Keywords

Armenia; Award; Recognition; Enforcement; New York Convention

Armenia’s two highest courts rejected the application of the domestic procedural law’s one-year statute of limitations to actions to recognize and enforce international arbitral awards. Hard on their heels, Armenia’s parliament is seeking to codify this and further solidify the regime of international arbitration in Armenia.

Underlying facts

In 2012, Interpipe Ukraine (the ‘Claimant’) filed a petition with the first instance court of the Centre and Nork-Marash administrative districts of Yerevan, Armenia (the ‘Court’) for the recognition and enforcement of an arbitral award, which had been issued a year and a half earlier under the rules of the International Arbitration Court at the Ukrainian Chamber of Commerce and Industry (the ‘ICAC’) against Golden Field, an Armenian company (the ‘Respondent’).

In early 2014, the Court granted the exequatur, specifically ordering that the ICAC’s award be recognised in Armenia, a writ of execution be issued, and permitting the enforcement of the award in accordance with Armenian law.

However, at the enforcement stage, the acting deputy head of the Centre and Nork-Marash division of the Compulsory Execution Service of Armenia (the ‘CESA’), who was in charge of executing and collecting upon the award against Golden Field returned the writ of execution to the Claimant stating that the writ was unenforceable under the Compulsory Execution Act of Armenia (the ‘Act’). Article 23 of the Act provides for a one-year time limit to initiate an action seeking a writ of execution for enforcement from the time when either (i) the judicial act has entered into force or (ii) the arbitration tribunal has issued its award. On that basis, when returning the unenforced writ of execution, the acting deputy head of the CESA explained that the one-year limitation period under the Act had expired. The Claimant therefore applied to the Court of Appeal of Armenia to amend the Court’s decision by deleting any express reference to ‘compliance with the order and terms established by the Armenian legislation’. According to the Claimant, ‘examination of the recognition terms by the Court in general was baseless, irrelevant and tended to mislead and misinform the CESA’. The Claimant emphasised that under the Civil Procedure Code of Armenia (the ‘CPC’), when deciding on applications for the recognition of international arbitration awards, the competent court of the Republic of Armenia must only ascertain that the award complies with the requirements set forth in the applicable international treaty in force in the Republic of Armenia. The Court of Appeal, however, dismissed the appeal, so that the original Court’s decision remained intact.

The Cassation Court’s decision

By a decision dated 30 April 2015, the Cassation Court overruled the Court of Appeal’s ruling and removed the language challenged by the Claimant from the Court’s decision. In doing so, the Cassation Court explicitly referred to the New York Convention (the ‘Convention’), which has been in force in Armenia since 1998, and stated that ‘the Convention equally applies to foreign and international arbitration awards’. The Cassation Court then emphasised that 'neither the Convention nor domestic legislation provides a time limit for the recognition of arbitration awards rendered by a foreign State’s arbitral tribunal (international arbitration)’. In doing so, the Cassation Court acknowledged the coexistence under Armenian law of a regime for the recognition of international arbitral awards and the enforcement of Armenian court decisions in accordance with the Act. Parsing the CPC rules and the Act, the Cassation Court concluded that the legislator had explicitly separated the notion of ‘arbitral tribunal’ and that of ‘foreign arbitral tribunal’, so that international awards would be subject to a separate regime. The Cassation Court noted that domestic arbitral awards can be enforced without any prior recognition action, whereas international arbitral awards must be first recognised by a competent Armenian court before a writ of execution is issued. Therefore, the Cassation Court concluded that for the recognition and enforcement of an international arbitral award, the one-year term envisaged by the Act can start to run only when such award has been recognised by the competent Armenian court.

The Constitutional Court’s decision

In 2015, the Respondent applied to the Constitutional Court of Armenia challenging the constitutionality of the provisions in the CPC and the Act referring to ‘arbitral tribunal’ and ‘foreign arbitral tribunal’. The Respondent claimed that the Cassation Court applied these provisions to it by means of interpretation, contradicting the constitutional requirement of legal certainty. The Respondent further alleged that the Cassation Court’s interpretation against a time limit for enforcing foreign (international) arbitral awards was inconsistent with the principle of equality before the law.

Notably, the National Assembly of Armenia, a respondent in the action before the Constitutional Court, stated in its response that ‘the absence of a time limit for filing for the recognition of a foreign arbitral award does not mean that one can file for recognition of an arbitral award to the Armenian competent court decades after the award was issued and obtain recognition. When recognising foreign arbitral awards, Armenian courts must assess the reasonableness of the time between the issuance of the award and the filing for its recognition, and the impact of any delay on the constitutional right to a fair hearing within a reasonable time.’

However, the Constitutional Court dismissed the Respondent’s challenge and affirmed the Cassation Court’s finding that the notion of ‘arbitral tribunal’ used in Article 23 of the Act relates only to domestic tribunals. The Constitutional Court found no ambiguity in the statutes’ use of the terms ‘foreign arbitral award’, ‘arbitral tribunal’s award’, ‘arbitral tribunal’ and ‘international arbitration’ as all these terms are precisely defined under Armenian law. Regarding the Respondent’s discrimination objection, the Constitutional Court concluded that, with respect to time limits for filing actions to enforce arbitral awards, the status of parties to domestic as opposed to foreign or international arbitration and their rights and obligations deriving from such status cannot be identical. The Constitutional Court emphasised that the compulsory execution ‘of judicial acts applying the statute in this case does not arise from the requirements of due process, guaranteed by the Constitution’.

Consequences

These two decisions by the country’s two highest courts were welcome support for the Armenian judiciary’s favourable approach towards the recognition and enforcement of foreign/international arbitration awards and the application of the Convention.

In an effort to avoid any further inconsistent applications of the law and establish a more predictable regime for the recognition and enforcement of foreign arbitral awards, the Armenian Ministry of Justice has proposed amending the rules governing exequatur of foreign/international arbitral awards. Under the Ministry’s proposal, which is currently before the National Assembly, applications for the recognition and enforcement of a foreign arbitral award, including its compulsory execution, must be filed within three years from the effective date of the award.