires witnesses to take an oath. This is understood to imply swearing on a holy book. An affirmation is not considered to be available to witnesses and therefore questions would arise as whether the evidence is admissible at all. Apostasy is not an option in Dubai. Religion must be declared on all official forms. Arbitrators please beware if taking opinion evidence from Western free thinkers who express a desire to merely affirm.
The Labour Cases – Report in Gulf News 17 May 2011
The Court of Cassation ruled an arbitration clause in an executive contract was invalid even where the amount in dispute was more significantly more than normal employment cases [reportedly US$ 450,000].
The Power of Attorney Cases – Numerous Court of Cassation decisions on appropriate powers of attorney. There must be a specific power to refer to arbitration as “arbitration excludes the dispute from the judicial system”. The Power of Attorney must be specific.
The Insurance Cases – There are several instances at Cassation of arbitration being held invalid because the arbitration clause in relation to the policies was contained in schedules to the policy and was held by the court not to have been signed. There must be a signed arbitration agreement. The agreement must be set out in the award.
The Signed Award Cases – There are several cases indicating the Arbitrator must sign the reasons as well as the award. If in doubt sign every page.
The Terms of Reference – Required or referred to by several Articles of the CPC but not by the DIAC Rules. This is a Risk Management Issue: get TOR signed and incorporate the document into Final Award.
General Principles
The following UAE domestic arbitration law provisions on procedure contain mandatory content and may not be derogated from by the parties
• written and signed arbitration clause article 203 (2)
• an uneven number of arbitrators article 206(2)
• the arbitrators’ independence and impartiality article 207(4)
• the right of both parties to a fair hearing article 212(1)
• the obligation of any fact or expert witnesses to present their respective evidence on oath on pain of perjury article 211
• specific power of attorney
• and any other public policy considerations
The following disputes are definitely non-arbitrable under UAE law
• commercial agency and distributorship disputes, which are expressly subject to the exclusive jurisdiction of the UAE Courts Article 6, Federal Law No. 18 of 1981 (as amended), the Commercial Agency Law
• labour disputes, which are subject to the exclusive jurisdiction of the UAE Courts
• rental or tenancy agreements
• referral to the competent department of the UAE Ministry of Labour and Social Affairs (Federal Law No. 8 of 1980 (as amended), the labour Law
• collective labour disputes are referred to the Supreme Arbitration Board appointed by the said Ministry
• disputes of a criminal nature
The Good News Cases
Appeal for Cassation No 98/2008
The Court upheld the principle in Articles 212 and 216 stating that a court may not re-examine the merits of a decision made in an award. It is sufficient to prove validity in an arbitration award if it incorporates the arbitration agreement (copy is OK) a summary of the litigants cases and documents and the grounds upon which the decision is based.
Maxtel International FZE V Airmec Dubai LLC Dubai Court of First Instance Commercial Action No 268 – 2010 12 January 2011
The Dubai Court of First Instance enforced two LCIA Awards dismissing arguments as to forgery and fraud on the basis such claims should have been put before the sole arbitrator. Procedural irregularity was also raised including the method of swearing witnesses and procedure contrary to UAE Law. The Court made the observation that the arbitration was held in England and therefore the UAE Civil Code di not apply.
“the court’s supervisory role when looking to recognise and enforce a foreign arbitration award is strictly to ensure that it does not conflict with the Federal Decree under which the UAE acceded to the New York Convention and satisfies the applicable procedural substantive requirements of Articles 4 and 5 of the Decree.”
Conclusions
Can the arbitration panel make efforts to improve the chances of enforcement? The answer is a resounding yes. Check the procedural requirements and arbitrability and understand the local requirements. A brief comparison with more rigorous requirements in KSA – Saudi where lady arbitrators are not permitted nor their awards enforced will require a great deal more commitment to produce an enforceable award. Not many arbitrators will willingly undergo gender change or reorientation to render their award enforceable.
Malaysia
Malaysia has a new Arbitration Act. The Arbitration Act 2005 became law in March 2006. My sources suggest that it is too early for any enforcement issues to arise. I will just look briefly at some interesting law under the old regime as an illustration of something an Arbitrator cannot foresee or even with abundant exercise of caution – avoid.
Sri Lanka Cricket v World Sport Nimbus Pte Ltd [2006] 2 CLJ 316
This is a case where (under the old regime) enforcement of an English Award was refused because of an apparent oversight in the Malaysian legislature. The then governing act required notification of signature states to the New York Convention to be published in the official Gazette. It was alleged in the Malaysian Court of Appeal that the Recognition and Enforcement of Foreign Awards Act 1985 required that England be Gazetted as a convention country. The Court of Appeal accepted the argument and refused to enforce the award. As you can appreciate this led to political difficulties with Malaysia standing accused of failing to enforce its foreign treaty obligations. In the event the case was not appealed to the Federal Court as the parties settled.
Lombard Commodities Limited v Alami Vegetable Oil Products Sdn Bhd [2010] 1 CLJ 137
A similar argument was raised in this case but on appeal the Federal Court over turned the decision in Sri Lanka holding inter alia that the Gazetting of notifications amounted to evidence that a particular state had signed the convention. It was not however the exclusive source of evidence and the court would permit other evidence to be brought forward to allow enforcement of foreign awards.
It goes to show that in enforcement actions it augurs well to expect the unexpected.
What can be foreseen?
In Sundra Rajoo v Mohamed Abdul Majed The central issue was whether the co-arbitrator had a duty of disclosure to the arbitral tribunal in addition to the entrenched duty of disclosure to the parties. In this case one of the co arbitrators became aware that his colleague had acted in as an arbitrator in more than 20 cases for one of the parties in dispute. Where no voluntary disclosure had taken place then the court held there was a duty of disclosure to the tribunal as well as the parties. Note the IBA Code on conflicts of interest in International Arbitrations provides as an orange list item: “The arbitrator has within the past three years been appointed as arbitrator on two or more occasions by one of the parties or an affiliate of one of the parties.” The arbitrator in this case had exceeded his IBA Guide quota tenfold.

