The Danish Supreme Court Refuses Enforcement of a Foreign Arbitral Award

The case concerned two parties, A and B, who entered into an agreement on 25 April 2017 for B to invest in a company. The agreement contained a clause stating that any dispute between the parties would be settled by arbitration before the Shanghai Arbitration Commission (SHAC). In June 2020, B filed for SHAC arbitration against A, claiming among other things, cancellation of the agreement and that A should repay the investment. A did not participate in the arbitration, and in an award of 19 November 2020, B’s claims were allowed by way of default.

B subsequently tried to enforce the award in Denmark against A, which was domiciled in Denmark. The matter reached the Danish Supreme Court, which had to decide whether the arbitral award could be enforced in Denmark, including whether the defendant, A, had received proper notice of the arbitration proceedings as required under Article V(1)(b) of the 1958 New York Convention and Section 39(1)(1)(b) of the Danish Arbitration Act.

A claimed that the arbitral award could not be enforced in Denmark because he had not received notice of the arbitration proceedings prior to the default award. B, on the other hand, claimed that the notice was served on A in accordance with the SHAC rules and that the arbitral award should therefore be enforced.

As is well known in international arbitration, foreign arbitral awards can be enforced in accordance with the New York Convention. However, enforcement may be refused if the party against whom the arbitral award is invoked so requests and proves that it was not duly notified of the appointment of an arbitrator, of the arbitral proceedings, or for other reasons was unable to present its case, as outlined in Section 39(1)(1)(b) of the Danish Arbitration Act and included in the UNCITRAL Model Law.

In its ruling, the Supreme Court emphasised the fundamental principle that a party must be notified of the arbitration proceedings in order to be able to present its case. If a party has not received such notice, there is in principle no basis for recognising and enforcing the arbitral award. The Supreme Court referred to a similar decision from the Swedish Supreme Court of 16 April 2010 (NJA 2010.219) and stated that the decisive factor is whether the party has received the notice, not in what form it was given or whether or not it adhered to the rules of some foreign institute.

According to Section 39(1)(1)(b) of the Arbitration Act, it is the party opposing the recognition and enforcement of the arbitral award that has the burden of proof that it has not been notified of the arbitration proceedings. In continuation of this, the Supreme Court stated that this evidentiary assessment must take into account that it can be difficult to prove that a party has not been notified. According to the Supreme Court, there will therefore normally be grounds for refusing to recognise and enforce an arbitral award if there is reasonable doubt as to whether the party has been notified of the arbitration proceedings.

In the case in question, SHAC sent two letters notifying A of the case to different Chinese addresses. One address was A’s childhood home, which he had left in 1997. The other address belonged to an inactive company that A owned. This business was unrelated to the parties’ agreement.

Prior to the arbitral tribunal’s award in November 2020, no other communications were sent about the arbitration, including, for example, an email to A about the arbitration. The evidence showed that A was staying in Denmark in 2020.

The Supreme Court found that A had proved that he was not duly notified of the arbitration proceedings and thus did not have the opportunity to present his case. The Supreme Court further found that it was irrelevant that SHAC considered the notice served on A pursuant to their rules. The Supreme Court then concluded that the SHAC’s arbitration award of 19 November 2020 could not be enforced in Denmark.

This decision sets out guidelines for the standard of proof and shows that the Danish courts will independently review whether a party has received proper notice of the arbitration proceedings in case of doubt. The ruling emphasises the importance of due process even if the local institute’s rules are otherwise adhered to.

It is an old maxim in arbitration that getting an award is only half the victory. This case proves that to be correct. It also shows that in arbitration one should be hesitant to pursue a default judgment unless there is absolute certainty that your opponent has received proper notice of the arbitration and has been given a fair chance to present their case. Otherwise, the money spent trying to enforce the award might leave you much worse off than you were to begin with.