Enforcement of the Arbitration Agreement within the Context of the European Union

Abstract

An arbitration agreement is the essential basis for international arbitration as it materialises the principle of party autonomy. Accordingly, parties to the agreement voluntary consent to litigate outside national courts employing a private and consensual method of resolving disputes, where an effective final and binding award is obtained and is enforceable by a court due to the New York Convention (NY Convention). The breach of this agreement means that a party will commence court proceedings as opposed to resorting to arbitration. When faced with a breach, the innocent party will have mechanisms at its disposal to prevent court proceedings and enforce arbitration, pursuant to the agreement. Traditionally, the remedies sought under common law have been the following: stay of proceedings and anti-suit injunctions. However, due to recent European Court of Justice (ECJ) case law, the resort to anti-suit injunctions has been severely questioned and parties have had to consider alternative remedies in order to obtain some form of relief. As a consequence, more emphasise has been given to an action in damages as a remedial option, which provides the innocent party with a remedy to at least recover costs for litigating in the wrong forum, since the resort to anti-suit injunctions within European Union (EU) Member State courts requires further clarification. Conversely, an award of damages does not depend on the cooperation of foreign courts and the breaching party. Additionally, the claim for damages is not an application for a provisional or interim measure, much like the anti-suit injunction. This means that it is procedurally simpler, as the claim for monetary relief can be considered in the course of the arbitration alongside other claims for breach, making this a great advantage. Finally, the enforcement of the award of damages can be done with less difficulty under the NY Convention and its compensatory result definitely outweighs that of simply impeding foreign proceedings. Hence, for the non-breaching party, it might be more advisable to seek protection in the form of damages.