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their dispute” which is determinative whether the New York Convention applies.
43
It was irrelevant that the dispute was brought before a commercial court in Prague
or that the arbitration was decided upon commercial laws of the Czech Republic.
The judge stressed that before Diag Human commenced the proceedings, “there
had been no pre-existing legal relationship between the parties, let alone a commercial
one”.
44
Under this reasoning it would appear that also investment awards having
as their basis claims arising out of an unlawful regulatory measure by the host state
instead of a contractual relationship between the claimant and the host state cannot
be enforced in the US under the New York Convention. In my view, the court
offered a rather restrictive interpretation of the commercial reservation compared to
a number of United States courts’ decisions in which a favourable attitude towards
the New York Convention has been expressed.
As the proceedings were brought against a foreign sovereign, the court further
needed to find out whether the Czech Republic does not enjoy sovereign immunity
from the enforcement action. Under the Foreign Sovereign Immunities Act (FSIA),
the foreign state shall not be immune in any case in which the foreign state has
explicitly or implicitly waived its immunity or if an exception applies.
45
For the purpose of the present paper, I will only briefly illustrate the obstacles
a claimant may encounter when seeking to enforce a Czech award rendered against
the Czech Republic in the US due to the foreign sovereign immunity. The US
Court found no basis for a waiver of the immunity as the Czech Republic did not
agree to arbitrate in another country, there was no contract between the parties
subjected to a foreign law, and the Czech Republic did not file a responsive pleading
in the proceedings without raising the defence of sovereign immunity. As no other
exception was established to foreign sovereign immunity under the FSIA, the court
lacked jurisdiction over the case and could not enforce the award.
46
The New York Convention and forum shopping in enforcement proceedings
As enforcement is usually made against debtor’s assets, the first step for a winning
party having at its hands an arbitral award is to trace the losing party’s assets. The
results of such search indicate the potential countries where enforcement will need
to be sought.
Following publication of the English High Court’s judgment, some commentators
referred to the decision as a key lesson in a pitfall of forum shopping regarding
the enforcement of international arbitral awards.
47
It appears that, in addition
43
Supra
note 38, p. 8.
44
Supra
note 38, p. 8-9.
45
Supra
note 38, p. 10.
46
Supra
note 38, p. 16.
47
See Fletcher, B.:
Commercial Court finds NY Convention award ‘not binding’ under AA
1996, s 103(2)(f)