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Asian Dispute Review
Bibliographic reference
Judith Gill and David Baker,
'The Public Policy Exception
Under Article V.2(b) of the
New York Convention:
Lessons From Around the
World', Asian Dispute
Review, (© Hong Kong
International Arbitration
Centre (HKIAC); Hong Kong
International Arbitration
Centre (HKIAC) 2016, Volume
18 Issue 2) pp. 74 - 81
P 74 process, or as an excuse for national courts unjustly to protect their State's national interests.
P 75 It is therefore necessary
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
The Public Policy Exception Under Article V.2(b) of the New
York Convention: Lessons From Around the World
Judith Gill; David Baker
This article discusses the scope of review by national courts worldwide in dealing with public
policy in the context of art V.2(b) of the New York Convention and considers what guidance may
be gleaned from their decisions and from (inter alia) data derived from reports by the
International Law Association (2000) and the International Bar Association (2015). The article is
an edited version of a presentation given by one of the authors at the UNCITRAL Asia-Pacific
Judicial Summit as part of Hong Kong Arbitration Week 2015. (1)
Introduction
Art V.2(b) of the 1958 New York Convention on the Recognition and Enforcement of Arbitral
Awards (the New York Convention) provides that:
“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:
…
(b) The recognition and enforcement of the award would be contrary to the public policy of
that country.”
The public policy exception under art V.2(b) is one of the few grounds for the refusal of
recognition or enforcement of an arbitral award under the New York Convention. The wording is
open-ended and unqualified, so the approaches taken by national courts in interpreting and
addressing ‘public policy’ when deciding whether to recognise and enforce awards are evolving
features in the landscape of international arbitration. This ground for challenge therefore has
the potential to be used in different ways: as a valuable tool for protecting the arbitral
to consider what is meant by ‘public policy’, how egregious a
contravention needs to be to engage art V.2(b) and the scope of the review undertaken by
national courts.
Further, the authors will analyse particular examples of public policy violation that have arisen
in the context of the recognition and enforcement of awards under the New York Convention, by
reference to (inter alia) the results of and data derived from the ongoing review of the
International Bar Association Subcommittee on Recognition and Enforcement of Arbitral
Awards (the ‘IBA Report’) (2) and an earlier review by the International Law Association (the ‘ILA
Report’). (3)
What is meant by ‘public policy’?
“[P]ublic policy … is a very unruly horse, and when once you get astride it you never know where
it will carry you. It may lead you from the sound law. It is never argued at all but when other
points fail.” (4)
The ‘unruly horse’ cliché has been trotted out many times since 1824, (5) but the ‘public policy’
concept itself is still elusive. Judicial warnings such as those contained in the judgments in
Richardson v Mellish tend to emphasise that the courts' main concern is deciding the case at
hand rather than laying down principles of general application. Similarly, the New York
Convention's drafters considered that what constituted public policy was “a matter within the
discretionary power of each country” and that the concept “should not be given a broad scope
of application” within the New York Convention itself. (6)
In October 2015, the IBA Report, which examined the public policy exception under art V.2(b)
and its application in over 40 countries, was issued. The report looked at how public policy has
been defined and sought to draw up “a catalogue of its concrete manifestations, based upon
the decisions issued by enforcing courts”. Rather than seeking to replicate the IBA Sub-
committee's excellent work, this article seeks to draw on the IBA Report to identify some of the
broad themes and approaches that can be discerned from the reported court decisions on this
subject, with further illustration where appropriate. (7)
Perhaps unsurprisingly, in the vast majority of jurisdictions covered by the IBA Report, a
violation of public policy must involve an assault on ‘fundamental’ or ‘basic’ principles.
However, the results exhibit a divergence between common law and civil law jurisdictions
when it comes to the manner in which this is expressed. Civil law definitions tend to refer to
general principles or values, for example “the very fundamentals of public and economic life”
(8) and “the basic principles or basic ideas of the legal system of our country” (authors'
emphases). (9) Conversely, common law jurisdictions tend to refer to specific, albeit broad,
principles or values, for example “fundamental norms of justice and fairness” (10) and “the most
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 basic notions of morality and justice”(authors' emphases). (11)
“The ‘unruly horse’ cliché has been trotted out many times since 1824, but the ‘public policy’
concept itself is still elusive. Judicial warnings … tend to emphasise that the courts' main
concern is deciding the case at hand rather than laying down principles of general
application.”
P 75
P 76
A third, less common, approach combines civil law and common law principles, resulting in
public policy having broader content. For example, in India the Supreme Court has held that
enforcement of a foreign arbitral award would be refused if it “would be contrary to (i)
fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality” (authors
emphases). (12)
These attempts at general definitions are perhaps interesting rather than determinative. They
do, however, create the overall impression that the values concerned have to be ‘fundamental’
the particular State. (13) This leads on to the question of just how serious a violation of such
fundamental values has to be in order to support a challenge.
“… [Whilst] a violation of public policy must involve an assault on ‘fundamental’ or ‘basic’
principles …, the [IBA] results exhibit a divergence between common law and civil law
jurisdictions when it comes to the manner in which this is expressed. Civil law definitions tend
to refer to general principles or values … Conversely, common law jurisdictions tend to refer to
specific, albeit broad, principles or values …”

