Public their entailment, and leads to a lack of

Public policy is still today of
significant importance to any national court that seeks to process arbitral awards.
The differences in public policy across national courts is why we see different
corporations and indeed countries under contractual agreements seeking mutual
grounds (different courts than their own) to settle arbitrary disputes, and why
no universal guidelines have been fully explored or written down in terms of
their entailment, and leads to a lack of precision and uncertainty in reaching
outcomes. If agreements are to be reached it is evident that more international
legal initiatives need to be in place in order to give greater clarity to
public policy defences that hold up the current loose-endedness of defence in
arbitration cases. 1As
well as clarity of public policy use in arbitration cases we should also be
aware of being unjust, and the penalties that these interferences have on
either the claimant or the defendants development either financially or
otherwise. 2It
has been argued that due to the differences in public policy across borders as
well as its changing nature within any particular nation that strict and
precise legal guidelines can never be set to benefit each party in reaching an
agreement and this is why the idea has been disputed so exhaustively.

The 1958 New York Convention or
“The Convention” aims to recognise the increasing
importance of international arbitration in settling commercial disputes across
borders as well as provide common legal standards for their recognition and
enforcement in non-domestic arbitral awards. A non-domestic award in a
sense is seen to be as such even in cases where an award has been granted in a
state of enforcement, 3mainly
due to the fact of an element which does not adhere to its proceedings or its
laws relating to justice, here we can see that another nation’s courts i.e. the
seated decision’s laws are implemented, which do not adhere to their own
(enforcement court’s) idea of justice. One main indication of the convention is
not to discriminate against foreign, non-domestic or even domestic awards, this
highlights a key contradiction of the capability of enforcement across borders,
4although
it may be possible in their own state, a further idea of the New York
convention is to give each party the ability to action arbitration agreements
when either of the agreed are in breach of it, denying said parties access to
the courts if they have this breach, furthermore delivering clarity of the use
of public policy as a defence in judicial proceedings. 5This
paper critically discusses the changing nature of public policy across nations
in relation to the enforcement or arbitral awards under the 1958 New York
Convention in connection to set aside proceedings at the seat of arbitration.

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Understanding the enforcement of arbitral
awards requires us to first consider the prominence of public policy, as it
allows common opinions to be found between international domains and allows us
to recognise the influences of different interpretations of public policy and
contradictions it creates between different legal systems and in this case
arbitral awards, allowing national courts to acquit a foreign or non-domestic
arbitral award merely by finding a public policy discharge for it6,
without real reason. The changes in public policy interpretation across
countries depend on the clarity of the damage of upholding an award, e.g.:
proving that he award would damage the public must be clear and offer
substantiated evidence, however this depends on said country’s required level
of damage to the public, or their ceiling for what is deemed a violation of
public policy, hence leaving a court to decide if a violation to public policy
has been committed this “level” of damage is what has led to, in part, legislative
enforcement becoming a prominent tool and allows an arbitral award to remain
unenforced7.

 

Countries that hold a legal system based on
civil law on which society’s moral, political and economic order rests Pertain
to public policy as its root, whereas in nations which hold common law as the
basis of its legal identity public policy is more narrowly defined as an
“abstract set of values”8.
In the united states, for the award to be in violation of public policy it has
to be opposed to the legal system’s “most basic concept of morality and
justice”9,
whereas in the UK, the clarity of injury has to be absolute in its nature to
put the idea forward that not only legal aspects are being taken into account.

In the case of public policy, we
must also take recommendations from cases that allow its application. There are
such cases where a prevailing standard has been substantive in their approach
to the implementation of public policy in arbitral awards cases. Specifically,
the Court of Appeal in DST v Rakoil
applies a public policy exception to various jurisdictions with the use of a
generalised approach10.
Whilst implementing the public policy exception in this case there has been
some record that enforcing an award would present the idea of “clearly
injurious” appropriation would be committed towards the public good, hence
present illegality in its enforcement11. Internationalisation
and even globalisation sees the goals of different states converging, meaning
that we are also seeing the same effect on public policy, hence the need for
international public policy and arbitration regulation under a universal
standard as a contesting practice. 

