Anselmo REYES: Agreement and Issue Estoppels

Keynote Speech on the 60th Anniversary of New York Convention and “One Belt and One Road” Conference

by Mr. Anselmo REYES

International Judge of Singapore International Commercial Court，SCIA Arbitrator

Distinguished guests, ladies and gentlemen, I'm very grateful, I'm very honored to have been asked to speak today at this conference. That being said, you might think that I have an odd way of showing my gratitude by speaking on a topic that is so boring. The topic that I suggested to the organizers was agreement and issue estoppels, and setting aside of awards under the Model Law, and then the refusal of recognition and enforcement under the New York Convention. What does it even mean?

I propose to answer three questions. Suppose you have a jurisdiction, a country, along the Belt and Road that is a New York Convention state and that has adopted the Model Law or is heavily influenced, like China, by the Model Law. Then to what extent can parties agree amongst themselves to impose more stringent requirements than those imposed by the New York Convention for the recognition and enforcement of awards? So the parties agree in their contract that someone can reject an award on grounds additional to those found in the New York Convention. To what extent is that sort of agreement enforceable? The other agreement is supposing the parties agree to impose more stringent requirements than those found in the Model Law. The Model Law is very similar to the New York Convention and grounds for setting aside, but supposing the parties say, "We want to make it tougher, so we will impose even more stringent requirements"? Conversely, supposing the parties say, "Well, we want more liberal requirements than those found in the New York Convention or the Model Law.  We would like our awards to be more easily enforced." So they agree something more liberal. To what extent is that enforceable? That's what I call agreement estoppel: to what extent will the parties be bound by their agreement when they come to court? To what extent will the courts enforce their agreements, give effect to party autonomy? That's the first set of questions.

The next question is this. Supposing that you have a jurisdictional point or some other objection against an arbitral award. You don't take that point up in setting aside proceedings in the seat of arbitration. You don't raise that point. Can you nonetheless raise that point in an enforcing state when the award is sought to be enforced against you? Can you say, "I've got a jurisdictional or some other objection on the matter?"  So that's the second question I'd like to talk about.

In terms of the first two questions, the more stringent requirement than the New York Convention or a more liberal requirement, I think or I suggest the answer is relatively straightforward. Because the New York Convention is a convention, it's a treaty, under article III, parties to the New York Convention, contracting states, are required to implement the terms of the New York Convention. They can be more liberal than the New York Convention, but they cannot be stricter than the New York Convention. Therefore, in terms of recognition and enforcement, my suggested answers to my questions are these. In terms of the New York Convention recognition and enforcement, if the parties agree more stringent requirements, set tougher matters, tougher requirements in recognizing and enforcing an award, the New York Convention state cannot give effect to that, because the limit, the toughest you can be is what is set in the New York Convention. On the other hand, if the parties say, "We will dispense with some of the criteria in the New York Convention, we want to be more liberal than the New York Convention," then there's nothing preventing a country, providing it is in accordance with the enforcing state's laws, to allow party autonomy in that case and allow more liberal regime.    

Setting aside is a little different, because the Model Law is a soft-law instrument that the countries can adopt in whole or in part, so nothing, it seems to me, prevents a country from saying in its law, “We will give effect to party autonomy and apply more stringent requirements than that found in the UNCITRAL Model Law, or we will apply more liberal requirements to the parties' agreements." So I think the answers to the first two sets of questions are relatively straightforward, because the Model Law is a soft-law instrument, it is more conducive to party autonomy, to agreements of the sort I describe. On the other hand, because the New York Convention is a convention, parties, contracting states agree to uphold certain standards and incur international obligations to do so, the New York Convention is less flexible in that respect.

Let's go now to the third question. What about what I call issue estoppels? "Issue estoppels" is not necessarily a term known to many civil law jurisdictions. Perhaps the best way to put it is good faith. If some matter has been decided in the seat of arbitration, are you bound by that decision when you go and resist an obligation to enforce an award in an enforcing state? Are you bound, estopped by the finding in that particular issue, or can you reargue that point? If you put it in terms of good faith, is it good faith to reargue, , reopen that point in an enforcing state? Under the Model Law, one should know article IV, “waiver”. If you take part in arbitration but don't raise a point, you keep it hidden, and if you lose, you raise the point later on, the Model Law doesn't allow that. The Model Law says you will be deemed to waive the point if you don't raise it when the arbitration is proceeding. You can't keep a point secret to yourself. Another point to bear in mind in the Model Law is perhaps article 16. If you have a jurisdictional or procedural question, you can take it up with the tribunal as a preliminary question. If it's decided against you, you typically have about 30 days in which to object, otherwise that's it. If the arbitral tribunal takes up the point together with the main substance, with the substantive argument, and puts out the main award dealing with the substantive argument as well as the jurisdictional point, then you have three months in which to object.