The court's discretion: how serious must a contravention of public policy be?
The wording of art V.2(b) is permissive rather than mandatory. Refusal of recognition and
enforcement is not mandatory when faced with a trivial violation of public policy; rather, it
“may” be refused. This discretion does appear to be exercised in practice by national courts:
the IBA Report concluded that in most of the countries it covered, the violation would have to
be of a particular nature or level of severity to justify a refusal to recognise or enforce. (14)
Terms such as ‘manifestly contrary’, ‘flagrant’ and ‘concrete’ have all been used as thresholds
to determine whether a violation of public policy warrants intervention under art V.2(b). (15)
These different epithets serve a laudable common purpose and have a beneficial common
effect: narrowing the scope of court intervention and limiting the extent to which courts will
review the merits of a case.

Scope of the review of the award

A key question grappled with in a number of jurisdictions concerns the appropriate scope of
the court's investigation into an award and whether its review processes should extend beyond
the ‘result’ or ‘operative part’ of the award to consider the underlying reasoning adopted by
arbitral tribunals.
The IBA Report concluded that the predominant trend is not to look beyond the decision itself.
(16) For example, in Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd, (17) the English
Court of Appeal was reluctant to interfere with the tribunal's determination that allegations of
bribery had not been substantiated. However, this will by no means always be the case and
looking beyond the decision itself may be inevitable if the public policy argument was itself
raised before, and addressed by, the tribunal.
P 76
P 77
An illustrative example is BCB Holdings Ltd v AG of Belize, (18) heard before the Caribbean
Court of Justice (CCJ), which was asked to enforce an award giving effect to a contract the
tribunal had determined was legal under the laws of the jurisdiction in which it was performed.
Enforcement was resisted on the basis that the alleged illegality made the resulting award
contrary to public policy.
Despite endorsing a restrictive view of international public policy, the CCJ revisited the
tribunal's reasoning and reached a contrary view, concluding that the contract was illegal and
that enforcement would be contrary to public policy. It rejected the proposition that the
tribunal's finding of legality precluded the Court from reconsidering the issue, citing Colman J
in Westacre at first instance (19) to the effect that such an estoppel had to yield to the public
policy against giving effect to transactions obviously offensive to the court.
“…[T]he IBA Report concluded that in most of the countries it covered, the violation would have
to be of a particular nature or level of severity to justify a refusal to recognise or enforce.”

Rarity of refusal of recognition and enforcement on public policy grounds

Nearly 200 years on from Burrough J's judgment in Richardson v Mellish, (20) there is still
perhaps a sense today that public policy is “never argued at all but when other points fail”.
One of the most significant and telling findings in the IBA Report is the conclusion that
recognition and enforcement of a foreign award are rarely refused under art V.2(b). (21)
P 77
P 78
When examining the success or failure of public policy arguments, a distinction emerges

