Factual and Procedural Background
The Applicant, Company A, seeks recognition and enforcement of an international arbitral award pursuant to Article 35(1) of the UNCITRAL Model Law on international commercial arbitration, as incorporated into domestic law by the Arbitration Act 2010. The award, referred to as the Partial Award, was made in Vienna, Austria, under the UNCITRAL Arbitration Rules and relates to the first phase of arbitration covering the period from February 1994 to June 2004.
The dispute concerns a contract dated 17th April 1991 between Polish Foreign Trade Company ELECTRIM S.A., acting on behalf of the Polish PTT, and Company A regarding the construction of the North/South Link Optical Fibre System in Poland. The Respondent, Company B, is the legal successor to the Polish PTT under this contract. The dispute arose over amounts owed by Company B under a revenue sharing provision of the contract.
Three arbitrators were appointed, with changes in composition and chairmanship over the course of the lengthy and complex arbitration. The Partial Award was issued on 24th August 2010, with a corrected addendum on 2nd November 2010. Company B initiated proceedings in the Commercial Court of Vienna on 2nd December 2010 seeking to set aside the Partial Award, which Company A vigorously opposes.
This application for recognition and enforcement was initiated in the domestic Commercial Court on 26th January 2011. Both parties filed affidavits and expert opinions on issues of Austrian law and the UNCITRAL rules, with differing expert views on the likelihood of success of the Austrian proceedings.
Legal Issues Presented
- Whether the Partial Award should be recognized and enforced under Article 35 of the UNCITRAL Model Law.
- Whether recognition and enforcement should be refused under Article 36 of the Model Law on grounds including inability of the Respondent to present its case, improper composition or procedure of the Arbitral Tribunal, or contravention of public policy.
- Whether the Court should adjourn the decision on recognition and enforcement pursuant to Article 36(2) pending the outcome of the Austrian setting aside proceedings.
- Whether partial enforcement of the award is permissible pending the adjournment decision.
- Whether security should be ordered if an adjournment is granted.
Arguments of the Parties
Respondent's Arguments
- The Respondent contends that recognition and enforcement should be refused because it was unable to present its case during arbitration (Article 36(1)(a)(ii)).
- The composition of the Arbitral Tribunal and the arbitral procedure were not in accordance with the parties' agreement or Austrian law (Article 36(1)(a)(iv)).
- Recognition and enforcement would violate the public policy of the State, particularly the right to present one's case to an independent tribunal (Article 36(1)(b)(ii)).
- Alternatively, the Respondent seeks an adjournment of the enforcement decision pending resolution of the Austrian setting aside proceedings under Article 36(2).
Applicant's Arguments
- The Applicant submits that none of the grounds for refusal under Article 36(1) have merit.
- The Applicant opposes the adjournment application, arguing that the Austrian experts retained by the Respondent do not establish reasonable or substantial grounds for setting aside the award.
- If an adjournment is granted, the Applicant requests partial enforcement of the award for amounts not in dispute, supported by the Respondent's acknowledgment in the arbitration.
- The Applicant also requests an order for security if the adjournment is granted, referencing the Respondent's assets within the jurisdiction.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Brostrom Tankers AB v. Factorias Vulcano SA [2004] 2 I.R. 191 |
Approach to enforcement applications involving foreign law disputes and expert evidence; deciding enforcement based on whether foreign law issues would justify refusal. |
The court adopted the approach of deciding whether, even if foreign law issues were resolved in Respondent's favour, enforcement refusal would be justified before considering expert cross-examination. |
| Dalimpex Ltd. v. Janicki and Others (2003), Court of Appeal for Ontario |
Interpretation of adjournment under Article 36(2) of the Model Law as adjournment of decision on enforcement rather than stay of enforcement already granted. |
The court relied on this precedent to construe Article 36(2) as permitting adjournment of the enforcement decision pending setting aside proceedings. |
| Ipco (Nigeria) Ltd. v. Nigerian National Petroleum Corp [2009] 1 All ER (Comm) 611 |
Clarifies that the enforcement court may adjourn enforcement decisions and may grant partial enforcement of awards where parts are undisputed. |
The court referenced this case in considering partial enforcement and the nature of adjournment under Article 36(2). |
| Soleh Boneh International Ltd v. Government of the Republic of Uganda and National Housing Corp [1993] 2 Lloyd's Law Reports 208 |
Factors to consider on adjournment applications including strength of invalidity arguments and whether award is manifestly invalid. |
The court applied the principles to evaluate whether to adjourn enforcement pending setting aside proceedings and the need for security. |
Court's Reasoning and Analysis
The Court first considered the proper construction of Article 36(2) of the Model Law, concluding it allows only for the adjournment of the decision on enforcement, not a stay of enforcement already granted. This interpretation aligns with the wording of Article 36(2) and related provisions, and is supported by authority from the Court of Appeal for Ontario and the English High Court.
Given the parties' agreement to initially assume the Respondent's expert statements on Austrian law as correct, the Court determined it was unnecessary to resolve disputed Austrian law issues at this stage or permit expert cross-examination before deciding on the adjournment.
The Court held that for an adjournment under Article 36(2) to be appropriate, the Respondent must show reasonable grounds or a seriously arguable case that the award may be set aside in the Austrian proceedings. The Court found that the Respondent's experts presented such grounds, including allegations of arbitrariness, usury, procedural irregularities, improper tribunal composition, and violation of the right to be heard under Austrian law and the European Convention on Human Rights.
The Applicant's experts disputed these grounds, but the Court did not resolve the conflicting expert opinions on Austrian law, noting this is a matter for the Austrian courts. The Court gave the Applicant an opportunity to make further submissions based on all material, including the joint legal opinions, prior to a final decision on adjournment.
The Court also considered the possibility of partial enforcement of the award, but concluded it lacked jurisdiction to grant leave to enforce the portion of the award which the Applicant contended was undisputed, as there was no separate dispositive order for that amount in the award's terms.
Regarding security, the Court found that if an adjournment is granted, security should be ordered given the Respondent's assets within the jurisdiction, the size of the award, the duration of the arbitration, and the timing of the Austrian proceedings. The Court proposed an initial security sum and liberty to apply for further security or continuation of the adjournment pending appeal.
Holding and Implications
The Court's decision on the adjournment application is pending further submissions from the Applicant. However, the Court has determined that:
- The decision on recognition and enforcement of the Partial Award shall be adjourned pursuant to Article 36(2) of the UNCITRAL Model Law, pending the outcome of the Austrian setting aside proceedings, as the Respondent has shown reasonable grounds or a seriously arguable case for setting aside.
- The Court does not have jurisdiction to grant partial enforcement of the award for amounts not separately ordered in the dispositive part of the award.
- If adjournment is granted, security will be ordered in an initial sum proposed at €1.5 million, with liberty to apply for variation.
The direct effect is that enforcement of the award is temporarily delayed pending the Austrian courts' determination, with protective security measures to safeguard the Applicant's interests. The Court's approach reflects a pro-enforcement policy but respects the procedural safeguards under the Model Law and the concurrent foreign setting aside proceedings. No new precedent beyond the application of established principles was set.