INTERNATIONAL LAW ASSOCIATION
NEW DELHI CONFERENCE (2002)
COMMITTEE ON INTERNATIONAL COMMERCIAL
ARBITRATION
Members of the Committee:
Professor Pierre Mayer (France): Chair
Mr Audley Sheppard (UK): Co-Rapporteur
Dr Nagla Nassar (HQ/Egypt):Co-Rapporteur
Dr Mohammed Aboul-Einein (Egypt)
Alternate: Professor Ahmed El-Kosheri
Mr Guillermo Aguilar Alvarez (Mexico)
Judge Koorosh H Ameli (HQ/Iran)
Professor David J Attard (Malta)
Professor Sidnei Beneti (Brazil)
Mr Piero Bernadini (Italy)
Alternate: Professor Giorgio Recchia
Professor Karl-Heinz Bockstiegel (Germany)
Alternate: Dr Norbert Wuhler
Professor Bengt Broms (Finland)
Alternate: Judge Gustaf Moller
Mr Charles N Brower (USA)
Professor Fernando Carmona (Brazil)
Professor Bernardo M Cremades Sanz-Pastor
(HQ/Spain)
M Jean-Louis Delvolve (France)
M Yves Derains (France)
Lord Devaird QC (UK)
Dr Anghelos C Foustoucos (Hellenic)
Direktor Ulf Franke (Sweden)
Alternate: Professor Lars Hjerner
Professor Julio Gonzalez Soria (Spain)
Dr Horacio Alberto Grigera Naon (Argentina)
Mr Mustapha Hamdane (HQ/Algeria)
Professor Bernard Hanotiau (Belgium-Luxembourg)
Alternate: Professor Hans van Houtte
Mr Michael F Hoellering (USA)
Dr Pierre A Karrer (Switzerland)
Alternate: Mrs Teresa Giovannini
Dr Mojtaba Kazazi (HQ/Iran)
Professor Tae Ryun Kim (Korea)
Alternate: Professor Young -Gil Park
Dr A F M Maniruzzaman (Bangladesh)
Mr Fernando Mantilla-Serrano (HQ/Colombia)
Mr F S Nariman (India)
Alternate: Mr S K Dholakia
Mr Philip D O'Neill (USA)
The Hon Justice Rodney Purvis QC (Australia)
Alternate: Judge Andrew Rogers
Alternate: Mr Damian Sturzaker
Mr LHW van Sandick (Netherlands)
Professor Toshio Sawada (Japan)
Mr Stewart Shackleton (Canada)
Professor Jose Luis Siqueiros (Mexico)
Dr Atef Suleiman (HQ/United Arab Emirates)
Dr Andrzej Tynel (Poland)
Mr V V Veeder Q C (UK)
Alternate: Mr Robert Volterra
Professor Bernd von Hoffmann (Germany)
Professor Dragica Wedan-Lukic (Slovenia)
Mr David Williams QC (New Zealand)
FINAL REPORT ON PUBLIC POLICY
AS A BAR TO ENFORCEMENT OF INTERNATIONAL ARBITRAL AWARDS
I.
INTRODUCTION
1.
This is the Final Report of the Committee on the topic of public policy as a ground for refusing
recognition1 and enforcement of international arbitral awards.
2.
The Committee has agreed upon a number of Recommendations as to the application of public
policy by State courts.2 This Final Report sets out the Recommendations and provides a brief
1
Recognition of an international arbitral award may be a step in the process of enforcement or it may in some
countries be a separate stand-alone procedure. In this Report, for convenience, we refer just to enforcement.
2
The Recommendations and the Committee's Reports do not address the public policy issues facing an arbitral
tribunal: only the public policy issues facing an enforcement court. For the former, see the literature referred to
in the Committee's Interim Report, nn. 4, 84-87; and Racine, L'Arbitrage Commercial International et L'Ordre
Public (LGDJ, 1999); and Seraglini, Lois de Police et Justice Arbitrale Internationale (Dalloz, 2001); and
Kreindler, "Aspects of Illegality in the Formation and Performance of Contracts" (paper presented at the 16th
ICCA Congress, London, 2002); see also the literature relating to Arts. 7 and 16 of the 1980 Rome Convention
on the Law Applicable to Contractual Obligations.
2
commentary on each. This Report should be read together with the Committee's Interim Report
presented at the London Conference in June 2000 ("Interim Report").3
3.
II.
The Recommendations are the culmination of a six year study of public policy by the Committee,
starting after the Helsinki Conference in 1996.4 The Recommendations themselves have been
discussed and agreed by the Committee at meetings in London (June 2000), Amsterdam
(September 2000), Paris (January 2002) and at the Conference Working Session in New Delhi
(April 2002). A number of Committee members have made written comments.
RECOMMENDATIONS: GENERAL
Recommendation 1(a)
"The finality of awards rendered in the context of international commercial arbitration should
be respected save in exceptional circumstances."
4.
