Have there been any recent court decisions in your country considering the definition and application of “public policy” in the context of enforcing or setting aside an arbitral award?
International Arbitration (4th edition)
Under Argentine law, an award must not violate the public policy principles to be recognized and enforced. Local courts usually avoid to provide a general definition of what “public policy” means (a concept that should be considered and applied on a case-by-case basis), but it is generally understood that it comprises of rules of law from which rights or obligations are derived that cannot be validly waived by the parties.
The Austrian Supreme Court stresses in its established jurisprudence, including its recent decisions, the very limited nature of setting aside or refusing enforcement of an arbitral award on grounds of public policy. Only an award contrary to the fundamental values of the Austrian legal system can be set aside or refused enforcement. For instance, a 2016 decision referred to in recent rulings stated that a reasoning consisting of “meaningless phrases” (inhaltsleere Floskeln) is contrary to Austrian public policy and therefore a ground for setting aside an award.
With the amendments of 2017 the ground for setting aside an award based on public policy was revoked in ICCA. Thus, only foreign arbitral awards that are enforced under the New York Convention would be faced with the “public policy” exception.
The last court decision that deals with this matter is Decision No. 853 of Sofia city court dated 03.05.2019 rendered on commercial case No. 2036/2018: “The Bulgarian public order is a set of basic principles on which the rule of law in the Republic of Bulgaria is built and operates. A basic principle in Bulgarian law is that every legal entity is liable for damages, including property ones, which it has caused to another entity as a result of its default, which arose in its burden under a contract concluded between them, of a nature the claim which is the subject of the matter brought before arbitration by "S. S. S. A.", Liberia v. "F. C." EOOD claim for receiving a contractual penalty for delayed execution by the latter company of its obligation under a charter contract to perform actions on landing the ship in the cargo port, the so-called demurrage.
Three key cases in this area are Corporacion Mexicana De Mantenimiento Integral, S. De R.L. De C.V. v. Pemex-Exploracion y Produccion, 832 F.3d 92, 107 (2d Cir. 2016), cert. dismissed, 137 S. Ct. 1622 (2017) and Thai-Lao Lignite (Thailand) Co. v. Gov’t of Lao People’s Democratic Republic, 864 F.3d 172 (2d Cir. 2017), and Getma Int’l v. Republic of Guinea, No 16-7087 (D.C. Cir. July 7, 2017). Both cases considered the definition and application of “public policy” in the context of recognizing an annulled arbitral award.
In Pemex, the Second Circuit confirmed an annulled award that had been set aside in the seat, Mexico, under Chapter 3 of the FAA (the Panama Convention). The Second Circuit agreed with the district court’s finding that recognizing the annulment — which was based on a law that had been enacted after the award was rendered — would violate U.S. public policy. The district court found that the decision to vacate the award violated “basic notions of justice” and on that basis, confirmed the award. In Thai-Lao Lignite, the Second Circuit recognized its authority to enforce awards annulled at the seat, but found that the annulment — which was based on a finding that the arbitrators exceed their jurisdiction — did not offend basic notions of what is decent and just. In Getma Int’l, the D.C. Circuit refused to confirm an annulled award that had been set aside in the seat, the Common Court of Justice and Arbitration of the Organization for the Harmonization of Business Law in Africa (the “CCJ”), under Chapter 2 of the FAA (the New York Convention). The D.C. Circuit stated that it would not second-guess a competent authority absent extraordinary circumstances. It went on to clarify that extraordinary circumstances were not simply conflicts with U.S. public policy, but had to arise to the level of violating the U.S.’s “most basic notions of morality and justice.” The D.C. Circuit then went on to find that, setting arbitral fees against the parties’ wishes does not violate the most basic notions of morality and justice in the United States, and refused to confirm the annulled award.
As mentioned above, in general, Federal Court decisions are not rendered public in the UAE (although DIFC and ADGM Court decisions generally are) and, as such, case reporting is limited.
In that context there have been no publicised or commented UAE Court decisions that considered the aforementioned judgment and it is unlikely that any judgment will do so in the future, given the remoteness to UAE’s arbitral and judicial practice of the topics the said Court of Justice of the European Union judgment covered.
