sorted by (Publication date descending, Resource ascending) 

V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

18. It is not disputed that certain mandatory rules meet the standard of the public policy defense to recognition and enforcement of awards.28 However, different views have been expressed as to whether specific sets of mandatory rules do rise to that standard in the context of recognition and enforcement of foreign awards in fields such as of competition law, bankruptcy, employment and consumer protection, interest rates, foreign exchange regulations, export prohibitions and futures contracts.

28. See Luke Villiers, Breaking in the “Unruly Horse”: The Status of Mandatory Rules of Law as a Public Policy Basis for the Non-Enforcement of Arbitral Awards, AUSTL. INT’L. L.J. 155 (2011), at 179-180.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

19. For example, in the field of competition law, the Court of Justice of the European Union (CJEU) held that article 101 of the Treaty on the Functioning of the European Union (TFEU), which renders automatically void certain anti-competitive agreements or decisions, constitutes “a fundamental provision which is essential for the accomplishment of the tasks entrusted to the [Union] and, in particular, for the functioning of the internal market”. The CJEU held that for this reason it should be regarded as a matter of public policy within the meaning of article V(2)(b) of the New York Convention.29 It has thus imposed on the courts of the EU Member States the obligation to refuse recognition and enforcement to all awards which conflict with article 101 TFEU.30

29. Eco Swiss China Time Ltd v. Benetton International NV, Court of Justice of the European Union, 1 June 1999, Case C-126/97, [1999] ECR I-3055, paras. 37-39. 30. See, e.g., SNF SAS v. Cytec Industries B.V., Court of Appeal of Paris, 23 March 2006, XXXII Y.B. COM. ARB. 282 (2008), where the French court accepted that EU competition law forms part of French public policy; Oberlandesgericht [OLG] Düsseldorf, Germany, 21 July 2004, VI Sch (Kart) 1/02; Court of Cassation, Greece, 30 June 2009, 1665/2009, XXXVI Y.B. COM. ARB. 284 (2011), and Marketing Displays International Inc. v. VR Van Raalte Reclame B.V., Court of Appeal, The Hague, Netherlands, 24 March 2005, XXXI Y.B. COM. ARB. 808(2006), where the German, Greek and Dutch courts respectively recognized that article 101 TFEU formed part of their public policy.

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V(2) / V(2)(b) / 1. INTRODUCTION (V(2)(b)) /

2. Public policy is not a concept unique to the New York Convention. Rather, public policy forms part of a wider range of tools, such as the mandatory rules of the forum that override private autonomy, that allow a court to protect the integrity of the legal order to which it belongs. It is, therefore, impossible to sever the concept of public policy in the sense of article V(2)(b) of the New York Convention from the concept of public policy as is understood in international law.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

20. In proceedings to set aside an award handed down in Switzerland regarding a dispute between two Italian companies, the Federal Tribunal acknowledged the existence of other economic systems based on a planned economy and favoring State intervention in the economy. It concluded though that “no one would consider labeling them immoral or contrary to fundamental legal principles simply because they do not follow the Swiss model.31 The Federal Tribunal thus held that “the provisions of competition law do not form part of the essential and widely-recognized values, which, according to the prevailing position in Switzerland, should form the basis of any legal order”.32

31. X S.p.A. v. Y S.r.l., Federal Tribunal, Switzerland, 8 March 2006, Arrêts du Tribunal Fédéral (2006) 132 III 389, 396. 32. Id., at 398.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

21. These decisions highlight the fact that Article V(2)(b) refers to the public policy of the country where recognition and enforcement is sought. It does not require a New York Convention signatory to uphold the public policy of another State. As Switzerland has not acceded to the European Union, it is not required to consider that Article 101 TFEU forms part of Swiss public policy.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

22. The United States Supreme Court held that claims arising out of the Sherman Antitrust Act are arbitrable but that public policy can be used to ensure that the legitimate interest in the antitrust issues had been appropriately addressed, leaving the issue to be decided on an ad hoc basis.33

33. Mitsubishi Motors Corp v. Soler Chrysler-Plymouth, Supreme Court, United States of America, 2 July 1985, 473 U.S. 614.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

23. In the field of insolvency, the French courts have held that the principle according to which individual actions brought by creditors against the estate of the bankrupt are stayed during bankruptcy to be part of public policy,34 while the German courts have not considered the arbitration of insolvency disputes to be contrary to public policy.35

34. Mandataires judiciaires Associés, in the person of Mrs. X as liquidators of Jean Lion et Cie S.A. v. International Company for Commercial Exchanges, Court of Cassation, France, 6 May 2009, XXXV Y.B. COM. ARB. 353 (2010). 35. Oberlandesgericht [OLG] Karlsruhe, Germany, 4 January 2012, 9 Sch 02/09.