The Malaysian court took a serious view of the Arbitrator’s non-disclosure and ordered him to disclose past and present appointments; if he failed to do so, he would be disqualified as an arbitrator. So if this action by a co arbitrator had not been taken there may have been a serious risk on enforceability. Arbitrators should ensure that even the plain vanilla obligations are complied with to ensure their functions are discharged with integrity and in accordance with local and international standards.

Conclusions

There are event and circumstances beyond the control of the tribunal and there are the very basic disclosures every arbitrator should consider making if appropriate.

Indonesia

For a comprehensive look at the issues facing enforcers in Indonesia I would recommend reading Karen Mills Enforcement of Arbitral Awards in Indonesia Paper presented for ARBITRATION & THE FINANCIAL CRISIS Conference J. W. Marriott Hotel, Hong Kong Enforcement of Arbitral Awards in Indonesia Conference J. W. Marriott Hotel, Hong Kong 2009. I believe you can find it on her firm’s website . I am sure we will learn a great deal from the next speaker Mr M Husseyn Umar of BANI

I won’t this morning attempt to describe how to negotiate all the administrative obstacles in this brief talk. There is one element of the enforcement process which can be positively assisted by a Tribunal and that is to grant a power of attorney in circumstances where award registration is a condition precedent to enforcement procedures.
Karen Mills set the position in a recent GAFTA Newsletter from which I quote:
All awards must be registered in the court before one can apply to have them enforced. Domestic awards must be registered within 30 days of issuance, but there is no time limit for registration of international awards. One of the major difficulties lies in the wording of the registration requirement, which states that such registration must be effected by the arbitrator(s) or their duly authorised representative(s).
This requirement may prove difficult for international awards. Arbitrators sitting in another jurisdiction may not be familiar with the registration requirement and thus make no arrangement to authorise the parties to effect registration. Only later, after the award has been issued and the losing party has failed to satisfy it, would the successful party seek enforcement, invariably instructing Indonesian counsel to handle the matter. Such counsel can only effect registration if it has received authorisation from the tribunal to do so on its behalf. This means the successful party must request the arbitrators to issue a power of attorney in favor of its Indonesian counsel. In our experience this is often difficult to arrange. Either the counsel for the successful party is hesitant to request this of the arbitrators because they may, incorrectly we believe, deem it improper to make contact with the arbitrator(s) without involving the losing party as well, while the losing party might object to such authorisation being given. In any case considerable explanation is usually required for the arbitrators, involving legal costs which cannot be recovered because they are not included in the award. Note also that the court has declined to accept registration where the power of attorney was issued by the arbitral institution, demanding that it must come from the actual arbitrators themselves.
The solution to above problem is either to hold the arbitration in Indonesia, where arbitrators will be familiar with the requirement, or to request the arbitrators to include in the award a power of attorney to the parties to effect registration, with a power of substitution so that the parties may authorise Indonesian counsel to register.
In correspondence with Karen she confirmed that she had personal experience of representing clients where foreign arbitrators have refused to give the requisite power of attorney. This in my view is unacceptable. This is a very real example how arbitrators can make efforts to remedy enforcement.
A similar provision can be found in the Thai Arbitration Act 2002 Section 33 where arbitrators can request the court for assistance in summoning witnesses – not the Parties.