Yes. In Rakna Arakshaka Lanka Ltd v Avant Garde Maritime Services (Pte) Ltd,  2 SLR 131 at , the Singapore Court of Appeal confirmed its agreement with the conclusion of the lower court judge that s 24(a) of the IAA (which provides that the High Court in Singapore may set aside an arbitral award in the event that ‘the making of the award was induced or affected by fraud or corruption’) ‘contemplates a situation where the Award itself (rather than the contract between the parties) is tainted or induced by fraud or corruption’.
Most recently, the High Court of Singapore has also helpfully characterized the public policy ground for setting aside or refusal of recognition or enforcement of an arbitral award as follows:
‘The public policy ground for setting aside or refusal of recognition/enforcement is very narrow in scope. The Court of Appeal has held that the ground should only succeed in cases where upholding or enforcing the arbitral award would “shock the conscience”, or be “clearly injurious to the public good or … wholly offensive to the ordinary reasonable and fully informed member of the public”, or violate “the forum’s most basic notion of morality and justice”. In a public policy challenge, it is important to identify whether the alleged public policy exists in the first place. BTN and another v BTP and another,  SGHC 212 at . [Internal citations omitted.]
In 2018, the Supreme Court issued a ruling on the application of public policy in an action for setting aside of the arbitral award (Supreme Court 2018Da240387, 13 December 2018). The court confirmed that the ground provided for under Article 26(2)2(b), that “the award is in conflict with the good morals and other forms of social order of the Republic of Korea”, does not encompass any and all cases where the substance of the arbitral award is unreasonable because the arbitrator’s factual finding is erroneous or legal determination violates laws and regulations. Rather, the determination for setting aside should center on whether enforcing the award would result in violating the good morals and social order of Korea.
In that case, the relief sought was that the appellant be ordered to instruct a particular bank to pay the appellees KRW 4.9 billion and interest thereon. The relief granted, however, stated that the arbitral tribunal “confirms” that the appellant owed the duty to effect payment of the principal and interest by instructing the bank. The arbitral award was challenged on the ground that, contrary to the principle of public policy, the award violated the principle of disposition provided for under Article 203 of the Code of Civil Procedure that “A court shall not render any judgment on matters which have not been claimed by the parties.” However, the Supreme Court held that the award did not breach the principle of disposition because (i) unlike civil judges who must strictly apply the principle of disposition in issuing judgment, arbitral tribunals are allowed more flexibility to consider equitable resolution; and (ii) the award does not impose on the appellant any additional obligation to make payment using any other asset than the asset requested in the relief sought. Even if the award did breach the principle of disposition, the Supreme Court held that such breach would not be deemed a violation of the public policy of Korea.
See at 7 above.
In October 2018 the Federal High Court (Bundesgerichtshof) came to the conclusion that the misjudgment of the res judicata constitutes a violation of the procedural orde public by the arbitral tribunal (Bundesgerichtshof, 11. October 2018 – I ZB 9/18). Consequently an award which wrongly assesses the res judicata of a previous decision shall be set aside pursuant to section 1059 (2) Nr. 2 lit. b ZPO. However the assumption of a violation of public policy presupposes that the determination of the extent of the res judicata on the basis of the earlier decision is not doubtful and, in particular, does not require any interpretation of the grounds of the decision.
In the same judgement the Federal High Court (Bundesgerichtshof) noted additionally that an award can also be set aside if the res judicata has been overestimated, e.g. because it overestimates the subject matter of the dispute in the previous proceedings. This decision of the Federal High Court (Bundesgerichtshof) seems to be an international novelty.
Yes, Ssangyong Engineering & Construction Co. Ltd v. National High Authority of India wherein court held that to deal with purely domestic awards, which may also be set aside by the Court if the Court finds that such award is vitiated by “patent illegality appearing on the face of the award” — In order to provide a balance and to avoid excessive intervention, it is clarified in the proposed proviso to the proposed S. 34(2A) that such “an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence”
In 2010, Indonesia’s Supreme Court affirmed the Central Jakarta District Court’s position in Astro Nusantara International et al. v. PT Ayunda Primamitra et al. which rejected Astro’s application to recognise SIAC’s Award on Preliminary Issues of Jurisdiction, Interim Anti Suit Injunction and Joinder. This SIAC award essentially ordered Ayunda to cease pursuing parallel litigation in Indonesia against some of the claimants in the on-going SIAC arbitration. The district court, as affirmed by the Supreme Court, rejected the application on the basis of public order, among other things. In particular, the SIAC award was deemed to intervene with an Indonesian court proceeding, thus in conflict with the principle of sovereignty.