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24. In the context of interest rates, while acknowledging that a mere incompatibility of a foreign award with domestic mandatory rules does not amount to a breach of public policy, several courts have refused to recognize and enforce awards, or the part of the award which was considered to be contrary to public policy,36 where they considered that the awarded interest was unreasonably high.37

36. See J. J. Agro Industries (P) Ltd v. Texuna International Ltd., High Court, Hong Kong, 12 August 1992, HCMP000751/1992. 37. See Supreme Court, Austria, Case 3Ob221/04b, 26 January 2005, XXX Y.B. COM. ARB. 421 (2005). See to the same effect, Laminoires-Trefileries-Cablerie de Lens S.A. v. Southwire Co. and Southwire International Corp., District Court, Northern District of Georgia, United States of America, 18 January 1980, C79-43N, C79-44N; See Misr Foreign Trade Co. v. R.D. Harboties (Mercantile), Court of Cassation, Egypt, 22 January 2008, 2010/64; See Belaja Rus v. Westintorg Corp., Court of Cassation, Lithuania, 10 November 2008, 3K-3-562/2008.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

25. Other examples of domestic mandatory rules that have been considered to be a public policy matter under which recognition and enforcement can be refused, include foreign exchange regulations, with regard to which the German Federal Court of Justice held that an award conflicting with German foreign exchange regulations is contrary to public policy;38 export prohibitions, in relation to which the Indian courts have refused recognition of awards which conflict with an Indian ban on the export of hot rolled steel sheet coils due to a shortage in the domestic market;39 and offshore futures transactions, in relation to which the Chinese courts have refused recognition to an award on the basis that it conflicted with the Chinese mandatory rules forbidding futures contracts.40

38. See Bundesgerichtshof [BGH], Germany, 15 June 1987, II ZR 124/86. See also Susan Choi, Judicial Enforcement of Arbitration Awards Under the ICSID and New York Conventions, 1196 N.Y.U. J. INT’L. L. & POL. 175 (1995), at 202-204. 39. See COSID Inc. v. Steel Authority of India Ltd., High Court of Delhi, India, 12 July 1985, XI Y.B. COM. ARB. 502 (1986). 40. See ED & F Man (Hong Kong) Co., Ltd. v. China National Sugar & Wines Group Corp., Supreme People’s Court, China, 1 July 2003, [2003] Min Si Ta Zi No. 3. See also Lanfang Fei, Public Policy as a Bar to Enforcement of International Arbitral Awards: A Review of the Chinese Approach, 2010 ARB. INT’L. 301, at 305-306.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / c. Mandatory rules as public policy /

26. The criteria forming the basis of the determination as to whether mandatory national law constitutes public policy are often not specified by national courts. Commentators note that it is consistent with the letter and spirit of the New York Convention that, as a matter of principle, the mandatory rules of the enforcement forum should be considered as part of its public policy when they reflect that forum’s fundamental concepts of morality and justice, from which no derogation can be allowed.41

41. See FOUCHARD GAILLARD GOLDMAN ON INTERNATIONAL COMMERCIAL ARBITRATION (E. Gaillard, J. Savage eds., 1996), at 996.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / A. Concept / d. Public policy and constitutional principles /

27. Constitutional principles may also interact with the public policy exception to the recognition and enforcement of foreign arbitral awards under the New York Convention.42

42. BCB Holdings Limited and The Belize Bank Limited v. The Attorney General of Belize, Caribbean Court of Justice, Appellate Jurisdiction, 26 July 2013, [2013] CCJ 5 (AJ).

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / B. Application /

28. Public policy allows the courts of the Contracting Party where recognition and enforcement is sought to consider the merits of an award so as to satisfy themselves that there is nothing in the award that would infringe the fundamental values of that State. The enforcement court’s assessment also extends to procedural matters, such that it might refuse to recognize or enforce an award where the procedure followed by the arbitral tribunal contradicts the understanding of basic procedural fairness in the State where recognition and enforcement is sought.43

43. See e.g., X S.p.A. v. Y S.r.l., Federal Tribunal, Switzerland, 8 March 2006, Arrêts du Tribunal Fédéral (2006) 132 III 389, 392.

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V(2) / V(2)(b) / 2. ANALYSIS (V(2)(b)) / B. Application /

29. The Swiss Federal Tribunal distinguishes between substantive and procedural public policy (ordre public matériel et ordre public procédural).44 In its words: “[t]here is a difference between substantive and procedural public policy […] procedural public policy guarantees parties the right to an independent judgment on their submissions and the facts submitted to the arbitral tribunal, in accordance with the applicable procedural law; substantive public policy is breached when fundamental and generally recognized principles are breached, leading to an untenable contradiction with the notion of justice, so that the decision appears incompatible with the values recognized in a state governed by the rule of law”.45

44. For a similar distinction between substantive and procedural public policy (ordre public quant à la procedure et ordre public quant au fond), see Soc. Excelsior Film TV v. Soc. UGC-PH, Court of Cassation, France, 24 March 1998. 45. X S.p.A. v. Y S.r.l., Federal Tribunal, Switzerland, 8 March 2006, Arrêts du Tribunal Fédéral (2006) 132 III 389, 392.

