According to the New York Convention, a signatory party’s domestic legislation should not impose more demanding requirements for the enforcement of international awards than those required for domestic awards. Consistently, the Ecuadorian Arbitration and Mediation Law does not make any differentiation between international awards and domestic awards. Nevertheless, it seems that Ecuadorian legislators decided to ignore those provisions when they were considering the approval of the Ecuadorian General Organic Code of Processes (the “GOCP”) that came into force in May 2015. The GOCP reformed the Civil Code of Procedure and included new provisions regarding the enforcement of international arbitral awards. For instance, a party seeking the enforcement of an international award in Ecuador shall first complete a homologation process1 before the Provincial Court in order to obtain its recognition. This process does not only entail a new layer of potential judicial intervention, but it also imposes an excessive burden on the party seeking the enforcement of the award. This article focuses on the homologation process and its impact on the enforcement of foreign arbitral awards.
The Homologation Process and Its Contradiction to The New York convention
The New York Convention2, 1958 (hereinafter “the Convention”), establishes an effective recognition and execution system developed for international arbitral awards for the States parties. This regulation is more effective than the ancient provisions contained in the 1923 Geneva Protocol on Arbitration Clauses and the Geneva Convention on the Execution of Foreign Arbitral Awards of 19273. A remarkable benefit instituted was the elimination of the double exequatur4 for arbitral awards and arbitration agreements, removing the obligation to obtain a declaration of enforceability from a national court prior the execution, which implies assurance for commercial transactions.
For the success of these binding arbitrations, it is required that the State uphold domestic laws in accordance with the Convention, as was the case with the Arbitration and Mediation Law (AML) that came into force in 1997. In fact, article 425 of AML, in its first clause, establishes that international arbitration is regulated by treaties, conventions and protocols signed and ratified by the Ecuadorian State. In which case, there should not be a distinction between the enforcement of domestic arbitral and international awards in the State where the enforcement is sought, on the base of reciprocity. According to the Convention, signatory States shall recognize arbitral awards as binding and do not require the confirmation of enforcement of a national court, so that the arbitral judgment would be protected and treated equally in all jurisdictions. Article III6 of the Convention establishes that signatory States should not impose more difficult conditions, hurdles, or higher fees for the recognition of arbitral awards than they do for their domestic awards. In this instance, if domestic arbitrations awards do not require a process of knowledge as an intermediate stage between its expedition and its execution, neither should international awards.
Likewise, the Convention demands formal requirements for the purpose of obtaining the recognition and enforcement of the award, which include (i) the supplying of the duly authenticated original award or a duly certified copy thereof, (ii) the supplying of the original agreement signed by the parties involved or a duly certified copy thereof. In the event that the original agreement or award is not subscribed in the official language of the country, the applicant shall include a certified translation of the instrument establishing a valid agreement. Nevertheless, in Ecuador, with the enactment of the Ecuadorian General Organic Code of Processes (GOCP) in 2015, the domestic rules of procedure require a new homologation process prior the enforcement of international arbitral awards. This procedure is supposed to protect the autonomy of the State and intended to provide legal certainty to the parties. Despite the fact that article 1037 of the GOCP grants the arbitral award and mediation agreements the same treatment that the Convention and other treaties do, the process of homologation is still required. The revision shall not include substantial issues of the award.
Therefore, the homologation process in Ecuador implies that the party that seeks the enforcement of a foreign award shall file a petition with the Provincial Court8, which will assess whether the award complies with the following requirements: (i) The international award complies with the formalities required for it to be considered authentic in the state where it was issued; (ii) The award is final and binding in the jurisdiction where it was delivered and the attachments are duly legalized; (iii) With regard to the requirement prescribed in the Convention, if the award is in a language other than the official language of the country, in this case Spanish, it shall incorporate a translation; (iv) It is shown from the legal papers of the arbitration proceedings that the party against whom the awards is being enforced was duly notified of the claim and that there was no due process violation; (v) The petition must specify the domicile of the party against whom the award is being enforced.
Once the Provincial Court receives the petition for the homologation of the award, it will notify the party against whom the award is being enforced. This will entail that the losing party might exercise their right to oppose the recognition of the arbitral award. Although the GOCP does not clearly specify the grounds for opposition, the losing party might argue that the requirements referred above were not met. With respect to this opposition, we consider that it presents an opportunity for the losing party to delay the recognition of the award, to the detriment of the party seeking enforcement. Moreover, this step of the homologation process contradicts the finality of the arbitral award and is not a part of the enforcement of domestic awards. As mentioned above, contracting States of the Convention should not impose more onerous conditions on the recognition or enforcement of international arbitral awards than those imposed on domestic arbitral awards. With respect to the enforcement of domestic awards, the party seeking enforcement shall file a petition with a first instance judge. The judge will order the losing party to comply with their obligations within 5 working days9. In case the losing party does not comply with their obligation, the judge might order the seizure of their property or resort to any other coercive mechanism to collect the money awarded. It is worth noting that the procedure for enforcing a domestic award is simpler than the one established for foreign awards.
