RECOGNITION AND ENFORCEMENT IN SRI LANKA OF ARBITRAL AWARDS SET ASIDE OR SUSPENDED AT THE SEAT OF ARBITRATION

By Janak De Silva*

Introduction

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (hereinafter referred to as the “Convention”) is one of the most successful treaties in the field of international commercial law. More than 100 States have become parties to it, including many communist and South American countries, which traditionally rejected third party dispute settlement measures. Sri Lanka, Ceylon as it was then, signed it on 30th December 1958 and ratified it on 9th April 1962. However, no action was taken to give effect to the Convention in the municipal law. A party who obtained a foreign arbitral award had to enforce it in Sri Lanka by an action at common law on the award1.

The Arbitration Act No. 11 of 1995 (hereinafter referred to as the “Act”) changed this position. The preamble to the Act, states, inter-alia, that it is to give effect to the Convention. Section 33 specifies that a foreign arbitral award, irrespective of the country in which it was made, shall, subject to the provisions of section 34, be recognised as binding, and upon application by a party under section 34 to the High Court, be enforced by filing the award in accordance with the provisions of that section. Section 34 sets out the grounds for refusing recognition or enforcement of foreign arbitral awards. These broadly conform to Article V and VI of the Convention. The grounds set out therein are the only grounds that are available as a defence against recognition and enforcement. The section is framed in a permissive manner. The question arises whether the court should refuse recognition and enforcement where one of the grounds is present or whether it has a residual discretion in enforcing the award. The opinion on this issue is divided.2 The subject of this article is not the issue in this wider form. It is intended to deal only with the particular situation under section 34(l)(a)(v) of the Act, which corresponds to Article V(l)(e) of the Convention. This states that recognition or enforcement of a foreign arbitral award, irrespective of the country in which it was made, may be refused only on the objection of the party against whom it is invoked, if that party furnishes to the court where recognition or enforcement is sought, proof that the award has not yet become

* LL.M.(Merit) (London), B.C.L.(Oxoa). State Counsel

1 However, where the arbitral award fell within the definition of “judgement” in Section 2 of the Reciprocal Enforcement of Judgments Ordinance No. 41 of 1921, it was enforceable under this Ordinance.

2 See W.M. Reismann, System of Control in International Adjudication and Arbitration (Durham.Noth Carolina, 1992) at 115-120

binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which that award was made. Here the issue is not whether the court must respect the foreign judgement but whether as a matter of policy it should 3.

Recognition and Enforcement of Foreign Judgements

The first issue that will arise is whether the foreign judgement, which set aside or suspended the arbitral award, qualifies for recognition and enforcement according to the Sri Lankan conflict of laws rules. The Act only deals with the recognition and enforcement of foreign arbitral awards. The recognition and enforcement of foreign judgements do not fall within the scope of the Act. This is governed by the Enforcement of Foreign Judgments Ordinance No. 41 of 1921 and the Reciprocal Enforcement of Judgements Ordinance No. 4 of 1937. Therefore, it is submitted, that for the defence to be available in terms of Section 34(l)(a)(v) of the Act, the judgement of the foreign court must itself be entitled for recognition and enforcement in Sri Lanka under the provisions of the above Ordinances.

According to the conflict of laws rules, the question whether, in the event of a judgment having been obtained abroad on the award, the award is merged in that judgement is governed by the lex fori (law of the forum) of the court asked to enforce it . Where a judgement is obtained in a Sri Lankan Court, the original cause of action is merged in the decree and ceases to exist by itself. However, the principal of merger of the original cause of action does not operate where the judgement is a foreign or Commonwealth judgement5. Thus where the arbitral award has been set aside or suspended by a court at the place of arbitration and that judgement is entitled for recognition and enforcement in Sri Lanka, there will be two orders: the arbitral award in favour of the claimant and the judgement of the foreign court at the place of arbitration in favour of the respondent setting aside or suspending the arbitral award. The arbitral award can be enforced under the Act while the judgement would be enforceable under the relevant Ordinance. If the court takes the view that there is a residual discretion vested in it to enforce an arbitral award under section 34(l)(a)(v) though the award itself has been set aside or suspended, the situation becomes paradoxical. The arbitral award will be enforced only to be the subject of a claim for restitution by the enforcement of the foreign judgement that set aside or suspended the award. This is a very strong argument in favour of refusing recognition and enforcement in this situation.

