0. Commercial Arbitration in the ECO Region
Article V, New York Convention: Due Process, Public Policy and Arbitrability
Khawar Qureshi QC
1 December 2014

1. Article V, New York Convention
“1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding, on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.”

2. Article V, New York Convention
“2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that: (a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or (b) The recognition or enforcement of the award would be contrary to the public policy of that country.”

3. Refusal to enforce arbitration award
New York Convention – discretion under Article V to refuse to enforce arbitration award.
“Pro-enforcement bias” of New York Convention
Article V - “Recognition and enforcement of the award may be refused at the request of the party against whom it is invoked…”
Differing approach of jurisdictions:
Germany: “may” has been interpreted as “shall”
England: discretion retained (see Dallah Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2009] EWCA Civ 755 )

4. Grounds for refusing enforcement – Part 1
Limited grounds for refusing enforcement under New York Convention (Article V(1)) :
The agreement is not valid under the law to which the parties have subjected it, or the law of the country where the award was made.
The party against whom the award was made was not given proper notice of the proceedings.
The award deals with a difference which does not fall within the terms of the submission to arbitration.
The arbitration procedure was not in accordance with the agreement, or was not in accordance with the laws of the country in which the arbitration took place.
The award has not yet become binding on the parties, or it has been set aside or suspended by a competent authority of the country in which the award was made.

5. Grounds for refusing enforcement – Part 2
NYC Article V(2) - Recognition and enforcement may be refused if the competent authority in the country of enforcement finds that the subject matter of the dispute is not capable of settlement under the arbitration laws of that country (“arbitrability”); or finds that the recognition or enforcement of the award is contrary to the public policy of that country.

6. Due Process
V(1)(b) guarantees minimum requirements for a fair arbitral procedure
This is one of the most frequently invoked grounds for non-recognition or non-enforcement of awards – however, courts appear to accept a violation of due process only in serious cases.
The burden of proof rests on the party resisting recognition or enforcement of an arbitral award.
Violations of procedural fairness under Article V(1)(b) may be waived but parties cannot grant blank or unlimited waivers of
minimal due process requirements prior to arbitration.

7. Due Process
A violation of domestic notions of due process does not necessarily constitute a violation of due process in a case where the award is foreign.
Must be a connection between the due process violation and the arbitral outcome – ie a violation of fair arbitral procedural standards constitutes grounds for refusal of recognition or enforcement of an award, only if the award would have likely been differently decided had the procedural irregularity not occurred.
However, standard required is very low - (“very lenient,” “appears likely to have affected”, “could” or “may have affected”)
V(1)(b) requires the party against whom the award is invoked was properly notified of the appointment of the arbitrator and of the arbitral proceedings. However – short time limits for the appointment of an arbitrator and the preparation of the defence, or of the notice period to appear at the hearing generally, is held by the courts not to be a violation of due process under Article V(1)(b).

8. Public Policy Decline to enforce based on public policy?
International v domestic public policy
Examples:
Default of a party;
Lack of impartiality of arbitrator;
Lack of reasons in award;
Irregularities in the arbitral procedure.
2002: International Law Association - “Final Report on Public Policy as a Bar to Enforcement of International Arbitral Awards” – recommendations in relation to public policy as a ground for refusal to enforce

9. ILA Report on Public Policy
Key recommendations:
The finality of awards rendered in the context of international commercial arbitration should be respected save in exceptional circumstances.
Such exceptional circumstances may in particular be found to exist if recognition or enforcement of the international arbitral award would be against international public policy.
The expression "international public policy" is used to designate the body of principles and rules recognised by a State, which, by their nature, may bar the recognition or enforcement of an arbitral award rendered in the context of international commercial arbitration when recognition or enforcement of said award would entail their violation on account either of the procedure pursuant to which it was rendered (procedural international public policy) or of its contents (substantive international public policy).

10. ILA Report on Public Policy
The international public policy of any State includes: (i) fundamental principles, pertaining to justice or morality, that the State wishes to protect even when it is not directly concerned; (ii) rules designed to serve the essential political, social or economic interests of the State, these being known as “lois de police” or “public policy rules”; and (iii) the duty of the State to respect its obligations towards other States or international organisations.
An example of a substantive fundamental principle is prohibition of abuse of rights. An example of a procedural fundamental principle is the requirement that tribunals be impartial. An example of a public policy rule is anti-trust law. An example of an international obligation is a United Nations resolution imposing sanctions. Some rules, such as those prohibiting corruption, fall into more than one category.
Whether the seat of the arbitration was located within the territory of the forum or abroad is not a consideration which should be taken into account by a court when assessing an award's conformity with international public policy.

