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Kimbrough & Associés

Paris, France

Arbitral Awards and Enforcement in Romania

Philip Kimbrough, Judith Butchers

The advantages of arbitration for the resolution of international commercial disputes are universally recognised: neutrality, flexibility, rapidity, confidentiality and responsiveness to complex technical issues.

In particular, by reason of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 ("New York Convention") to which over 100 countries are signatory, an arbitral award is more easily enforceable internationally by court action than a judgment of a national court, which depends on the existence of bilateral treaties for reciprocal enforcement.

Unfortunately, this does not mean that the time taken to obtain enforcement of an award, even if eventually granted, is in all cases rapid. It is clearly dependent on the attitude of the local courts where enforcement of an award is sought. This note concerns the delays encountered in Romania in enforcing an international arbitral award.

Proceedings were instituted before the Romanian courts by a statutory corporation established under Zimbabwean law against a trading company incorporated in Romania and successor-in-title to a Romanian government owned and controlled foreign trade corporation for enforcement of an arbitral award in favour of the Zimbabwean corporation (the "Award"). The arbitration had been conducted according to the rules of arbitration then in force of the International Chamber of Commerce ("ICC") (1) , an international organisation with its seat in Paris.

By decision of the Commercial Department of the Bucharest Tribunal (2) , the request for exequatur of the Award was refused on the procedural grounds that the document evidencing the Award submitted to the court had not been "over-authenticated" according to article 162 of Romanian law 105 of 1992, entitled "Settlement of Private International Law Relations", which provides, as a general rule, that:

"Official documents drawn up or authenticated by a foreign authority may be used before Romanian instances only if they are over-authenticated in the hierarchical administrative way, and, further, by the diplomatic missions or by the official Consular Offices of Romania in order to guarantee the authenticity of the signatures and of the seal."

In practical terms, this meant in the present case that the copy of the arbitral award submitted, which had been certified by the Secretariat of the ICC to be a true copy of the original, had to be certified by the French Ministry of Justice, the French Ministry of Foreign Affairs and the Romanian Consulate in Paris.

The manner in which the Romanian lower court applied the article 162 requirement of over-authentication to the Award is not in accordance with Articles III and IV of the New York Convention.

Moreover, article 162 expressly provides for an exemption from the requirement of over-authentication where otherwise provided by law, by an international agreement to which Romania is party or on a reciprocity basis. The Romanian court made no reference to this express exemption, enacted to give effect to Romania's obligations under international treaties, including the New York Convention.

The conditions for application of the New York Convention to the Award were indeed satisfied:

  • the the Award was made in Paris (3) and enforcement sought in Romania (4) ;
  • each of France and Romania are "Contracting States" (5) ; and
  • the Award is final. (6)

Articles III and IV of the New York Convention provide as follows:

Article III:

"Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards."

Article IV:

"1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:

(a) the duly authenticated original award or a duly certified copy thereof…"

Article IV sets up a simple procedure for establishing prima facie the enforceability in a Contracting State of an award made in another Contracting State. "Article IV is set up to facilitate the request for enforcement by requiring a minimum of conditions to be fulfilled by the party seeking enforcement" (7) . The party seeking enforcement is only required to produce the duly authenticated original arbitral award or a duly certified copy thereof together with the original arbitration agreement or duly certified copy thereof. "The conditions mentioned in Article IV are the only conditions with which the party seeking enforcement of a Convention award has to comply." (8) "In fulfilling these conditions, the party seeking enforcement produces prima facie evidence entitling him to obtain enforcement of the award." (9) The award may, however, be refused enforcement on any of the substantive grounds enumerated in Article V. This note is not concerned with those substantive grounds of refusal of enforcement, but only with the Article IV conditions for establishing the prima facie right to obtain enforcement in Romania of an award made under the auspices of the ICC in Paris.

"Authenticated" in Article IV of the New York Convention means evidence of the genuineness of the signature. There is no fixed rule as to which law determines this question: it can be either the laws of the country where enforcement is sought or where the award was made. (10)

The Romanian lower court applied Romanian law 105 and refused exequatur on the grounds that, inter alia, the award was not "over-authenticated". The plaintiff had submitted a copy of the Award certified as being conform to the original by the Secretariat of the ICC. While the Romanian courts are entitled to apply Romanian law to the authentication procedure, it is well established that the spirit of the Convention is for ease of enforcement and not the contrary. (11) Article III of the Convention proscribing "more onerous" procedural rules underlines this reasoning. Cases of refusal for enforcing a foreign arbitration award on procedural grounds for failure to comply with Article IV (1)(a) are rare.(12) In all the reported cases refusing enforcement for failure to comply with Article IV (1)(a) of the New York Convention, no original of the award to be enforced was submitted, but only a copy. Hence, they deal with the question of the due certification of the copy of the award required under Article IV (1)(a) and not authentication as such. Moreover, there have been several cases where the original award is considered as sufficient, without any extra requirement as to authentication being imposed. (13)

Romanian Law 105 states that over-authentication is required for "official documents drawn up or authenticated by a foreign authority". (14) From the drafting of this obligation, it is clear that "over-authentication" is a procedure different from, and in addition to, authentication, from the use of the prefix "over" and the fact that it applies to documents, which are already "authenticated". Hence, the imposition of this requirement on an arbitral award otherwise subject to the New York Convention is in breach of both Articles III and IV of the New York Convention. In particular with regard to Article III, there is no requirement of over-authentication for the enforcement of local Romanian awards in Romania. All that is required is the authentication of the award by the body, which issued it.

