CLOUT
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The decision, arising out of an action to have a foreign award declared enforceable, concerns the question of whether the Respondent was duly informed about the arbitration, or whether his due process rights were violated.

The dispute arose out of a sales contract between a Russian seller (Claimant) and a German buyer (Respondent) which provided for arbitration before the Court of Arbitration of the Chamber of Commerce of the Russian Federation. Since the buyer withheld part of the purchase price, invoking a set-off with a claim for damages, the seller initiated an arbitration proceeding. The buyer did not attend the oral hearing and a decision in favour of Claimant was rendered by default.

Claimant sought enforcement of that award in Germany under the bilateral Agreement on Trade and Maritime Shipping between Germany and Russia of 1958. According to this Agreement, recognition and enforcement of an arbitral award may only be refused if the award is either not considered final in the country where it was rendered or violates public policy in the country where enforcement is sought. Respondent requested that enforcement be denied because he was not duly summoned to the arbitration proceeding.

The Court decided that the award which was final and enforceable in Russia should not be recognized in Germany as the arbitral proceeding violated the principle of due process. The right to be heard is fundamental to public policy and, as recognized by article V (1) (b) New York Convention, encompasses the right to be informed and to be summoned to a hearing in due time. Since Claimant did not contest Respondent's allegation that he never received a notice of arbitration, and on the basis of the evidence, the Court concluded that Respondent's right to be heard was violated. The Russian court never demanded any evidence that Claimant actually received a notice of arbitration because, according to article 3 (1) of the Russian Law on International Arbitration, the dispatch of the notice was considered sufficient. Under German law, however, the legal fiction of receipt is not sufficient for valid notice. Moreover, the Court stated that a duly dispatched notice should have resulted in a successful delivery as Respondent did not change its place of business. Finally, the Court held that Respondent was not restricted to legal remedies against the award in the country where it was rendered. Since Claimant availed itself of enforcement procedures in Germany, Respondent must not be deprived of its remedies under the same law.

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