Article V(1)(b) of the New York Convention permits a court to refuse recognition and enforcement of an arbitral award where the party against whom the award is invoked:
“was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case.”
The provision is central to the legitimacy of international arbitration. It ensures that arbitral proceedings comply with minimum standards of procedural fairness, while recognising that arbitration is intended to be more flexible and less formal than litigation.
A party resisting enforcement bears the burden of proving one or more of the grounds set out in Article V. Those grounds are exhaustive and are generally interpreted narrowly ¹. In Dallah Real Estate and Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan , the UK Supreme Court confirmed that the burden of establishing a ground for non-enforcement rests firmly on the party opposing enforcement.
Article V(1)(b) therefore does not provide a general right to challenge procedural decisions with which a party disagrees. Nor does it permit an enforcement court to reconsider the merits of the tribunal’s procedural choices. It is directed at serious procedural unfairness that deprived a party of a meaningful opportunity to participate in the arbitration and, in many jurisdictions, materially affected the award.
The two elements of Article V(1)(b)
Article V(1)(b) contains two related protections.
- The first concerns proper notice of the appointment of the arbitrator and of the arbitral proceedings. This is the formal notice requirement; and
- The second applies where a party was “otherwise unable to present his case”. This is the substantive procedural fairness requirement and is the focus of this article.
The New York Convention does not define what it means to be unable to present a case. The omission is understood to be deliberate so as to allow national courts some flexibility when assessing whether the arbitral procedure met the minimum requirements of fairness. It also creates a risk that courts will apply their own domestic litigation standards to international arbitration.
That approach should be avoided. The New York Convention is an international instrument applicable across legal systems with very different procedural traditions. Article V(1)(b) should therefore be understood as establishing an international minimum standard rather than incorporating every procedural rule of the enforcement forum.
The central question is whether the party had a reasonable and meaningful opportunity to present its case. The provision does not guarantee that a party will be permitted to present its case in precisely the manner it prefers.
National legislative approaches
Many states who have ratified the New York Convention have incorporated the wording of Article V(1)(b) directly into their arbitration legislation.
The relevant legislation in the United Kingdomiii, United Statesiv, Mauritius v, Australiavi, Hong Kongvii, Indiaviii, Russiaix, Spainx and Swedenxi either reproduces or closely follows the New York Convention’s formulation. The practical meaning of the provision has consequently been developed through judicial decisions.
Other jurisdictions use different terminology.
French and Swiss legislation focuses on the “right to be heard” xii, together with equality of treatment between the parties. Singapore’s International Arbitration Actxiv refers to a breach of the rules of natural justice that prejudices a party’s rights.
Chinesexv legislation describes the relevant situation as one in which a party was unable to state its position for reasons for which it was not responsible. This formulation expressly distinguishes a genuine inability to participate from a party’s deliberate decision not to do so.
Brazilianxvi law adopts an expressly material approach. It considers whether a serious procedural defect resulted in a material denial of the party’s opportunity to present its case or rebut the opposing party’s case.
Despite these differences in language, several common principles emerge from the case law.
A reasonable opportunity, not a perfect process
The English courts have treated Article V(1)(b) as reflecting the natural justice principle that each party must be heard.
In Minmetals Germany GmbH v Ferco Steel Ltd xvii, Coleman J explained that the provision protects a party’s reasonable opportunity to present its case. Where a tribunal is entitled to conduct its own factual investigations, it cannot base its award on the results of those investigations without giving the affected party a reasonable opportunity to respond.
The emphasis is therefore on opportunity. A party need not be satisfied with every procedural ruling, but it must be given a fair chance to address evidence and issues that may materially influence the outcome.
The English Court of Appeal’s decision in Kanoria v Guinnessxviii illustrates circumstances in which that opportunity may be genuinely absent. The court recognised that serious illness preventing a party from participating could fall within the concept of being unable to present a case.
Australian courts have adopted a similar approach. In Uganda Telecom Ltd v Hi-Tech Telecom Pty Ltd xix, the Federal Court distinguished between a party that was genuinely prevented from presenting its case and one that received notice and had the opportunity to participate but chose not to do so.
A party cannot ordinarily manufacture an Article V(1)(b) objection by declining to engage in the arbitration.