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V(2) / V(2)(b) / 1. INTRODUCTION (V(2)(b)) /

3. Nor did the New York Convention first introduce public policy as a ground for refusing the recognition and enforcement of awards. Article 1(e) of the 1927 Geneva Convention required that, in order for recognition and enforcement to be granted, it had to be positively demonstrated that such “recognition or enforcement of the award [was] not contrary to the public policy or to the principles of law of the country in which it is sought to be relied upon”. The New York Convention simply provides, in article V(2)(b), that recognition may be refused on the basis of public policy.1 In addition, the omission in the New York Convention of any reference to an award being contrary to “principles of law”2 is notable and underscores the strong pro-enforcement bias of the Convention.3

1. See ANTON G. MAURER, THE PUBLIC POLICY EXCEPTION UNDER THE NEW YORK CONVENTION: HISTORY, INTERPRETATION AND APPLICATION (2012),at 61; Bernard Hanotiau & Olivier Caprasse, Public Policy in International Commercial Arbitration, in ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS, THE NEW YORK CONVENTION IN PRACTICE 787, at 802 (E. Gaillard, D. Di Pietro, eds., 2008). 2. For various comments on this phrase which was eventually omitted, see Travaux préparatoires, Report of the Committee on the Enforcement of International Arbitral Awards, E/AC.42/4/Rev.1, at. 13; Report by the Secretary-General, Recognition and Enforcement of Foreign Arbitral Awards, E/2822, Annex II, at 20-21 & 23; Recognition and Enforcement of Foreign Arbitral Awards: Comments by Governments on the draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards E/2822/Add.4, at 2; Recognition and Enforcement of Foreign Arbitral Awards: Comments by Governments on the draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, E/CONF.26/3, at 3; Activities of Inter-Governmental and Non-Governmental Organizations in the Field of International Commercial Arbitration: Consolidated Report by the Secretary-General, E/CONF.26/4, at 29; Comments on draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, E/CONF.26/2, at 6-7; Yugoslavia: amendment to Articles III and IV of the draft Convention, E/CONF. 26/L.35; Federal Republic of Germany: amendment to Articles III and IV of the draft Convention, E/CONF. 26/L.34; Summary Record of the Sixth Meeting, E/AC.42/SR.6, at 11; Summary Record of the Seventh Meeting, E/AC.42/SR. 7; Comments of the representative of the Peruvian Government, Mr. Maurtua: Summary Record of the Fourteenth Meeting, E/CONF.26/SR .14, at 9; Summary Record of the Seventeenth Meeting, E/CONF.26/SR.17, at 15-16. See also Joel R. Junker, The Public Policy Defense to Recognition and Enforcement of Foreign Arbitral Awards, CAL. W. INT’L. L.J. 228 (1977), at 229-230. 3. See Parsons & Whittemore Overseas v. Société Générale de l’Industrie du Papier (RAKTA), Court of Appeals, Second Circuit, United States of America, 23 December 1974, 508 F.2d 969.

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30. Even though the defense of public policy allows courts to consider the merits of the award, the scope of such review is not unlimited. Courts have recognized that public policy does not furnish an opportunity to the party opposing recognition and enforcement to reargue the merits of the case or to allege that the case was wrongly decided.46

46. See, e.g., BCB Holdings Limited and The Belize Bank Limited v. The Attorney General of Belize, Caribbean Court of Justice, Appellate Jurisdiction, 26 July 2013, [2013] CCJ 5 (AJ); Karaha Bodas Company, L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara and P.T. PLN (Persero), Alberta Court of Queen’s Bench, Canada, 24 October 2007, 2007 ABQB 616; Atecs Mannesmann GmbH v. Rodrimar S/A Transportes Equipamentos Industriais e Armazéns Gerais, Superior Court of Justice, Brazil, 19 August 2009, SEC 3.035; GRD Minproc Limited v. Shanghai Feilun Industrial Co., Supreme People’s Court, China, 13 March 2009, [2008] Min Si Ta Zi No. 48; Société I.A.I.G.C.- Inter-Arab Investment Guarantee Corporation v. Société B.A.I.I.- Banque arabe et internationale d’investissement S.A., Court of Appeal of Paris, France, 23 October 1997; Oberlandesgericht, [OLG] Munich, Germany, 22 June 2009, 34 Sch 26/08; Oberlandesgericht [OLG] Karlsruhe, Germany, 27 March 2006, 9 Sch 02/05; Qinhuangdao Tongda Enterprise Development Company, et al. v. Million Basic Co. Ltd., High Court, Supreme Court of Hong Kong, 5 January 1993; C.G. Impianti S.p.A. v. B.M.A.A.B. & Sons International Contracting Co. WLL, Court of Appeal of Milan, Italy, 29 April 2009; Inter Maritime Management S.A. v. Russin & Vecchi, Federal Tribunal, Switzerland, 9 January 1995, XXII Y.B. COM. ARB. 789 (1997), at 796, para. 21; Odfjell SE v. OAO PO Sevmash, Highest Arbitrazh Court, Russia, 26 May 2011, VAS-4369/11; Presidium of the Highest Arbitrazh Court, Russia, Information Letter No. 156 of 26 February 2013, at 1; Supreme Court, Austria, 26 January 2005, 3Ob221/04b, XXX Y.B. COM. ARB. 421 (2005), at 427, para. 19. See also William W. Park, Private Adjudicators and the Public Interest: the Expanding Scope of International Arbitration, 1986 BROOK. J. INT’L. L. 629, at 646-647.