In 2016, the Supreme Court issued its decision on the civil review that Astro had filed against the previous Supreme Court decision, confirming that the district court’s rationale had been correct.
Liechtenstein courts have repeatedly considered the definition and application of the term “public policy”, also in the context of the challenge of arbitral awards. Liechtenstein courts have held that the main purpose of the concept of public policy is the preservation of the fundamental principles of the Liechtenstein legal system. The public policy clause should therefore only be invoked in exceptional cases involving intolerable violations of such fundamental principles. The following principles, among others, form part of the Liechtenstein public policy: the principle of good faith, the prohibition of punitive damages, the right to be heard, the principle of res iudicata, and the principle of good morals.
Recently, the Federal Court in Jan De Nul (Malaysia) Sdn BHd & Anor. v. Vincent Tan Chee Yioun & Anor.  1 CLJ 1 dealt with the scope and application of public policy and held as follows:-
‘ The scope of public policy ground for setting aside an arbitral award could only be invoked in deserving case ie, in instances where it appears a violation of the most basic notions of morality and justice. It covers fundamental principles of law and justice in substantive as well as procedural respect. Instances where the upholding of an arbitral award would shock the conscience, or clearly injurious to the public good, or wholly offensive to the ordinary reasonable and fully informed member of the public, had been held by courts in various jurisdiction to fall within the category of public policy ground for setting aside an arbitral award.’
In fact, there exist numerous court decisions addressing public policy as a ground for annulment and refusal of enforcement of arbitral awards. However, Egyptian courts appear to be enforcement friendly (with respect to awards related to non-administrative contracts) and the public policy ground is normally narrowly construed.
As to the definition of public policy, it is worth noting that it has been well-established by the Egyptian Court of Cassation that contravention of public policy in Egypt consists that the award is in contravention with the social, political, economic and ethical principles in the country which are related to the nation’s higher interests.
The public policy definition provided by Egyptian courts reads: ‘Rules aiming to achieve a public interest, whether political, social, economic, pertaining to the society’s high order and which prevails over the individual’s interest.’ (Court of Cassation, challenge no. 385 of JY 44, hearing session dated 24 April 1980) In this regard, the Court of Cassation has adopted an ‘objective’ notion of public policy, and ruled that a judge must define public policy based on objective criteria, reflecting general trends of the Egyptian community at a given time. (Court of Cassation, challenge no. 10132 of JY 78, hearing session dated 11 May 2010 and challenge no. 12790 of JY 75, hearing session dated 22 March 2011).
Furthermore, there exists two separate categories of public policy in Egypt, i.e. procedural public policy and substantive public policy. In this respect, the Egyptian Court of Cassation held that the violation of public policy may occur ‘in case of violation of provisions of the law regulating the arbitral process or violation through deciding [on the merits] in contravention with public policy.’ (Court of Cassation, challenge no. 10132 of JY 78, hearing session dated 11 May 2010 and challenge no. 12790 of JY 75, hearing session dated 22 March 2011) Accordingly, examples of procedural public policy, as adopted by Egyptian courts, include the prohibition of compulsory arbitration (See, for example, Cairo Court of Appeal, commercial circuit no. 91, case no. 88 of JY 120, hearing session dated 28 April 2004) and the requirement that at least one oral hearing be repeated if an arbitrator is replaced after hearings have ended. (Court of Cassation, challenge no. 4083 of JY 77, hearing session dated 27 April 2014) As to the substantive public policy application by Egyptian courts, it can be referred to the example of prohibition of late payment interest exceeding the maximum ceiling of 7% set by law, and which does not apply to bank loans. (Court of Cassation, challenge no. 810 of JY 71, hearing session dated 25 January 2007)
Moreover, it is worth noting that the Cairo Court of Appeal considered that a mandatory rule is not necessarily part of public policy and stated that ‘if public policy encompasses, in general, the fundamental interests of the society affecting its economic, social and political values on which it is based, it is difficult to provide an exhaustive definition for public policy since its content is relative, flexible and evolving.’ (Cairo Court of Appeal, commercial circuit no. 91, cases nos. 108 and 111 of JY 121, hearing session dated 30 May 2005) The Court of Cassation confirmed same approach and ruled that the breach of a mandatory rule does not ex officio or ipso facto qualify as a ground for annulment of an award for violation of public policy. (Court of Cassation, challenge no. 12790 of JY 75, hearing session dated 22 March 2011)
Finally, in a very recent court decision annulling an arbitral award, the concept of public policy has been defined as a group of imperative/peremptory norms which the parties cannot derogate from by agreement, by way of exception from the principle of party autonomy. (Cairo Court of Appeal, commercial circuit no. 91, case no. 17 of JY 134, hearing session dated 14 May 2019)
We are not aware of any such recent decision. Recent court decisions have considered the topic of the enforcement of the arbitration awards.