An ancillary issue is whether the court may refuse to enforce a foreign arbitral award in a case where, as a result of the bringing of proceedings to have the award set aside in the country where it was made, the award is automatically suspended. Since section 34(l)(a)(v) refers to an award being suspended by a court, it would seem that automatic suspension under the law of the country where the award was made does not entitle the

” See Roy Goode in “The Role of the Lex Loci Arbitri in International Commercial Arbitration” (2001) 17 Arb. Int. 19

4 Dicey & Morris in “The Conflict of Laws ” (13* Ed.) al 621

5 C.G. Weeramantry in “The Law of Contracts” at 875-6. The position in England relating to the doctrine of non-merger in relation to foreign judgements has been abolished by Section 34 of the Civil Jurisdiction and Judgements Act of 1982.

High Court to refuse recognition and enforcement. This analysis is consistent with the framework of the Act that draws a distinction between the grounds on which recognition or enforcement may be refused and circumstances in which proceedings for the recognition or enforcement of an award may be adjourned under section 34(2) of the Act.

It may be contended, contrary to the position taken above, that the foreign judgement setting aside or suspending the award need not qualify for recognition and enforcement in Sri Lanka for section 34(l)(a)(v) of the Act to become operative. Even if this is accepted, the reasons set out hereinafter support the proposition sought to be established herein. These reasons also apply, in addition to the ground enumerated above, where the foreign judgement itself qualifies for recognition and enforcement.

Lex Arbitri

In order to determine the effect that the judgement of the court at the place of arbitration has on the award, it is necessary to ascertain the connection, if any, the arbitration proceeding has with the seat of arbitration.

It is firmly established that more than one national system of law may bear upon an international arbitration . First, there is the law, which governs the substantive rights of the parties. Secondly, there is the law governing the arbitration agreement. Thirdly, there is the law, which regulates the procedure of the arbitration (curial law or the lex arbitri)1.

The procedural law of the arbitration or the lex arbitri will determine how the arbitrators are to be appointed, in so far as this is not regulated in the arbitration agreement

There are different views as to the nexus between the lex arbitri and the place or the seat of arbitration. These are based on the conflicting theories propounded by scholars as to fundamental conceptions of the nature of arbitration.

Territoriality

The “jurisdictional theory” maintains that arbitration is rooted in the sovereignty of States and their authority to prescribe methods for dispute resolution that may, or must be adopted within their borders. On this view, the freedom to arbitrate disputes is granted by

6 Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd. (1993 AC 334 at 357) 7 See Steyn J. in Paul Smith v. II & S Holding IncA 1992) 2 Lloyd’s Rep. 127 at 130 8 Dicey & Morris in “The Conflict of Laws” ( 12th Ed.) at 582-3

the law of the State, and consequently subject to any constraints imposed by that law. The theory therefore points to the law of the State where the arbitration takes place-the lex loci arbitri-as the law that governs the conduct of the arbitration and the status of the award, 9

Several persuasive arguments can be made in favour for the lex loci arbitri to be the lex arbitri. Paulsson 10 summarises the fundamental arguments as follows: (a) The principle that contracts are governed by the law chosen by the parties does not exist in vacuo

9 Collier and Lowe in “The Settlement of Disputes in International Law ” at 230

10 “Arbitration Unbound: Award Detached From The Law Of Its Country Of Origin” 30 ICLQ 358 at 361 “Lex Factt Arbitrum”, in International Arbitration: Liber Amicorum for Martin Dotnke(Sanders,ed.1967)

159 at 161

In Channel Tunnel Group Ltd. v. Balfour Beatty Construction Ltd}2 Lord Mustill stated that, “the inference that the parties when contracting to arbitrate in a particular place consented to having the arbitral process governed by the law of that place is irresistible”. The English case of Whitworth Street Estates (Manchester) Ltd. v. James Miller Partners Ltd. ~ supports the common presumption that the lex arbitri is the law of the seat of the arbitration. An English company and a Scottish company entered into a contract under which work was to be performed on a building in Scotland. The contract provided for arbitration in Scotland. At the conclusion of the arbitration, the English company requested the arbitrator to state a case to the English High Court, seeking a review of the arbitral award on a point of law which was possible under English law, but not under Scots law. The House of Lords upheld the arbitrator’s refusal to state a case, because it was held that although English law governed the contract, Scots law was the lex arbitri and governed the arbitration. Park14 states that there are two assumptions about the interaction of national law and commercial arbitration inhere in this decision. The first is that arbitration is controlled by some national law, a lex arbitri. The lex arbitri is not necessarily the law governing the substance of the dispute, nor the procedural rules applied by the arbitrators. Rather, the lex arbitri governs the validity of the arbitral process itself. The second assumption underlying Whitworth is that the law of the arbitration is the law of the place of the proceedings: the lex arbitri is the lex loci arbitri. Thus an arbitrator must bow to mandatory norms of the country in which he sits. Parties may choose, the law governing the contract. They may even choose some of the procedural rules applied by the arbitrator to a matter such as cross-examination of witnesses. They do not, however, choose the law governing the arbitration, except indirectly through the choice of its situs. This position is illustrated by the decision in Union of India v. McDonnell Douglas Corp. 15 where the contract provided for arbitration in accordance with the procedure contained in the Indian Arbitration Act 1940, while the seat of the arbitration was London. The English court held that the law governing the arbitration was Indian law, but that the parties had submitted to the supervisory jurisdiction of the English court. Therefore it was held that English law was in sense the procedural law and will prevail over Indian law where it was inconsistent with the Indian arbitration law. In Sumitomo Heavy Industries Ltd. v. Oil & Natural Gas Commission , the Oil and Natural Gas Commission petitioned the English courts to restrain a London arbitration from proceeding until an Indian court could decide the issues of the extent of arbitral jurisdiction and possible frustration of the arbitration agreement because the contract in question, and the arbitration clause in the contract were governed by Indian law. However, the English court found that the choice of London as the seat of arbitration carried with it the choice of English procedural law and therefore retained jurisdiction to supervise and assist the arbitration.

” supra n,6 13 (1970) AC583(HL)

“The Lex Loci Arbitri and International Commercial Arbitration” 32 ICLQ 21 at 23 15 1993 Lloyd’s Rep. 48

16 (1994) I Lloyd’s Rep. 45

The “jurisdictional theory” that supports the proposition that the lex loci arbitri is the lex arbitri find support in the Convention and the corresponding provisions in the Act. Article V(l)(e) of the Convention , section 34(l)(a)(v) of the Act, enables a court which is called upon to recognise and enforce a foreign arbitral award to refuse to do so if the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. An arbitrator should give an effective order. Failure to comply with the mandatory provisions of the lex loci arbitri may render the award unenforceable in a foreign country. Further, Articles II (3),V(I)(a),V(l)(d) and VI of the Convention explicitly recognise the role of the lex loci arbitri in the arbitral process. Sections 34(l)(a)(i), 34(l)(a)(iv) and 34 (2) of the Act in turn recognise the role of the lex loci arbitri. There have also being instances where international arbitral tribunals applied the law of the seat of arbitration as the lex arbitri}1

Delocalisation

The “contractual theory” asserts that the validity of arbitration proceedings and awards spring from the freedom of the parties to make contractual arrangements for the ordering of their affairs and not from the lex loci arbitri. It is stated that denationalized arbitration marries well with the commercial motive behind the trend towards greater arbitral autonomy in modern arbitration law. It increases a country’s attractiveness as a situs for arbitral proceedings and permits national tribunals to concern themselves less with disputes not implicating national interests and accommodates international business transactions in which the parties divergent nationalities create a special need for a neutral and private forum for dispute resolution. Lalive 18 reasons as follows in support of detaching the lex arbitri from the lex loci arbitri. The municipal judge necessarily applies the rules of conflict of the forum, which represent the politico-juridical concepts-particularly as to the territorial limits of legislative power-of the State from which he derives his authority. The international arbitrator is in a fundamentally different position. Whatever one might think of the contractual (as opposed to judicial) source of an arbitral tribunal’s authority as a purely internal matter, it is difficult to consider the international arbitration as a manifestation of the power of a State. His mission, conferred by the party’s consent, is one of a private nature and it would be a rather artificial interpretation to deem his power to be derived, and very indirectly at that, from a tolerance of the State of the place of arbitration. Paulsson 19 goes further and states that the binding force of an international award may be derived from the contractual commitment to arbitrate in and of itself, that is to say without a specific national legal system serving as its foundation. In this sense, an arbitral award may indeed “drift”, but of course it is ultimately subject to the post facto control of the execution jurisdiction(s). The decision of the Paris Court of Appeal in Gotaverken v. Libyan Maritime Co.20 is cited in support of this thesis.

