Is having a reasoned award for your international arbitration a good idea? This Commentary, written by international arbitrator and business lawyer Paul E. Mason, discusses this emerging issue, and sets forth the advantages and disadvantages of reasoned awards in international arbitration cases.
The author writes: In France, for reasons of ordre public, grounds for domestic arbitral awards must be stated, although this is no longer true for international awards made subject to foreign law (under which reasons are not required).
Likewise, in Italy, the courts have held that foreign awards do not have to be reasoned in order to gain enforcement. The courts have distinguished between requirements of Italian domestic law for domestic arbitrations and requirements of the New York Convention for foreign arbitrations, giving pre-eminence to the fact that the text of the New York Convention and European Convention on International Commercial Arbitration of 1961 do not require reasoned awards. In the Efxinos Shipping Co. Ltd. v. Rawi Shipping Lines, Ltd. [citation omitted], the Court observed that the European Convention does contain a default provision for reasoned awards, but with an exception if the parties use an arbitral procedure where it is not customary to give reasons for awards. The Court determined that the English charter party arbitration in London was one in which it was not customary to provide reasons for the award.
In Brazil, the story has not yet been completely written. Article 26 (II) of the Brazilian Arbitration Law 9.307/96 provides that for an arbitral award to be legally valid, it must be reasoned. Even so, there is an open question as to whether an arbitral award made outside Brazil must be a reasoned one in order to be enforced in Brazil by the Brazilian courts. This is at issue in the case of Kanematsu USA Inc. v. ATS - Advanced Telecommunications Systems do Brasil Ltda. In this case, Kanematsu is seeking to enforce (in Brazil) a foreign arbitral award rendered against ATS under the AAA Commercial Rules. As noted earlier, the AAA Commercial Rules do not require (and do not even default to) a reasoned award and, accordingly, the arbitral award rendered in favor of Kanematsu was not reasoned. It is not clear to us why the Commercial Rules were used in this arbitration, as it is normal AAA practice to have parties from different countries use their International Rules instead. Perhaps the arbitration clause was simply copied and pasted directly from a standard U.S. domestic version of the contract, or perhaps the parties insisted on the application of the Commercial Rules in their arbitration clause or later on in the proceedings. [footnotes omitted]
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