Not with the Court of Appeal, not recently. The definitive precedent on the issue is still the 20 years old Republic of Kenya v. Bank Fur Arbeit Und Wirtschaft AG (1999) 1 A.A.D. 585. There it was decided that, the term ‘public policy’ encompasses the fundamental values that are recognized by a society in a given period, that governs the transactions and events of its members’ lives. However, in the First Instance Courts around the country the defence of “public policy” merges every now and again. The most recent case on “public policy” is probably -first instance courts decisions are not exhaustively listed- an application for enforcement of a London Court of International Arbitration award tried by the District Court of Limassol in which the Defendants put forward the “public policy” defence on the grounds that under Cyprus law the notion of “reflecting loss” is not recognised and therefore the award should not be recognised as contrary to “public policy”. The District Court of Limassol held that the award was not a “reflecting loss” award but it rather awarded damages on the grounds of breach of contract and therefore “public policy” rule was not infringed. The District Court of Limassol judgment was given on 18 July 2018. It is unclear at this stage whether an appeal was filed.
The issue has been addressed in the context of setting aside arbitral awards under the ICA Act. The Court of Appeals of Santiago has adopted an international view of public policy, this is to say that it is to cover and protect only basic and fundamental legal principles rather than merely local mandatory rules.
Over the last few years, a number of decisions from Canadian courts have considered the definition and application of “public policy” in the context of enforcing or setting aside arbitral awards.
In 1552955 Ontario Inc. v. Lakeside Produce Inc. (2017 ONSC 4933), one of the parties (JAG) sought to set aside an arbitral award pursuant to Article 34(2) of the Model Law on International Commercial Arbitration, which provides that “An arbitral award may be set aside by the court specified in article 6 only if . . . the court finds that . . . the award is in conflict with the public policy of this State.” According to JAG, numerous errors in the arbitrator’s decision undermined the integrity of the arbitration process such that its enforcement would be contrary to the public policy of Ontario (para 76). The Court rejected this submission, emphasizing that the public policy defence is intended to have narrow application to “guard against enforcement of an award which offends our local principles of justice and fairness in a fundamental way… or where there was ignorance or corruption on the part of the tribunal which could not be seen to be tolerated or condoned by our courts” (para 82). This will be the case where “enforcement would violate our ‘most basic notions of morality and justice’ (para 84). However, the public policy defence should not be employed to re-determine the merits of the claim or where the court believes that the tribunal wrongly decided a point of fact or law (para 83 and 84). Applying these principles, the Court found that the alleged errors did not meet the threshold of a conflict with public policy, and that JAG was instead attempting to re-open the merits of the parties’ dispute on factual and legal issues within the arbitrator’s jurisdiction (para 87).
In Consolidated Contractors Group S.A.L. (Offshore) v. Ambatovy Minerals S.A. (2017 ONCA 939), the ONCA considered another application to set aside an arbitral award pursuant to Article 34 of the Model Law. In that case, the appellant argued that the arbitration award amounted to double recovery for the respondent and was therefore a penalty that offended Ontario public policy. The Court rejected the appellant’s submissions, citing the same leading cases as Lakeside and emphasizing that public policy is only engaged when enforcement of an award “offends our local principles of justice and fairness in a fundamental way” (para 99). According to the Court, the alleged double recovery “does not come close” to meeting that test (para 101).