Those who drafted the New York Convention intended that enforcement should be refused only in
a number of limited circumstances (see Article V). This was also the objective of the UNCITRAL
Model Law (see Article 36).
5.
An enforcement court must carry out a balancing exercise between finality and justice. The New
York Convention and the Model Law permit such an exercise by making the court's power
discretionary, i.e. enforcement "may" be refused.
6.
Many courts have expressed a policy favouring enforcement.5 For example, the European Court
of Justice in Eco Swiss China Time Ltd -v- Benetton International NV (1999) stated:6
"… it is in the interest of efficient arbitration proceedings that review of arbitration
awards should be limited in scope and that annulment of or refusal to recognise an
award should be possible only in exceptional circumstances."
7.
The Committee endorses this policy and recommends that enforcement should be refused only in
exceptional circumstances.
8.
These Recommendations are intended to apply to awards which are not strictly domestic, i.e.
those which include a material foreign element. These are referred to as "international arbitral
awards". The same test should apply to all international arbitral awards, irrespective of whether
the award is made in the same jurisdiction as the enforcement court (and enforceable pursuant to
domestic legislation) or made abroad and enforceable pursuant to the New York or other
international Conventions.
Recommendation 1(b)
"Such exceptional circumstances may in particular be found to exist if recognition or
enforcement of the international arbitral award would be against international public policy."
9.
It is an accepted norm that a State has the ultimate right to refuse to enforce an arbitral award
within its jurisdiction on grounds of public policy. This was acknowledged by the drafters of the
New York Convention (Article V.2(b))7 and of the Model Law (Article 36(1)(b)(ii))8. The public
3
Published in the Report of the Sixty-Ninth Conference, London, 2000 (available from the International Law
Association) and in pdf format at www.ila-hq.org.
4
The Committee's initial research into public policy was written up in the report of Rapporteur Sheppard presented
at the Taiwan Conference in 1998.
5
See Interim Report, part IV.A.
6
Case C-126/97, reported at [1999] 2 All ER (Comm) 44 and [1999] European Court Reports I-3055.
7
Article V.2(b) states (in the English text): "Recognition and enforcement of an arbitral award may also be refused
if the competent authority in the country where enforcement is sought finds that: … the recognition or
enforcement of the award would be contrary to the public policy of that country". It must be remembered that the
Convention has equally authentic texts in five languages, namely Chinese, English, French, Russian and Spanish.
While the term "public policy" is used in the English text of Art. V, civil law countries generally use the term
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policy exception is referred to in most other enforcement conventions9 and in domestic
legislation.10 Similarly, it is included in international instruments concerning the enforcement of
foreign judgments (e.g. the 1968 Brussels Convention, the 1988 Lugano Convention, and the
2001 EC Council Regulation),11 and accepted by the drafters of the Hague Convention.12
10.
In the context of enforcement of arbitral awards, the legislatures13 and courts14 of a number of
countries have sought to qualify or restrict the scope of public policy by applying a test of
"international public policy".15 Leading commentators have also approved the narrowing of the
public policy exception and the application of "international public policy".16 The Committee
endorses the application of a test of "international public policy".
11.
In these Recommendations, the expression "international public policy" is to be understood in the
sense given to it in the field of private international law; namely, that part of the public policy of a
State which, if violated, would prevent a party from invoking a foreign law or foreign judgment or
foreign award. It is not to be understood, in these Recommendations, as referring to a public
policy which is common to many States (which is better referred to as "transnational public
policy") or to public policy which is part of public international law. International public policy is
generally considered to be narrower in scope than domestic public policy.17
"ordre public", which appears in the French text. The Spanish text refers to "ordine pubblico". "Public policy"
and "ordre public" are now considered to be synonymous: see Interim Report, n. 35.
8
Articles 36 states that recognition or enforcement of an award may be refused "if the court finds that … the
recognition or enforcement of the award would be contrary to the public policy of this State".
9
See Interim Report, part III, under the heading "Other Conventions". See, for example, the 1975 Panama
Convention Art. 5(2)(b); and the 1983 Riyadh Convention Art. 37; which both refer to public policy. The
OHADA Convention Art. 25, sub-para. 4 refers to international public policy. As a notable exception, the
Washington (ICSID) Convention does not refer to public policy (although some of the grounds for annulment are
generally considered to be part of international public policy) and the French Cour de Cassation held that an
ICSID award may not be refused enforcement in Contracting States on grounds of public policy (see SOABI -vSenegal, Interim Report, n. 30).
10
See Interim Report, part III, under the heading "National legislation". Most legislation refers to "public policy"
although some enactments refer to "international public policy" (e.g. France, Portugal, Algeria, Lebanon and the
OHADA Uniform Arbitration Law).
11
The Brussels and Lugano Conventions both state (at Art. 27(1)) that: "A judgment shall not be recognized ... if
such recognition is contrary to public policy in the State in which recognition is sought". The new EC Council
Regulation (No. 44/2001) on jurisdiction and the recognition and enforcement of judgments in civil and
commercial matters (applicable to all EU Member States except Denmark) states (at Art. 34(1)): "A judgment
shall not be recognised … if such recognition is manifestly contrary to public policy in the Member State in which
recognition is sought."