All right. Let's look at a number of scenarios. You participate in the arbitration. You do not raise the point. You have a jurisdictional objection. You don't raise the point. You keep it to yourself. Well, as we've seen, article IV, waiver. That's it, you can't take up the point. You participated in the arbitration; you've waived the point. What if you don't participate in the arbitration? You don't apply to set aside the arbitral award, which is against you in the seat of the arbitration. Instead, you simply apply against the recognition enforcement of the award when it is sought to be enforced against you under the New York Convention. Well, we've seen a number of cases now that say the New York Convention form travaux-preparatoire there is an active and a passive remedy. You don’t have to set aside. You can simply sit back, wait for your jurisdiction, wait for the claimant to come and enforce the award, "Come and get me in my jurisdiction, I can still resist." So you're not estopped in that situation.

Those are the easy situations, but let's now look at some more difficult situations. You take part in the arbitration, you disagree and you raise the point. The tribunal rules as the preliminary point against you, then you apply to set aside the tribunal’s ruling within the 30 days allowed. You apply to the courts of the seat of the arbitration to set aside the ruling that is against you. You fail. Can you still resist enforcement when the claimant comes and seeks enforcement against you in your home jurisdiction, in an enforcing state? There are different views on this matter. The most recent view I know is the judgment of Mr. Justice Quentin Loh just last month in Singapore in a case called Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Private) Limited. He says, "You can take that point. It's part of the passive remedy." And he refers to a decision of the Singapore Court of Appeal in that matter. I think that's my view as well. I say "I think" because I bear in mind that I suggested something like that in one of my own decisions in Hong Kong, in a decision which some of you may be familiar with, called Gaohaiyan. I suggested that this was a possibility. And I was overruled by the Court of Appeal. The Court of Appeal said I was wrong. The Court of Appeal suggested in that case I should have been more deferential to a decision of the Xian Intermediate People's Court saying there was no breach or no procedural objection to be taken in that particular case. So there may be some controversy over that.

What about this situation? You do not participate in the arbitration. The tribunal rules that it has a jurisdiction. And there is no application to set aside within 30 days. The tribunal rules, as a matter of preliminary issue, it's decided on its own to take it as a preliminary issue, you don't apply, and you don't do anything. Can you raise the point in setting-aside proceedings within three months of the final award? You may not be able to do so, according to Mr. Justice Loh, in the same Singapore case decided last month that I just mentioned. He says: "Where the arbitral tribunal chooses to decide jurisdiction as a preliminary question or issue, then all the considerations of finality, certainty, cost, preventing dilatory tactics and setting the procession at an early stage at the seat mitigate against allowing a despondent to reserve an objection to the last minute which result in delays and costs." So you are against it. But he says one may be able to raise the same point in enforcement proceedings against the passive remedy point. So that's what Mr. Loh says in that case.

Now, the final question. What if you participate in setting-aside proceedings but you don't raise a point, you raise other points? You don't raise some objection, some jurisdictional objection and so on, you don't raise that, you raise some other point. You lose. Then comes a recognition and enforcement proceedings against you in your state. Can you now come up with new points, jurisdictional points that you could have raised in the setting-aside proceedings, but you didn't? Now, there is a dictum in a Hong Kong case called “Hebei Import” by Sir Anthony Mason, one of the non-permanent judges of the Court of Final Appeal, saying or suggesting that may be bad faith. I'm not sure he is correct on that, because the logic of what I have said today, the passive remedy, the ability to rely on the passive remedy found in the travaux-preparatoire of New York Convention, should still apply. But that's something we can all think about in the days and months to come.

I'd like to make one last point. So far I've not distinguished between objections under article V(1) of the New York Convention, and objections under article V(2) of the New York Convention. Recall, article V(1) of the New York Convention deals with what one might call international public policy points, points about due process, points about jurisdiction, those sorts of points. Article V(2) deals with matters of domestic law, domestic public policy, whether something is arbitrable under domestic law. If there are issues estoppel in any sense along the lines that I've just talked about, or if there is agreement estoppel in any sense along the lines that I've just talked about, I think it may be that under article V(2), because V(2) grounds can be raised by a court of its own motion – in other words, the parties don't have to mention that -- if the court by itself as a guardian of domestic law can raise the objections, the courts can never be estopped. So whatever the parties have agreed or argued before, I think the court can always raise the question of arbitrability and the court can always, must always be able to raise the question of public policy, because that's what the court is there for, to guard, as a guardian of public policy and as a guardian of what is arbitrable and not arbitrable under the law. Thank you very much.