An arbitral award from Slovakia in Czechia and from Czechia in Slovakia: recognition and enforcement

A Slovak company wins an arbitration against a Czech customer, or a Czech creditor holds an arbitral award made in Czechia while the debtor’s assets are in Slovakia. The award is enforceable at home, but the assets are across the border. For judgments of State courts, Regulation (EU) No 1215/2012 (Brussels I bis) applies between Member States, but it does not extend to arbitration (Article 1(2)(d)). Under its recital 12, the 1958 New York Convention takes precedence in the recognition and enforcement of arbitral awards. Enforcement of arbitral awards between Slovakia and Czechia likewise rests on that Convention and on national statutes.

The common basis: the New York Convention

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards was signed on 10 June 1958 in New York and promulgated in the then Czechoslovak collection of laws as Decree No. 74/1959 Coll. The Slovak Act No. 244/2002 Coll. on Arbitration refers to it in Section 53, under which the Act applies unless an international treaty provides otherwise. The Convention binds both Slovakia and Czechia.

The Convention rests on two rules. A State recognises an arbitral award as binding and permits its enforcement under its own procedural rules, and may not impose substantially more onerous conditions or higher fees than for domestic awards (Article III). Enforcement may be refused only on a closed list of grounds (Article V): incapacity of the parties or invalidity of the arbitration agreement, lack of proper notice of the appointment of an arbitrator or of the proceedings, a decision beyond the scope of the clause, composition of the arbitral tribunal or conduct of the proceedings contrary to the parties’ agreement, the award not being binding or having been set aside in the State where it was made, non-arbitrability of the matter under the law of the State of enforcement, and conflict with that State’s public policy. Those grounds concern the clause, the conduct of the proceedings, the nature of the matter and the fundamental values of the State of enforcement, not the correctness of the decision on the merits. At the enforcement stage, the debtor cannot reopen the question whether the invoice was due or whether the goods were defective.

A Czech arbitral award in Slovakia

Slovak law treats an award made in Czechia as a foreign arbitral award (Section 46(1) of Act No. 244/2002 Coll.). No separate recognition proceedings are needed:

Recognition of a foreign arbitral award is not pronounced by a separate decision. A foreign arbitral award is recognised by the court having jurisdiction over enforcement of the decision taking it into account as if it were a domestic arbitral award.

— Section 49(1) of Act No. 244/2002 Coll. (unofficial English translation)

The creditor attaches to the application the original or a certified copy of the award and of the arbitration agreement; where these are not in the official language, the creditor provides an official translation (Section 47). The foreign award is then enforced as a domestic one (Section 49(2)). The debtor may defend itself only on the grounds in Section 50, which correspond to the Convention. If the debtor has applied in Czechia to have the award set aside, the Slovak court may, on the debtor’s application, postpone enforceability (Section 48).

A Slovak arbitral award in Czechia

Alongside the Convention, Czechia applies Act No. 91/2012 Sb. on Private International Law, which proceeds in a similar way. A foreign arbitral award is recognised by being taken into account as if it were Czech, without a separate decision (Section 122(1)); enforcement, however, is ordered by a Czech court in a decision that must be reasoned (Section 122(3)). Recognition and enforcement are refused where the award is not final or enforceable in the State where it was made, where it has been set aside there, where it suffers from a defect that is a ground for setting aside a Czech award, or where it conflicts with public policy (Section 121). How enforcement itself proceeds in Czechia and what it costs is examined in the article Enforcement in Czechia for a Slovak creditor.

Setting an award aside belongs to the State where it was made

Setting an award aside is decided by a court of the State in which it was made. An award from proceedings with their place in Slovakia is deemed to have been made here (Section 34(3)) and may be set aside only by an action before a Slovak court within 60 days of its service (Sections 40 and 41 of Act No. 244/2002 Coll.). The court will not take into account certain grounds for setting aside where the party failed to raise them during the arbitration (Section 40(4)); they are examined in more detail in the question on challenging an arbitration clause. A Czech arbitral award is set aside by a Czech court, and the application must be filed within three months of service of the award (Section 32(1) of Act No. 216/1994 Sb.).

Defence at the enforcement stage in the other State is limited to the grounds in the Convention and does not set the award aside. Even where a court in one State refuses enforcement, the award remains valid in the State where it was made. A debtor wishing to remove the award must therefore act in the State where it was made and within that State’s time limits.

What to consider as early as the clause

• The place of the proceedings determines which State will decide on setting the award aside and in which State the award will be a domestic one. If the debtor’s assets are concentrated in one country, consider placing the proceedings there.
• The language of the proceedings affects the cost of translating the award and the arbitration agreement for enforcement (Article IV of the Convention, Section 47 of Act No. 244/2002 Coll.).
• Keep the original of the arbitration agreement or a certified copy; the Convention requires it as an annex to the application for recognition and enforcement (Article IV(1)(b) of the Convention).
• A precise scope of the clause protects against an objection that the award decided a dispute not covered by the clause (Article V(1)(c) of the Convention).

We conduct enforcement proceedings on an arbitral award in Czechia as well as in Slovakia from a single office, within our arbitration and cross-border debt recovery services. If you are still drafting the clause, see the question on what an arbitration clause must contain.