Annulment of Arbitral Awards

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  • Topic: Arbitration, Arbitration award, International arbitration
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ANNULMENT OF ARBITRAL AWARDS

Prepared for Genc Trnavci,
Law of International Arbitration
AUL 305

Prepared by Stefani Marjanović
Student at American University in BiH
January 5th, 2013

Table of Contents
Introduction1
Legal Grounds for Annulment1
Why do Courts Review Arbitral Awards4
Case Law6
Conclusion10
Appendix A11
Appendix B13
Appendix C14
Works Cited15

Introduction
The Arbitral award is final and binding upon all the parties in the dispute. It may only be vacated or annulled by a court on the grounds provided in the Federal Arbitration Act (FAA), such as corruption, fraud or irregularity during the hearing, or exceeding the arbitrator’s power. Throughout this paper one will see how it works in practice, meaning how the court actually implements it. The paper will also include some interesting cases regarding the annulment of arbitral awards, so it can help the reader to better understand the topic. The most important this paper will also include all the rules that are regulating annulment of arbitral awards. It is very important to understand the rules, and then see how they are actually implemented in practice. That is the reason why this paper will include both, the rules and the cases. Since arbitration is very common nowadays, it is very important to understand its concept and annulment of arbitral award is just one small part of it. So, when the arbitral award is rendered it may be a subject to the annulment by the court in the country where it is rendered, upon the request of either party if it does not conform to due process of law, non – arbitrability of the subject matter of the dispute or conflicts with the public policy of the State. What is the purpose of annulment? The purpose of annulment is actually to make the award granted invalid before it is enforced in another jurisdiction against the losing party. (Kazutake) Legal Grounds for Annulment

The legal grounds for annulment are provided in Article 34 of the Model Law and in Article V of the New York Convention. Those Articles are following the main topics for annulment which are: * The validity as to the form and substance of the arbitration agreement * the regularity of the constitution of the arbitral tribunal * the arbitral tribunal’s compliance with the mandate conferred to it by the parties * the public policy. (Giovannini)

First of all one must see what those rules are providing us for each main topic of annulling the award. First one is “The validity as to the form and substance of the arbitration agreement.” According to Article 34.2(a)(i) of the UNCITRAL Model Law:

“ (2) An arbitral award may be set aside by the court specified in article 6 only if: (a) the party making the application furnishes proof that:
(i) a party to the arbitration agreement referred to in article 7 was under some incapacity; or the said agreement is not 20 UNCITRAL Model Law on International Commercial Arbitration valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State.” (UNCITRAL) The whole Article can be found in Appendix A (UNCITRAL) where one can read all the reasons for setting aside or annulling the award, but here we are focusing on the validity as to the form and substance of the arbitration agreement. The same ground for refusal is provided in Article V.1.(a) where the ground for refusal or recognition of award is where the party furnished the proof to the competent authority that: (Giovannini)

“(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made.” (Attorneys) The whole Article V of New York Convention can be found in Appendix B (Attorneys). So, here one can see how the rules look like...
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