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31. In addition, most courts ascribe a narrow interpretation to public policy. It is thus not surprising that 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.47

47. See Pieter Sanders, A Twenty Years’ Review of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1979 INT’L. L. 269, at 270; Susan Choi, Judicial Enforcement of Arbitration Awards Under the ICSID and New York Conventions, 1196 N.Y.U. J. INT’L. & POL. 175 (1995), at 206-207.

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32. Such rare instances include cases where: the award conflicted with a previous judgment of the courts of the forum;48 the award ordered the party opposing recognition and enforcement to pay interest at an amount considered excessive according to the standards of the lex fori;49 the parties to the arbitration settled secretly from the arbitral tribunal and the claimant in the arbitration failed to stop the arbitration so as to acquire an award condemning the respondent to pay twice the same debt;50 the award contravened mandatory rules of the forum in the area of competition law, consumer protection, foreign exchange regulation or bans on exports;51 the award was contrary to core constitutional values such as the separation of powers and sovereignty of Parliament;52 the award was contrary to the national interest of the forum State.53

48. See Hemofarm DD, MAG International Trade Holding DD, Suram Media Ltd. v. Jinan Yongning Pharmaceutical Co. Ltd., Supreme People’s Court, China, 2 June 2008, [2008] Min Si Ta Zi No. 11; Ciments Français v. OAO Holding Company Siberian Cement, Istanbul Çimento Yatırımları, Highest Arbitrazh Court, Russia, 27 August 2012, VAS-17458/11. 49. See Supreme Court, Austria, 26 January 2005, 3Ob221/04b, XXX Y.B. COM. ARB. 421(2005); Ahmed Mostapha Shawky v. Andersen Worldwide & Wahid El Din Abdel Ghaffar Megahed & Emad Hafez Raghed & Nabil Istanboly Akram Instanboly, Court of Appeal of Cairo, Egypt, 23 May 2001, 25/116; Harbottle Co. Ltd. v. Egypt for Foreign Trade Co., Court of Cassation, Egypt, 21 May 1990, 815/52; Belaja Rus v. Westintorg Corp., Court of Cassation, Lithuania, 10 November 2008, 3K-3-562/2008. 50. See Bayerisches Oberstes Landgericht [BayObLG], Germany, 20 November 2003, 4 Z Sch 17/03. 51. See Court of Cassation, Greece, 30 June 2009, 1665/2009, XXXVI Y.B. COM. ARB. 284 (2011); SNF SAS v. Cytec Industries B.V., Court of Appeal of Paris, 23 March 2006, XXXII Y.B. COM. ARB. 282 (2008); Elisa María Mostaza Claro v. Centro Móvil Milenium SL, Court of Justice of the European Union, 26 October 2006, C-168/05, [2006] ECR I-10421; Marketing Displays International Inc. v. VR Van Raalte Reclame B.V., Court of Appeal of The Hague, Netherlands, 24 March 2005, XXXI Y.B. COM. ARB. 808 (2006); Oberlandesgericht [OLG] Düsseldorf, Germany, 21 July 2004, VI Sch (Kart) 1/02; Eco Swiss China Time Ltd v. Benetton International NV, Court of Justice of the European Union, 1 June 1999, C-126/97, [1999] ECR I-3055; Bundesgerichtshof [BGH], Germany, 15 June 1987, II ZR 124/86; COSID Inc. v. Steel Authority of India Ltd., High Court of Delhi, India, 12 July 1985, XI Y.B. COM. ARB. 502 (1986). 52. See BCB Holdings Limited and The Belize Bank Limited v. The Attorney General of Belize, Caribbean Court of Justice, Appellate Jurisdiction, 26 July 2013, [2013] CCJ 5 (AJ). 53. See United World v. Krasny Yakor, Federal Arbitrazh Court of the Volgo-Vyatsky Region, Russia, 17 February 2003, A43-10716/02-27-10. See supra, para. 12.