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 between cases involving allegations of procedural violations and those concerning allegations
of substantive violations of public policy. Both the ILA Report and the IBA Report recognised
that public policy violations can fall into these two categories and this distinction is used for
convenience of reference.
Procedural violations of public policy
The IBA Report shows that procedural violations of public policy seem more likely than
substantive violations to result in a refusal of recognition and enforcement.
Some procedural violations, such as a violation of equal opportunity to present one's case or
an award obtained by fraud or based on falsified documents, are “almost universally
accepted” (22) as engaging public policy.
In the majority of jurisdictions, certain other procedural violations are regularly deemed to
justify intervention under art V.2(b). The two examples given by the IBA are cases involving
alleged violations of the principle of res judicata (23) and allegations regarding a lack of
impartiality or independence. (24)
Finally, some procedural violations are only accepted by a minority of jurisdictions as
constituting a sufficiently egregious breach of public policy. One example is the doctrine of lis
pendens and the practice of denying recognition and enforcement to foreign awards where a
pending case before the domestic courts in the country in which enforcement is sought could
result in an incompatible decision. (25)
There is a clear overlap between the application by national courts of art V.2(b) to ‘procedural’
violations of public policy and other grounds under arts V.1(b) (26) and (d) (27) of the New York
Convention for refusing to recognise and enforce an award. (28) Such overlap may provide
some reassurance for parties seeking to enforce in jurisdictions where there may be some
debate as to whether procedural violations are covered by the relevant national legislation.
(29)
Substantive violations of public policy
It is far more difficult to classify a distinct set of substantive violations that are applicable
across jurisdictional boundaries. One notable caveat to this is the transnational condemnation
of awards that give effect to certain illegal activities, otherwise described as “universally
condemned activities such as terrorism, drug trafficking, prostitution, paedophilia …,
corruption or fraud in international commerce”. (30)
“The IBA Report concluded that the predominant trend [as to the scope of review] is not to look
beyond the decision itself. … However, this will by no means always be the case and looking
beyond the decision itself may be inevitable if the public policy argument was itself raised
before, and addressed by, the tribunal.”
Such activities aside, the position is more opaque. The IBA Report identified the following
categories of substantive public policy:
(1) antitrust and competition law;
(2) pacta sunt servanda;
(3) equality of creditors in insolvency situations;
(4) State immunity;
(5) prohibition of punitive damages; and
(6) prohibition of excessive interest.
The earlier ILA Report contained an overlapping but somewhat different set of categorisations.
Given, however, the recognised tendency of public policy to evolve, neither set of
categorisations should be considered exhaustive or definitive. For example, in some
jurisdictions, arbitrability is considered as belonging to public policy. (31)
P 78
P 79
A further category identified by the ILA was ‘national interests/foreign relations’, which
includes war, diplomatic concerns, embargoes and the like. In COSID Inc v Steel Authority of
India Ltd, (32) the Delhi High Court refused to recognise an award on the basis that it would
violate an Indian export ban, which it held would be against public policy. One commentator
has, however, suggested that a more representative approach may be seen in the US case of
MGM Productions Group Inc v Russian Aeroflot Airlines, (33) in which a US appellate court
refused to deny recognition to an award that allegedly enforced a contract made in violation of
the US Iranian Transactions Regulations. (34)
The IBA's categories of punitive damages and excessive interest were dealt with by the ILA
under ‘unlawful relief’. Courts in Japan have refused to enforce foreign court judgments which
awarded punitive damages on public policy grounds. (35) It has been suggested that the same
reasoning would apply in respect of arbitral awards. (36) On the other hand, in Dandong
Shuguang Axel Corp Ltd v Brilliance Machinery Co, (37) a US court held that the enforcement of
an award that included punitive damages would not offend US public policy. No doubt the
different approaches can in part be explained by the relevant familiarity with punitive

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 damages in the domestic judicial context.
The authors would add the following further comments on the substantive categories:
(1) in countries applying Moslem Shari'a Law, the principles of that law can naturally impact
upon the State's view of public policy; and
(2) constitutional and political issues may influence the approach of local courts towards the
finality of a tribunal's decision on enforcing the State's own law. In the BCB case, (38) the
issue was the validity of an award giving effect to an agreement signed by the Belizean
Prime Minister, who had warranted his authority to do so, but in relation to which the
constitutional requirement of parliamentary approval had not been sought.
In general, the pattern of court intervention in Asia under art V.2(b) seems to have followed
global trends, a good example being the generally restrictive approach to public policy
adopted by the Chinese Supreme People's Court since 2000. (39) The local trends noted in a
2008 review are familiar ones to arbitration practitioners worldwide, namely: (40)
(1) great strides to promote arbitration, especially on the statutory front;
(2) in some countries, a struggle by the judiciary to come to terms with their recognition and
enforcement role, due to:
(i) unfamiliarity with new statutes and conflicts with old law; and
(ii) nervousness about arbitration and “visceral judicial parochialism.” (41)