12
The Preliminary Draft Hague Convention (October 1999) states (at Art. 28(1)(f)): "Recognition or enforcement
of a judgment may be refused if ... recognition or enforcement would be manifestly incompatible with the public
policy of the State addressed."
13
As noted above (n. 10), the arbitration legislation in France, Portugal, Algeria, Lebanon and OHADA make
reference to "international public policy".
14
See Interim Report, part III, under the heading "Approach of the courts".
15
For a recent review, see Sikiric, "Arbitral proceedings and public policy", (2000) 7 Croation Arbitration
Yearbook 85.
16
E.g., van den Berg, "Distinction Domestic-International Public Policy" in "New York Convention Consolidated
Commentary Cases", (1996) XXI ICCA Yearbook at p. 502; and "Refusals of Enforcement under the New York
Convention of 1958: the Unfortunate Few" in Arbitration in the Next Decade (ICC Bulletin - 1999 Special
Supplement) at p. 86.
17
The concept of "international public policy" was considered by the drafters of the UNCITRAL Model Law.
They concluded that the underlying idea was not generally accepted and, above all, the term lacked precision (see
Third Working Group Report UN Doc. A/CN.9/253 (para. 154) and Holtzmann and Neuhaus, A Guide to the
UNCITRAL Model Law on International Commercial Arbitration: Legislative History and Commentary (Kluwer,
1989) at p. 919). The Committee considers that the concept is now sufficiently well established to be used as the
test of enforceability by State courts.
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12.
There have been attempts to define the contents of "public policy" and "international public
policy" but no precise definition is possible.18 The most oft quoted comment, in arbitration case
law, is that of Judge Joseph Smith in Parsons & Whittemore (US Court of Appeals, 1974) in
which he stated that enforcement of a foreign award should be denied "only where enforcement
would violate the forum state's most basic notions of morality and justice".19
13.
The Committee's recommendations on the contents and scope of international public policy, as a
ground for refusing enforcement of arbitral awards, are set out below. In limiting the scope of the
public policy exception, the Committee is reflecting the pro-enforcement bias of many national
courts.
14.
Application of a narrow test of public policy has also found favour with the European Court of
Justice in the context of enforcement of court judgments. The intention of the 1968 Brussels
Convention/1988 Lugano Convention/2001 EC Council Regulation is to facilitate to the greatest
possible extent, the free movement of judgments within the EU and EFTA region by providing for
a simple and rapid enforcement procedure.20 That intention is very similar to the underlying
objective of the New York Convention. In Krombach -v- Bamberski (2000), the European Court
of Justice stated:21
"Recourse to the public policy clause in Article 27, point 1 of the Convention can be
envisaged only where recognition or enforcement of the judgment in another
Contracting State would be at variance to an unacceptable degree with the legal order of
the State in which enforcement is sought inasmuch as it infringes a fundamental
principle. … [T]he infringement would have to constitute a manifest breach of a rule of
law regarded as essential in the legal order of the State in which enforcement is sought
or of a right recognised as being fundamental within that legal order."
15.
Some international instruments require that the judgment or award be "manifestly" contrary to
public policy or international public policy (for example, the 1979 Montevideo Convention, the
2001 EC Regulation, and draft Hague Convention).22 A Hague Conference Special Commission
Report has explained:23
"It is traditional to state that the requirement of a "manifest" violation allows the judge
addressed to carry out a superficial examination of the decision because the violation
must be obvious or clear. That is to say, a refusal to enforce for this reason will be
relatively infrequent."
The Committee agreed that the public policy violation must usually be relatively obvious or
clear, but it concluded that scrutiny of the facts of the case may be justified in some
circumstances (see Recommendation 3(c)) and therefore it would not be appropriate to include
"manifestly" in Recommendation 1(b).
16.
The application of "international public policy", narrowly defined, should mean that public policy
is rarely a ground for refusing enforcement of international arbitral awards.
17.
Some members of the Committee considered that court interference in the enforcement process
should be strongly discouraged, and that the public policy exception to enforcement should be
restricted to the greatest extent possible. Some members of the Committee, mainly from
developing countries, were of view that State courts should be entitled to protect the State from
18
See Interim Report, part II; and Mayer, Droit International Privé, (6th edn., Montchrestien, 1998), p. 135 et seq.
19
Parsons & Whittemore Overseas Co., Inc. -v- Société Générale de l'Industrie du Papier RAKTA and Bank of
America 508 F. 2d 969 (2nd Cir., 1974).
20
Brussels and Lugano Conventions, recitals, third paragraph; EC Council Regulation, recital (2); and Krombach v- Bamberski, ECJ Case C-7/98, reported at [2001] 3 WLR 488 and [2000] ECR I-01935, at para. 19.
21
Ibid. n. 20 above, at para. 36. The court also stated that recourse to Art. 27(1) "is to be had only in exceptional
cases" (at para. 21).
