Sierra Leone became the 166th State Party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the “New York Convention” (the “Convention“), by depositing its instrument of accession to the UN Secretary General on 28 October 2020. The Convention will enter into force for Sierra Leone on 26 January 2021. According to the United Nations, there are 195 sovereign States in the world today. The near-global applicability of the New York Convention explains the primary advantage of international arbitration over domestic litigation to resolve disputes concerning international transactions, as it permits the enforceability, in streamlined proceedings, of arbitration awards in over 85% of the States of the world. This is a significant advantage of arbitration over domestic litigation, as an unenforceable domestic court judgement can take years of time and effort to obtain, but ultimately prove to be worthless if it cannot be enforced internationally.
Sierra Leone is following the path of other African nations which have increasingly acceded to the New York Convention recently. Ethiopia, for instance, ratified the Convention in February 2020. Palau, Seychelles and Tonga also acceded the Convention this year, following the Democratic Republic of Congo, Angola and Sudan, which acceded the Convention in 2017 and 2018.
What Is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards?
The New York Convention applies to the recognition and enforcement of foreign arbitral awards and referral by a court to arbitration. It is the most successful document in international trade law, considered as a “cornerstone” of international arbitration. The Convention provides that 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, subject to certain, limited defenses which are listed in Article V(1) of the Convention and include:
- 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; or
- 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; or
- The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
- The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
- The award has not yet become binding, on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
Current Contracting State Parties to the New York Convention
The New York Convention was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959.
As of November 2020, the New York Convention has 166 State Parties. In addition to Taiwan, which has not been permitted to accede to the New York Convention, UN Member States which are still not members include Belize, Grenada, Iraq, North Korea, Suriname, Turkmenistan, Yemen, and a number of African countries, including Libya, Eritrea, Somalia, South Sudan, Chad, the Republic of Congo (not the larger Democratic Republic of the Congo, which is a member), Malawi, Namibia, the former Swaziland (now Eswatini) and, in West Africa, Equatorial Guinea, Gambia, Guinea-Bassau and Togo. Other Non-Contracting States include small States, such as the Federated States of Micronesia, Niue, Saint Kitts, Nevis, Kiribati, Saint Lucia, Solomon Islands, Nauru, Samoa, Tuvalu, Timor-Leste and Vanuatu. Of States with the world’s largest 100 economies, only Iraq and Turkmenistan are not State Parties.
It is interesting to note that Iraq, for many years, has been making announcements that it would join the Convention. Efforts to accede the Convention were yet again revived in 2018 with the Iraqi Cabinet officially announcing to endorse the ratification of New York Convention and submit it for the ratification of its Parliament. Unfortunately, however, Iraq is still not a Party to the Convention today.[1] Iraq has the largest economy of any State that is not a Party to the New York Convention.
Reservations and Declarations
Under Article I.3 of the New York Convention, Contracting States can make two reservations: a so-called “reciprocity reservation“, meaning that the Convention only applies to the the recognition and enforcement of awards made in the territory of other Contracting States, and a so-called “commercial reservation”, meaning the Convention applies only to differences arising out of legal relationships, contractual or not, which are considered commercial under the national law of the State making such a reservation (see Article I(3) of the New York Convention). Sierra Leone has opted for both reservations, in addition to formulating a declaration that it will apply the Convention only to arbitration agreements concluded and awards rendered after the date of its accession.
The increasing accession of African States to the New York Convention, including Sierra Leone, is a positive development, seen as one key indicator of countries opening up to business and to foreign investment. Sierra Leone has been a member of the ICSID Convention since 1965. As of last year, it is facing its first ICSID claim, brought by Gerald Group, a London-based company, under the United Kingdom-Sierra Leone Bilateral Investment Treaty (“BIT“) over a ban imposed by the State on exports on iron ore. Sierra Leone has only one other BIT in force, with Germany, which was signed in 1965. It also signed a BIT with China in 2001, which, however, still has not entered into force (see Investment Policy Hub, Sierra Leone).
[1] See Kluwer Arbitration Blog, “Finally, Iraq Says Yes to the New York Convention”, March 13, 2018, available at http://arbitrationblog.kluwerarbitration.com/2018/03/13/scheduled-15-march-better-late-never-iraq-embraces-new-york-convention/