This discussion has allowed us a
look into the public policy exception and its meaning of serious violation of
fundamental rules of a certain society. The rules of a particular ‘public” are
based on societal values, political and legal concepts, which, in its turn,
depend on many different factors. The vagueness of the public policy concept,
which stems from the way it changes in any particular country, has created the
need to regulate it internationally rather than domestically.

The New York Convention 1958 encompasses two
basic actions, firstly it looks at recognising and enforcing arbitral awards
made in a foreign state, or for the purposes of understanding another nation
from which the pre-requisite to the award was made, the application of
enforcement here depends upon a particular state’s rules and procedures, in
that they must enforce the award in accordance with those, and recognise the
award as binding, however in many cases grounds for refusal are brought forth
to the enforcing court and or can be brought to attention by the court itself
on the grounds of public policy12,
in other words the decision of approval by the seated court can be adjourned if
reasonable grounds for refusal of enforcement are evident in the country of
origin’s own law or public policy and that of the enforcing court. The second
action is based on the courts referral to arbitration where one or more of the
parties has requested it and the arbitrary agreement includes both parties
submissions of differences that may arise and have arisen, not only this but
both contractual and non-contractual dispute equivalencies (article ii (1)),
that not only look at specific contracts, but also claims in tort and also
involve the consideration of arbitration clauses that either they must be
signed contractual documents or agreements made in writing in exchanged
messages this under article ii (2) of the New York Convention 1958 13.

 

When considering the changing nature of
public policy and indeed the interpretation of the convention it is important
to mention that public policy not only differs from state to state, but also
from international to domestic public policy, the grounds for refusal concerns
in this case the application of public policy in “audi et alteram partem” or the principles of fair and adverse
proceedings. 14 The
constricted interpretation of this comes to light when considering domestic
notions of due process are considered above that of international ones, in this
case there can be grounds to refuse the enforcement of an arbitral award, and
grant one as domestic violation of due process that pertains to public policy
may not be considered so where the award is foreign.

 

International disputes in this case usually
fall under public policy fewer times than domestic ones due to the, due to the
enforcement court holding less bias towards any particular party or any
specific domestic country’s public policy, but rather a favourable view on
international public policy. Here the application of arbitral awards failure
could be said to be one negative of the interpretation of domestic vs international
public policy and should be denied enforcement only when the asserted public
policy “would violate the forum State’s most basic notions of morality and justice”15.
 

Other cases where public policy could be taken into
account under the convention include; impartiality and non-disclosure of
reasons. Being impartial at the seat or arbitration is a basic requirement
here, this means that under the convention an individual arbitrator shouldn’t
have any pre-requisite involvement before the arbitration of a case, if this
was to take place the enforcement court could easily acquit the arbitral award16. It
must also be made clear that the initial arbitration must contain reasons
pertaining to the arbitral decision grounds if not the award simply becomes null
and void, however in countries that have a common law system, do not
particularly have to state said reasons for the granting of an award.
International if the awarding court is under common law it is general practice
to assume that the enforcement in a county where reasons are mandatory would
grant these cases without valid reasons and the seated courts decision would be
upheld17.

Arbitral awards generally refer to an
equivalent to a court of law judgement by an arbitration tribunal, and does not
necessarily refer to monetary gains by either party, but rather and award of
value to the claimant in a case, where we see failure of the claims no fee
should be paid by either party. Arbitral awards can be defined as “any decision
of the arbitral tribunal on the substance of a dispute, submitted to it and
including interim, interlocutory, or partial arbitral award” Cal Code Civ Proc § 1297.21 (a). In this
case it must be noted that the court can at any time bring in new material to
which it may enhance its construction in concluding an arbitral award 18.

 

Deference in judiciary systems is
currently being weakened more and more by lower courts, in their decision to prioritize
domestic public policy in arbitral awards cases, although the awards do not
breach any legal regulation or Act, or lead to contractual misconduct by any
party, it causes the “lower” enforcement courts in question to engage in
judicial activism19, therefore a substitution
of domestic commercial justice is sometimes made, being replaced by the perceived
values of justice of the arbitrator. Arbitral awards here have a direct
connection to public policy as they can be greatly impacted by the use of
public policy to grant or deny an arbitral award, depending on the
interpretation of said public policy at the seated court and that of
enforcement as well as in a set aside judgment20.