22
23
See also Art. 16 of the 1980 Rome Convention on the Law Applicable to Contractual Obligations.
Report on the Synthesis of the Work of the Special Commission of March 1998 on international jurisdiction and
the effects of foreign judgments in civil and commercial matters, drawn up by Professor Catherine Kessedjian, at
para. 32, footnote 26.
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perverse and/or prejudiced awards, and there should be no attempt to restrict the scope of public
policy. The majority of the Committee, however, considered that court intervention should be
limited, and approved the pro-enforcement policy referred to above. The majority recognised that
a State is ultimately entitled to refuse to enforce an award that it found offensive, but concluded
that the Recommendations as formulated by the Committee provided the appropriate balance
between the various interests; namely, those of the parties to a specific arbitration, of arbitration
users generally and of the State.
Recommendation 1(c)
"The expression "international public policy" is used in these Recommendations to designate the
body of principles and rules recognised by a State, which, by their nature, may bar the
recognition or enforcement of an arbitral award rendered in the context of international
commercial arbitration when recognition or enforcement of said award would entail their
violation on account either of the procedure pursuant to which it was rendered (procedural
international public policy) or of its contents (substantive international public policy)."
18.
As explained above, the Committee recommends that the test for refusing enforcement of
international arbitral awards should be that of "international public policy".
19.
International public policy includes both substantive and procedural violations.24 Examples of
each are given in Recommendation 1(e) below.
20.
The body of principles and rules comprising international public policy should be those of the
enforcement State. It has been suggested that the public policy of the State where the award was
rendered, or the governing law of the relationship in question, or the place of performance of the
underlying obligation, should be considered. The prevailing view, however, is that only the public
policy of the State where enforcement is sought should be applied.25
21.
Public policy may vary from country to country. The drafters of the various international
conventions and the UNCITRAL Model Law did not seek to prescribe a universal standard of
public policy. Article V.2(b) of the New York Convention provides that enforcement of an award
may be refused, if enforcement of the award would be contrary to "the public policy of that
country". Similarly, the 1927 Geneva Convention, the 1975 Panama Convention, the 1979
Montevideo Convention, the 1983 Riyadh Convention and the 1985 UNCITRAL Model Law all
expressly refer to the public policy of the State where enforcement is sought. The only exception
is the 1999 OHADA Uniform Arbitration Law, which provides that enforcement shall be refused
if the "award is manifestly contrary to a rule of international public policy of the Member States".
Harmonisation is likely to be achieved amongst OHADA Member States given the existence of a
single supervisory court (i.e. the Cour Commune de Justice et d'Arbitrage). Similarly, the
European Court of Justice may develop a common public policy amongst Member States of the
European Community in the context of enforcement of judgments.26
22.
Notwithstanding that there has been little attempt at harmonisation, the Committee has found in
its study that most State courts favour a restrictive interpretation and application of public policy,
which has resulted in a notable consistency of decisions amongst courts of different countries and
legal traditions.
23.
The New York Convention's goal was to provide uniform procedures for enforcing foreign
arbitral awards, while minimising the effect of discrepancies between the laws of different
countries.27 Fifty years on, public policy remains the most significant aspect of the Convention in
24
See Report of the UNCITRAL Commission, commenting on public policy as understood in the New York
Convention and Model Law, UN Doc. A/40/17 (paras. 297 and 303), referred to in Interim Report, part III,
under heading "UNITRAL Model Law".
25
See Interim Report, part V.
26
See nn. 37 and 48 below.
27
For example, the Conference of Plenipotentiaries which prepared and opened the New York Convention for
signature adopted a resolution which states, inter alia, that the Conference "considers that greater uniformity of
national laws on arbitration would further the effectiveness of arbitration in the settlement of private law disputes
..". (published in Gaja, International Commercial Arbitration - New York Convention (Oceana, 1978-96)). The
US Supreme Court stated in Scherk -v- Alberto-Culver Co. (1974) 417 U.S. 506, 520 n.15., that the overriding
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respect of which such discrepancies might still exist. Whilst Article V.2(b) of the New York
Convention has not given rise to any serious mischief and attempts to resist enforcement on
grounds of public policy have rarely been successful, perceived uncertainty and inconsistency
concerning the interpretation and application of public policy by State courts has encouraged
losing parties to rely on public policy to resist, or at least delay, enforcement. Greater consistency
would lead to a better ability to predict the outcome of a public policy challenge, irrespective of
the court in which enforcement proceedings are brought. This, in turn, should discourage
speculative challenges and facilitate the finality of arbitral awards.
24.
The Committee recognises the ultimate right of State courts to determine what constitutes public
policy in their respective jurisdictions, and to determine whether an arbitral award should be
enforced or not, particularly given that enforcement may require the support of the police powers
of the State. However, the Committee encourages State courts to consider how courts of other
countries have applied the public policy test and, to the greatest extent possible, to apply the test
consistently. (This objective would be enhanced if courts set out their reasoning in some detail:
see Recommendation 1(g) below.)