Not only is the requirement of over-authentication in breach of international law embodied in the New York Convention, it is also in breach, on its face, of Romanian law. As stated in paragraph 3 above, Romanian law 105 provides in Article 162 that an exemption from the requirement of over-authentication "is allowed, according to law, to an international agreement to which Romania is part or on a reciprocity basis". (15)

First, the New York Convention, as shown above, is clearly opposed to any such procedure of over-authentication.

Secondly, the party seeking exequatur informed the court that the Bilateral Treaty between France and Romania for Judicial Co-operation dated November 5, 1974, which came into force on September 1, 1975, exempts from over-authentication:

"Documents issued by judicial authorities or other competent authorities of one of the two States, as well as documents which such authorities certify the date, the signature or conformity to the original, are exempt from authentication, when they are produced in the territory of the other State." (English translation) (16)

The Romanian lower court, however, considered that there was no exemption from over-authentication pursuant to the Franco-Romanian Treaty, since the Award was not issued by a "competent authority" of France, but an international organisation, which just happens to have its seat in Paris.

Whether or not this is the correct interpretation, the French authorities consider that arbitral awards made in France pursuant to the rules of the ICC are within the ambit of the exemption from over-authentication provided by the Treaty. For this reason, the French authorities refused to over-authenticate the Award when requested. (17) Hence, on the basis of reciprocity as provided in article 162 of the Romanian law 105, the Romanian lower court should not have required over-authentication of the Award.

Reciprocity and the application of the Franco-Romanian Treaty is the source of the "Catch 22" situation in which the Zimbabwean corporation finds itself. The Romanian court required over-authentication of the Award but when the applicant attempted to comply, the French authorities refused over-authentication on the grounds that there is a legal impossibility to over-authenticate arbitral awards made in France for the purposes of enforcement in a Romanian jurisdiction because of the exemption provided by the Franco-Romanian Treaty.

Accordingly, there would seem to be no basis under the New York Convention for the Romanian lower court refusing on procedural grounds the prima facie case for enforcement of the Award in favor of the Zimbabwean corporation by the presentation of the Award, duly authenticated by the body issuing it, the ICC.

An appeal was made against the judgment of the lower court. The Bucharest Court of Appeal (18) upheld the appeal on the grounds that the lower court had incorrectly rejected the request for exequatur as being inadmissible because of the plaintiff's failure to submit over-authenticated documents as the appeal court was of the opinion that the question of over-authentication was of the merits and not as to inadmissibility of the claim. Thus, the request has been returned to the lower court for reconsideration of the question of over-authentication on the merits.

The original request for exequatur was filed in the first quarter of 2000. As a result of the decision of the lower court and the appeal therefrom, more than one year has passed, and the plaintiff finds itself in exactly the same position as when the request was originally filed.

The moral of the story is that the champagne should never be opened when an arbitral award is issued. It can go very flat pending enforcement.

Notes:

1 ICC Rules of Conciliation and Arbitration, in force as from January 1, 1988 ("applicable ICC Arbitration Rules").

2 Court decision no. 5804 of October 4, 2000.

3 The Award was stated to be made in Paris and the hearings were held in Paris. Pursuant to Art. 22 of the applicable ICC Arbitration Rules, "The arbitral award shall be deemed to be made at the place of the arbitration proceedings".

4 Art. I of the New York Convention provides: "This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought."

5 France ratified the New York Convention on June 26, 1959 and Romania acceded to the New York Convention on September 13, 1961, each imposing, pursuant to Art. I(3) of the New York Convention, the reservation that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State (cf. Yearbook Commercial Arbitration (1998, International Council for Commercial Arbitration), Vol. XXIII (1998), at pp. 582 and 584).

6 Art. 24(1) of the applicable ICC Arbitration Rules. The New York Convention provides in Art. V.1(e) that recognition and enforcement may be refused if the award has not yet become binding on the parties. This is, strictly speaking, a defence to be raised by the party against whom enforcement is sought in the discussion of the merits of the case rather than a pre-condition for establishing a prima facie case for enforcement.

7 Albert Jan van den Berg, The New York Arbitration Convention of 1958. Towards a Uniform Judicial Interpretation (1981), at p. 246.

8 Yearbook Commercial Arbitration (1991, International Council for Commercial Arbitration), Vol. XVI at pp. 483 and 484.

9 Albert Jan van den Berg, The New York Arbitration Convention of 1958. Towards a Uniform Judicial Interpretation (1981), at p. 247.

