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Missing signatures on arbitral awards: lessons from recent state court decisions
Missing signatures on arbitral awards: lessons from recent state court decisions
2 October 2024
Series
Blogs
2 October 2024
Arbitration awards need to be signed by the arbitrators. In most jurisdictions, it is sufficient for a majority of the arbitral tribunal to sign, provided that the reason for any missing signature is stated. In a multibillion Euro arbitration seated in Germany, this issue has come to a head, prompting the German Federal Court of Justice to weigh in and provide clarification.
Background
The UNCITRAL Model Law on International Commercial Arbitration of 1985, amended in 2006, (the “Model Law”) has been adopted in nearly 100 states, standardising national arbitration laws globally. Article 31 of the Model Law addresses the form and contents of arbitral awards, stating in its para. 1:
“The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated.”
This provision, along with related issues around signatures, has been relevant in several notable cases around the world recently (see, for example, the decisions in Boralex Energie France v SAS InnoVent, (30 November 2021 - Paris Court of Appeal) and Gaslink Nigeria Limited v Reliance Textile Industries (17 November 2017 -Lagos Court of Appeal)). The latest significant commentary comes from Germany, contributing further to the discourse on efficiency in arbitration.
The award and the first-instance court’s decision
The Federal Court of Justice’s decision concerns a Post M&A dispute concerning the multi-billion EUR sale of a crop science business. The transaction, governed by New York law, has since become the subject of an ICC arbitration seated in Frankfurt in which the purchaser alleged various breaches of warranty and disclosure obligations, and sought significant damages.
The arbitral proceedings concluded in August 2022 with an award dismissing all claims. The award notably lacked the signature of one party-appointed arbitrator. Instead, the printed remark “[signature could not be obtained]” had been placed under his signature field.
The purchaser challenged the award for several reasons. One complaint was that Section 1054 para. 1 of the German Code of Civil Procedure (Zivilprozessordnung – “ZPO”) had been violated. This provision is based on Article 31 para. 1 of the Model Law and provides that the signatures of the majority of all members of the arbitrators will suffice, provided that the reason for any missing signature is stated. The purchaser argued that this was not the case, and it moved to set the award aside or, in the alternative, declare it invalid due to the missing signature.
The first instance court in Frankfurt followed the alternative request and declared the award invalid. It held that the phrase “signature could not be obtained” only stated that there was no signature but not why it could not be obtained. This, according to the Frankfurt court was insufficient under the ZPO (and the Model Law). Additionally, the Frankfurt court raised a question of whether the “signature could not be obtained” note would itself need to be signed, at least by the presiding arbitrator. The court left this question undecided as, in its view, the note was insufficient at any rate.
The Federal Court of Justice’s decision
The Federal Court of Justice, in a decision dated 11 July 2024, overturned the Frankfurt court’s ruling. The court first noted that the wording of the ZPO (and Model Law) only requires a statement of the reason for a signature, and that “signature could not be obtained” provides such a reason.
Per the court, this interpretation aligns with the intention behind allowing signatures from a majority of arbitrators, which is to prevent obstructive arbitrators from invalidating an award. The requirement to state a reason for a missing signature serves to confirm that the award is final and not missing a signature by accident. In line with this, where a signature is missing, the reason given for this is not reviewed for its accuracy, so an incorrect reason does not invalidate the award.
Additionally, the German legislator, when adopting the Model Law, aimed to simplify proceedings in the interest of international arbitration. The Federal Court of Justice cited this objective as another justification for not taking an overly stringent approach to the reason-for-missing-signature requirement.
The court noted obiter dictum that the statement "signature could not be obtained" itself does not require a signature, as this is not mandated by the Model Law. This further underscores the court's intention to streamline arbitration proceedings and minimise procedural impediments. In the same spirit, the court clarified that any formal deficiencies, such as a missing signature or the absence of a note explaining the reason, can be rectified retrospectively.
Conclusion
The decision by the Federal Court of Justice is instructive for all Model Law jurisdictions. By clarifying that a simple statement of “signature could not be obtained” meets the Model Law’s requirements, the court has embraced a pragmatic approach that is arguably in the Model Law’s spirit. This stance reflects an intent to promote efficiency and finality in arbitration proceedings, thereby strengthening the authority of arbitration awards.
That being said, tribunals should remain sensitive to following appropriate procedures in the signing of awards as several important questions remain unanswered. For example, the court’s suggestion that formalities can be retroactively rectified raises issues about the permissible timeframe for such corrections. It also stands in contrast to the procedural rules of major arbitral institutions, which typically do not allow for tribunals to reconstitute after an award has been issued. More broadly, it is unclear if Article. 31 para. 1 of the Model Law is mandatory, or if the parties (and arbitral institutions) can agree on alternative signature requirements. Another pertinent issue, although not addressed in the present decision, is the use of electronic signatures in international arbitration and the Model Law’s stance on their validity.
These considerations will undoubtedly shape future arbitration practices and the ongoing evolution of procedural norms.