17 See Sapphire International Petroleum Co. v. NIOC (1963) 35 ILR 136 at 138

” Les regies de confict de lots appliquees au fond du litige par l’arbitre international siegeant en Suisse” (I976)Revue de l’arbitrage 155 at 159

19 supra n. 10 at 368

20 Decision with commentaries published in (1980) Journal du droit international 666

In this case, Gotaverken, a Gothenburg shipyard, commenced arbitration under the ICC Rules against the Libyan General National Maritime Transport Company for the unpaid balance of the sales price stipulated in the construction contract for three tankers between the parties. The seat of the arbitration was Paris. An award was rendered in favour of Gotuverken that was repudiated by the Libyan Company. Enforcement of the award was sought in Sweden by Gotaverken. The Libyan Company replied by commencing proceedings in France by appealing to the Paris Court of Appeal to set aside the award and request the Swedish court to stay enforcement until the French action was determined. The Paris Court of Appeal dismissed the appeal. The court based its decision on the principle that in international arbitration proceedings, parties have the freedom to select the legal order to which they wish to attach the proceedings, and that this freedom extends to the exclusion of any national system of law. Paulsson submits that the decision of the Court of Appeals of Paris constitutes clear acceptance of the detachment phenomenon. Its underlying thesis is that the legal force of transnational arbitration is founded on the parties’ creation of a contractual institution

However, the French and Swedish decisions do not support detachment of the lex arbitri from the lex loci arbitri. Neither case was concerned with an award that had been set aside or nullified by a court at the seat of arbitration. The French Gotaverken decision is only supportive of the proposition that international arbitration receives substantially greater autonomy and thus subject to less constraints than a domestic arbitration. The 1981 French Decree on International Arbitration23 severely limited the extent to which French law affects international arbitrations and the grounds on which the French court may interfere with them. Similar approaches have been adopted in other national laws such as the Belgian legislation of 1985 24 and the Swiss law of 198725.

The “contractual theory ” and its extended detachment thesis cannot be supported either in theory or practice for the following reasons:

(a) Critical to the viability of the “contractual theory” is the legal effect of an arbitral award not linked to a national legal system. As Park states,26 the paradox of a legal

21 supra n. 10 at 367

22 See (1981) 21 Virginia Journal of International Law 244

24 (1986) 25 1LM 725

25 (1988) 25 ILM37

26 supra n. 14 at 26

obligation independent of a legal order suggests Athena springing full-blown from the head of Zeus: a binding commitment free from any municipal law just appears. Grasp of Paulsson’s thesis requires a conceptual leap to a document labeled “obligation” enforced without respect to whether the document constitutes a valid obligation under the legal system normally selected by the enforcement forum’s choice of law principles. In other words, the document receives contractual force from the enforcement forum itself regardless of the otherwise governing law. In Amin Rasheed Shipping Corporation v. Kuwait Insurance Co.,27 Lord Diplock held that contracts are incapable of existing in a legal vacuum, and are mere pieces of papers devoid of all legal effects unless made by reference to some system of private law. Although in practice, parties can enter into contracts, no legally enforceable rights are created thereunder unless the contract is recognised by a system of law. A person who is under a particular incapacity under the applicable law cannot enter into any legally enforceable contract although he may have the intention to do so. Every right that persons enjoy is inexorably conferred by a system of municipal law. Contracts are governed by the law chosen by the parties only by reason of the fact that the rule is a part of the law of a specific legal system and where private parties are concerned, that system is a national legal system. The same analysis holds for the notion that the arbitral process is subject to the law of the place chosen by the parties as the seat of the arbitration. Consequences of any activity taking place in a given country, including arbitration, must be subject to the law of that country. It is rooted in the sovereignty of States and their authority to prescribe methods for the resolution of disputes, which may, or must, be adopted within their borders. Freedom to arbitrate disputes is granted by the law of the State, and consequently subject to any constraints imposed by that law.

(b) Article V(l)(e) of the New York Convention implies that the failure to comply with the law of the seat may render the award unenforceable in foreign courts: an arbitrator seeking to give an effective award cannot ignore the mandatory provisions of the lex loci arbitri.

(c) The parties, or the arbitrators, may wish to have the assistance of the local courts during the proceedings, and the local courts may refuse to give it if the arbitration is in some sense insulated from the local law.

(d) The residual ability to challenge the award at the stage of recognition or enforcement is far from satisfactory, because it obliges the party making the challenge to do so by way of a defense to proceedings in a jurisdiction chosen by the other party. In the era of globalization where a person or commercial entity will have assets in many jurisdictions, this is far too a greater prize to be paid for the perceived benefits of detachment.

(e) The respondent will have to relitigate identical issues in every country, having battled successfully in a different country. It is a danger to the perceived advantages of

27 1984 AC 50 at 65. Cf. Deutsche Schachlbau v. Shell International Petroleum Co. Ltd (1990) 1 AC 295(CA) at 315-6. See also Mustill L.J. (1988) 4 Arb. Int. 86 at 107-9: Hunter (1987) LMCLQ 277

arbitration in the sense of confidentiality as the circumstances of the proceedings would become public in every country where the award is sought to be enforced, an outcome which can be avoided if the binding nature of the award derives solely from the lex loci arbitri.

(f) A fundamental purpose of international commercial arbitration is to promote economic efficiency in the handling of disputes. This is undermined if a series of costly litigation takes place at different places on the validity of the award.

(g) Estoppel is a well-established principle in most legal systems and a general principle of international law. Acceptance of the “floating” or delocalised arbitration fails to respect this principle inasmuch a party is given several chances to challenge the award having failed earlier on the same grounds.

(h) It leaves the path open for conflicting decisions from different foreign courts and the uncertainty that follows from it is certainly contrary to the expectations of certainty of the commercial community.

(i) International law increasingly relies on the comity and co-operation of foreign courts in several areas such as civil procedure and cross-border insolvency. Delocalisation severely impedes the international co-operation in dispute resolution.

(j) Courts have also shown a reluctance to recognize or enforce awards not grounded in some system of national law as reflected in the decisions of BP v. Libya and Bank Mellat v. Helliniki Techniki SA 28 where it was held that, “Despite suggestions to the contrary by some learned writers under the other systems, our jurisprudence does not recognise the concept of arbitral procedures floating in the transnational firmament, unconnected with any municipal system of law”.

(k) Interest reipublicae sit finis litium or it is the policy of the law that there should be an end to litigation. The territorial approach respects this by referring the question of the validity of the arbitral award to a single court at the seat of arbitration whereas the contractual approach does not do so.

(1) The acceptance of the delocalisation theory would mean that it leaves no forum where a manifestly deficient award may be set aside. This does not augur well for the growth of international commercial arbitration.

(m) It will lead to the unsatisfactory result of having an award executed in one country only to be set-aside afterwards in the country of origin. The reasoning is reflected in the German law29 where the enforcement of foreign awards is now exclusively governed by the Convention without prejudice to any other applicable international treaty. Article V(l)(e) of the Convention has been considered by German

28 1984 Q.B. 291 at 301

” See Sachs in The Enforcement of Awards nullified in the country oforigin:The German perspective in

Improving the Efficiency of Arbitration Agreements and Awards (lCCA Congress Series No. 9

Berg. 1999)

commentators as meaning “shall be refused”. So where the award has been set aside at the place of arbitration, recognition will not be granted. Where the foreign award has been set aside after the German court has ordered enforcement, the German Arbitration Law contains a section in terms of which an application can be made for setting aside of the declaration of enforceability, thus constituting the basis for a special restitution proceeding relating to the setting aside of the declaration of enforceability, based on posterior annulment of a foreign award in the country of origin.

(n) The principle of comity was thought of at one time as one of the cornerstones of private international law. Though it was downgraded later, it has seen resurgence, specifically in the area of mareva injunctions. Delocalisation is incompatible with comity since the decision of the court at the seat of arbitration is disregarded.

(o) There are also matters of principle, which arise for consideration if the detachment thesis is accepted. It immediately challenges the orthodox conceptions of sovereignty and the independence of the states. It would result in arbitration conducted in Sri Lanka, subject only, probably, to considerations of domestic public policy, being outside the scope of the supervisory powers of the High Court in terms of section 32 of the Act. Any question of intervention in the course of the arbitration, of challenging an award would in such circumstances be governed by a foreign court How are the orders of the foreign court going to be enforced? The idea of a foreign court intervening in an arbitration conducted in Sri Lanka and removing an arbitrator for misconduct is far from digestible.

The arguments against the delocalisation of the arbitral proceedings are overwhelming. The movement in favour of detaching the arbitral process from the lex loci arbitri was begun, mainly by Continental scholars, at a time when States frowned upon the institution of arbitration as a method of dispute settlement. These objections are no more prevalent. A large number of countries have enacted legislation to facilitate both domestic and international arbitration. While not taking a stand in favour of a total hands-off position, most of these laws have relaxed the circumstances under which the local courts could interfere in the arbitration process. For example, the UK Arbitration Act 1996 allows the parties to an international arbitration having its seat in England to agree to exclude the jurisdiction of English courts in appeals on points of law. A corollary development has been that even the countries that enacted laws having a total hands – off position for international commercial arbitration have had second thoughts and amended some of the provisions. Belgium had enacted laws in 1985 whereby a losing party to an international commercial arbitration was not able to challenge the award in the Belgian courts. However, as it appeared that this discouraged the parties from choosing Belgium as the seat of arbitration, the law was changed in 1998 and now a party to an international commercial arbitration may opt-out of local control if they wish. But, automatic delocalisation is no longer possible.

In these circumstances, it is submitted that the lex loci arbitri is the lex arbitri and that this position is tenable in theory as well as in practice. Thus, the validity of the arbitral award is derived from the lex loci arbitri and where the award has been set aside or suspended by a court at the place of arbitration, the award is devoid of any validity.

Uniformity

It has been argued that the Convention grants discretion to the enforcement court in Art. V(l)(e) to ensure that there is uniformity at international level in the recognition and enforcement of foreign arbitral awards. It is said that the grounds on which an arbitral award may be suspended or set aside is not uniform to all the countries. They differ from country to country and some of the reasons are not accepted universally and therefore the foreign judgment does not deserve or demand recognition. This is a slippery ground to embark on and will expose the judges in Sri Lanka to make a most invidious choice. They will be called upon to constitute themselves as the guardians of the international acceptability of the laws of another country. The principle of res judicata will not survive the demand that the acceptability of the laws of one country be measured by another. It is also to be borne in mind that the Convention is aimed at bringing uniformity at the stage of recognition and enforcement and not aimed at creating a transnationaj regime for setting aside or suspending arbitral awards. This is exemplified by the acknowledgement of the role of two courts in the Convention: setting aside or suspending the award by a court at the place of arbitration and recognition and enforcement by a court at the place where it is sought to be recognised and enforced. Establishing uniform regimes in the national legal systems relating to arbitration is a goal, which is being pursued by UNCITRAL in the form of the Model Law on International Commercial Arbitration. The consideration about the different grounds on which an award can be set aside should be for the parties to consider at the time and the place of arbitration is agreed upon.

Conclusion

The weight of academic and judicial authority is for the lex loci arbitri to be the lex arbitri. One of the greatest attributes of this position is that certainty is achieved in the process of international commercial arbitration, which in turn facilitates the development of this institution. The position can be supported on theoretical as well as practical considerations. The logical conclusion is that the arbitral award secures its validity from the lex loci arbitri acting as the lex arbitri. Therefore, where the question of recognition or enforcement of a foreign arbitral award which has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, that award was made arise for consideration before our courts, recognition or enforcement should be refused as a matter of policy30.

30 See Dicey & Moms in “The Conflict of Laws ” (13thEd) at 640. For exceptional cases where the awards had been set aside in the country where they were made, but were enforced abroad sec Hilmarton Ltd, v. Omnium de Traitement el de Valorisation (1995) 20 Yb.Comm.Arb. 663

It was submitted at the beginning of this article that the application of section 34(l)(a)(v) of the Act will not arise for consideration if the judgement of the court at the seat of arbitration, which set aside or suspended the arbitral award, is not entitled for recognition and enforcement according to the Sri Lankan conflict of law rules. It may appear that this enables an award which is not valid according to the lex loci arbitri to be enforced in Sri Lanka and thus contrary to the position taken above. However, there the judgement of the foreign court is not granted recognition and enforcement in Sri Lanka in terms of the conflict of laws rules enshrined in the Ordinances referred to in earlier. In this situation, the legislature has thought it fit not to grant recognition and enforcement within Sri Lanka to the foreign judgement. This cannot under any circumstances be construed as accepting delocalisation of the arbitral award. In that situation the arbitral award would qualify for recognition or enforcement only if it fulfills the other criteria set out in the Arbitration Act. Where it does so, the legislature has thought it fit to grant recognition and enforcement of the award even though it has been set aside or suspended at the seat of arbitration. The question of applying section 34(l)(a)(v) of the Act does not arise for consideration. The proposition that is sought to be established herein is that where the court has to apply the provisions of section 34(l)(a)(v), the policy of the court should be to accept the role of the lex loci arbitri as giving validity to the arbitral award.