The decision making process
becomes extremely complex whilst coming to an agreement, in that the court
enforcing the decision should have understanding of their extent of concession
to the decision of the seat of arbitration. As a general rule of thumb it has
been considered that it would be inappropriate for the enforcement court to
undermine the decision made by the court at the seat, which made the decision
to either grant or deny an arbitral award. 21Where
there is international arbitration the seat’s role must also be considered, as
this will change across borders, for instance US courts would usually concede
to decisions made by the judicial court that holds the seat, whereas the French
approach would be to ignore these decisions, which would not be the correct
proceeding under the New York Convention 1958, unless circumstances arise where
the decision is made with evidence made only in part by the seat, considered as
“exceptional circumstances”, or if the nations principles of justice are
undermined, with this in mind the violation of public policy must also be taken
into account, where the proper use of the word justice22.
Theories that are relative to the importance of the seat are also in dispute
with each other such as duty vs. discretion.

The different interpretations of the role of
the seat and its importance levels in different states causes strain on its own
relationship with the enforcement court of the resulting arbitral award, this
happens precisely when the enforcement court is asked to reach an outcome on
enforcing an award that has been set aside by the seat.  Nikolay
Viktorovich Maximov v Open Joint Stock Company 2017 EWHC
1911 (Comm) serves a reminder that the defense of a annulment
based on non-disclosures of public policy and therefore the arbitrability of
offences raised at the seat can be upheld after an award has been granted and
then deferred based on evidence not being raised during the set aside hearing,
this was done so under proceedings at the seat set forth by the enforcing court
under the New York Convention 195823.

 

Later there is a sought enforcement of an award in
three different states, this is why there is need for international/ global legal initiatives to set consistent and
tangible guidelines for public policy as it will stop larger parties seeking
settlement on favourable enforcement courts as this case saw from Paris as
their judicial system allows many limitations for the refusal of enforcement of
an arbitral award, simply the Paris court of appeal overruled the defendants
claims that there was a failure of disclosures and the setting aside of the
arbitration was not an excuse for annulling an award.

 

Enforcement was also sought from The
Amsterdam District court, whom determined that the annulment decision could
only be overturned if there was reasonable grounds to assume that the set aside
judgement from the enforcement court would violate their own public policy, as
they were not satisfied that there were exceptional circumstances they would
uphold the annulled arbitral award, after an appeal was launched, following
this experts were then involved to give evidence relative to the fairness of the proceedings that were set aside by the Russian proceedings
that had taken place, the court still decided that the original annulled
decision should remain as there was not sufficient evidence to uphold the
notion of an unfair trial, or that the decision would damage their public
policy and the decisions were not partial and dependent and were simply a
provision of justice.

 

Further to the previous sought enforcements another
action was brought to London where no conclusion was reached due to a number of
reasons, firstly on the basis of bias in proceedings of the set aside award
there was no evidence to suggest that these were unfair or that the manner of
delivery was pre-obstinate and the rationality for this being pursued was
incoherent, after this the grounds for setting the award aside were examined.
The grounds of non-disclosure at the set aside hearing were un-surmountable in
that an un supportable conclusion was made rather than making a rational
decision, however the public policy ground was found to be favorable for the
defendant as it is arguable by the standards of the seated court, finally the
finding of non-arbitrary nature of the offences were found to be courageous
although not unsupported in evidence.

 

What this case shows us is that in this and many
cases, claimants looking to have an arbitral award enforced that has already
been set aside at the seat can be nullified under the grounds of public policy,
which can cause problems both domestically and internationally, due to the changing
nature of public policy over time as well as differences across nations, even
those under the sanction of the New York Convention, in retrospect this could
be overturned by commercial courts, however they are likely to come to the same
verdict, so not to undermine the public policy of a
particular county, unless proceedings were shown to be bias in the annulment of
the set aside seated judgement. The approaches of different national courts, as
well as the enforcement of awards in different cases where updated domestic and
international public policy has not been taken into account shows that there is
a lack in conforming to the use of international public policy under the New
York convention as it undermines domestic capabilities of public policy and infers
the misappropriation of courts from seated to set aside through to enforced
judgements based on domestic principles, yet more reason for parties to be
thoughtful when choosing their seat of arbitration.24

 