Boycotting the arbitration
Courts generally reject attempts to invoke Article V(1)(b) where the alleged inability to present a case is the result of the party’s own conduct.
In Corporación Transnacional de Inversiones SA de CV v STET International SpAxx , the Supreme Court of Ontario held that a party that boycotted the arbitration had forfeited its opportunity to be heard.
Similarly, US courts have held that a failure to appear without adequate justification does not establish a Convention defence. The distinction is between being prevented from participating and voluntarily deciding not to participate.
This has an important practical consequence. A party that objects to the tribunal’s jurisdiction or procedure should normally raise its objections promptly and continue participating under protest where appropriate. Simply withdrawing may substantially weaken any later attempt to resist enforcement.
Is an oral hearing required?
Article V(1)(b) does not invariably create a right to an oral hearing.
In Government Trading Corporation v Iranxxi, the Swiss Federal Tribunal held that the right to be heard did not necessarily include a right to present oral argument. Written proceedings may satisfy procedural fairness where the parties have an adequate opportunity to submit evidence and legal arguments.
The US position is more context-specific. In Generica Ltd v Pharmaceutical Basics Inc xxii, the court described a fundamentally fair hearing as one satisfying minimum requirements of fairness, including adequate notice, an opportunity to be heard on the evidence and an impartial decision-maker.
The judgment does not mean that an oral hearing or cross-examination is always mandatory. The court’s concern was whether the restricted evidence was central to liability and whether the procedure, viewed as a whole, remained fair.
Parties choosing arbitration should not expect every procedure available in court litigation. The relevant inquiry is not whether the tribunal followed all judicial formalities. It is whether the party was deprived of a meaningful opportunity to address a material issue.
Materiality and prejudice
A procedural irregularity alone will not usually justify non-enforcement. Courts increasingly require a connection between the alleged breach and the award.
In Fitzroy Engineering Ltd v Flame Engineering Ltd xxiii, the US court required convincing evidence that the alleged inability to present the case affected the outcome of the proceedings.
A similar approach appears in Sonera Holding BV v Çukurova Holding AS xxiv. The court explained that it was not enough to show that an arbitrator had failed to follow all the procedural niceties observed in federal courts. The resisting party had to establish that it was denied an opportunity to be heard at a meaningful time and in a meaningful manner.
Singaporean case law provides one of the clearest frameworks for assessing this issue. In Soh Beng Tee & Co Pte Ltd v Fairmount Development Pte Ltd xxv , the Court of Appeal identified four matters that an applicant must establish:
- the specific rule of natural justice that was breached;
- how that rule was breached;
- the connection between the breach and the making of the award; and
- the prejudice caused to the applicant.
This approach was subsequently applied in Dongwoo Mann+Hummel Co Ltd v Mann Hummel GmbH xxvi, where the High Court emphasised the need for a causal link between the breach of natural justice and the award.
Singapore’s courts have also warned against allowing disappointed parties to rely on technical procedural complaints to deprive a successful claimant of the benefit of its award. Only meaningful breaches that cause actual prejudice should be remedied.
Equality of arms and the opportunity to rebut
The right to present a case includes a reasonable opportunity to answer the opposing party’s case. It may be infringed where a tribunal relies on an argument, factual basis or evidential issue that was not properly put to the affected party.
It does not follow that a tribunal must adopt one of the parties’ competing submissions. Arbitrators are entitled to reach their own conclusions and are not confined to an “either-or” choice between the outcomes proposed by the parties.
The crucial distinction is between independent reasoning based on matters fairly within the scope of the dispute and a decision based on an unexpected issue that the parties had no reasonable opportunity to address.
An award should therefore be read fairly and as a whole. Enforcement should not be refused merely because the tribunal expressed its reasoning differently from the parties or did not deal expressly with every submission.
Judicial discretion
Even where Article V(1)(b) is established, the wording of Article V states that enforcement “may” be refused. This has generated differing approaches to judicial discretion.
Some courts, particularly in parts of Asia, have been prepared to enforce an award where the procedural irregularity had no material effect on the outcome. English authority has traditionally focused more directly on whether the Convention ground itself has been established.
The practical difference between these approaches may be narrower than it first appears. A court applying a strict materiality or prejudice requirement may conclude that no Article V(1)(b) breach has been proved. Another court may find a technical breach but exercise its discretion to enforce the award nonetheless.