10 ibid, at p. 252.

11 ibid, at pp. 252 and 253. "It is necessary to bear in mind that while enforcing a foreign award one should not be extremely strict and technical as to the compliance of the requirements of Sect. 8(1)(a) of Foreign Awards Act 1961." "Sect. 8(1)(a) prescribes that the party applying for the enforcement of a foreign award shall, at the time of the application, produce the original award, or a copy thereof, duly authenticated in the manner required by the law of the country in which it was made", Yearbook Commercial Arbitration (1990), Vol. XV, India no. 18 (27, 29), p. 465. The U.S. District Court, Eastern District of Michigan, Southern Division, rejected the claim that petitioner seeking enforcement of a foreign award had not complied with Art. IV of the Convention by submitting only a copy of the award and not the original nor a certified copy, stating that "the respondent may not assert such technical deficiencies to defeat or delay confirmation of a valid award", Yearbook Commercial Arbitration (1978), Vol. III, p. 291, U.S. no. 16 at 8th defence; the Zurich Commercial Court has also stated, in relation to the application for enforcement of an arbitral award of the Chamber of Maritime Arbitration of Paris where only a non-certified photocopy of the award was submitted "one should not apply too strict a standard to the formal requirements for the submission of documents (authentications, attestations regarding the absence of means of recourse), when - as in the case under consideration - the conditions for recognition are undisputed and materially beyond doubt", Yearbook Commercial Arbitration (1992), Vol. XVII, Switzerland no. 21 (5), p. 584; "Similarly, the genuineness of the arbitration award is not in dispute. Respondent is merely grasping at straws, attempting to persuade the court to refuse to confirm the award on the basis of a mere technicality", Yearbook Commercial Arbitration (1998), Vol. XXIII, U.S. no. 267 (14), p. 1102.

12 There are only five cases reported in the published editions of Yearbook Commercial Arbitration where the court has held that the party seeking enforcement of a foreign arbitral award has not complied with Art. IV(1) of the New York Convention:

  • - FR Germany no. 14, Vol. IV, p. 258, 259: "The original had not been presented to the Court. Instead, a copy was presented which lacked the certification that the copy was in conformity with the original, since the official certification on the copy concerned only the signatures. …Moreover, the copy did not reflect the complete original because it did not contain the names of the arbitrators who had participated in the decision."
  • - Italy, no. 130 (8,9), (1994), Vol. XIX, p. 700 : "Petitioner failed to request enforcement of the partial award and to supply an original or a duly certified copy of the same at the moment of the application; hence, the request for enforcement must be denied according to Art. IV of the New York Convention. …It is irrelevant that respondent supplied a copy of the partial award, which has not been duly certified." This can be distinguished since the petitioner had supplied an original of the final award and only sought enforcement of the final award, but the Court agreed with respondent's argument that the final award, if unaccompanied by the partial award, lacked two essential elements: determination of liability and direction to the respondent to pay.
  • - Italy, no. 136 (3,4), Vol. XXI, p. 587: "we must find ex officio that the request for enforcement of the first award…is inadmissible because only an informal photostatic copy of the document containing the award has been submitted in these proceedings… We reach a different conclusion as to the second award … The original award has been submitted in this case".
  • - Italy, no. 137 (8, 9), Vol. XXI, p. 590 : "Only the joint examination of the partial award and the final award can allow to ascertain whether the decision of the arbitrators is final, certain, consistent and decides all the claims and issues filed by the parties. The two awards are thus inseparably united and must be considered as a whole. … Claimant's omission to seek enforcement of the partial award and submit the original or certified copy of the same at the time of initiating this action makes enforcement of the final award inadmissible under Art. IV of the New York Convention."
  • - Italy, no. 140 (1,2), Vol. XX1, p. 607: "(Appellant)… alleges that the award should not have been deemed duly certified according to Art. IV(1)(a) of the [New York Convention], as the original award contained three signatures and the copy, in order to be valid, should equally have contained three authenticated signatures… This ground for appeal is founded."

13 Yearbook Commercial Arbitration (1983), Vol. VIII, Italy no. 54 (5), p. 390; (1990), Vol. XV, India no. 18 (29), p. 480; (1993), Vol. XVIII, Hong Kong no. 3 (4, 5), p. 387; (1996), Vol. XXI, Italy no. 136 (4), p. 588; (1997), Vol. XXII, Austria no. 11 (1), p. 629.

14 Art. 162.

15 ibid.

16 Art. 10.

17 Letter from French Ministry of Foreign Affairs to French Justice Ministry dated January 11, 2001, which states in the first paragraph: "concerning the exequatur in Romania of a decision of the International Chamber of Commerce in Paris on 15/02/99, the Office for Over-authentication confirms that there exists an exemption for over-authentication in respect of all French documents for production in Romania, pursuant to the provisions of the Franco-Romanian Treaty of 5/11/1974 in force since 01/09/1975". (English translation)

18 The Bucharest Court of Appeal, VIth Commercial Department, judgment in civil matters, No. 616.