Attachment based on annulled arbitration award?

Update Letter Nr. 136

In attachment proceedings based on foreign arbitral awards, the prerequisites for the enforceability of such awards have to be examined based on Art. 194 PILA in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention NYC) (FSC 144 III 411). In a decision of May 25, 2022, which has become final, the Cantonal Court of Graubünden (KG) dealt in detail with the question of whether a Russian arbitral award could be declared enforceable in Switzerland if the arbitral award in the state of origin (Russia) had been set aside by a state court in the meantime. The KG Graubünden (like the lower court) rightly denied enforceability and largely adopted the argumentation put forward by the respondent.

In its carefully reasoned and correct decision of May 25, 2022, the KG Graubünden stated:

1.   The central question is whether the wording of Art. V no. 1 (e) NYC Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if ... the award ... has been set aside ... by a competent authority of the country in which ... that award was made is a "may" or "must" provision (KG GR para. 8.3.1);

2.   The NYC shall be interpreted in accordance with the rules of the Vienna Convention on the Law of Contracts. The territorial approach (an arbitral award is anchored to the legal order of the state of origin and therefore it loses its legal existence when set aside by a state court) and the delocalised approach (the annullment of an the arbitral award by a state court has no bearing on its enforcement) are distinguished. The KG Graubünden refers to case law in different countries (KR GR para. 8.3.1) and to the doctrine in Switzerland (KG GR para. 8.3.2).

3.   The KG Graubünden comes to the conclusion that the Swiss recognition and enforcement court has no discretion and thus no power to substantively review the foreign annulment decision (KG GR para. 8.3.3. ), and that the enforcment judge is generally not entitled to review the correctness of the foreign anulment decision, but that it is solely a matter of whether the award is binding at the seat of the arbitral tribunal (subject to an obvious abuse of law or "extraordinary" circumstances, KG GR para. 8.3.4);

4.   The KG Graubünden subsequently also rejected an Ordre public breach and in this context examined the foreign case law, e.g. the judgments in connection with the expropriation of the Russian oil company Yukos (KG GR para. 8.4.1.1.). An abuse of rights was also denied (KG GR para 8.4.2.1.).

Categories: Litigation and Arbitration, Restructuring & Insolvency, Blog