Thailand
Thailand is not an APRAG member. Nonetheless it is a regional power and is a signatory to the New York Convention and has a Modern Arbitration Act based on the Model Law. In fact most of Indochina presents challenges to enforcement. For a fascinating read I would refer you to an Article by Alastair Henderson in the Journal of International Arbitration on the Enforcement of Arbitration Awards in Indochina. To bring us back to subject allow me to quote a brief passage from the article:
“No matter how splendidly neutral the forum, no matter how experienced the tribunal, no matter how efficient the process, the award will be nothing more than an enriching experience for counsel if enforcement proves impossible and the winner is never paid. Worse the winner will have incurred substantial costs to obtain the award and will therefore be altogether worse off than if he had simply walked away from the claim at the outset”.
What about Thailand? The first Arbitration Act was enacted some 24 years ago in 1987. Long before this, Thailand had adopted the Hague Conventions of 1899 and 1907 as well as the Geneva Protocol of 1923 and Geneva Convention of 1927. The New York Convention became law in Thailand on 20 March 1960 the treaty having been ratified without reservation in 1959. In 2002 a new Arbitration Act was enacted based on the Model Law. This evidences more than a century of promise and the promotion of international arbitration as part of Thai diplomacy to attract international business.
It is common knowledge that Thai Governments since 2004 have progressively stepped away from this century of achievement in the field of international arbitration. In fact in the confusing world of Thai colour coded politics it is perhaps one of the few things the ‘red shirts’ and the ‘yellow shirts’ appear to agree upon is that arbitration is an undesirable process. In January 2004 the government led by Prime Minister Mr. Thaksin passed a cabinet resolution restricting the application of arbitration clauses in government concession contracts. In July 2009 Prime Minister Abhisit moved one step close to a complete ban extending the earlier cabinet resolution to cover all contracts between public and private sectors. This has attracted widespread criticism. See for example the American Chamber of Commerce position paper on Arbitration in Thailand October 2009 . This is not a complete ban. When Thai Airways wants to renew its fleet or the state power companies want to invest in hydropower in Laos PDR then exemptions are available. Each instance must however be approved by the cabinet.
For reasons of recent history the Thai public authorities have not fared well in either international or domestic arbitration. There is serious distrust of the process fuelled by these (from a government perspective) series of legal catastrophes. The 2001 award in the Bangna-Bang Pra kong Expressway, the 2004 iTV case and more recently this year the Samut Prakarn Case.
There is also anecdotally a long-standing injunction from the Auditor General’s Department that no government department should pay any judgment of any court except the Thai court of last resort. Appeals to the Supreme Court can take upwards of 5 years.
Having spoken with colleagues in Thailand recently there are reports of increasing devious tactics being employed to derail the arbitration process. One of these tactics is to engage Thai immigration in inspecting work permits of international arbitrators.
The difficulties in Thailand are caused primarily by a lack of understanding of the process led by the absence of formal legal training in arbitration practice and procedure. There is no scope today to discuss ways in which this can be remedied. As for arbitrators faced with opposition to their role and a possible impromptu seat in Bang Kwang immigration prison prior to deportation then any arbitrator sitting in Thailand must ensure all the paper work is in place. 15 day work permits are available and are now widely publicised following the recent arrest of several musicians playing one night stands in Chang Mai. I do not of course intend to make any meaningful comparison between Buskers and Arbitrators (having already compared them to Mayflies) nevertheless Arbitrators should always ensure their conduct cannot call their awards into challenge.
A comprehensive review of the history and current issues facing the arbitration community can be found in Alastair Henderson’s excellent article on Commercial Arbitration in Thailand .
Conclusions
I reach the conclusion therefore that arbitrators can do more to remedy efforts for enforcement of their awards. In summary:
• Understand the procedural requirements at the seat of arbitration and stick to them
• Enquire of the appointing institution if there is check list
• Seek expert local advice if needed.
• From mere observation of the Parties names and nationalities issues of enforcement may become apparent (My GmbH Case)
• Ask the parties or their counsel if there are any aspects of the procedure with which they disagree or propose changes to. This can be done at preliminary hearing when discussing witness proof standards for example
• Maintain International Standards of Integrity and Transparency
• Make sure you are street legal (if you want to avoid a seat at Bang Kwang immigration prison in Bangkok)

