The New York (“The Convention”) is kind of a backbone of international arbitration area that applies to the recognition and enforcement of foreign arbitral awards. According to Article 3 of the Convention, each Contracting State shall recognise arbitral awards as binding and enforce them in accordance with the procedural rules of the territory where the award is given, under the conditions stated in the following articles.1 However, the Contracting States have an obligation to recognise and enforce international arbitral awards subject only to the limitations which are expressly regulated in the Convention.2 The New York Convention’s fundamental objective is to simplify the recognition and of awards imposing unduly complicated or gruelling procedural obstacles at the recognition and enforcement stage.3 In other words, the Convention’s principal aim is not to discriminate against the foreign and nondomestic awards and it obliges Contracting States to provide such awards to recognize and enforce in their jurisdiction in the same way as domestic awards.

It should be emphasized that the Convention does not give courts the authority to review the awards invoked. Meaning, in the states that Convention applies, courts cannot review the merits reached by the arbitral body, which is known as prohibition of the revision or alias prohibition of “revision au fond”. Prohibition of revision au fond means that “Under no circumstances may a decision given in a Member State be reviewed as to its substance in another Member State during the enforcement procedure.”4 Since the subject of the writing hereby is the Article V of the Convention, grounds shall emphasized that set forth under this Article. These grounds include incapacity of the parties, invalidity of the arbitration agreement, due process, scope of the arbitration agreement, jurisdiction of the arbitral tribunal, setting aside or suspension of an award in the country in which, or under the law of which, that award was made and also the grounds that placed under the Article V are the only grounds that an award could be held non-enforceable.

Furthermore, based on the grounds set forth under the Article V of the Convention, States may also refuse to recognise and to enforce an international arbitral award if the competent authority in the State where recognition and enforcement is sought finds that the recognition or enforcement of the award would be contrary to the public policy of that country.

As it is mentioned above, one of the grounds to resist recognition and enforcement of foreign arbitral award is “the public policy exception” regulated under the Article V (2)(b) which is also the main subject of the writing hereby. Pursuant to Article V (2)(b) of the New York Convention, recognition and enforcement of an arbitral award may be refused if; “the recognition or enforcement of the award would be contrary to the public policy of that country where recognition and enforcement is sought.” Additionally, under Article V (2)(b), the subject of inquiry is the recognition and enforcement of the award and not the award itself. In addition to that, public policy is the only ground under which the court can refuse recognition and enforcement on its own motion (except the non-arbitrability as determined in Article V(2)(a) of the New York Convention).5 Besides, the term “public policy” appears in several international instruments, but has not been defined in any of them. Also, the New York Convention does not provide any universal applicable definition or common interpretation of “public policy” and therefore it allows the chance to courts to apply public policy widely or narrowly which means the interpretation of public policy is in the exclusive domain of the courts of those states.6 Most major arbitral jurisdictions define public policy narrowly and apply it exceptionally when an award contravenes fundamental legal norms. In fact, the New York Convention is consistent in the idea in accordance with the purpose of the Convention that States must define the term “public policy” narrowly. Also according to the research conducted by UNCITRAL reveals that most courts ascribe a narrow interpretation to public policy.7 For instance, in arbitration-friendly countries like France and USA and other developed arbitral jurisdictions, courts have taken up a narrow view on the interpretation of the expression “Public Policy”. This is mainly because developed arbitral jurisdictions have pro-enforcement attitude when it comes to enforcement of arbitral awards, which according to them, is a main element of public policy.8 In international arbitration especially in the enforcement of foreign arbitral awards, the principle of the narrow interpretation of the public policy institution has been adopted predominantly by the courts of the western countries and recently the Turkish Supreme Court. Judicial decisions regarding the enforcement of international arbitral awards rendered in Turkey, is increasingly taken into account the principles arising from being a state of law and narrow interpretation of public policy exception. This shows that the enforcement of foreign arbitral awards in Turkey has made a quite decent improvement.9 For instance, 15th Civil Chamber of Supreme Court ruled that; “The amount imposed in the arbitrator’s decision, which is requested to be enforced, is the amount agreed by the parties in the settlement agreement. The rejection of the request for enforcement was not correct since there was no violation of public policy even if the penalty was agreed to be exorbitant when the judgment was requested for the enforcement thus the provision had to be reversed for these reasons.”10 According to the decision, the exorbitant penalty was not interpreted as a violation of public policy, and a narrow interpretation of public policy was accepted.

