Arbitrator’s jurisdiction reviewed on enforcement


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The Supreme Court has held that the doctrine of Kompetenz-Kompetenz will not be final and will be subject to review by the courts on an application for recognition and enforcement under the New York Convention.

In Dallah Real Estate and Tourism Holding Co v Government of Pakistan [2010] UKSC 46 the Supreme Court dismissed an appeal against a refusal to enforce an award from an ICC arbitration in France. It did so on the basis that Pakistan was not a party to the arbitration agreement, even though the tribunal had previously ruled that it was, and was bound by it.

Section 103(2) of the Arbitration Act 1996, which is based on Article V of the New York Convention, provides that "Recognition or enforcement of the award may be refused if a person against whom it is invoked proves … (b) the arbitration agreement was not valid".

The Government of Pakistan had set up a trust as a vehicle for a project, and it was the trust that was a party to the arbitration agreement, not the Government of Pakistan. The Supreme Court applied the relevant French law test of "common intention".

Despite the tribunal having found against the Government, the Supreme Court held that a party who denies being a party to an arbitration agreement has no obligation to participate, nor to take steps, in the courts of the seat of the arbitration. It is entitled to wait until steps are taken to enforce the award and then to resist enforcement. That is despite the New York Convention envisaging that such challenges may be made in the courts of the seat.

Paul Howcroft, Partner, Fladgate LLP (phowcroft@fladgate.com)

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