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Dispute Adjudication Board decision enforcement under New York Convention. Admissibility in court. Does it constitute an arbitral award?

6 octombrie 2014 | Veronica JUNGER

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Secţiuni: Arbitraj, RNSJ, Romanian Lawyers Week

The essay has in view a litigation (second appeal) held before High Court of Romania, that took place between two parties involved in a construction agreement concluded under the General Conditions of the FIDIC standard contract (the Red Book), as amended by Special Conditions agreed by the parties.[1]

The object of the litigation was the request addressed by the claimant to the regular Tribunal for the recognition and the enforcement of a a DAB decision contested by the respondent party, request grounded upon the basis of art.V par.1 subparagraph e) of the New York Convention in 1958.

Relevant provision in the General Conditions of the Red FIDIC.

In case a Construction Agreement is concluded under the General Conditions of the FIDIC standard contract (the Red Book), the competence to solve any conflict that may arise from such Agreement belongs to the arbitral tribunal, in accordance to art. 20.6 in the General Conditions.

However, art. 20.4 (the paragraph before last) in the Red FIDIC General Conditions states that (….) neither party shall be entitled to commence arbitration of a dispute unless a notice of dissatisfaction has been given.

Therefore, by interpretation of the provisions in art. 20.1-20.4 in the Red FIDIC General Conditions it results that, unless otherwise agreed by the parties, prior to addressing the conflict to the arbitral tribunal, the parties should undergo the preliminary Dispute Adjudication Board (DAB) proceedings, consisting in submiting the case before such Board for the purpose of amiable settlement.

The dispositions of art. 20.4 provides that such preliminary proceedings are completed by the issuance of a DAB decision binding to the parties, who shall promptly give effect to it, unless and untill it shall be revised in an amicable settlement or an arbitral award. It is further specified that either Party may, if dissatisfied with the DAB decision, within 28 days after receiving it, give notice to the other party regarding such dissatisfaction.

To the contrary, if the DAB has given its decision and no notice of dissatisfaction has been given by the parties in the said interval, the decision shall become final and binding upon both parties.

High Court decision and reasoning.

Considering the above described proceedings, the parties to the litigation have submitted the conflict to such DAB, which issued the decision. Despite that, the respondent had notified to the claimant its dissatisfaction within the 28 days time-frame set out by Art.20.4 in the Red FIDIC General Conditions.

In rulling on the recourse (second appeal) request submited by the claimant against the Tribunal’s decision (held by the Appeal Court, as well), the High Court of Justice of Romania analyzed whether or not the claimant’s request for recognition and enforcement of the DAB decision – contested by the respondent party – is admissible or not, by contemplating the dispositions of art.V par.1 subparagraph e) of the New York Convention in 1958.

To start with, it was noted that in accordance with the above mentioned legal norm, the recognition and enforcement of the foreign award may be refused if the „award has not yet become binding on the parties ….”.

Moreover, art. I paragraph 1 in the New York Convention of 1958 mentions that such convention will apply to arbitral awards….” and in paragraph 2 it states that the term „arbitral award” shall include not only awards made by arbitrators, but also those made by permanent arbitral bodies …”.

In order to determine the courts of law competence, the High Court considered that it must establish whether or not the decision issued by DAB – as determined by the parties through the Dispute Adjudication Board Agreement – is final and irevocable and represents an arbitral award binding by the parties.

It was held that the DAB decision does not fulfil the necessary conditions of admissibility in the view of art. V par. 1 subparagraph e) in the 1958 Convention due to the fact that i) such decision was issued during the proceedings that took place preliminary to the arbitration, when the parties submited the conflict to a DAB, and that ii) such preliminary DAB proceedings phase was not finalized, following the respondent’s notification of dissatisfaction transmited within the 28 days duration, according to art. 20.4 in the General Conditions.

The High Court concluded its reasoning by stating that such DAB decision would have become binding to the parties only in the situation the dissatisfaction notification was not sent, in which case the parties do not need to address to the arbitration tribunal. 

It was, therefore, considered that the regular Tribunal lawfully rejected – as inadmissible – the claimant’s request for recognition and enforcement of the DAB decision by stating that the such decision is not a final and binding, in the view of the above mentioned legal norms and it does not constitutes an arbitral award since it was contested by the respondent and consequently, did not become binding.

Personal opinion

Eventhough in its finality, the High Court decision was a fair one, the reasoning behind it could have been more appropriate to the legal provisions of the Convention and the relevant text of the Red FIDIC General Conditions.

1) It is true that a DAB decision that is not contested by any of the parties in litigation during the 28 days interval provided by art. 20.4 become final and binding.

A contested DAB decision, in disagreement with the High Court reasoning, even if not final, would nevertheless remain a binding one, having a distinctive legal regime in terms of obtaining its enforcement: it would draw the application of art. 20.5 & 20.6 in the General Conditions in the Red FIDIC, namely the amicable settlement procedure and the arbitration for final determination.

2) Notwithstanding the DAB decision would be binding and final, it does not constitute an arbitral award in the sense of the New York Convention; under the General Conditions in the Red FIDIC, in case of failure to comply with DAB decision, the parties must address to the arbitration tribunal in order to obtain an arbitral award by means of a summary arbitration.

Consequently, in such situation, the request for recognition and enforcement of a DAB decision- even if binding and final – would have to be rejected by court as being inadmissible, as well, due to the fact that the parties, prior to addressing the court must obtain the arbitral award in accordance with art. 20.7 in the General Conditions, in order to successfully invoke the application of art. I of the New York Convention.

[1] High Court of Cassation and Justice’s decision no. 4613/2012 – Civil Section I.

Veronica JUNGER

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