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33. By contrast, without purporting to set out an exhaustive list of instances where applications made under article V(2)(b) of the New York Convention have been unsuccessful, courts have dismissed such applications on the merits where: it was alleged it was alleged that the law applicable to the merits of the dispute was incorrectly applied by the arbitral tribunal;54 it was alleged that the recognition and enforcement of the award would violate the exceptio non adimpleti contractus;55 the benefit of domestic mandatory rules was sought by a sophisticated business person who should have been aware of the risks he/she had undertaken;56 the award debtor would have to obtain regulatory approval in order to perform an act necessary to comply with the award;57 the award included a substantial sum which appeared to represent an acceleration of future damages;58 it was alleged that the arbitration agreement was null and void because the parties submitted a non-foreign-related dispute to a foreign arbitration tribunal;59 the transaction in question was an offshore future transaction which violated the enforcement forum’s mandatory rules;60 compliance with the award was alleged to offend the law of the place of incorporation of the respondent company;61 the award concerned matters that were normally subject to the exclusive jurisdiction of the employment tribunals;62 the award granted compensation for legal costs;63 it was alleged that the arbitral tribunal awarded damages in an arbitrary fashion;64 it was alleged that the award debtor had no legal remedies against the decision of the sole arbitrator;65 it was alleged that the contractual penalty imposed by the arbitral tribunal rising to 40% of the value of the main obligation under the contract was disproportionately high;66 it was alleged that the arbitral tribunal should have applied the Convention on the International Sale of Goods to the contract rather than the governing law chosen by the parties;67 lump sum damages were prohibited under the law of the country where recognition and enforcement was sought but were allowed by the law applied to the dispute by the arbitral tribunal;68 the award granted compound interest which was allowed under the law of the seat of the arbitration;69 it was alleged that the award was contrary to EU competition law;70 the arbitrator had failed to expressly order one of the parties to pay certain taxes due in the United States;71 the party opposing enforcement failed to establish that the contractually stipulated penalties imposed by the tribunal was not reasonably related to the actual damages resulting from the breach;72 compliance with the award resulting in the making of certain payments to the Iranian Government breached U.S. sanctions;73 the party opposing enforcement alleged that an order of specific performance breached public policy because an award of monetary damages would have been adequate and appropriate;74 the party opposing enforcement alleged that the award improperly imported and endorsed the conclusions of foreign prosecuting authorities;75 the award conflicted with judgments handed down by the courts of a foreign country;76 the party opposing enforcement alleged that its actions that resulted in the breach of the contract were justified as compliance with a change in its country’s foreign policy;77 the tribunal calculated interest that would not be available under the law of the enforcement forum;78 the person seeking the enforcement was not a party to the arbitration but a successor to that party.79