In the respect of public policy and its changing
nature we can see that the variances in public policy has allowed three
different courts to make different decisions on weather or not an arbitral
award that is set aside at the seat and under the states where the New York
Convention is applied should be granted and enforced or not. It is important to
mention that the main objectives of different jurisdictions, when applying
public policy exception concept are entirely separate, hence in this case there
was different outcomes from each nation, this would imply that although we can
see the generalisation and globalisation of some values in the world public,
simply different political, economical and societal values differ too much for
public policy and arbitral awards to be regulated internationally, although
there is a need for it due to the use of this exception to escape making
difficult decisions 25in
cases where clearly there is no reason to set aside decisions or even to deny
enforcement based on public interest, as many of the cases involve private
organisations.

 

Overall

 

Reference
core texts

1 P. Lascoumes and P. Le. Gales Understanding
Public Policy through Its Instruments—From the Nature of Instruments to the
Sociology of Public Policy Instrumentation (2007) 20(1) IJPAI 1-21.

2 Margaret L. Moses, The
principles and practice of international commercial arbitration 3rd
edition, Cambridge University Press (2017) 244- 247

3 UN New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (1958)

4 Quigley LV, ‘Accession by the United
States to the United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards.’ (1961), 70,(7) Yale LJ 1049

 

5 M.A. Buchanan Public policy And International commercial arbitration (1988) American Business Law Journal, 26

6 H.
T. Edwards, Judicial review of Labour Arbitration Awards: The clash Between the
Public Policy Exception and The Duty to Bargain. (1988) CKLR 64

7 S. Sameer, Enforcement of Arbitral
Awards and Public Policy Same Concept Different Approach (2011) TDM 8.5

 

8 A. M. S. Burley, International law and
international relations theory: a dual agenda, (1993) American Journal of
International Law, 87(2), 205

 

9 T. Donaldson, T. W. Dunfee, toward a
unified conception of business ethics: Integrative social contracts theory
(1994). AMR 19(2), pp.252-284.

 

10 Ho Hock Lai Enforcement of Foreign Arbitral Award: Re An Arbitration Between Hainan
Machinery Import and Export Corporation and Donald & McArthy Pte Ltd
Singapore Journal of Legal Studies (July 1996) 241

 

11C. R. Sunstein, Standing and the
privatization of public law. (1988) CLR, 88(7), 1432.

 

12 A. Van den
Berg, T.M.C (1994). The New York Arbitration Convention of 1958: towards a
uniform judicial interpretation. Kluwer.

 

13 UN
New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (1958)

14 Parsons & Whittemore v. RAKTA, US no. 7, reported in Yearbook Vol. I p. 205

15 C. Bühring-Uhle, L.
Kirchhoff and G. Scherer, Arbitration and mediation in international
business (2006). Kluwer Law International. 26

 

16 R. Das and A. Keyal, ‘Judicial
Intervention in International Arbitration.’ (2009) 2(4) NUJS L Rev 585

 

17 M. Strub, ‘Resisting Enforcement of
Foreign Arbitral Awards under Article V(1)(e) and Article VI of the New York
Convention: A Proposal for Effective Guidelines .’ (1990) 68(5) Tex L Rev 1031

 

18 J. Paulsson, Arbitration unbound: award
detached from the law of its country of origin. (1981) ICLQ 30(2) 358.

 

19 G. A. Bermann Recognition and Enforcement of Foreign
Arbitral Awards: The Interpretation and Application of the New York Convention
by National Courts (2017) GSLC 23

 

20

21 M. Barry, The Role of the Seat in
International Arbitration: Theory, Practice, and Implications for Australian
Courts (2015) 32 (3) JIA 289

22 M. Barry, The Role of the Seat in International
Arbitration: Theory, Practice, and Implications for Australian Courts (2015) 32
(3) JIA 310

23 Shtromberg, Alexandra Substantive
Public Policy Concept in Enforcement of Foreign Arbitral Awards in Russia
(2017)

 

24 R. Gal, Enforcing awards that have been set aside at the seat: the English and
Dutch courts remind parties of the high hurdle that must be overcome, (2017)
PLAB 10.

 

25 Straus, Arbitration of Disputes Between Multinational Corporations,
in New Strategies for Peaceful Resolution of International Business Disputes,
American Arbitration Association (1971) 109 at 114.

 

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