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A Multilateral Arbitration Treaty for the Lusophone world?

In an article entitled ‘Bilateral Arbitration Treaties: A Few “Bits” More and No “Buts” Within the Portuguese Jurisdiction’ (posted on Kluwer Arbitration Blog [1]),  follows up on the idea put forward by Gary Born [2] of creating Bilateral Arbitration Treaties (BATs). These treaties would basically be the translation, into the field of international commercial arbitration, of the experience accrued in the realm of Bilateral Investment Treaties (BITs). States would enter into a bilateral treaty providing for arbitration as a mechanism to solve disputes between nationals or entities located in the territory of each contracting state arising from any business transaction carried out between those different nationals or entities. Henriques points out an important question: the recognition and enforcement of foreign arbitral awards in the Lusophone world. In fact, Portugal has strong cultural, historical and also economic relationships with its former colonies (Angola, Mozambique, Cape Verde, Guinea-Bissau, São Tomé, Timor), but only São Tomé and Mozambique are parties to the New York Convention. For those countries, it may be easier to enter into a BAT than to adhere to the New York Convention.
In my opinion this may be a useful tool to enhance the popularity and effectiveness of international commercial arbitration within the Portuguese-speaking world. A key advantage of international arbitration is its enforceability. If carried out without any major problems, arbitration will result in an arbitral award which is enforceable against the losing party not only in the jurisdiction where it was made but also abroad. This is only possible thanks to the existence of international treaties that make available a global framework for transnational arbitration. The most important legal instrument in this regard is the New York Convention. It currently covers most jurisdictions in the world, establishing an almost universal standard for the recognition and enforcement of foreign arbitral awards.

Currently Angola, Cape Verde, Guinea Bissau, and East Timor are not parties to the New York Convention. The recognition and enforcement, in those countries, of arbitral awards made in other countries is still possible but depends on other legal instruments. In the absence of any bilateral or multilateral convention on the recognition and enforcement of foreign arbitral awards between the Lusophone countries, the process will be dependent on national laws. In case the successful party wishes to enforce the arbitral award in one of those states, he will have to apply to the respective national courts, according to the pertinent domestic rules of civil procedure. To do so he will have to acquaint himself with the specific provisions on the recognition and enforcement of foreign arbitral awards, which may impose more onerous conditions than those laid down in the New York Convention.

Accession to the New York Convention by Angola, Cape Verde, Guinea Bissau, and East Timor would be valuable as it would harmonise and simplify the legal requirements for recognition and enforcement of foreign arbitral awards within the Portuguese-speaking world. This measure would boost the parties’ confidence in the practical outcome of the arbitration proceedings and ensure uniformity and certainty across the territory of all Lusophone States. Accession to the New York Convention, and its effective application by national courts, would give international businessmen more security and confidence in the commercial and investment climate in those countries. It would also be a significant token of the States’ commitment to embrace international commercial arbitration according to recognised international standards. In the long run this legal reform initiative would facilitate and promote international commercial activities, thereby contributing to economic development.

There is an alternative to accession to the New York Convention by Angola, Cape Verde, Guinea Bissau, and East Timor: the creation of a Multilateral Arbitration Treaty, binding all of the Portuguese-speaking countries. I have supported this option, for instance, here. Such a treaty could even be shaped after the New York Convention. The creation of such a legal instrument would ensure that the process of recognition and enforcement of arbitral awards rendered in any of the Member States was subject to uniform rules. This agreement would not create any problem to those states that are members of the New York Convention. In fact, article VII(1) of the New York Convention provides that its provisions ‘shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon’. This is the so-called ‘more-favourable-right provision’. It allows a party seeking recognition and enforcement of an arbitral award to rely on rules that are more favourable than those of the convention.

The creation of a multilateral treaty would be an intermediary step between the current state of affairs and accession by the Angola, Cape Verde, Guinea Bissau, and East Timor to the wide universe of countries that have subscribed to the New York Convention. If, for whatever reasons, those countries feel they are not ready to join the New York Convention and thus become a member of the global arbitration community; they may prefer to create a multilateral instrument with a narrower scope of application, limited to the Portuguese-speaking countries.

In any case, the creation of uniform legal rules on the recognition and enforcement of foreign arbitral awards is highly desirable so as to ensure the effectiveness of international commercial arbitration across the territory of all Portuguese-speaking countries. Indeed, accession to international legal instruments on this matter is generally one of the first measures countries adopt when they decide to open themselves to the international arbitration community.

[1] The post is a summary of the article ‘Dealing with the ‘BUTs’ of ‘BATs’ within the Portuguese jurisdiction’, published in the Young Arbitration Review, March 2014 Edition.
[2] Gary Born, ‘BITS, BATS and BUTS: reflections on international dispute resolution’, Young Arbitration Review, March 2014 Edition.

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