JULY 14 ― Luxembourg is party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Arbitration Convention” or the “New York Convention.” It is one of the key instruments in international arbitration. It applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration.
Luxembourg is also party to other bilateral or multilateral treaties regarding the recognition and enforcement of arbitral awards which include the European Convention on International Commercial Arbitration of 1961, the Convention on Conciliation and Arbitration within the OSCE of 1992, the Energy Charter Treaty of 1994, the 1965 Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention).
By reason of the New York Convention alone, international arbitration awards can and are enforced in Luxembourg. As a matter of fact, the courts there have adopted a liberal regime in favour of the recognition and enforcement of foreign or international arbitral awards.
It is said that the country “has been and remains a pro arbitration jurisdiction.” Recently the government has even moved to modernise the country’s arbitration rules to highlight the advantages of flexibility, speed and confidentiality, making Luxembourg more attractive as a pro arbitration jurisdiction with liberal and arbitration-friendly provisions in the New Code of Civil Procedure (NCCP).
Luxembourg’s pro arbitration reputation is well reflected in a long-standing decision of the Court of Appeal in 1999. In this landmark case, the Luxembourg Court of Appeal ruled that the fact that an award could be set aside in the seat of arbitration did not prevent the jurisdiction where the recognition and enforcement was sought from enforcing the award (Court of Appeal, 28 January 1999, Pasicrisie Luxembourgeoise 31).
The Court decided so, not on the basis of the New York Convention, but on the basis of Article 1251 of the NCCP which lists the grounds for refusal of the recognition of a foreign arbitration award.
The Court allowed the party seeking recognition and enforcement to rely on the rules that are more favourable to enforcement than those of the Convention, that is, those rules that can lead to recognition and enforcement where the Convention would not.
The Court has explicitly been to declare enforceable as many awards as possible, much influenced by French case-law and doctrine.
It was only in 2015 that the liberal position of the Luxembourg courts was challenged when the Court of Appeal handed down a judgment ruling that the enforcement of an award could be refused if it had been set aside in the state of the seat of arbitration ― even if the annulment of an award in its state of origin does not constitute grounds for refusal of enforcement pursuant to Article 1251 of the NCCP.
In its judgment, the Court refers to Articles V and VI of the New York Convention which state the recognition and enforcement of an arbitral award may be refused or adjourned, at the request of the party against whom it is invoked, 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 state of origin. (See Guy Loesch and Katrien Baetens, “Recognition and Enforcement of Foreign Arbitration Awards in Luxembourg” available here.)
So all is not lost despite the shocking reports of authorities in Luxembourg seizing the assets of two Petronas subsidiaries valued at over US$2 billion (RM8.9 billion).
There are appropriate guarantees under Luxembourg law, particularly with regard to the right of the parties to arbitration and respect for the rights of third parties.
Petronas is the unfortunate third party. It must mount a rigorous challenge to the recognition and enforcement of the French arbitral award in Luxembourg.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