54. See Presidium of the Highest Arbitrazh Court, Russia, Information Letter No. 156 of 26 February 2013; Sei Societa Esplosivi S.p.A. v. L-3 Fuzing and Ordnance Systems, Inc., District Court, District of Delaware, United States of America, 17 February 2012, 11–149–RGA; Penn Racquet Sports v. Mayor International Ltd., High Court of Delhi, India, 11 January 2011; Odfjell SE v. OAO PO Sevmash, Highest Arbitrazh Court, Russia, 26 May 2011, VAS-4369/11; Atecs Mannesmann GmbH v. Rodrimar S/A Transportes Equipamentos Industriais e Armazéns Gerais, Superior Court of Justice, Brazil, 19 August 2009, SEC 3.035. 55. See Grain Partners S.p.A. v. Cooperativa dos Produtores Trabalhadores Rurais de Sorriso Ltda., Superior Court of Justice, Brazil, 18 October 2006, SEC 507. 56. See Bad Ass Coffee Company of Hawaii Inc.v. Bad Ass Enterprises Inc., Alberta Court of Queen’s Bench, Canada, 2 July 2008, 2008 ABQB 404. 57. See Adamas Management & Services Inc. v.Aurado Energy Inc., New Brunswick Court of Queen’s Bench, Canada, 28 July 2004, 2004 NBQB 342. 58. See Schreter v. Gasmac, Ontario Court (General Division), Canada, 13 February 1992, 89 D.L.R. (4th) 365. 59. See Lifu Candy (Shanghai) Corporation v. Shanghai Lianfu Foodstuff Corporation, Shanghai No. 2 Intermediate People’s Court, China, 24 June 2009, [2008] Hu Er Zhong Min Wu (Shang) Chu Zi No. 19. 60. See ED & F Man (Hong Kong) Co., Ltd. v. China National Sugar & Wines Group Corp., Supreme People’s Court, China, 1 July 2003, [2003] Min Si Ta Zi No. 3. 61. See Soinco SACI & anor. v. Novokuznetsk Aluminium Plant & Ors., Court of Appeal, England and Wales, 16 December 1997, [1998] CLC 730. 62. See Agence pour la sécurité de la navigation aérienne en Afrique et à Madagascar v. M. N’DOYE Issakha, Court of Appeal of Paris, France, 16 October 1997. 63. See Oberlandesgericht [OLG] Munich, Germany, 1 September 2009, 34 Sch 14/09. 64. See Obergalandesgericht [OLG] Frankfurt, Germany, 16 October 2008, 26 Sch 13/08. 65. See Oberlandesgericht [OLG] Frankfurt, Germany, 18 October 2007, 26 Sch 1/07. 66. See Oberlandesgericht [OLG] Celle, Germany, 6 October 2005, 8 Sch 06/05. 67. See Oberlandesgericht [OLG] Cologne, Germany, 15 February 2000, 9 Sch 13/99. 68. See Oberlandesgericht [OLG] Dresden, Germany, 13 January 1999, 11 Sch 06/98. 69. See Hanseatisches Oberlandesgericht [OLG], Germany, 26 January 1989, 6 U 71/88. For the view that the domestic prohibition of compound interest does not amount to public policy see Inter Maritime Management S.A. v. Vecchi, Federal Tribunal, Switzerland, 9 January 1995, XXII Y.B. COM. ARB. 789 (1997). 70. See X S.p.A. v. Y S.r.l., Federal Tribunal, Switzerland, 8 March 2006, Arrêts du Tribunal Fédéral (2006) 132 III 389. For the opposite view, see SNF SAS v. Cytec Industries B.V., Court of Appeal of Paris, 23 March 2006, XXXII Y.B. COM. ARB. 282 (2008); Oberlandesgericht [OLG] Düsseldorf, Germany, 21 July 2004, VI Sch (Kart) 1/02; Court of Cassation, Greece, 30 June 2009, 1665/2009, XXXVI Y.B. COM. ARB. 284 (2011); Marketing Displays International Inc. v. VR Van Raalte Reclame B.V., Court of Appeal of The Hague, Netherlands, 24 March 2005, XXXI Y.B. COM. ARB. 808 (2006). 71. See Subway International B.V. v. Panayota Bletas and John Bletas, District Court, District of Connecticut, United States of America, 13 March 2012, 3:10–cv–1714 (JCH). 72. See Chelsea Football Club Ltd. v. Adrian Mutu, District Court, Southern District of Florida, United States of America, 13 February 2012, 10–24028. See also Presidium of the Highest Arbitrazh Court, Russia, Information Letter No. 156 of 26 February 2013; Stena RoRo AB v. OAO Baltiysky Zavod, Presidium of the Highest Arbitrazh Court, Russia, 13 September 2011, 9899/09. 73. See The Ministry of Defense and Support for the Armed Forces of the Islamic Republic of Iran, as Successor in Interest to the Ministry of War of the Government of Iran v. Cubic Defense Systems, Inc, Court of Appeals, Ninth Circuit, United States of America, 15 December 2011, 665 F.3d 1091. See also, Ameropa A.G. v. Havi Ocean Co. LLC, District Court, Southern District of New York, United States of America, 16 February 2011, 2011 WL 570130. 74. See NTT Docomo Inc. v. Ultra D.O.O., District Court, Southern District of New York, United States of America, 12 October 2010, 10 Civ. 3823 (RMB)(JCF). 75. See AO Techsnabexport v. Globe Nuclear Services and Supply Ltd., District Court, District of Maryland, United States of America 28 August 2009, AW-08-1521. 76. See Telenor Mobile Communications AS v. Storm LLC, District Court, Southern District of New York, United States of America, 2 November 2007,524 F. Supp 2d 332. 77. See Parsons & Whittemore Overseas v. Société Générale de l’Industrie du Papier (RAKTA), Court of Appeals, Second Circuit, United States of America, 23 December 1974, 508 F.2d 969 (1974). 78. See Lugana Handelsgesellschaft mbH v. OAO Ryazan Metal Ceramics Instrumentation Plant, Presidium of the Highest Arbitrazh Court, Russia, 2 February 2010, 13211/09. 79. See Joy-Lud Distributors International Inc. v. OAO Moscow Refinery, Presidium of the Highest Arbitrazh Court, Russia, 22 January 2008, 5243/06.

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34. In applying article V(2)(b) of the New York Convention, courts review not only the substantive outcome of the award but also the procedure leading to the award.