Another decision of the Supreme Court Assembly of Civil Chambers, the following statements were included; “according to the agreement, the right to choose arbitral tribunal belongs to the claimant.

It was accepted by the court that this regulation was against the Turkish public policy. Such an arbitration agreement or arbitration clause is not valid, since only one of the parties is granted the right to choose the arbitral tribunal in the arbitration agreement or in the arbitration clause included in a contract, because one of the parties will be given superiority in the judgement”.11 In the decision, it was found against the public policy that only one of the parties was granted the right to choose the arbitration tribunal. Since the violation of right to fair trial will also the violation of the public policy, the decision of the Supreme Court Assembly of Civil Chambers is quite appropriate.To look at the Contracting States’ interpretation of public policy, in decisions taken by U.S. courts, it can be clearly seen that the U.S. courts are adopting a narrow view of public policy. For instance, in a case which U.S. courts adopted a narrow interpretation of public policy is “Parsons & Whittemore v. Société Générale”.12 In the case, it is stated that “The legislative history of the provision offers no certain guidelines to its construction. Its precursors in the Geneva Convention and the 1958 Convention’s ad hoc committee draft extended the public policy exception to, respectively, awards contrary to ‘principles of the law’ and awards violative of ‘fundamental principles of the law.’….We conclude, therefore, that the Convention’s public policy defense should be construed narrowly. Enforcement of foreign arbitral awards may be denied on this basis only where enforcement would violate the forum state’s most basic notions of morality and justice.” The U.S. Court of Appeal also stated an expansive construction of this defense would vitiate the Convention’s basic effort to remove pre-existing obstacles to enforcement.In France, the expression “public policy” in France is influenced by the judgment of Swiss China Time Ltd. v Benetton International,13 which was in turn influenced by the European Court of Justice. Jurisprudence developed by the European Court of Justice has had a huge effect on French Court’s interpretation of the expression “public policy” and enforcement of foreign arbitral award. In this particular case, it is held that “An efficient arbitration proceeding is one in which the scope of refuse and review is restricted and arbitral award is set aside only in exceptional and rare cases. Although the public policy is flexible and relative notion, wide interpretation of public policy could lead to arbitrary application of courts and loss of rights in international arbitration area. Furthermore, despite the softer effect of public policy based on the acquired rights during the enforcement stage, negative consequence of the wide interpretation of the public policy is that it prevents the implementation of the international conventions.14 As a result, the main provision of the public policy has become the elimination of the authorized foreign law. As regards the consequences of the intervention of the public policy, especially the German authors insist that only the concrete rule of law violating the basic principles of the court should be abolished.15 Another negative result of the wide interpretation of public policy is the loss of trust towards the enforcement of the arbitral awards and negative consequences on international trade. In a word, enforcement of foreign arbitral awards is not only a legal practice but also a commercial requirement.16

DİPNOT

  1. Petra Butler, Christoph Katerndahl – A Public Policy Exception Under the New York Convention On The Recognition And Enforcement Of Foreign Arbitral Awards
  2. GARY BORN, International Commercial Arbitration
  3. UNCITRAL SECRETARIAT, Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York 1968), p. 77
  4. Proposal for a COUNCIL REGULATION on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations – Brussels, 15.12.2005 COM(2005) 649 final, Art.32
  5. REINMAR WOLFF in Reinmar Wolff (ed.), New York Convention – Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 – Commentary, Article V, marginal no. 490
  6. Id. art. 55
  7. UNCITRAL SECRETARIAT, Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958), p. 248
  8. Yash Dubey, Analysis of Public Policy and Enforcement of Domestic and Foreign Arbitral Awards in India
  9. Prof. Dr. Mahmut Tevfik BİRSEL, Constitutional and Global Dimensions of Enforcement of International Arbitration in Turkey
  10. Yargıtay 15. Hukuk Dairesi Esas No:2014/2183 Karar No:2014/3226;
  11. Supreme Court Assembly of Civil Chambers, T: 9/6/1999 Esas: 1999/ 19-467, Karar: 1999/489
  12. 508 F.2d 969 (2d Cir. 1974)
  13. European Court Reports 1999 I-03055
  14. Dayınlarlı, Kamu Düzeni, p. 691
  15. Maury, p. 69-70
  16. Holtzmann, Commentary, p.362; “In the development of international trade, it is of great importance that disputes arising from these relations are resolved satisfactorily for parties from different political, legal and economic systems.”