11. ILA Report on Public Policy
If the court refuses recognition or enforcement of the arbitral award, it should not limit itself to a mere reference to Article V.2 (b) of the New York Convention 1958 or to its own statute or case law. Setting out in detail the method of its reasoning and the grounds for refusing recognition or enforcement will help to promote a more coherent practice and the development of a consensus on principles and rules which may be deemed to belong to international public policy.
If any part of the award which violates international public policy can be separated from any part which does not, that part which does not violate international public policy may be recognised or enforced.
A court verifying an arbitral award's conformity with fundamental principles, whether procedural or substantive, should do so by reference to those principles considered fundamental within its own legal system rather than in the context of the law governing the contract, the law of the place of performance of the contract or the law of the seat of the arbitration.

12. ILA Report on Public Policy
Nevertheless, in order to determine whether a principle forming part of its legal system must be considered sufficiently fundamental to justify a refusal to recognise or enforce an award, a court should take into account, on the one hand, the international nature of the case and its connection with the legal system of the forum, and, on the other hand, the existence or otherwise of a consensus within the international community as regards the principle under consideration (international conventions may evidence the existence of such a consensus). When said consensus exists, the term “transnational public policy” may be used to describe such norms.
Where a party could have relied on a fundamental principle before the tribunal but failed to do so, it should not be entitled to raise said fundamental principle as a ground for refusing recognition or enforcement of the award.

13. ILA Report on Public Policy
An award's violation of a mere "mandatory rule" (i.e. a rule that is mandatory but does not form part of the State's international public policy so as to compel its application in the case under consideration) should not bar its recognition or enforcement, even when said rule forms part of the law of the forum, the law governing the contract, the law of the place of performance of the contract or the law of the seat of the arbitration.
A court should only refuse recognition or enforcement of an award giving effect to a solution prohibited by a rule of public policy forming part of its own legal system when: (i) the scope of said rule is intended to encompass the situation under consideration; and (ii) recognition or enforcement of the award would manifestly disrupt the essential political, social or economic interests protected by the rule.

14. ILA Report on Public Policy
When the violation of a public policy rule of the forum alleged by a party cannot be established from a mere review of the award and could only become apparent upon a scrutiny of the facts of the case, the court should be allowed to undertake such reassessment of the facts.
When a public policy rule of the forum enacted after the rendering of the award prohibits the solution implemented by said award, a court should only refuse the award's recognition or enforcement if it is plain that the legislator intended said rule to have effect as regards awards rendered prior to its enactment.
A court may refuse recognition or enforcement of an award where such recognition or enforcement would constitute a manifest infringement by the forum State of its obligations towards other States or international organisations.

15. Arbitrability “Arbitrability” Raised in very few challenges
Normally determined according to the law chosen by the parties, or failing that, according to the law of the seat of the arbitration.
Arbitrability determines those types of issues which can or cannot be submitted to dispute settlement by arbitration.
If the subject matter of the dispute is non-arbitrable, the arbitration agreement is invalid and the tribunal has no jurisdiction to decide the dispute even if both parties want it to.
Consider:
Bribery/corruption;
Fraud.

16. NY Convention in England and Wales
NYC was implemented originally by means of the Arbitration Act currently given the force of law by sections of the Arbitration Act 1996.
To date, more than 1,700 court decisions worldwide have been published interpreting and applying the New York Convention.
English approach - presumption of enforcement – “pro-enforcement bias of the Convention” (Westacre Investments Inc v Jugoimport SDRP Holding Co Ltd [1999] Q.B. 740, Lombard-Knight & Anor v Rainstorm Pictures Inc [2014] EWCA Civ 356)
No cases decided before the English courts on arbitrability in a NYC context

17. Public Policy and arbitration in English Courts
Narrow approach taken:
Deutsche Schachtbau- und Tiefbohrgesellschaft mbH v Ras Al Khaimah National Oil Co. [1987] 2 Lloyd’s Re. 246, 254: “Considerations of public policy can never be exhaustively defined, but they should be approached with extreme caution… It has to be shown that there is some element of illegality or that the enforcement of the award would be clearly injurious to the public good or, possibly, that enforcement would be wholly offensive to the ordinary reasonably and fully informed member of the public on whose behalf the powers of the state are exercised.”
Soleimany v Soleimany [1999] QB 785
Honeywell International Middle East Ltd v Meydan Group LLC (formerly Meydan LLC) [2014] EWHC 1344 (TCC) - High Court refused the application of a party alleging bribery to set aside an order granting permission to enforce a Dubai International Arbitration Centre (DIAC) arbitration award.

18. Public Policy and arbitration in English Courts
But have been successful challenges on basis of public policy:
Dallah Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46: the UK Supreme Court refused to enforce an arbitral award on the basis that the arbitration agreement was ‘not valid’ for the purposes of section 103(2)(b) of the Arbitration Act 1996.