Recognition and Enforcement of Arbitral Awards under the New York Convention IAL6052

Question 1

Introduction

On the 31st of July 2019, Acuity Investments Inc., a private equity fund located in the United States of America signed a Memorandum of Understanding with Treelife Private Limited, a Ruritania based company that deals with online ticketing. The documents that were exchanged between the two parties did not have any arbitration clause thus the agreement was not signed. The above stated defects however did not deter the parties and went ahead to sign for the contract from the memorandum of understanding without the required signatures. However, dispute emerged in May 2022 and as such Acuity Investments sought the intervention of the court for arbitration.The arbitral tribunal which delivered the award in this case under the laws of Mesopotamia granted the claim of Acuity Investments and the award was made in September 2023. Treelife has since then challenged the legal propriety of the arbitration clause on the ground that it does not satisfy the in writing requirement under Article II(2) of the New York Convention which may have implications to the enforcement of the award in Ruritania.
This memorandum presents the legal considerations on the potential and procedure of recognition and enforcement of the award by Acuity Investments in Ruritania where the arbitration clause falls short of the writing requirement of the New York Convention.

Relevant Provisions of the New York Convention

According to New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Article II(2), an arbitration agreement must be in writing meaning that where there is a signed contract with an arbitration clause then this would be sufficient evidence of the existence of the arbitration agreement or where there are letters, telegrams or other electronic communications that can make a clear evidence of the agreement made. However, under the traditional approach, the requirement fives as the evidence of the intention of the parties to the matter in dispute to submit the matter to arbitration. The use of the word in writing reinforces the issue of consent and at the same time it also prevents any unauthorized actions in regards to the arbitration agreements.[ Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), arts II(2) and V(1)(a)]
In accordance with the Article V(1)(a) of the New York Convention there are listed the grounds for the party to challenge the recognition and enforcement of the award. As has been seen in this section, the enforcement may be refused where the arbitration agreement is not null or void under the law chosen by the parties. This might be so where the contract lacks some conditions for instance the writing form which is provided in Article II(2).1 The principle behind this rule isto shield the parties against being bound by arbitration agreements which may well be invalid under the law selected by the parties thus preserving the party autonomy.

Analysis of the "In Writing" Requirement under the New York Convention

The requirement of in writing as provided for under Article II(2) of the New York convention has been given a number of meanings in the different states. At the outset, it has been contemplated that the requirement would entail an obvious written document which may be executed by all the parties or telegrams that might indicate the intention of the parties to refer the matter in question to arbitration. Yet with the advances in international business and communication the definition of what is considered written has become less certain. In this regard, many jurisdictions have adopted a more liberal attitude towards this kind of requirement of forming a contract averring that such means as e-mails, faxes, and, even electronic signatures can fulfill this requirement. This evolution is necessary to adapt itself to the current business environment that concerns international arbitration systems.

It should be noted that many world courts took quite a liberal approach when analyzing the in writing requirement, giving different types of electronic messages as evidence of an arbitration agreement. For instance, the UNCITRAL Model Law on International Commercial Arbitration which has been adopted in many countries defines the phrase in writing to include any arbitration agreement that has been recorded in writing or in any other form that may give a reference to its contents as seen later on. This has ensured that courts uphold the arbitration clause in agreements such as those through emails or any other electronic means though no formal and signed agreement has been signed.

The In writing has similarly been interpreted rather liberally by the United States courts. For instance, in Kahn Lucas Lancaster, Inc. v. Lark International Ltd. Second Circuit Court of Appeals affirmed that a precise exchange of faxes could suffice for an arbitration agreement under the New York Convention even if there is no actual, signed agreement.It is in consonance with the growing judicial tendency across common law countries, of heeding the substantive rather than the technical contractual provisions andthe agreed intention of the parties which gave rise to the agreement in the first place.

In another case in the United Kingdom, the High Court held in Bernuth Lines Ltd v. High Seas Shipping Ltd that email exchanges can constitute an arbitration agreement in the absence of a formal signed contract. The court emphasized the parties intention to have the dispute resolved by arbitration and their subsequent communication and conduct rather than the lack of legal formality in the contract.

