Are consent awards enforceable under the New York Convention?

This post is written by Mr Denis Parchajev, an Associate Lecturer at QMUL and tutor for the online International Dispute Resolution LLM.

Major arbitration rules and multiple national laws encourage or, at the very least, offer parties an opportunity to settle their cases in arbitration on mutually acceptable terms. Despite the evident advantages of settling a case, attractiveness of amicable settlement is strongly hinged on its enforceability.

It goes without saying that when a company finds itself in arbitration against its counterparty, it already has certain doubts whether the latter will honour any agreement reached in the context of further negotiations.

In order to translate their settlement agreement into an enforceable document, parties can ask the tribunal to confirm their settlement in so-called ‘consent award’ or an award on agreed terms. In this post, we look at whether a such consent award is capable of being enforced under the New York Convention (“Convention”). 

Scholars like Laura A. Kaster suggest there is no reason to deprive consent awards of any Convention benefits. Kaster reinforces her views with recent U.S. case law.

In Erin Energy, the Transocean district court held that New York Convention’s silence on the issue of consent awards cannot imply its non-applicability to the latter. Importantly, the court rejected the premise that a tribunal “must reach its own conclusions, separate from the parties’ agreement” for a consent award to fall within the ambit of the Convention. Hence, simple confirmation of parties’ settlement suffices to make it enforceable under the Convention.

Queen Mary Online's International Dispute Resolution programme can be studied part-time as Master of Law (LLM), Postgraduate Diploma (PGDip) or Postgraduate Certificate (PGCert):

Nonetheless, other scholars, including Prof. Yarik Kryvoi, caution that there are specific circumstances, where the enforcement of a consent award is open to a challenge. These potential impediments are inherent to the peculiar nature of consent awards.

First, a consent award must arise “out of differences between persons, whether physical or legal”. Therefore, Art. I of the Convention may prevent the application of the Convention where the settlement was reached prior to commencement of the arbitration proceedings.

Arguably, if the opposite was true, there would be no difference for an arbitrator to resolve. Likewise, one could contest the jurisdiction of the tribunal, whose powers are limited to resolving “any dispute arising out of or in connection with [a contract]”.

Second, an enforcement of a consent award may be refused where the settlement expands beyond the four corners of the arbitration agreement and/or beyond the realm of claims made by the parties in arbitration. It is not uncommon for parties to negotiate “package deals” in their settlement agreements, involving mutual concessions arising from several aspects of their relationship.

It is also not uncommon for some of these concessions to be unrelated to the contract containing an arbitration clause. Confirming such settlement makes the consent award susceptible to Art. V(1)(c) challenge, as dealing “with a difference not contemplated by or not falling within the terms of the submission to arbitration, or contain[ing] decisions on matters beyond the scope of the submission to arbitration”.

On the one hand, Art. V(1)(c) seems to offer a simple solution. “[I]f the decisions on matters submitted to arbitration can be separated from those not so submitted”, the Convention allows for partial enforcement of the award. On the other hand, as shown in Latvijas Tilti v. Vozrojdenie, partial enforcement may be rejected since unilateral interference in the settlement terms of the parties distorts the equilibrium of parties’ negotiated balance of concessions.

Third, recognition of consent awards will be refused where such awards create rights and obligations contrary to international public policy. Viva Chemical is an illustrative case in this respect. French Court of Appeal refused to enforce a consent award that was rendered in preparation for the bankruptcy and in absence of genuine dispute with the sole purpose of escaping liability before creditors of the insolvent party.

To sum up, there seems to be little doubt that consent awards are capable of being enforced under the New York Convention. And yet, such enforcement is by no means automatic. Counsels and arbitrators alike will do well to think of the above nuances in advance of rendering the consent awards.

Mr Denis Parchajev is an Associate Lecturer at QMUL and teaches on the online International Dispute Resolution LLM. He’s a Senior Associate at Motieka & Audzevicius PLP in Vilnius, Lithuania and has been involved in arbitration cases under the Rules of ICC, SCC, LCIA, IAC at the BelCCI and Lithuanian Arbitration Court.

Find out more about how QMUL's online International Dispute Resolution LLM can help you rethink traditional approaches to conflict resolution: