A Comparison Of The Use Of The Public Policy Defence By Different Countries To Resist The Enforcement Of International Arbitral Awards – A Rising Star Or Setting Sun?
A review of the cases shows that some countries have favoured an ‘expansionist’ interpretation of ‘public policy’ which enables their national courts to refuse enforcement not by reference to any legitimate interpretation of the relevant law but to protect the domestic party and frustrate the award.
Though there are not many cases on the public policy concept of enforcement of arbitration, it can be observed that most “forum states” which incidentally are mostly developed countries tend to apply a restrictive interpretation to public policy. Thus, it is not surprising that in forum states applications to refuse recognition and enforcement of a foreign arbitral award made under article V(2)(b) of the New York Convention have rarely been successful.
However there has been a spate of decisions using the public policy defence to refuse enforcement of foreign arbitral awards, most especially from developing countries and a few from some European countries. Since party autonomy gives parties the freedom to choose who to contract with and were they want to seek enforcement, if investors view a country as averse to enforcing foreign arbitral awards, the enthusiasm for investing in the country will be reduced, and the reduced inflow of foreign direct investment projects will negatively impact upon economic growth prospects for that country.
In totality however, the trend [taking into account the most recent amendment to the Indian Arbitration Act] seems not to support the view that the public policy defence is a rising star whose light will diminish that of the Convention. On the contrary, it seems more likely that the public policy defence in enforcement proceedings is a setting sun whose sparkle is rapidly fading in the developing world and though its relics might linger for a longer time than expected, it is expected that the defence will more often be used in line with the Convention pro- enforcement bias, thus supporting the framework for cross border recognition of international arbitration awards.