Implementation of Foreign Arbitral Awards in Australia and Saudi Arabia - Assignment Example

Conclusion Under this chapter, the controls of the implementation of foreign arbitral awards in Australia and Saudi Arabia have been discussed. Explanations have given how the controls work, or their effect on arbitration. It is this that is analysed to find out their efficiency, Justice to the parties in the individual cases and societal values. The two controls are: public order and limits of Islamic law. Efficiency As described in the criteria, efficiency in this research "for purposes of comparison between the Saudi law and Australian law" means the effectiveness of these laws via the implementation of the provisions of foreign arbitral awards, the effectiveness of such laws to achieve the greatest degree of freedom for the parties to resort to arbitration and also to give a larger circle of freedoms in the area of arbitration. Analysis of the controls therefore focuses on if they lead to achievement of the greatest degree of freedom for the parties to resort to arbitration and if they give a larger circle of freedoms in the area of arbitration. Consequently, the analysis answers whether the controls, grant all freedoms and outcomes assumed in the arbitration process. So what are the freedoms and outcomes? Do these encourage of discourage arbitration? Outcomes of Implementing the Provisions of Foreign Arbitral Awards SAUDI ARABIA There is a problem in the Kingdom of Saudi Arabia. Arbitration (‘Tahkim’) in this kingdom is still a debate and this reduces the confidence that parties may have to arbitration or of resorting to arbitration involving the country. It increases the probability of disagreement between Saudi Arabian and Western beliefs about arbitration. In Saudi Arabia, the Saudi Grievances Board refers to the public order in two cases: Violation of Islamic Law and Violation of legal regulations relating to the arbitration “peremptory norms of public policy” Outcomes of Implementing Provisions So long as the Islamic law is not violated, implementation of the foreign arbitral award is not a problem. The definition of public order includes more than the Islamic law. Public morals are also considered when determining if an award should be implemented. This is as according to the Riyadh Convention on Judicial Cooperation. It means therefore, that the Riyadh Convention on Judicial Cooperation forms part of public order in the Saudi Kingdom. So the definition of public order determines what foreign arbitrations are to be implemented. These, considering what efficiency is, lead to achievement of the freedom and encourage the use of arbitration in Saudi Arabia. What the country considers public order should not be an issue when it comes to implementing foreign arbitral awards since these define the moral values of the country and maintain order. Different countries have different cultures and beliefs and these contribute to their daily economic and social activities. They therefore determine what laws are implemented to achieve public order. Saudi Arabia has controversies just like other countries that are signatory to the New York Convention. In one ruling, No. 235 / T/ 2 of 1415 AH, there was controversy on whether the foreign judgment should be implemented or not because one court indicated that such a judgment was contrary to public order while the other court argued that there was no such evidence. Evidence is considered to be a direct text from the holy Qur’an or the Sunnah or an Ijma’a between Muslim Scholars. If the implementation of an award decides what the Shari’a decides, there is no contrary to the law. Implementation is also flexible and this is an advantage to the parties who would like to resort to arbitration. As much as some parts of the arbitration may be contrary to the public order, sections that are not contrary to public order can be implemented. One example given is the implementation of a foreign award in Case No. (10 142) dated 31/1/2004, in which annual interest was required to be paid on profit. This is against the Sharia law, but the whole compensation or profit that the plaintiff should have received is not against any Shari’a law. Because of that, implementation of the award is undertaken but the interest part is excluded. It means the right to receive payment to expenses incurred should not be taken away because of the interest added on top of what should be paid. There are different reasons for inclusion of interest and these reasons are only known to the arbitrators and the parties involved in the agreement, but such should not go against the public order of a country. It is only a disadvantage which could be discouraging, but then to any understanding party on the scope of public order of a country, such should not be an issue. The above explanation shows how effective the laws involved in implementing foreign arbitral awards are except for the disadvantage. The Saudi Arabian Grievances Board has limited the Islamic public order to the assets of Shari’a law. This, as described in the discussion area, is not easy to specify and has other non-specific and loose contracts. But for the international