The ability to settle complex disputes arising in the context of international business through arbitration has many advantages, not least the attraction of a rather less formal and private forum than the Courts. Where an Isle of Man entity is party to an arbitral process, the issue of ease of enforcement of any award made within the arbitration with respect to any party or assets located in the Isle of Man, will be an important consideration. Fortunately, the laws of the Isle of Man have long made provision in this area adding to a long list of the Island's many advantages as a stable and developed offshore jurisdiction for international business.

The Arbitration Act 1976 ("the Act") enables the enforcement in the Isle of Man, either by action or in the same manner as though it were a local award, of a wide range of foreign arbitral awards, which the Act divides into two separate categories.

Convention Awards

These are awards made in pursuance of an arbitration agreement in the territory of a State, other than the United Kingdom, which is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial Arbitration on the 10th June 1958. Part III of the Act applies to Convention Awards.

Enforcement of a Convention Award may be refused if the person against whom it is invoked proves-

(a) that a party to the arbitration was (under the law applicable to him) under some incapacity; or

(b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made; or

(c) that he 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

(d) that the award deals with a difference not contemplated by, or not falling within the terms of, the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration; or

(e) that the composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties or, failing such agreement, with the law of the country where the arbitration took place; or

(f) that 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, it was made. Enforcement of a Convention Award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to enforce the award. A Convention Award which contains decisions on matters not submitted to arbitration may be enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those on matters not so submitted.

Foreign Awards These are awards made after the 28th July 1924;

(a) in pursuance of an agreement for arbitration to which the Protocol on Arbitration Clauses signed at a Meeting of the Assembly of the League of Nations held on the 24th September 1923 applies; and

(b) between persons of whom one is subject to the jurisdiction of a signatory country to the Geneva Convention on the Execution of Foreign Arbitral Awards (signed at Geneva, on the 26th September 1927) ("the Geneva Convention") and of whom the other is subject to the jurisdiction of some other signatory country; and

(c) in a territory to which the Geneva Convention applies,

Part II of the Act applies to Foreign Awards. In order that a Foreign Award may be enforceable under Part II, it must have -

(a) been made in pursuance of an agreement for arbitration which was valid under the law by which it was governed;

(b) been made by the tribunal provided for in the agreement orconstituted in the manner agreed upon by the parties;

(c) been made in conformity with the law governing the arbitration procedure;

(d) become final in the country in which it was made;

(e) been in respect of a matter which may lawfully be referred to arbitration under the law of the Island, and the enforcement must not be contrary to the public policy or the law of the Island.

A Foreign Award will not been forceable if the Court is satisfied that —

(a) the award has been annulled in the country in which it was made; or

(b) the party against whom it is sought to enforce the award was not given notice of the arbitration proceedings in sufficient time to enable him to present his case, or was under some legal incapacity and was not properly represented; or

(c) the award does not deal with all the questions referred or contains decisions on matters beyond the scope of the agreement for arbitration.

Further, if a party seeking to resist the enforcement of a Foreign Award proves that there is any ground other than those set out above entitling him to contest the validity of the award, the Court may, if it thinks fit, either refuse to enforce the award or adjourn the hearing until after the expiration of such period as appears to the Court to be reasonably sufficient to enable that party to take the necessary steps to have the award annulled by the competent tribunal.

Where both Parts II and III of the Act apply, Part III overrides Part II. At the present time, Part II of the Act applies, amongst others, to the United Kingdom, and Part III, to the United States of America.

At common law a foreign arbitral award is likely to be enforceable if the parties have submitted to arbitration by agreement which is valid under its governing law and the award is valid and final according to the law governing the arbitration.

Christopher J Murphy - Advocate

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