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02 August 2018
The public policy exception to the recognition and enforcement of international arbitral awards creates uncertainty with respect to the enforcement of these awards – particularly because contracting states have diverse approaches to issues of public policy.
Article V(2)(b) of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and Article 36(1)(b)(ii) of the United Nations Commission on International Trade Law's Model Law both provide that a state may refuse to enforce an award if doing so would be contrary to the public policy of the state in which enforcement is sought. Unfortunately, neither provides a definition of 'public policy'. In October 2015 the International Bar Association released a Report on the Public Policy Exception in the New York Convention, which reaffirmed that public policy remains a nebulous and evolving concept that defies precise definition.
Most major arbitral jurisdictions define public policy (or 'ordre public') narrowly and apply it exceptionally when an award contravenes fundamental (and largely international) legal norms. Indeed, in most, the public policy violation must reach a certain threshold to warrant refusing enforcement, such as 'blatant', 'flagrant' or 'intolerable'. The exception can legitimately apply, for instance, to awards concerning contracts that would be illegal under national laws (eg, those concerning crime).
While some jurisdictions still maintain a parochial approach to the public policy exception, recent trends in its interpretation by legislators and national courts invite cautious optimism that major jurisdictions are converging in the practice of adopting a narrow interpretation of the public policy exception.
For further information on this topic please contact Paul Stothard at Norton Rose Fulbright LLP's Dubai office by telephone (+971 4 293 2222) or email (email@example.com). Alternatively, contact Alexa Biscaro at Norton Rose Fulbright LLP's Ottawa office by telephone (+1 613 780 8661) or email (firstname.lastname@example.org). The Norton Rose Fulbright LLP website can be accessed at www.nortonrosefulbright.com.
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