In recent decades, arbitration of international commercial disputes has

increased and is likely to continue to grow. Many businesses prefer

arbitration to litigation in court because of its relative promptness,

privacy and economy. However, in some instances, arbitration requires

the support of national courts to be effective when arbitral awards are not

satisfied through voluntary compliance of the parties. Among many

claims, the public policy defense under the New York Convention is

most frequently invoked and has also become one of the most

controversial grounds for refusing to enforce arbitral awards. This article

examines examples and case law that deals with objections to

enforcement of foreign arbitral awards based on substantive public

policy concerns. Substantive public policy challenges are directed at the

merits of arbitral awards. Substantive grounds offered for objection have

included payments of excessive interest or costs, violations of Islamic

legal principles, violations of competition laws, violations of bankruptcy

rules, violations of consumer protection laws, foreign exchange controls,

illegal contracts, foreign policy, and the principle of comity.

 

 

 

Over the last few decades, disputes arising from international

commercial transactions have increasingly been adjudicated by arbitration.

Contracts for sale now routinely contain arbitration clauses to protect

sellers from expensive, drawn-out litigation. Arbitration proceedings

differ from the traditional judicial model and are more flexible

procedurally, allowing the parties to choose the arbitrators, the forum or

location, and by extension, the governing procedural and substantive

law.1 However, opting to seek resolution through arbitration does not

divorce a dispute from the national court system entirely. If the losing
party refuses to pay, the winning party may seek to enforce the arbitral