Recommendation 1(d)
"The international public policy of any State includes: (i) fundamental principles, pertaining to
justice or morality, that the State wishes to protect even when it is not directly concerned; (ii)
rules designed to serve the essential political, social or economic interests of the State, these
being known as “lois de police” or “public policy rules”; and (iii) the duty of the State to
respect its obligations towards other States or international organisations."
25.
International public policy can be broken down into three categories: fundamental principles; lois
de police; and international obligations. For further recommendations concerning each, see Parts
2, 3 and 4 of these Recommendations below.
26.
It is often said that arbitrability is part of public policy. Because the New York Convention and
the UNCITRAL Model Law include separate provisions concerning arbitrability,28 the Committee
has not included it within its study of public policy.
Recommendation 1(e)
"An example of a substantive fundamental principle is prohibition of abuse of rights. An
example of a procedural fundamental principle is the requirement that tribunals be impartial. An
example of a public policy rule is anti-trust law. An example of an international obligation is a
United Nations resolution imposing sanctions. Some rules, such as those prohibiting corruption,
fall into more than one category."
27.
In this Recommendation, the Committee has sought to indicate what it considers to fall within the
scope of international public policy, the violation of which might justify a State court refusing
enforcement.
28.
An example of a substantive fundamental principle is the principle of good faith and prohibition
of abuse of rights (especially in civil law countries).29 Other examples that are cited by courts and
commentators include: pacta sunt servanda; prohibition against uncompensated expropriation;
purpose of the Convention was "to encourage the recognition and enforcement of commercial arbitration
agreements in international contracts and to unify the standards by which agreements to arbitrate are observed and
arbitral awards are enforced in the signatory countries". The Hong Kong Court of Final Appeal noted in Hebei
Import and Export Corp. -v- Polytek Engineering Co. Ltd [1999] 2 HKC 205, also reported in (1999) XXIV
ICCA Yearbook 652: "When a number of States enter into a treaty to enforce each other's arbitral awards, it
stands to reason that they would do so in the realization that they, or some of them, will very likely have very
different outlooks in regard to internal matters. And they would hardly intend, when entering into the treaty or
later when incorporating it into their domestic law, that these differences should be allowed to operate so as to
undermine the broad uniformity which must be the obvious aim of such a treaty and the domestic laws
incorporating it."
28
New York Convention Art. V.2(a); and Model Law Art. 36(1)(b)(i).
29
See Interim Report, part IV.B.2(a).
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and prohibition against discrimination. The prohibition of activities that are contra bonos mores
also comes within this category, for example the proscription against piracy, terrorism, genocide,
slavery, smuggling, drug trafficking and paedophilia.30
29.
An example of procedural public policy is the requirement that tribunals be impartial.31 Other
examples of breaches of procedural public policy that are cited include: the making of the award
was induced or affected by fraud or corruption;32 breach of the rules of natural justice;33 and the
parties were on an unequal footing in the appointment of the tribunal.34 It may also be a breach of
procedural public policy to enforce an award that is inconsistent with a court decision or arbitral
award that has res judicata effect in the enforcement forum.35 It is widely accepted that
procedural public policy should not include manifest disregard of the law or the facts.36
Procedural public policy rules overlap with the requirements of due process, prescribed in Article
V.1(b) of the New York Convention.
30.
An example of a public policy rule is anti-trust law (including, in particular EU competition law,
Article 81 EC).37 Other examples that are often cited are: currency controls; price fixing rules;
environmental protection laws; measures of embargo, blockade or boycott; tax laws; and laws to
protect parties presumed to be in an inferior bargaining position (e.g. consumer protection laws).38
31.
An example of an international obligation is a United Nations Security Council resolution
imposing sanctions. Such resolutions are immediately binding on Member States of the United
Nations (pursuant to Chapter V, Article 25 of the United Nations Charter). The State must also
respect the obligations in international conventions it has ratified.
32.
Some aspects of international public policy may fall into more than one category. For example,
bribery and corruption39 are generally considered to be contra bonos mores, and most courts will
refuse to uphold agreements relating to corruption even when the parties and the acts of
corruption are all foreign. Corruption might also be proscribed in legislation and have the status of
lois de police. The State might also owe an obligation to other States not to allow corruption as a
result of signing the OECD 1997 Convention on Combating the Bribery of Foreign Officials in
International Transactions.40
Recommendation 1(f)
"Whether the seat of the arbitration was located within the territory of the forum or abroad is
not a consideration which should be taken into account by a court when assessing an award's
conformity with international public policy."
30
See Interim Report, part IV.B.3.
31
See Interim Report, part IV.C.3.
32
See additions to the UNCITRAL Model Law adopted by Australia, New Zealand, Singapore, Zimbabwe and
India. See also Hanotiau, "Misdeeds, Wrongful Conduct and Illegality in Arbitral Proceedings" (paper presented
at the 16th ICCA Congress, London, 2002).