arbitration, going against public order means involving in or having agreements involving prohibited contracts, having contracts with Riba, but if the contract is valid, the Usury part will not be implemented, and if the contract is Gharrer. All these provisions and actions encourage arbitration and so the use of Islamic public order is effective in implementation of foreign arbitral awards. Violation of any law within the country is also considered against the public order. Saudi Arabia has regulations that guide implementation of foreign arbitral awards. Such are the ones concerning courts with authority to carry out such jurisdictions, arbitrability, requirements of an arbitral award for it to be implemented and legal status. Going against any of these is considered going against public order. This does not discourage arbitration at all; instead, it encourages it through its just system. The award has to be arbitrable, all the requirements of an agreement have to be fulfilled before accepting that as an agreement and the courts or arbitrators dealing with the case must have jurisdiction over the cases. There are negative perceptions about Saudi Arabia being a country that discourages enforcement of foreign arbitral awards. An example is; “Saudi Arabia ‘embraces’ the international community without rejecting its domestic public policy. As a result, the international community loses the certainty offered by the New York Convention that international arbitral awards will be reviewed methodically.” It therefore could be that, the Kingdom of Saudi Arabia does not provide the freedoms expected of its implementation of the foreign arbitral award provisions, but this is not the case. Some other issues pointed out about implementation of foreign arbitral awards provisions by the Saudi Arabian government that support the perception that this government and its laws make the enforcement of an international arbitral award difficult and time consuming are: “The Saudi government reserves the right to refuse enforcement of an award. Awards rendered by default against a Saudi party are automatically unenforceable”1 These perceptions should be cleared out since most of them come as a result of lack of proper research and understanding of the Shari’a law, especially arbitration in the Islamic law. It is important to first understand the scope of Islamic public order, which is dependent on the Islamic law, social morality and consensus Ijma’a by scholars, just like any other country with its own scope of public order. The Kingdom of Saudi Arabia has different cultures from the Western countries, and it is clear that they have Islamic law guiding them, compared to Australia, with the Australian Laws guiding them. The Islamic law for example, prohibits interests on profits, while other country’s laws do not prohibit this. Acting according to the prohibitions is only right and in order, and not discouraging arbitration. Another factor that contributes a lot to the misunderstanding is lack of translations of Saudi laws and regulations in English to non-Arabic Speakers. Lack of published decisions is also a big impediment. AUSTRALIA Does the use of public policy encourage foreign arbitration? The use of public order and the scope of public order in the country determine the outcomes of cases handled by the Australian courts, in which contrary to public policy is used as a basis of refusal to implement an award. From the cases presented, public policy is shown to be acting according to the law as well as ensuring, justice, social morality and public order. The courts’ main objective is to preserve the social morality, justice and public order and so even in a case in which a defendant argues that the plaintiff’s case is contrary to public policy and should not be implemented, the court determines the plaintiff’s fault or role in that. Justice and social morality to any party is considered first which maintains the public policy argued about. An example of the case is Yang v S & L Consulting & Anor [2009]. Controversy: Australian courts made a judgment based on s.8 (5) indicating that this section provides for residual discretion as an additional ground for refusal of enforcement of such awards based on contrary to public policy by the courts. This however is not accepted by many academicians who feel that s.8 (5) of the IAA defenses were exhaustive. This controversy is a disadvantage to implementation of the foreign arbitral awards in the country but based on the arguments of the court considering other reasons why the award could not be implemented, it is only fair. Making use of judges own discretion may or may not discourage foreign arbitration depending on the outcomes. If justice is served in the cases like in most cases of Australia, then such measures may encourage arbitration. Solving the cases by the courts is done according to the laws and no laws are violated except for areas of controversy where one may say that a law has been violated; like the case above. Because of that, implementation of foreign arbitral awards in the country are considered just and so encourage international foreign arbitration. Resort Condominiums v. Bolwell case is an