News

The Constitutional Court of the Republic of Azerbaijan Annulled the Supreme Court’s Decision on Refusal to Enforce an International Arbitration Award

Issue

“POSCO DAEWOO” Corporation (“POSCO”) entered into several agreements with “Grand Motors” LLC (“Grand Motors”) on the supply of construction machinery. The agreements contained arbitration clauses which submitted disputes among the parties to the Korean Commercial Arbitration Council (“Council”). POSCO brought an arbitration case before the Council and subsequently applied to the Administrative-Economic Board of the Supreme Court of the Republic of Azerbaijan to enforce the award of the Council against Grand Motors.

The Supreme Court refused to enforce the award based on the protest of Grand Motors that it has not been given proper notice of the appointment of the arbitrator and the arbitration proceeding.

POSCO submitted a complaint to the Constitutional Court claiming that the Decision of the Supreme Court not to enforce the arbitration award violated Article 60 (Administrative and Court Protection of Rights and Freedoms) of the Constitution of the Republic of Azerbaijan (the “Constitution”) and Article 138 (Court Notifications) of the Civil Procedure Code of the Republic of Azerbaijan (“CPC”). POSCO indicated that the Supreme Court in its decision referred to Articles 465 and 466 of CPC, while, these articles are in chapters 47 and 48 of CPC, which relate to the recognition and enforcement of judgments of foreign courts. Instead, the court should have referred to Article 476 of CPC which specifically deals with the enforcement of foreign arbitral awards. Also, Article 476 requires the party against whom the award is invoked to provide proofs that it has not been given proper notice of the appointment of arbitrator and the arbitration proceeding or it has otherwise not been able to present his case which to the ignorance of the Supreme Court Grand Motors failed to do.

COURT’s ANALYSIS

The Court stated the following:

Both New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (Article 1 (b)) and Article 476 of CPC allow courts to refuse the recognition and enforcement of foreign arbitral awards provided that the party against whom the award is invoked furnishes to the court that it has not been given proper notice of the appointment of arbitrator and arbitration proceeding or it has otherwise not been able to present his case.

The Supreme Court instead referred to provisions of Chapter 48 which lists the documents to be attached to the application on enforcement of foreign court decisions. … Thus, the Supreme Court erroneously shifted the burden of proof on proper notification of the appointment of an arbitrator and arbitration proceeding to the party requesting enforcement AND

By doing so, the Supreme Court violated both the principles of Article 127 of the Constitution and Article 9 of CPC, i.e. impartiality, fairness, and adversarialilty of process, equality of parties, examination of cases based on facts and law.

A court shall always ensure the adversariality of a process.

The Supreme Court, on the other hand, did not comply with the requirements mentioned above satisfying itself with the explanations provided by Grand Motors and this way putting the authenticity of the proofs into doubt.

Thus, the Supreme Court did not properly examine the existence of grounds for refusing the recognition and enforcement of the foreign arbitral award and ultimately violated the principles of justice based on equality of arms.

DECISION

The Court annulled the decision of the Supreme Court by Articles 60, 127 of the Constitution and article 476 of CPC and ordered the re-examination of the case following its decision and in the manner and within the period specified by civil procedural legislation.

20 May, 2019