33
See additions to the UNCITRAL Model Law, ibid. n. 32 above. Natural justice is said to include the right to: (a)
receive proper and adequate notice; (b) a reasonable opportunity to present one's case; (c) equality between the
parties; and (d) a fair hearing before an impartial tribunal.
34
See the decision of the French Cour de Cassation dated 7 January 1992, BKMI and Siemens -v- Dutco, published
in (1992) Rev. Arb. 470.
35
See Interim Report, part IV.C.7.
36
See Interim Report, part IV.C.5 and 6.
37
See Interim Report, part IV.B.1(b), and see, for example, Eco Swiss China Time -v- Benetton, n. 6 above, in
which the ECJ held that "the provision of Art. 81 EC may be regarded as a matter of public policy within the
meaning of the New York Convention" (para. 39); and the decision of the French Cour de Cassation, dated 5
January 1999, in Gallay -v- Fabricated Metals INC, published in [2000] Rev. Arb. No.4, p. 805; see also n. 48
below.
38
See Interim Report, part IV.B.1.
39
See Interim Report, part IV.B.3(a).
40
Signed on 17 December 1997, and came into effect on 15 February 1999.
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33.
The Committee recommends that no distinction be made between international arbitral awards
made in the jurisdiction of the enforcement court or abroad: the test of international public policy
should be the same.
34.
The Committee did not address whether a different public policy standard should apply to purely
domestic awards.
Recommendation 1(g)
"If the court refuses recognition or enforcement of the arbitral award, it should not limit itself to
a mere reference to Article V.2 (b) of the New York Convention 1958 or to its own statute or
case law. Setting out in detail the method of its reasoning and the grounds for refusing
recognition or enforcement will help to promote a more coherent practice and the development
of a consensus on principles and rules which may be deemed to belong to international public
policy."
35.
For the reasons set out under Recommendation 1(c) above, the Committee encourages courts to
look to the practice of courts in other jurisdictions in relation to the application of public policy
with a view to achieving a consensus and a consistent approach. This aim would be facilitated if
courts would not merely refer to, for example, Article V.2(b) of the New York Convention, but
would set out their sources and reasoning and note the extent to which they had been guided by
the approach of courts in other jurisdictions.
Recommendation 1(h)
"If any part of the award which violates international public policy can be separated from any
part which does not, that part which does not violate international public policy may be
recognised or enforced."
36.
The Committee recommends that enforcement courts, if possible, separate those parts of an
award that violate international public policy from those that do not, and enforces the latter.
37.
The New York Convention (Article V.1(c)) and the UNCITRAL Model Law (Article
36(1)(a)(iii)) sanction such separation, where the award deals with differences not contemplated
by, or not falling within, the terms of the submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration. Whilst neither the New York
Convention nor the Model Law refers to separation in the context of public policy violations,
separation of offending parts from non-offending parts, where possible, would not be inconsistent
with the provisions and objectives of those instruments.
38.
This approach has been adopted by several courts.41
IV.
RECOMMENDATIONS: FUNDAMENTAL PRINCIPLES
Recommendation 2(a)
"A court verifying an arbitral award's conformity with fundamental principles, whether
procedural or substantive, should do so by reference to those principles considered fundamental
within its own legal system rather than in the context of the law governing the contract, the law
of the place of performance of the contract or the law of the seat of the arbitration."
39.
41
42
As noted under above,42 a State court should apply the international public policy of that State.
Thus, it should not seek to apply principles which are argued to be fundamental in the context of
For example, in Laminoirs-Trefileries-Cableries de Lens SA -v- Southwire Co., 484 F. Supp. 1063 (N.D. Ga.,
1980), also reported at (1981) VI ICCA Yearbook 247, a US Federal District refused to enforce that part of an
award requiring the defendant to pay an additional 5% interest if payment was delayed (which it held constituted
a penalty); in J.J. Agro Industries (P) Ltd -v- Texuna International Ltd [1992] 2 HKLR 391, also reported at
(1993) XVIII ICCA Yearbook 396, the Hong Kong Supreme Court held that it could sever the free standing parts
of the award that violated public policy; and in Société European Gas Turbines SA -v- Westman International Ltd
(1994) Rev. Arb. No. 2, p. 359, also reported at (1995) XX ICCA Yearbook 198, the Paris Court of Appeal set
aside that part of the award that was based on a fraudulent claim for expenses.
See commentary to Recommendations 1(b) and (c).
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the law governing the contract (that was for the tribunal to consider) or the law of the place of
performance of the contract (again, that was a matter for the tribunal) or the law of the seat (and
again, that was a matter for the tribunal to consider and/or the supervisory courts at the seat). But
see Recommendation 2(b) below.
Recommendation 2(b)
"Nevertheless, in order to determine whether a principle forming part of its legal system must be
considered sufficiently fundamental to justify a refusal to recognise or enforce an award, a court
should take into account, on the one hand, the international nature of the case and its connection
with the legal system of the forum, and, on the other hand, the existence or otherwise of a
consensus within the international community as regards the principle under consideration
(international conventions may evidence the existence of such a consensus). When said
consensus exists, the term “transnational public policy” may be used to describe such norms."