The British Columbia Supreme Court (BCSC) also recently considered the public policy defence to the enforcement of a foreign arbitration award in Ning v. Yang (2018 BCSC 943). In its brief decision, the BCSC declined to set aside an award made by the Hainan Arbitration Commission in connection with the respondent’s failure to repay a loan. While the respondent claimed the loan’s interest rates and default penalty were excessive, the Court held that since the tribunal’s procedural and substantive rules did not diverge markedly from the rules of the BC court, and there was no evidence of ignorance or corruption, enforcement of the award was not against public policy (para 17).
Finally, in Canada (Attorney General) v. Clayton, (2018 FC 436), the Federal Court (FC) considered the application of Article 34 of the Model Code in the context of a NAFTA tribunal’s finding that Canada had violated its obligations by refusing to approve a quarry and marine terminal project. Intervenors in the case argued that enforcement of the tribunal’s decision was contrary to Canada’s public policy because of its “flagrant” errors of law. In rejecting this public policy argument, the FC pointed out that setting aside the decision on this basis would frustrate the narrow application of Article 34, and would open the door for a review on the merits (para 195). Moreover, the FC noted that the threshold for violation of public policy was “extremely high”. While this threshold was met in instances of bribery, illegality and denial of due process, the issues raised by the intervenors did not rise to this level (para 196).
Yes, the First Chamber of the Mexican Supreme Court has stated that it is required a high standard to set aside an award on public policy grounds, it ruled that an award breaches public policy when:
- It is beyond the legal institutions of the State, the principles, norms and institutions forming it; and
- Transcends the community because of the offensive and serious misconduct committed in the decision.
Not to our knowledge.
In December 2018, the Philippine Supreme Court, for the first time, declared its adoption of a narrow definition of “public policy” in the context of enforcement of arbitral award. In Mabuhay Holdings Corporation v Sembcorp Logistics Limited , the Philippine Supreme Court held that “[m]ere errors in the interpretation of the law or factual findings would not suffice to warrant refusal of enforcement under the public policy ground. The illegality or immorality of the award must reach a certain threshold such that, enforcement of the same would be against [the Philippines’] fundamental tenets of justice and morality, or it would blatantly be injurious to the public, or the interests of the society.” In ruling against Mabuhay, the Philippine Supreme Court reasoned that a restrictive approach to public policy implies that not all violations of law are deemed contrary to public policy. Mere incompatibility of a foreign arbitral award with domestic law does not amount to a breach of public policy.
Typically, court decisions are not published in the Kingdom and as such, we are not aware of any recent court decisions considering the definition and application of “public policy” in the context of enforcing or setting aside an arbitral award.
As seen in the above responses to questions where “the violation of public order or morals” is mentioned, the concept of public policy is a fundamental deep-rooted concept of Taiwan law; no legal act, governmental policy, court decision or arbitral award may be enforced if it would be in violation of public order or morals. The term itself has been defined by the courts as the nation’s concept and understanding of general public benefits and morals that serve as the foundation of culture and social interaction in Taiwan. Whether an award would be deemed as in violation of public order or morals is dependent on whether the results of enforcement would be in conflict with such concepts and understandings of Taiwan society.
In accordance with art. V para 2(b) of the New York Convention, the Swiss courts will not enforce remedies that are considered to be contrary to Swiss public policy. In this regard and potentially of some practical relevance, according to the Swiss Federal Tribunal, treble and punitive damages might infringe Swiss public policy, depending on the particular circumstances of the case. Whilst this and also a limited selection of other matters have been noted by the Swiss Federal Tribunal as theoretically conceivable to violate Swiss public policy, it should be noted that the application of the public policy exception in Switzerland is extremely narrow. Since the coming into force of the PILA almost 30 years ago arbitral awards have only in two instances been set aside on grounds of a violation of public policy. Accordingly, objecting the enforcement of foreign awards in Switzerland on such grounds has only a remote chance of success.
No. Both questions are disputed in legal literature. The prevailing view is that a foreign award already annulled in the country where it was made shall not be recognized in Greece and that recognition or non-recognition elsewhere of an award made in Greece is, as a matter of principle, indifferent to the outcome of the request for setting aside the award filed with the Greek courts.