example. Australian courts limit the scope of public policy and have residual discretion to make decisions on what they consider public policy. In one case, the judge decided to make more investigations about the case without any request from the parties involved in the arbitration. The outcomes of this case produce a positive and a negative perception. The negative perception is that the judge decides on what public order is when dealing with a case. The use of court discretion and uncertainty as the basis of refusal to enforce a foreign arbitral award in two different cases is not taken lightly by some scholars. Court discretion is one important factor that shows the power of the courts to make decisions regarding what is public policy to the nation. The positive perception is that it gives an indication of the Australian courts aiming at justice and morality, although some of their decisions may seem not to go by the provisions of the New York Convention. Similarities In both countries, the national law guides the definition and scope of public order. This affects the implementation of foreign arbitral awards in both countries differently since both countries have different national laws. Both countries are parties to the New York convention and this has guided their implementation of one part of a foreign arbitral award that solves the conflict and is not contrary to public policy and non-implementation of the part that is contrary to public policy. In Islamic law, interests in profits is prohibited and so cases involving such interests are partly implemented leaving out the usury part. In Australia, if a part of the arbitral award can be implemented (not contrary to public policy and meets the legal requirements), it is implemented and the part which is contrary to the public policy is left out. This gives freedom to parties wishing to get involved in arbitration. With such knowledge of the level of justice, they decide on whether to go for or not, but the outcome will be determined by the legality of the award and its adherence to public policy. In Australia, uncertainty is used as a basis of refusal to implement foreign arbitral wards yet it is not one of the grounds of refusal in the New York Convention. Australian domestic law however, uses uncertainty as a basis of refusal to enforce domestic arbitral awards. This proves that Australia considers its domestic law and public policy and ignores the New York intervention rules. But then again according to the New York Convention, an award that is contrary to public policy should not be enforced. According to the domestic law, enforcing an award that is uncertain is contrary to the public policy. The scope of public policy is a disadvantage to the arbitration implementation process because it may discourage parties from resorting to arbitration. It however gives them a choice, for the rules are set already and they have to choose to abide by the rules or seek alternative methods of solving disputes. Saudi Arabia is also perceived to use its national laws and ignore the New York Convention laws. Based on the example above and the explanations of how the Islamic law is used in resolving disputes, this misunderstanding arises from what the two countries consider public order and from the evidence, national laws form the public order. Both countries consider what is against the national laws as against public order or policy. Kutty considers public policy as that defined by the New York Convention as an international public policy, but under the New York Convention, article V(2) (b), contrary to the public policy is that of the country in which the award is to be implemented. The use of national laws therefore, is just adhering to the New York Convention rules. Differences One difference is in what the two countries consider to be public order or public policy. The two nations are similar considering the maintenance of order in the society that all aim at. Australia develops policies to guide the public order, while Saudi Arabia has the Islamic law, the scholars to debate on consensus issues and to ensure public order which also includes social morality. The scope of public order in Australia lies within the courts guided by the national laws while the scope of public order in Saudi Arabia is limited by the Islamic law, social morality, violation of any law and consensus Ijma’a by scholars. The New York Convention is implemented through the International Arbitration Act 1974 (Cth) in Australia while in Saudi Arabia, there is no specific Act through which the Convention is implemented although it is a party to it. Justice to the Parties in the Individual Cases Is there justice in implementation of Australian and Saudi Arabian foreign arbitral award laws? Justice for the purpose of this research seeks to determine if both parties in cases analyzed were awarded equal rights and if the judges considered merits of the cases which had no direct effect on the public order of the state in which the award was to be enforced. In order to determine if there is justice in the use of public order and Islamic law in implementation of foreign arbitral awards, focus will be on the competence of court in