40.
When considering whether a principle is sufficiently fundamental to justify refusing enforcement,
the enforcement court is entitled to have regard to the connections the parties and the subject
matter have with the jurisdiction where enforcement is sought. Where there are few connections,
the court would be entitled to take a more liberal approach.43
41.
An enforcement court should look at the practice of other courts, the writings of commentators,
and other sources, to determine to what extent a principle that is submitted to be fundamental is
regarded as fundamental by the international community. This should facilitate consistency in the
application of the public policy test.
42.
A consensus as to what constitutes a fundamental principle might be evidenced by international
conventions, for example the 1950 European Convention for the Protection of Human Rights and
Fundamental Freedoms.
43.
Some commentators have proposed that State courts should apply "transnational" or "truly
international" public policy. It has been suggested that this concept should be of universal
application, albeit of very restricted scope, comprising: fundamental rules of natural law;
principles of universal justice; jus cogens in public international law; and the general principles of
morality accepted by what are referred to as "civilised nations". There appears to be little support
amongst State courts at the present time for the application of this concept.44
44.
For examples of substantive and procedural fundamental principles, see Recommendation 1(e)
above.
Recommendation 2(c)
"Where a party could have relied on a fundamental principle before the tribunal but failed to do
so, it should not be entitled to raise said fundamental principle as a ground for refusing
recognition or enforcement of the award."
45.
A party should be deemed to have waived the right to raise a fundamental principle of public
policy as a ground for refusing enforcement if it failed to raise any such principle before the
arbitral tribunal during the proceedings. This Recommendation is made in order to dissuade
unsuccessful parties raising arguments belatedly and solely to frustrate enforcement, especially
arguments based upon infringements of procedural public policy. The Committee took the view
that if a party considered that a fundamental principle was being infringed, that party - if it could should raise it promptly with the tribunal and allow the tribunal the opportunity to address the
issue. A similar requirement is found in arbitration rules and legislation, for example a challenge
to an arbitrator on grounds of bias must be made within a certain period from the time the party
became aware of such grounds (e.g. Model Law, Article 13(2)).
46.
A party should not be penalised, however, if it was not aware during the proceedings of the facts
which would constitute a breach of a fundamental principle, or was otherwise prevented from
43
44
French, Belgian and Swiss jurists refer to the "effet attenué" of public policy: see Interim Report, part IV.A and
nn. 82 and 83.
See Interim Report, part II, under the heading "Transnational or truly international public policy".
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raising it with the tribunal. In addition, this Recommendation should apply only to those
fundamental principles that are generally accepted as part of international public policy. A party
should not be prevented from relying on a fundamental principle of a State where enforcement is
sought, if that principle is applied only in that State (or a small number of States). Further, this
Recommendation does not apply to the other two categories of international public policy, namely
lois de police and international obligations.
47.
V.
Some courts have gone further and held that a party that complains that an award is defective, or
that the arbitration was defectively conducted, must, in the first instance, pursue such remedies as
exist under the supervisory jurisdiction of the courts of the seat of the arbitration. The Committee,
however, concluded that this approach was not at present generally accepted and makes no such
Recommendation.45
RECOMMENDATIONS: PUBLIC POLICY RULES
Recommendation 3(a)
"An award's violation of a mere "mandatory rule" (i.e. a rule that is mandatory but does not
form part of the State's international public policy so as to compel its application in the case
under consideration) should not bar its recognition or enforcement, even when said rule forms
part of the law of the forum, the law governing the contract, the law of the place of performance
of the contract or the law of the seat of the arbitration."
48.
In this Recommendation, a "mandatory rule" means an imperative rule of law that cannot be
excluded by agreement of the parties.46 Inconsistency with a mandatory rule should not per se be
a ground for refusing enforcement of an arbitral award. Only the violation of those mandatory
rules which are at the same time lois de police47 may be a ground for refusing enforcement.
Recommendation 3(b)
"A court should only refuse recognition or enforcement of an award giving effect to a solution
prohibited by a rule of public policy forming part of its own legal system when: (i) the scope of
said rule is intended to encompass the situation under consideration; and (ii) recognition or
enforcement of the award would manifestly disrupt the essential political, social or economic
interests protected by the rule."
49.
The enforcement court should determine whether the rule was intended to apply to prevent
enforcement of an international arbitral award. This might require consideration of the policy and
legislative history of the law. The enforcement court would be entitled to be slow to find a
violation of lois de police in a case with strong international elements.
50.
The public policy rules most often cited (see Recommendation 1(e) above) generally have a
specific economic purpose.
45
See Interim Report, part VI, under heading "Procedural public policy". See also the comments of the Hong
Kong Court of Final Appeal in Hebei Import and Export Corporation -v- Polytek Engineering Co. Ltd [1999] 2
HKC 205, also reported in (1999) XXIV ICCA Yearbook 652, which held that a failure to raise a public policy
ground before the court of the supervisory jurisdiction did not prevent a party from resisting enforcement in
another jurisdiction on that ground, because the public policy of the enforcement court might be different to that
of the supervisory court.