For further information, please contact:
Sharmilla Bhima, Partner, Appleby
i Redfern and Hunter on International Arbitration (5 ed. 2009) (Oxford University Press) at page 639
ii [2010] UKSC 46
iii Section 103(2)(c) of the English Arbitration Act 1996 states that:
“2 Recognition or enforcement of the award may be refused if the person against whom it is invoked proves– (c) that he was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case.”
iv Article V(1)(b) of the United States Federal Arbitration Act states that:
v Article V(1)(b) of the Mauritian The Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 2001 declares that: “1. Recognition and enforcement of the award maybe refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (b) The party against whom the award is invoked …/… was otherwise unable to present his case.”
vi Section 8(5)(c) of the International Arbitration Act 1974 declares that:
(5) Subject to section 6, in any proceedings in which the enforcement of a foreign award by virtue of this Part is sought, the court may, at the request of the party against whom it is invoked, refuse to enforce the award if that party proves to the satisfaction of the court that: (c) that party …/… was otherwise unable to present his or her case in the arbitration proceedings.”
vii Section 89(2)(c)(ii) of the Hong Kong Arbitration Ordinance states that:
(2) Enforcement of a Convention award may be refused if the person against whom it is invoked proves— (c) that the person—
(ii) was otherwise unable to present the person’s case.”
viii Section 34(2)(a)(iii) of The Indian Arbitration and Conciliation Act 1996 No. 2 of 1996 recites that:
“(2) An arbitral award may be set aside by the Court only if –
(a) the party making the application furnishes proof that – (iii) the party making the application …/… was otherwise unable to present his case.”
ix Article 34(2) of the Law of the Russian Federation 5338-1 on International Commercial Arbitration states that:
“2. An arbitral award may be set aside by the court specified in article 6(2) only if:
(1) the party making the application for setting aside furnishes proof that: – he …/… was otherwise unable to present his case.”
x Article 41(1)(b) of the Spanish Arbitration Act 2003 declares that:
“1. An arbitral award may be set aside only if the party making the application alleges and proves:
(b) that he was …/… otherwise unable to present his case.”
xi Section 54(2) of The Swedish Arbitration Act declares that: “A foreign award shall not be recognised and enforced in Sweden where the party against whom the award is invoked proves:
2. that the party against whom the award is invoked …/… was otherwise unable to present his case.”
xii Articles 1520 and 1525 of the French Code of Civil procedure provide that an award may be denied recognition and enforcement “if the right to be heard has not been respected”.
xiii Article 19(2)(d) of Swiss Law on Private International Law provides that:
“award may be annulled if the principle of equal treatment of the parties or the right of the parties to be heard was violated.”
xiv Section 24(b) of the Singapore International Arbitration Act states that an award may be annulled: “if a breach of the rules of natural justice occurred in connection with the making of the award by which the rights of any party have been prejudiced”.
xv Article 260(2) of the China Civil Procedure Law declares that:
“(2) the party against whom the enforcement is sought was not notified to appoint an arbitrator or to take part in the arbitration proceedings or the party against whom the enforcement is sought was unable to state his opinions due to reasons for which he is not responsible.”
xvi Article 32(b) of the Brazilian Arbitration Act states that:
A court may …. deny or enforce a foreign convention award to the extent that a serious procedural defect in the arbitral process resulted in a material denial of the party’s opportunity to present its case or to rebut its opponent’s case”.
xvii Minmetals Germany Gmbh v Ferco Steel Ltd [1999] 1 All E.R. (Comm.) 315 Cat 657
xviii Ajay Kanoria, Esols Worldwide Limited, Indekka Software Pvt Limited v Tony Francis Guinness [2006] EWCA Civ 222
xix NSD 171 of 2010, 22 February 2011
xx 1999 CanLII 14819
xxi Judgment of 01 July 1991 DFT 117 II 346
xxii 125 F125 F.d 1123 at paragraph 33
xxiii No. 94-C-2029, 1994 U.S. Dist, LEXIS 17781 at paragraph 14
xxiv895 F. Supp. 2d 51, 521 (S.D.N.Y.) 2012
xxv [2007] 3 SLR(R)
xxvi [2008] SGHC 67 at 126
