Originally from the American Review of International Arbitration (ARIA)

Much has been written about Article V(2)(b) of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards – the discretion to refuse enforcement of a foreign arbitral award on public policy grounds. The endless fascination with this ground of defense centers on its amorphous nature and the fear of its potential to negate arbitral awards. To date, English court decisions on the scope of public policy have focused on public policy in the national law context, and in particular whether allegations of illegality under national law justify review of the underlying dispute by the enforcing court and whether they are sufficient to meet the high threshold of “public policy” as intended by the New York Convention.

Until very recently, the only international law obligations of the United Kingdom to have played a role in enforcement decisions are those obligations under either the New York Convention or the ICSID Convention to enforce arbitral awards.  However, the last two years have seen increasing conflict between the UK’s obligations under these enforcement treaties and other international law obligations of the UK, in particular under EU law. Three relevant recent examples may be given.

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Against this background of increasing friction between international arbitration enforcement mechanisms and other international legal regimes, it is relevant to explore what scope there is under the New York Convention public policy exception to refuse to enforce an award where enforcement would conflict with other international law obligations of an enforcing state.

This article looks at this issue in three stages.  First, through the prism of the Micula case it considers how the English court has grappled with the potential conflict between the EU law on State aid and the UK’s obligation to enforce an ICSID award (a case where the public policy defense was not applicable).  Second, it looks at the approach of the English courts to the public policy defense where allegations of illegality as a matter of domestic law have been made.  Third, and finally, it considers how the English Court’s approach to the public policy defense where issues of illegality as a matter of domestic law could apply where the alleged “illegality” is a breach of international law obligations.