Author: Hans Smit*
Published: December 2003
Enforcement of Arbitral Awards
New York Convention
Description: Public policy may play a part in international arbitration in several respects: (1) the arbitration agreement may violate public policy; (2) the conduct of the arbitration may violate public policy; (3) the law the arbitrators apply may violate public policy; and (4) enforcement of the award may violate public policy. In all four situations, the question arises what the substantive content of the term is. The New York Convention, in Article V(1)(b), provides that recognition of an arbitral award may be refused if its enforcement would be “contrary to the public policy of the country in which enforcement is sought.” Other provisions in the Convention refer to public policy only indirectly. Article II(3) provides that the court shall refer the parties to arbitration unless it finds that the arbitration agreement is “null and void, inoperative or incapable of being performed.” Of course, an agreement that violates public policy comes within the quoted terms. Similarly, Article V(1)(a) provides that an arbitral award may be refused recognition if the arbitration agreement is “not valid under the law to which the parties have subjected it or… under the law of the country where the award was made.” Here again, an agreement is not valid under either law if it violates public policy. And Article V(1)(b), (c) and (d) give examples of situations in which public policy was not observed in the conduct of the arbitration. In all of the instances, it is typically the public policy of the local forum that is applied. Indeed, Article V(1)(b) makes that explicit.
This is regrettable. In the context of enforcing international arbitration agreements or awards, it is international public policy, not local public policy that should provide the applicable standard.
This has generally been recognized in the United States. In Parsons & Whittemore Overseas Co. v. Société Générale de l’Industrie du Papier, the Second Circuit resolutely rejected the argument that the award violated public policy because American law forced it to abandon the contract. It was international public policy that was decisive in the premises and that policy was not violated, the Court ruled. Similarly, in Mitsubishi Motors Corp. v. Soler…
*Stanley H. Fuld Professor of Law and Director, Center for International Arbitration and Litigation Law, Columbia University.