Although the homologation process was conceived as a way to guarantee that the international award does not breach public policy or constitutional provisions, prior to its enforcement, it might also become another layer for judicial intervention. It has been widely accepted in the international arena that when parties submit their dispute to arbitration they are also excluding courts from interfering10. In such a fashion, courts should only intervene in order to assist the tribunal (e.g. the arbitral tribunal is not empowered to issue precautionary measures) or to control the lawfulness -not the merits- of the award (e.g. annulment action). Unfortunately, the lack of judicial independence in the country might jeopardize the nature of the homologation process. The very nature of the homologation process, as well as the principle of non-judicial intervention established in the Arbitration and Mediation Law11, forbids the Provincial Court to examine the merits of the arbitral award. The Provincial Court shall only analyze whether the arbitral award complies with the requirements of article 104 of the GOCP. Thus, the homologation process shall only constitute a review of formal aspects of the award; it shall not examine the main aspects of the arbitral decision.
Once the international award has been recognized and homologated by the Provincial Court, the party seeking the enforcement shall file a petition with the first instance judge and follow the process for enforcing domestic awards described above. We consider that the homologation process constitutes an unnecessary step, which affects the development of international arbitration in the country, as the first instance judge shall be the one in charge of analyzing that the award does not breach public policy. Such course of action is in harmony with the Convention’s provisions and it also reduces cost and time for the party seeking the enforcement.
The new homologation process for international judgments and arbitration awards established in the GOPC entails a judicial process that might eventually affect the effectiveness of an international award by creating an unnecessary and unjustified distinction in comparison to domestic awards.
One of the most important objectives for a party seeking arbitration is to exclude courts from intervening in their dispute. Nevertheless, when the law requires recognition by the local courts regarding the enforcement and validity of an international award, creating an unnecessary distinction vis-à-vis domestic awards, this objective is jeopardized.
The homologation process might result in the non-enforcement of every single international arbitration award, since the GOCP has established an opportunity for the losing party to oppose the recognition. Consequently, the judge in charge of the homologation process might withhold the opposition and refuse to recognize the international award. Hence, the enforcement would not be possible.
In light of the above, the process represents not only a clear violation of the New York Convention but also of the Ecuadorian Constitution and domestic laws, which recognize the right to due process and arbitration as an alternative mechanism of dispute resolution, without making a distinction between international and domestic arbitration.
In addition, this new homologation process established in the GOPC represents a disadvantage for international arbitral awards compared to domestic awards, reducing somewhat the effectiveness and development of international arbitration in the country.
|6.||Those who have defended the homologation process for international awards or judgments justify their position by claiming that there is a legal necessity to verify that any international judgment and award comply with Ecuadorian legislation and are not violating public policy issues. However, it is worth noting that is it part of the judges’ -or arbitrators’- duty to make sure that these requirements are being complied with throughout the whole judicial or arbitration process. Hence, it is not necessary to create an additional homologation process to validate their judicial and arbitral decisions in any country.|
1 See article 102 of the General Organic Code of Processes.
2 The New York Convention (1958), (…) is the centerpiece in the mosaic of treaties and arbitration laws that ensure acceptance of arbitral awards and arbitration agreements (INTERNATIONAL COUNCIL FOR COMMERCIAL ARBITRATION, 2011).
3 The Geneva Protocol on Arbitration (1923) establishes the recognition of arbitration agreements; it has been ratified by 53 states. The Convention on the Execution of Foreign Arbitral Awards (1927) established the enforceability of the arbitral agreements; it has been accepted by 44 states.
4 The “double exequatur” doctrine requires two sorts of judicial reviews: the first one, by the country that issues the award; the second one, by the country where the award is enforced.
5 Art. 42, Arbitration and Mediation Law (1997): “International arbitration is regulated by the treaties, conventions, protocols and all other acts of international law executed and ratified by the Ecuadorian Republic (…)”.
6 Art. III, New York Convention (1958): “(…) There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards”.
7 Art. 103, General Organic Code of Processes (2015): The court judgments, arbitral awards and acts of mediation issued abroad, whether or not they have been homologated and issued in an adversarial proceedings, will have in Ecuador the same treatment as they have in the current international treaties and conventions (…).
8 The Provincial Court is an authority of second instance, a court in charge of the appeals procedure in Ecuador.
9 See article 372 of the General Organic Code of Processes.
10 Born, Gary. “The Principle of Judicial Non-Interference in International Arbitral Proceedings” (2009). U Pa J Intl.
11 See article 7 of the Arbitration and Mediation Law of Ecuador, 1997.
* María de Lourdes Maldonado is a partner in the Dispute Resolution Unit of TOBAR ZVS and an Arbitrator of the Quito Chamber of Commerce. Andrés Larrea Savinovich is an associate in the Dispute Resolution Unit of TOBAR ZVS. Ana Mogollón is a paralegal in the Dispute Resolution Unit of TOBAR ZVS. The three authors can be contacted at firstname.lastname@example.org