By resolution dated 28 July 2009 the Thai Cabinet has forbidden any contract entered into by the Government and a Thai or foreign entity from containing an arbitration clause as a method of dispute resolution. Why would any country actively seeking inward foreign investment take such a step? Why would you force foreign investors into the Thai Courts without any official Thai translation of the FIDIC Rainbow Contracts? A senior Thai Lawyer once explained to me that the Thai legal system is an adapted German import from the 1830’s. He continued “In many ways it still operates like a Mercedes Benz built in 1830”.

The answer perhaps lies in recent history. The boom years of the 90’s construction and infrastructure investment led to a series of high profile arbitrations which went against several Government entities leading to large monetary awards and consequential adverse and sometimes xenophobic headlines. The Thai government led by Mr. Taksin resolved in January 2004 to outlaw arbitration in government administrative contracts (loosely defined as concession contracts relating to public utilities) unless prior Cabinet approval was obtained.

Thailand has been a New York Convention Member State since 20 March 1960. The Thai Arbitration Institute (TAI) was formed in 1990 and under the auspices of the Office of the Judiciary of Thailand actively promotes Arbitration in Thailand. Throughout its 15-year history TAI has handled virtually all high-profile cases in Thailand. The TAI website proudly states “TAI is affiliated to the Office of the Judiciary which assures non-intervention policy, and provides safeguard from any domestic political interference. Therefore, the parties can completely trust the impartiality of the institute, even though one of the parties to a dispute may be a governmental agency”.

In 2002 the Thai Government introduced its Arbitration Act B.E.2545 based on the UNCITRAL Model Arbitration Law. It is generally recognised as a satisfactory piece of legislation (but marked ‘Model Law Minus’ by the international arbitration community). To a large extent the Act was a measure to encourage foreign investment and to promote international and domestic dispute resolution. Since its enactment in 2002 the scope of the Act has been progressively restricted through bad publicity and the two Cabinet resolutions of 2004 and 2009.

The 2004 Cabinet Resolution was explained to me by a senior Thai Judge in terms of pendular motion. “There has been an enormous swing in favour of globalisation and openness in Thai society but now the swing is the other way”. In true Buddhist tradition he went on to opine that equilibrium will be attained eventually.

The 2004 Cabinet resolution was passed even though Section 15 of the Act specifically provides that all contracts irrespective of the identity of parties involved may have an arbitration clause.  The 2009 Cabinet Resolution has widened the scope of the 2004 Cabinet Resolution to cover all contracts with government entities. The inclusion of an arbitration agreement in any contract with the Thai government remains subject to Cabinet approval on a case by case basis.

On a positive note it is good to see the red shirted Mr. Taksin Shinawatra and yellow shirted Mr. Abhisit Vejjajiva the 23^rd and 27^th Prime Ministers of Thailand respectively agree on something politically substantive.

Where does this leave the foreign investors implementing high value EPC Contracts in the Kingdom? You ought to get the right advice from professionals who understand the alternatives within the Thai system. You could of course ask United Utilities Plc who has published a footnote in its annual accounts since 1997 stating it is in arbitration in Thailand where the outcome remains uncertain.

Fuelled by the downturn in construction and Developers going out of business the Dubai International Arbitration Centre (DIAC) is reporting a tenfold increase in registration of arbitration claims. In August 2009 it reported 180 arbitration claims had been filed by June with twice the number expected by year end. (more…)

A country’s laws often provide a clear reflection of a nation’s culture and social values. The Arabian culture is founded on principles of Sharia Law where a promise is frequently treated as absolute. In the UAE you will find it impossible to break a rental or lease contract before the expiry of its natural term and you will go to debtor’s prison if your cheque bounces and payment is dishonoured. Local law requires all contracts to be entered into and performed in good faith. There are no western style insolvency protections and business is inextricably linked to issues of personal honour. (more…)