A “Pyrrhic victory” is a victory gained at too great a cost. An arbitral award won, but not paid, can readily be termed a Pyrrhic victory. The term has its origins in Greek history. In more contemporary terms, an unpaid award might be described as a “dud”, with the award having turned out to be ineffectual.
Whether termed a Pyrrhic victory or a dud, an unpaid award is something that all claimants wish to avoid.
In the early 20th century, the notion of being “honor” bound to pay awards not infrequently found its way into arbitration agreements and could be found in the rules of certain leading arbitral institutions of the day (notably the ICC). This engendered a certain amount of peer pressure to ensure that awards were paid. Peer pressure continues to this day in certain trade arbitrations, where non-payers of awards are named and shamed amongst the trade members concerned for as long as an award remains unpaid. GAFTA arbitrations and awards are an example of this. But 100 years from its founding year, the ICC Rules no longer make reference to honor. Parties are left to their own devices and a new modern legal framework to ensure that awards are in fact “honored.”
That said, and happily for claimants, the present-day position is that the majority of arbitral awards are paid voluntarily without the need for any particular enforcement measures. But where one is dealing with states or state-owned entities, or operating within certain sectors of industry, or where the individual case is otherwise giving out warning signs, it is advisable for a claimant to assume the worst and prepare accordingly.
As the articles in this edition illustrate, there are broadly four stages where one might turn one’s mind to matters of enforcement and how any eventual award will be paid:
- What considerations, if any, should be given to enforcement matters at the time of drafting an arbitration clause?
- Should interim measures be taken before the commencement of arbitration that might not be available through state courts under national laws once the arbitration is on foot?
- What procedural devices and powers are available to the arbitral tribunal, or to national courts, during the arbitral process to reduce or mitigate the likelihood of an award going unpaid?
- What measures are available post award to assist a successful, but unpaid, claimant?
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