recognizing and implementing foreign arbitral awards in both Saudi Arabia and Australia, and the limits of the courts in considering the subject matter of the provision of the foreign arbitral awards. SAUDI ARABIA There is evidence showing that Saudi Arabian courts do not refuse to implement foreign arbitral awards from foreign courts provided the courts are competent and the awards are not contrary to Islamic law and public morality. Evidence is in the case where the violation of rule of article II of the Arabic Convention on the implementation of the provisions 1952 was referred to when dealing with the case. According to article 3(d) of the rule, “competent judicial authority ... shall not refuse to implement the provision except in the following circumstances: (c) If the verdict was contrary to public order or public morals in the requested state of implementation ...”. Merits of the case must not be considered except in cases where the public order of the state is affected. In Saudi Arabia, the general rule is that “the Board retries the entire case on its merits in order to ensure that the award does not violate Islamic Shari’a”. Because of this, any retrial of cases to determine if Saudi public policy has been violated is considered just. There is no case in which the merits of the case were considered in the investigated court cases of Saudi Arabia. In fact, in one case, the court made a judgment based on this law that the court has no business in considering the merits of the case. This is ruling No. 157 / T / 4 in 1427AH (2007) in which the Audit-Circuit stated that “the Court had no right to consider the merit of the case or answer any substantive defence as long as that foreign rule did not violate the Islamic law”. The use of public order in Saudi Arabian cases shows justice and maintenance of public morality. Examples of such cases are: ruling No. 95 / T / 4 in1427AH (2007) in which the award met satisfied all the formal conditions and was not contrary to Islamic Shari’a law; ruling No. 92 / T / 4 in 1424 AH (2004) in which the award met the requirements specified in the agreement and was found “not contrary to Islamic law or public morals and public order in Saudi Arabia”; and No. 157 / T / 4 in 1427AH mentioned above. Making judgments based on Islamic Shari’a law (which has to be supported by direct text from the holy Qur’an or the Sunnah or an Ijma’a between Muslim Scholars), rules and public morality is just enough. It is also evident in the cases that justice was achieved in the cases handled (ruling No. 13 / T / 4 in 1425 AH (2005) and No. 102 / T / 4 in 1424 AH 2004 among others). The courts preserve the Islamic law which ensures public order, and any award that is contrary to the nation’s public order should not be implemented. That is justice. The courts are just for the scope of public order allows debate on debatable issues to produce evidence to prove the illegality or not in the cases. An example is the ruling No. 189 / T / 4 in 1427 AH (2007). Music songs in Islam are prohibited, and so a court refused to implement a foreign arbitral award on this basis. The Audit Court revoked this ruling and the reason for doing that was that; “the prohibition of songs is not in accordance to an explicit text in the holy Qur’an or Sunnah or in accordance with Ijma’a between the Muslim scholars”. It means contrary to public order should be in accordance with explicit text in the holy Qur’an or Sunnah or in accordance with Ijma’a. Saudi Arabia also has legal principles that prevent implementation of illegal contracts and other contracts that violate the Islamic Shari’a law. Examples are the prohibition of usury and Gharrer contracts. Gharrer contracts prohibition prevents exploitation and manipulation of any of the parties involved in the contract and also ensures the rights of those with logical and legitimate grounds. AUSTRALIA Justice is observed in many cases handled by the Australian courts. According to the New York Convention, only legal arbitral awards should be implemented. There is a case where the judge refused to implement an award because the awards were interim orders. According to the New York convention, it is the arbitral award that should be enforced and not an interim. Enforcement of such an interim would be contrary to public policy. The policy here is from the New York Convention laws and regulations. The scope of public order is limited by public policy and this is determined by the judges. So many cases may seem unjust based on the argument of being against public policy yet considered not against public policy. The main misunderstanding again here is the use of domestic laws to determine violation of public policy. An example is in the use of uncertainty as a basis for refusal to implement a foreign arbitral award, considering implementing such an award to be contrary to public policy. In Australian laws, as mentioned previously, uncertainty is used to refuse implementation of domestic arbitral awards. An example case is International Movie Group Inc. (IMG) v. Palace Entertainment Corp. Pty. Ltd. Although the scope of public order is determined by the judges, most of the cases decided aimed at justice