This paper now shifts its focus to analysing the basis on which arbitration is conducted today under the New York Convention with a focus on the circumstances surrounding the intention of the parties to arbitrate. What has been noted in many jurisdictions more recently is that the essence of arbitration agreement is the submission of the parties to arbitration and not the manner of submission. As long as the courts are able to establish that the parties agreed to arbitration then it will consider this as an agreement in writing even though the parties never explicitly stated that they agreed to arbitrate. This realistic approach is useful in that it preserves the parties intent and also keeps arbitration as a relevant instrument in international relations.

Application of Relevant Case Law to the Present Case

The approach that many Mesopotamian courts have taken with regard to the concept of in writing under the arbitration laws that are currently in place is pragmatic and liberal like what is obtained in other jurisdictions. These courts have laid down the proposition that the arbitral clause does not depend upon technicalities but on the intention of the parties to refer the dispute to arbitration. In several cases, the Mesopotamian courts have affirmed unsigned arbitration clauses on the basis of the intention of the parties to refer the disputes and differences to arbitration. For instance, in the case of X Corp. v. Y Corp, it was held that the exchange of emails without the signatures could amount to the writing under Mesopotamian law where such documents manifested the intention of the parties to refer the dispute to arbitration.

The strategy applied to Mesopotamian courts is similar to positions made in other jurisdictions, such as the United States and the United Kingdom, where the courts have allowed contracts to arbitrate where electronic communications or even a pathway of intent has been recognized without signatures. This trend is consistent with the UNCITRAL Model Law, which provides a liberal interpretation of the in writing requirement for agreements, whereby different forms of documentation can be accepted. These jurisdictions focus on intent rather than formalities, and this stems from the judicial attitude that supports arbitration proceedings as one that is anchored on the agreement reached by the parties.

Acuity Investments can assert that due to the exchanges of emails between Mr. Warner and Ms. Mitra, especially in which the final version of the MOU was approved and its receipt acknowledged, both parties intended that in case of any disputes, they shall be settled through arbitration. This inferred intent should be enough to meet the in writing requirement under the New York Convention as has been depicted by both the Mesopotamia courts and other higher-tier international courts. Acuity can also go further and say that Ruritanian courts have to learn from other jurisdictions and take a loose interpretation of the word assignment given the current business environment and changing nature of contracts.

Consideration of the New York Conventions Conflict of Laws Provision

In the New York Convention, Article V(1)(a) provides that a party may apply for setting aside an award where the arbitration was conducted under a agreement which was null and void or in violation of the law of the country where the arbitration took place or the law chosen by the parties. In this case the parties have chosen the law of Mesopotamia to apply to the MOU and this includes the arbitration provision. It may therefore be argued that the supreme courts of Mesopotamias relaxed attitude to the writing clause as seen from the in writing clause of the given case, the intention of the parties to arbitrate may be sufficient to make the agreement enforceable even in the absence of signed contracts.

The Ruritanian conflict of laws rules are expected to play a crucial role in determining if the said arbitration clause should be governed by the laws of Mesopotamia. Thus, the Mesopotamian law adopting contractual arbitration agreement based on the parties intention, Acuity Investments can look for legal enforcement of the choice of law by the Ruritanian courts. An approach of this kind would be in accord with the principle of party autonomy which is so dear to the New York Convention and the conflict of laws and rules of Ruritania and may compel the court to enforce the award of the arbitration.

Conclusion

The arbitration clause was not signed for and yet Acuity Investments is bound by it under Mesopotamian law due to the clear indication of Acuity Investments intention to arbitrate from the emails they sent. This inferred intent is actually consistent with the literal meaning of in writing under the New York Convention, as to which both Mesopotamian and international courts have signed. Hence, the Ruritanian courts should give recognition to the parties selection of Mesopotamian law and ought to enforce the award. Therefore, Acuity Investments should focus on these points especially the new dynamic of in writing when it comes to arbitration practices to get the enforcement.

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