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 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?

On the other side of the divide however, are cases also decided by the English courts relying on the ground of illegality in a contract to refuse to enforce a foreign arbitration award. In the case of Soleimany v Soleimany , the English Court of Appeal refused to enforce a Beth Din (court under Jewish law) arbitration award on the ground of public policy. In this case, the son purchased some carpets and exported them illegally out of Iran to be sold by the father in the United Kingdom or elsewhere. Disputes arose between the parties over the division of the proceeds of sale. The parties referred the matter to the Beth Din whereby the son was awarded a sum of £576,574. The English court was of the view that the contract between the parties was illegal in nature and held that the award was unenforceable, as to do so would tarnish the honour of the English judicial process and that the court is concerned with preserving the integrity of its process. It is stated thus:

“The parties cannot override that concern by private agreement. They cannot use arbitration…to enforce an illegal contract. Public policy will not allow it. It may be that they expected that the award, whatever it turned out to be, would be honoured without further argument. It may be that the plaintiff can enforce it in some place outside England and Wales. But enforcement here is governed by the public policy of the lex fori.”

In another Court of Appeal case of David Taylor & Son Ltd v Barnett, the court also refused to enforce an arbitral award on the ground that the contract between the parties was illegal and therefore in conflict with the public policy of the country. In this case, the seller and the buyer agreed on a certain price for the purchase of Irish stewed steak to be delivered at a later time. Prior to the delivery date, an order was made preventing the buying or selling of meat over a certain price (which the contract price exceeded). The seller therefore failed to deliver the meat to the buyer. The dispute was submitted to arbitration and the award was in favour of the buyer. The Court of Appeal held that the contract had been illegal at its formation due to the provision of the set prices that exceeded the legal limits, and accordingly set aside the award as it was based on an illegal contract.

Yet it is not every case where there is illegality as seen from the Westacre Case above that the enforcement of a foreign award will be refused. The difficulty is in determining when illegality will defeat enforcement and when it will not.

Perhaps in cases such as Soleimany v. Soleimany and Barnett the court has refused to compromise the dispensation of justice in an effort to implement the pro-enforcement spirit of the Convention. The court in Westacre declared that

“It is performing a balancing exercise between the competing public policies of finality and illegality; between the finality that should prima facie exist particularly for those that agree to have their disputes arbitrated, against the policy of ensuring that the executive power of the English court is not abused. It is for those reasons that the nature of the illegality is a factor, ….., and the extent to which it can be seen that the asserted illegality was addressed by the arbitral tribunal is a factor”.

Funke Adekoya

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