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35. Where the procedure followed in the arbitration suffered from serious irregularities, recognition and enforcement may be refused under article V(2)(b). It is thus common for courts to review awards brought before them for recognition and enforcement for fraud, bribery or some other significant due process irregularity.80

80. See, e.g., Karaha Bodas Company, L.L.C. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara and P.T. PLN (Persero), Alberta Court of Queen’s Bench, Canada, 24 October 2007, 2007 ABQB 616; Gater Assets Ltd. v. Nak Naftogaz Ukrainiy, High Court of Justice, England and Wales, 15 February 2008, [2008] EWHC 237 (Comm); Westacre Investments Inc. v. Jugoimport-SPDR Holding Ltd & others, Court of Appeal, England and Wales, 12 May 1999, [2000] 1 QB 288; Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Petarmina), Court of Appeal, Hong Kong, 9 October 2007, CACV 121/2003; Karaha Bodas Co. LLC v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, Court of Appeals, Fifth Circuit, United States of America, 23 March 2004, 364 F.3d 274; Oberlandesgericht [OLG] Düsseldorf, Germany, 15 December 2009, I-4 Sch 10/09; Oberlandesgericht [OLG] Frankfurt, Germany, 27 August 2009, 26 SchH 03/09; Oberlandesgericht [OLG] Munich, Germany, 28 November 2005, 34 Sch 019/05; Drummond Ltd v Ferrovias en Liquidacion, Ferrocariles Nacionales de Colombia S.A., Supreme Court of Justice, Colombia, 19 December 2011; SAS C22 v. Soc. John K. King & Sons Ltd. Frontier Agriculture Ltd., Court of Appeal of Paris, France, 10 April 2008; Cie de Saint-Gobain-Pont-à-Mousson v. The Fertilizer Corporation of India Ltd., Court of Appeal of Paris, 10 May 1971. See also, Stephen M. Schwebel & Susan G. Lahne, Public Policy and Arbitral Procedure, in ICCA CONGRESS SERIES NO. 3, COMPARATIVE ARBITRATION PRACTICE AND PUBLIC POLICY IN ARBITRATION 205, (Pieter Sanders ed.,1987).

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36. As with substantive public policy, applications to refuse recognition and enforcement on the basis of procedural public policy have rarely been successful. Courts have found a violation of public policy in cases where they considered that the right to be heard had been breached. For example, the Canadian courts have refused recognition and enforcement of an award where the tribunal had granted a remedy not requested by the parties on the basis that it violated the principle of audiatur et altera pars.81

81. Louis Dreyfus S.A.S. v. Holding Tusculum B.V., Superior Court of Quebec, Canada, 12 December 2008, 2008 QCCS 5903.

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37. The same conclusion has been reached in a case in which the court found a failure of the arbitral tribunal to give reasons where the agreement of the parties contained stipulations to that effect. In such circumstances, the Canadian courts have refused to grant recognition and enforcement of an award on the basis that “recognition of the award would be contrary to public policy because [the award], contrary to the express wish of the parties, does not contain reasons. […] What is at odds with fairness, equal treatment of the parties and consequently public policy, is not that an award lacks reasons but that it lacks reasons contrary to what the parties wanted. […] in a democratic country one cannot imagine that the judiciary renders a decision without being able to verify if that decision is not arbitrary”.82

82. Smart Systems Technologies Inc. v. Domotique Secant Inc., Court of Appeal of Quebec, Canada, 11 March 2008, XXXIII Y.B. COM. ARB. 464 (2008), For circumstances where the failure of the arbitrators to adhere to the agreement of the parties was considered to amount to a breach of public policy see also Société Dubois & Vanderwalle S.A.R.L. v. Société Boots Frites BV, Court of Appeal of Paris, France, 22 September 1995.

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38. Courts have also found a breach of procedural public policy where arbitrators have acted in a manner that breaches the principles of independence and impartiality. For example, in a dispute involving two parallel arbitrations between the same parties, one of the arbitrators, who was sitting in both panels, provided false information to one tribunal about the other arbitration which had an impact on that tribunal’s decision regarding its jurisdiction.83 In that case, the French Court of Cassation found that by acting in this manner, the arbitrator created an inequality between the parties which contravened the most basic requirements of due process.

83. See Soc. Excelsior Film TV v. Soc. UGC-PH, Court of Cassation, France, 24 March 1998.

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39. In a Swiss case, the fact that counsel for one of the parties in contractual negotiations inserted a provision in the contract appointing himself as the sole arbitrator should a dispute arise between the parties, was held to violate public policy.84 The Swiss court found that “the behavior of arbitrator Dr. E. is so extreme, that it is hard to imagine that any free and democratic legal system could equate the award rendered by such an arbitrator to a sovereign State act and enforce it. […] it is totally unacceptable that the person who draws up a contract must also, as an arbitrator, give a binding interpretation of it, particularly when he has been for years one of the parties’ lawyer”.85

84. See District Court of Affoltern am Albis, Switzerland, 26 May 1994, XXIII Y.B. COM. ARB. 754 (1998), at 759-760, paras. 18-24. 85. Id., paras. 21-22.

