Author: Parv Lodha*
| Jurisdiction: International |
Topics: Specific Performance |
Specific relief as a remedy in international disputes is not a practice often written about or deliberated upon – an observation several experts have made. Ewan McKendrick and Iain Maxwell, in their article “Specific Performance in International Arbitration,” complain about how the availability of specific performance in international arbitration proceedings as a remedy is “not one that is widely discussed in the legal literature.” Michael Schneider, in his study “Non-Monetary Relief in International Arbitration: Principles and Arbitration Practice,” makes a similar observation, claiming that, “[t]here are important treatises on international arbitration which do not even discuss the variety of remedies which parties may pursue.”
The lack of literature is possibly a consequence of the general reluctance among parties to seek the enforcement of specific performance, or vice versa. According to Kyriakos Pittas, “[t]he remedy which is most commonly sought and which is usually granted is that of damages, with only a relatively small percentage of the entirety of those awards providing for a remedy of specific performance.” This reluctance can be attributed to two factors: (1) questionable enforceability and (2) the possibility of non-compliance.
For the purpose of expanding on his study, Michael Schneider requested several leading arbitration institutions for information on cases in which non-monetary relief was sought by the claimants but “practically no information about the fate of the awards granting non-monetary relief was made available.” Therefore, it remained uncertain whether these awards were complied with by the entity from whom the performance was sought or whether the award was set aside or enforced. Therefore, it can be seen that Kyriakos Pittas’ suspicion of the possibility of non-compliance with an award granting specific performance is not unfounded.
There have, however, been examples of claimants successfully obtaining awards of specific performance and courts subsequently enforcing them. For example, in the case of Sheltam Rail Company (Proprietary) Ltd v Mirambo Holdings Ltd, not only were the claimants (a Tanzanian and Kenyan company) able to have an order of specific performance awarded against the defendant (a South African company), the England and Wales High Court (Commercial Court) even sought an undertaking from the defendant that it would not resist the enforcement of the award by advancing arguments against the arbitral tribunal’s jurisdiction. What makes this case even more significant is the fact that the Tanzanian and Kenyan companies were so sure of being able to defeat the South African company’s challenge against the jurisdiction of the arbitral tribunal (and therefore, an appeal to set aside the award) that they requested the court to set aside the South African company’s Notice of Discontinuation against its own claims and to pass an order on whether the tribunal held jurisdiction or not. The Court, however, in light of the fact that the South African company was willing to sign the undertaking, allowed the Notice of Discontinuation to stand and suggested that the Tanzanian and Kenyan companies to apply to the court in the event that the South African company resisted the enforcement of the award.
However, apart from the problems of enforceability and compliance, McKendrick and Maxwell also point out that parties tend to be less inclined to seek specific performance because of differences in the jurisdictions of the place where the arbitral seat is located and where the performance is ordered to be executed – a problem that is further aggravated by doctrinal differences between civil law jurisdictions and common law jurisdictions. In the former, specific performance is a primary remedy, whereas in the latter, it is a secondary remedy. Ole Lando, however, claims that the differences between common law and civil law jurisdictions are more “dogmatic” than “practical” and that, in reality, both jurisdictions observe similar practices as far as specific performance is concerned: courts in both jurisdictions would be unlikely to differ on the grant or refusal of specific performance under similar circumstances. Moreover, Peter Schlosser claims that since the New York Convention does not distinguish between the type (monetary or non-monetary) of relief provided by the award, there is no reason why the principle of ubiquity that the New York Convention upholds cannot be extended to awards that provide for non-monetary relief.
Nonetheless, cautious attempts at providing for specific performance have been made under international law. Article 28 of the Convention on the Law Applicable to Contracts for the International Sale of Goods, for example, states that a Court is not under an obligation to grant specific relief to a party unless it is required to do so under its own law for similar contracts not governed by the Convention. The Convention has therefore attempted to leave the question of whether specific performance ought to be awarded or not to the obligations established by national laws. As McKendrick and Maxwell observe, it has left the matter, “in the hands of the court asked to grant the remedy.” Ole Lando also highlights that civil and common lawyers struggled to arrive at a consensus on the rules relating to specific performance while the Convention was being drafted – a dispute which was “unnecessary,” as the real life practices in both jurisdictions tend to be similar despite the doctrinal differences between them. Ultimately, the importance and relevance of the Convention cannot be denied as it has been ratified by 94 States including most of the major economies like the United States, China, Japan, France and Germany.
Unlike the Convention, however, the Principles of European Contract Law take more serious steps towards providing for specific performance. Article 9:102 allows an aggrieved party to request specific performance for a non-monetary obligation subject to certain exceptions, including an unlawful or impossible performance, a performance that would inflict unreasonable effort or expense on the debtor, a performance that depends on a personal relationship or a performance that can reasonably be obtained from another source. These Principles (considered ‘soft law’), however, are not binding and therefore do not carry any power of enforceability nor do they impose any duties of adherence and even if they did, they would be restricted to the European Union.
It is also interesting to note that obtaining awards for specific performance against sovereign States is even more challenging. For instance, in the case of Hardy Exploration & Production (India), Inc. v. Government of India, Ministry of Petroleum & Natural Gas, the United States District Court for the District of Columbia refused to enforce an award of specific performance against the Government of India under which a geographical block off the south-east coast of India was to be restored to the plaintiff for the extraction of hydrocarbons. The Court refused performance because it believed that it would amount to an, “infringement on India’s national sovereignty,” which “would contravene the United States’ public policy interest in respecting the territorial integrity of other nations”.
As stated earlier, a major problem that comes in the way of awarding specific performance is enforceability (or the absence of it) due to differences in jurisdictions and the possibility of non-compliance. Even if an award for specific performance were granted, ensuring compliance would be a challenge. The Indian Specific Relief Act of 1963 even considers contracts, the performance of which would require court supervision to not be specifically enforceable. However, unlike Indian courts, the New York Court of Appeals in Grayson-Robinson Stores, Inc and Iris Construction Corp refused to set aside an award which provided for specific performance of a contract for the construction of a building. The fact that the performance would require supervision from the court was held to be “no deterrent” in the validity or enforceability of the award. The Indian Specific Relief Act, on the other hand, doesn’t recognize specific performance of contracts that would require such supervision. The New York Convention does not provide for any such prohibition. This could possibly be because the New York Convention was drafted with money awards in mind and not specific performance orders. Troy Elder has observed that “a meaningful enforcement” of an award granting specific performance would require, “conscripting one or more foreign courts to supervise the implementation of the arbitrator’s decree.”
To conclude, the importance of specific relief in “the remedial armory of an arbitral tribunal” is something that needs to be explored in greater detail by experts, jurists and lawyers. As Doug Jones claims, the powers of an arbitral tribunal are broader than those of a court. In order to ensure that a variety of remedies are made available to a claimant, modern mechanisms to facilitate specific performance need to be introduced in order to enhance collaborated supervisory capabilities among tribunals and ensure effective monitoring of award compliance. Moreover, efficient dialogue between lawmakers from different jurisdictions needs to be engaged in so that a common ground between civil law and common law advocates can be found.
*Parv Lodha is a student of Law at the Government Law College, Mumbai, and a Commerce graduate from Jain University, Bangalore. He aspires to establish a career in Dispute Resolution and Commercial Litigation.