46
For example, Article 3.19 of the 1994 UNIDROIT Principles of International Commercial Contracts (entitled
"Mandatory character of the provisions") provides: "The provisions of this Chapter [concerning fraud, threat and
gross disparity] are mandatory, except insofar as they relate to the binding force of mere agreement, initial
impossibility or mistake". For the extensive literature on the issue of mandatory laws, including the writings of
the Committee Chairman, Professor Mayer, see Interim Report part IV.B.1, nn. 84-87; see also Racine, n. 2
above, and Seraglini, n. 2 above.
47
See Recommendation 1(d)(ii) above.
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51.
The Committee notes that EC law is increasingly regarded as part of the international public
policy of EU Member States, and an arbitral award that violates that law will not be enforced.48
Recommendation 3(c)
"When the violation of a public policy rule of the forum alleged by a party cannot be established
from a mere review of the award and could only become apparent upon a scrutiny of the facts of
the case, the court should be allowed to undertake such reassessment of the facts."
52.
There has been a debate amongst commentators (and amongst members of the Committee) as to
whether the enforcement court should: (a) only look to the dispositif of the award and whether its
enforcement would be contrary to public policy; (b) also be entitled to review the reasoning in the
award; or (c) also be entitled to review the underlying facts and any new evidence presented by
the party resisting enforcement.49 The majority of the Committee concluded that the court, when
enforcement is resisted on grounds of lois de police, should be entitled to review the underlying
evidence presented to the tribunal and, in exceptional cases, any new evidence. However, the
court should undertake a reassessment of the facts only when there is a strong prima facie
argument of violation of international public policy.
Recommendation 3(d)
"When a public policy rule of the forum enacted after the rendering of the award prohibits the
solution implemented by said award, a court should only refuse the award's recognition or
enforcement if it is plain that the legislator intended said rule to have effect as regards awards
rendered prior to its enactment."
53.
VI.
Legislation might be passed which has the effect of causing a pre-existing dispositif and its
enforcement to be in violation of that newly enacted law. The Committee concluded that
enforcement should not be refused unless it was clear that the legislature intended that preexisting arbitral awards should be affected by the new law.
RECOMMENDATIONS - INTERNATIONAL OBLIGATIONS
Recommendation 4
"A court may refuse recognition or enforcement of an award where such recognition or
enforcement would constitute a manifest infringement by the forum State of its obligations
towards other States or international organisations."
54.
It is axiomatic that a State and its courts must respect that State's obligations towards other States.
Many such obligations, such as those that arise from Treaties, take precedence over national law.
States might also owe these higher obligations to international organisations. Enforcement of an
arbitral award should be refused, if it would constitute a manifest infringement of any such
obligation.50
55.
As an example, Member States of the United Nations must abide by resolutions of the Security
Council, pursuant to Chapter V, Article 25 of the UN Charter. As another example, States that
have ratified the OECD Convention on Combating Bribery of Foreign Officials in International
Transactions must take steps to discourage and prosecute such bribery.
48
49
50
See e.g. Eco Swiss -v- Benetton (ECJ, concerning competition law), n. 6 above; Gallay -v- Fabricated Metals
Inc., (French Cour de Cassation, also concerning competition law), n. 37 above; Ingmar GB Ltd -v- Eaton
Leonard Technologies Inc. (The Times, 16 November 2000) (English High Court, concerning Commercial
Agents (Council Directive) Regulations 1993). See also Schlosser, "Arbitration and European Public policy" in
L'Arbitrage et le Droit Européen (Bruylant, 1997); Liebscher, "European public policy after Eco Swiss", (1999)
10 American Review of International Arbitration No. 1, p. 81; Liebscher, "European public policy: a black
box?", (2000) 17 Journal of International Arbitration No. 3, p. 73; and Liebscher, "European public policy and
the Austrian Supreme Court", (2000) 16 Arbitration International 357.
See Interim Report, part VI.
See Marta Gonzalo Quiroga, "Globalizacion, Deslocalizacion y Arbitraje Privado Internacional: Utopia o
Realidad de un Orden Publico Transnacional?", (2000) Revista de Corte Espanola de Arbitraje 83.
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VII.
CONCLUSION
56.
The Committee officers thank all those Committee members who participated in the work of the
Committee on this subject.
57.
It is hoped that State courts will have regard to the Recommendations and strive for consistency,
to the greatest extent possible, in the interpretation and application of public policy as a bar to
enforcement of international arbitral awards.51
Professor Pierre Mayer
Chairman
and
Audley Sheppard
Rapporteur
51
For further reading, see the comprehensive bibliographies of publications on public policy and arbitration in:
Racine, n. 2 above; Seraglini, n. 2 above; and Smit and Pechota, International Commercial Arbitration and the
Courts (2nd edn., Sweet & Maxwell, 2000) at C6l-1.
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