In the process of doing business, regardless of its size, it is not uncommon for parties to contracts to refer to different legal provisions. The most common source of confusion is the inclusion of regulations relating to international transactions in contracts. Sometimes the confusion arises from not knowing which regulation should apply in a particular situation. One such statute encountered by parties to transactions is the New York Convention, which is mainly applied in the context of arbitration, international cooperation agreements and foreign debt collection.
What is the New York Convention?
The New York Convention was ratified in the Republic of Latvia (ratify - approve (international treaty) by the highest authority of the state) in 1992 and regulates the recognition and enforcement of foreign arbitral awards. The Convention is binding on more than 160 countries worldwide, providing a unified legal framework for the recognition and enforcement of arbitral awards.
The New York Convention applies to the recognition and enforcement of arbitral awards made outside the territory of the State in which recognition and enforcement is sought, in disputes to which both natural and legal persons may be parties.
This means that each State that is a signatory to the New York Convention and a party thereto recognizes a written agreement (a document on a transaction - a contract, agreement, invoice) on the basis of which the parties to the transaction undertake to submit to arbitration any dispute that has arisen or may arise between them relating to contractual or other legal relations that may be the subject of arbitration. The term "written agreement" includes an arbitration clause (a written agreement by the parties to arbitrate a dispute) in a contract or arbitration agreement signed by the parties.
When does the New York Convention apply?
The provisions of the New York Convention apply when there is an international dispute and a party who has received a favorable arbitral award wishes to enforce it. To obtain recognition and enforcement of an arbitral award, the party seeking recognition and enforcement prepares an application for enforcement and, in addition to the application, submits:
- the original or a certified copy of the award;
- the original or a certified copy of the contract containing the arbitration clause.
If the arbitral award or contract is not in the official language of the State in which recognition and enforcement of the arbitral award is requested, the party requesting recognition and enforcement shall submit a translation of those documents into the language of the State in which enforcement is requested. Such translation shall be certified by an official translator or a diplomatic/consular office.
Important: It is advisable to check the language in which the documents can be submitted prior to the translation, as there are countries, such as Sweden, that accept documents in both Swedish and English. This can save your financial resources on translations, as translating documents into English will be cheaper than into Swedish.
What if the country where the business partner is registered is not on the list of countries that have signed the New York Convention?
When concluding a transaction, the parties pay more attention to the transaction itself, the terms of the contract and the details of the transaction, and less to the location of the business partner. This question becomes relevant in case of disputes when an arbitration clause is included in the concluded contract as a dispute resolution tool, and after receiving a positive arbitration award it turns out that the country where the counterparty's office is registered is not included in the list of countries that have signed the New York Convention. The list of countries that have signed the New York Convention can be found here.
Although arbitration clauses are widely used in international contracts, it is useful to know that there are cases when one of the parties to a transaction represents a country that has not signed (acceded to) the New York Convention. This naturally raises the question of whether, in the event of a dispute, it would be possible to enforce an arbitral award in a country that has not acceded to the New York Convention. In such cases, two options are possible: to obtain a writ of execution to enforce the arbitral award or to obtain a refusal to grant the application with the indication that the dispute is subject to consideration in a state court. It all depends on the specific state legislation on international dispute resolution and the views of the judiciary on the practice of resolving such disputes. There are countries that confirm the decision and issue a writ of execution on its basis, and there are countries that are guided by their own rules and legislation and, if they consider that the dispute, its consideration and motivation of the decision do not correspond to the nature or procedure of the dispute or, in the opinion of the court, threaten or infringe upon the rights of a legal or natural person in the given country, may offer the parties to file a claim in a civil case in the state court at the place of registration or declared address of the defendant.
In addition, it should be borne in mind that there are countries that have signed the New York Convention, but the representatives (judges) of the courts of these countries, which will consider your application, may not have jurisdiction over the matter. In other words, just as there are lawyers who work and understand a particular field (civil law, criminal law, administrative law, arbitration, etc.), so any judge is competent in a particular field. In court practice, there are cases when an application is referred to a judge who is hearing arbitration cases for the first time and therefore may instruct the claimant (creditor) to submit additional evidence and refer to national legislation that is not relevant to the dispute in question, specified in the arbitration clause. In such cases, the creditor should provide further clarification by referring to the arbitration clause referring to specific legislation, articles of specific laws confirming the creditor's right of action and articles of the New York Convention confirming the creditor's right to seek recognition of the award. In addition, the year in which the state in question signed the Agreement on the Application of the New York Convention to Foreign Arbitral Awards may be cited, which means that these conditions must be met when considering an application for a writ of execution to enforce an arbitration award.
If you receive a refusal or request for additional explanations or evidence - check the reasons for the refusal or request! Not always the refusal or request has justification - you need to be sure and know your rights! If you are in doubt, you can always seek help from a competent lawyer or attorney!
If you still have questions, please call: +371 67365100, +371 25156055 or write: .