Recently a trend toward state court review of arbitral awards has emerged, especially when criminal activity is alleged, and no matter what side of the debate you are on, there’s no denying a change is afoot.
This trend has revealed itself in French case law. In Belokon vs. Kyrgyzstan, for example, the Paris Court of Appeal early last year set aside an arbitral tribunal’s decision that had found the Republic of Kyrgyzstan liable for the unlawful expropriation of the assets of a Latvian investor, Valeri Belokon.
The French court ruled that Belokon’s acquisition and operation of Manas Bank in Kyrgyzstan in 2007 hid money-laundering practices and consequently set aside the arbitral award.
Traditionally, arbitral awards have been the subject of little scrutiny by courts because of a general trend in favor of arbitration. Additionally, there is a competition angle at play between jurisdictions willing to appear as favorable as possible to arbitration to foster profitable arbitration activities in their territories.
But this absence of scrutiny might eventually prove detrimental to arbitration as a whole. Especially in cases brought against sovereign nations, public perception of arbitration’s “behind-closed-door” proceedings has led to increased criticism of arbitration, often viewed as a game played in the interest of greedy Western arbitrators paying little attention to the interests of those who would have to suffer the consequences, i.e. the population of these nations.
Feeling the diplomatic pressure of these governments and in a clumsy attempt to find a solution, lawmakers in Belgium and France have introduced legislation that reinforces sovereign immunity in contravention with their international obligations. The Dutch Supreme Court followed the same path.
As I argued recently at an arbitration and crime conference at the Basel University (organized by Mark Pieth), such legislation or case law is detrimental to claimants and victims, preventing them from legitimately obtaining redress. Instead, I believe that expanding judicial review of arbitral awards — as is happening in France — makes more sense, doesn’t violate claimants’ rights and is, indeed, the right thing to do. When public-policy issues, such as corruption, are at stake, arbitral tribunals and courts should simply not turn a blind eye. Otherwise, arbitration, as a whole, will be tainted and viewed with suspicion by the public instead of an efficient mechanism that should be preserved to render justice in the international arena.
As a litigator specialized in financial crime and in enforcement of foreign judgments and arbitral awards, I want to tell my arbitration colleagues, who may want to resist this shift, that public perception of arbitration has grown negative. They can’t practice the same way they used to. They need to engage with criminal law specialists, like me or others, to make sure that arbitration is preserved and to make sure that the arbitral awards they render will eventually be enforced.
Stéphane Bonifassi is the founder of Bonifassi Avocats. The Paris-based firm represents victims of fraud, embezzlement, misuse of company assets, corruption and money laundering. He has served as president of the Criminal Law Commission of the International Association of Lawyers (UIA), as well as co-chair of the Business Crime Committee of the International Bar Association (IBA). He can be contacted here.
The author is grateful to Elena Fedorova for her contributions to this post.