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4. Although different jurisdictions define public policy differently, case law tends to refer to a public policy basis for refusing recognition and enforcement of an award under article V(2)(b) of the New York Convention when the core values of a legal system have been deviated from. Invoking the public policy exception is a safety valve to be used in those exceptional circumstances when it would be impossible for a legal system to recognize an award and enforce it without abandoning the very fundaments on which it is based.4

4. For the exceptional nature of the defense, see the Comments of the Netherlands Government at: Travaux préparatoires, Recognition and Enforcement of Foreign Arbitral Awards: Comments by Governments on the draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards E/2822/Add.4, p. 2. See also the Comments of the representative of the French Government, Mr. Holleaux at: Travaux préparatoires, Summary Record of the Eleventh Meeting, E/CONF.26/SR.11, at 7. See also Jan Paulsson, The New York Convention in International Practice – Problems of Assimilation, 1996 ASA BULLETIN 145, at 108.

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40. Another significant example of breach of procedural public policy, albeit in the context of an action to set aside, is that of the case where two parties to a tripartite contact and dispute were required to appoint one arbitrator. The French Court of Cassation considered that the principle of equality of the parties in the appointment of arbitrators was part of the French understanding of international public policy and could be waived only after a dispute had arisen. The court concluded that an award which was rendered by a three-member tribunal, one of whom was appointed, under protest and with all reservations, jointly by the two defendants, should be set aside.86

86. See Siemens A.G. v. BKMI Industrienlagen GmbH, Court of Cassation, France, 7 January 1992, XVIII Y.B. COM. ARB. 140 (1993). See also Martin Platte, Multi-Party Arbitration: Legal Issues Arising out of Joinder and Consolidation, in ENFORCEMENT OF ARBITRATION AGREEMENTS AND INTERNATIONAL ARBITRAL AWARDS: THE NEW YORK CONVENTION IN PRACTICE 481, at 491, 492-494 (E. Gaillard, D. Di Pietro eds., 2008).

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41. An unusual example of a breach of procedural public policy is that of a case where the party opposing enforcement in Germany was a small franchisee that sold sandwiches and salads in a German provincial town but had been ordered by the arbitral tribunal to attend a hearing in New York. The German courts held that the location of such hearing placed an excessive burden on that party given its small size and refused recognition and enforcement on grounds of public policy.87

87. See Oberlandesgericht [OLG] Dresden, Germany, 7 December 2007, 11 Sch 08/07.

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42. The public policy defense can be based on facts which may also give rise to a defense under article V(1) of the New York Convention. This is particularly so in cases in which the arbitration agreement is invalid88 or where there has been a violation of due process89 amounting to a breach of public policy.

88. See supra, para. 36. 89. See supra, paras. 36, 38-39.

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43. For example, the Brazilian courts found that the fact that an arbitral tribunal had established its jurisdiction despite the failure of a party to sign the contract containing the arbitration agreement amounted to lack of consent to arbitrate and thus constituted a breach of public policy.90 Similarly, the German courts have refused recognition and enforcement on public policy grounds due to the arbitral tribunal’s failure to examine whether the arbitration agreement was valid.91

90. See, e.g., Kanematsu USA Inc. v. Advanced Telecommunications Systems do Brasil Ltda., Superior Court of Justice, Brazil, 18 April 2012, SEC 885; Indutech S.p.A. v. Algocentro Armazéns Gerais Ltda., Superior Court of Justice, Brazil, 17 December 2008, SEC 978; Plexus Cotton Ltd. v. Santana Têxtil S/A, Superior Court of Justice, Brazil, 15 February 2006, SEC 967. 91. See Landgericht [LG] Munich, Germany, 20 June 1978, V Y.B. COM. ARB. 260 (1980).

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44. Some courts have taken the view that a proper characterization of the matter as one falling either under article V(1) or under article V(2)(b) is necessary. For example, the Highest Arbitrazh Court of the Russian Federation endorsed the practice of Russian lower courts according to which improper notice of the appointment of an arbitrator or of the arbitration proceedings as well as the inability of a party to present its case constitute an independent defense to recognition and enforcement of a foreign award pursuant to article V(1)(b) and that, in light of its exceptional nature, there is no need to apply the public policy defense contained in article V(2)(b) of the New York Convention.92

92. See Presidium of the Highest Arbitrazh Court, Russia, Information Letter No. 156 of 26 February 2013, p. 10. See also ANTON G. MAURER, THE PUBLIC POLICY EXCEPTION UNDER THE NEW YORK CONVENTION: HISTORY, INTERPRETATION AND APPLICATION (2012), at 67-70.

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