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?
As attractive as the attributes of the New York Convention are, its application will be greatly diminished without the assurance of its uniform recognition in different jurisdictions.
The following discussion will only review the application by different countries of Article V (2) (b) which permits the courts of a Contracting State to refuse recognition and enforcement of a foreign award based on public policy. The public policy defence is often raised by a losing party in an attempt to manipulate an enforcing Court into re-examining matters which have been decided in the arbitration proceedings. The public policy ground is thereby invoked to prevent the winning party from enjoying the fruits of its victory.
The review of the ‘public policy’ defence to enforcement proceedings will highlight the manner in which some signatory countries to the Convention have attempted to interpret this provision in order to maintain the international system of arbitration enforcement in a manner most beneficial to their perceived interests.
In doing so, a comparison will be made between the different interpretations of developing countries and members of the European Union and other developed nations and an analysis of the efficacy and impact of the provision on setting aside applications or refusal of enforcement proceedings worldwide.
Some states have attempted to define “public policy” as used in the New York convention. The Court of Appeal of Paris has defined international public policy as “the body of rules and values whose violation the French legal order cannot tolerate even in situations of international character”. Also, the Court of Appeal of England and Wales has held that the public policy exception under the New York Convention encompasses cases where “the enforcement of the award would be clearly injurious to the public good or, possibly, enforcement would be wholly offensive to the ordinary reasonable and fully informed member of the public on whose behalf the powers of the state are exercised”.
Debates have also emerged, albeit more academic than real, as to whether the “public policy” referred to in the New York Convention refers to “international public policy” or the public policy of the “forum state ”, even though the wording of Article V(2) (b) says “The recognition or enforcement of the award would be contrary to the public policy of that country.” In attempting to define domestic public policy, many countries have been guided by internationally held concepts of public policy. The Italian courts in the case of Allsop Automatic Inc. v. Tecnoski snc , have stated that public policy refers to “a body of universal principles shared by nations of the same civilization, aiming at the protection of fundamental human rights, often embodied in international declarations or conventions”. English courts have held that it is difficult to see why acts which do not constitute universally condemned activities should give rise to a defence of public policy, especially where the contracts were not constituted in England, except it would result in a breach of England’s treaty obligations. However, perhaps relying on the rules of literal interpretation which say that words in a statute should ordinarily be given their literal or ordinary meaning, the Supreme Court of India has held that “public policy” in article V(2)(b) of the New York Convention should be taken to mean the public policy of the enforcement forum .