and morality. This is evidence that there is justice in individual cases. There is one case where one might think justice was not achieved. In this case (Resort Condominiums v. Bolwell), the court found something important that could affect future court decisions if the foreign award was implemented. It is very true that previous court decisions are used to handle future cases to ensure justice, for this, the court or the judges were right; but considering the plaintiff, this could be an injustice to the company. If the finding was contrary to public policy, then again the judges may be right, but in this case, the merits of the case were considered making it have no meaning to the parties who resorted to arbitration. The basis of making the ruling was unjust although it is right for the judges to have general discretion to decide to enforce and award or not. In deciding on what public policy is, the Australian courts can decide on the merits of the case like in the case (Resort Condominiums v. Bolwell case) to identify contrary to public policy. Article V of the New York Convention gives the judges the right to raise the issue of violation of the public order. This article however does not state the specific stage of violation of public policy. It is acceptable for the judges to apply the national policy at any stage of the arbitration proceeding to determine if the award is contrary to public policy. Because of this, considering the merits of the case to determine if the award is contrary to public policy is just. In this case however, there are three other reasons why the enforcement of the award was contrary to public policy and so was not implemented. The only unjust action was an important finding by the judges that would affect future decisions. A summary of the reasons for Australian courts rejection of enforcement of foreign arbitral awards also prove that these cases are handled justly. These are; to ensure the ‘Arbitrability, to refuse to enforce when there is existence of influence or fraud and to ensure justice and morality for the public. Differences When specific cases are considered from both countries; it can be considered that there was justice in almost all the cases injustice in very few, although injustice in this case may be due to the different scopes of what each country considers public order, influenced by their national laws. Some parties did not get their rightful claims because of the public policies of respective countries in which the award was to be enforced. Example is in the case where the interests in profits are left out when implementing a foreign arbitral award in Saudi Arabia. It would be contrary to Islamic Shari’a law, but if the award was legal, met the formal requirements and was not contrary to public policy, the rightful claims on the usury part are taken away. In Saudi Arabia, it is just since the law prohibits such, but in other nations, it is legal. This may be considered justice as well as injustice based on the explanations given above. An example is in ruling No. 235 / T/ 2 of 1415 AH 1995. Similarities It is the courts that determine or define what public policy is and decide on ‘contrary to public’ issue of an award. The composition of the courts and the laws guiding the courts however differ. Saudi Arabia is guided by Shari’a law, public morality and muslim scholars on matters concerning public order while Australia is fully guided by Australian laws, interpreted by the judges. In both countries, they aim at preserving justice and morality but some of their court decisions are not have direct implementations of the New York Convention. Societal Values To determine the social values, this section will explore the role of the laws in both countries in providing: a) Justice and fairness for both parties and to achieve their interests and maintain their rights. b) While maintaining social values and public order. Social values and public order is well maintained. This is because in both countries, the domestic laws maintain order, ensure justice and morality. As indicated in the criteria, laws that ensure both elements are achieved are those that “better and more worthy of being followed through its maintenance of public and private rights, whilst facilitating and encouraging people to resort to arbitration”. It is the domestic laws or public policies in both countries that are considered ‘public policy’ in interpreting the New York Convention or other conventions referring to public policy. It is also evident from the efficiency and justice found in the laws of both countries. Justice for both parties to have their rights and achieve their interest is according to the national laws is served, however, the justice for the parties according to their agreement sometimes is not served. This is mainly because of the public policy differences in both countries and the New York Convention allows enforcement of foreign awards in any signatory country. Certainly, this difference in the public policy may consider as a natural and unavoidable since each state has its privacy and legal culture. That is why the international efforts came to alleviate the difference between those states. Read More