“The striking common feature linking surveys of refusals to recognise or enforce under the
public policy ground is how scarce such refusals are.”
P 79
P 80
Concluding thoughts
The striking common feature linking surveys of refusals to recognise or enforce under the public
policy ground is how scarce such refusals are. A global review in 1999 (42) concluded that:
(1) the number of cases was surprisingly small, given the large number of Contracting States
with diverse legal and cultural perspectives;
(2) most refusals are the result of mistakes by parties, tribunals or courts, being exceptions
to the rule of enforcement; and
(3) these “unfortunate few” simply constituted a list of lessons to be learned, rather than an
argument for modifying the otherwise successful Convention.
Shortly afterwards, the ILA Report concluded that despite concerns, art V.2(b) had not in fact
created any serious mischief and had rarely been successfully invoked. These trends continue
to be clearly reflected in the IBA Report, the results of which reflect a continuing move towards
a narrow interpretation of international public policy.
The ILA suggested that one “way forward towards the achievement of greater predictability
would be for the international arbitration community to reach a broad consensus as to which
‘exceptional circumstances’ would justify a national court denying enforcement of a foreign
arbitral award, and for the courts to have regard to any such consensus”.43
This is, of course, under way to some extent. The technological revolution which prompted
reassessment of the meaning of the words “in writing” in art II.1 of the New York Convention has
meant that there is unprecedented access to, and awareness of, reports of cases and awards.
The modern problem tends to be too much information, and so the ILA's “way forward” is
greatly assisted by surveys, reviews and commentaries collecting and analysing the required
data.
The IBA Report is accordingly a welcome step on the path towards such a consensus. It is part
of an ongoing commentary and a sharing of information which should ensure that, if the unruly
horse is not wholly tamed, at least his antics will be thoroughly documented.
P 80

References
1) The views expressed in this article are those of the authors only and are not those of Allen
& Overy or its clients. The authors acknowledge their debt to and seek to draw attention to
the valuable ongoing work of the International Bar Association Subcommittee on
Recognition and Enforcement of Arbitral Awards (see note 2 below).
2) IBA Subcommittee on Recognition and Enforcement of Arbitral Awards, Report on the Public
Policy Exception in the New York Convention (October 2015), available at
http://www.ibanet.org/LPD/Dispute_Resolution_Section/Arbitration/Recogntn_Enfrcemnt
_Arbitl_Awrd/publ.... Editorial note: The IBA report is summarised at p 108 below.

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© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 3) ILA, Interim Report on Public Policy as a Bar to Enforcement of International Arbitral Awards
(2000), available at http:ila-hq.org.
4) Richardson v Mellish (1824) 2 Bing 229 at 252, per Burrough J.
5) See Jan Paulsson, Metaphors, Maxims and Other Mischief (Freshfields Arbitration Lecture
2013) (2014) 30 Arb Int'l 615-638 at 631 et seq (part VI, ‘The unruly horse is tired’).
6) United Nations Conference on International Commercial Arbitration, 17th Meeting, 12
September 1958, E/CONF.26/SR.17.
7) Like the IBA Report, this article is not concerned with domestic public policy. On this, see
Redfern & Hunter on International Arbitration (6th Edn, 2015), 10.84-10.85 at pp 598-599;
11.106-11.113 at pp 641-644; IBA Report, p 10; ILA Report, pp 17-19.
8) Germany: see BGH NJW 1986, 3027 at 3028.
9) Japan: see Northcon I, Oregon Partnership v Mansei Kôgyô Co Ltd., 51 Minshu 2573 (Supreme
Court, 11 July 1997).
10) Australia: see TCL Air Conditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd (2014) 311
ALR 387 at [111].
11) Singapore: see Aloe Vera of America Inc v Asianic Food (S) Pte Ltd [2006] 3 SLR(R) 174 at [40].
12) Shri Lal Mahal Ltd v Progetto Grano SpA [2014] 2 SCC 433.
13) See also Redfern & Hunter, op cit (note 7 above), 10.83 at p 598.
14) IBA Report, p 11.
15) China, Turkey, Poland and Nigeria respectively. See IBA Report, p 11.
16) IBA Report, p 12.
17) [1999] 2 Lloyd's Rep 65 (Court of Appeal) (Westacre).
18) [2013] CCJ 5 (AJ), 26 July 2013 (BCB).
19) [1998] 2 Lloyd's Rep 111 at 118.
20) Note 4 above.
21) See also AJ van den Berg, ‘Refusals of Enforcement under the New York Convention of 1958:
the Unfortunate Few’, in Arbitration in the Next Decade (ICC Bulletin – 1999 Special
Supplement) 75-94 at p 86.
22) IBA Report, p 14.
23) Hemofarm DD et al v Jinan Yonging Pharmaceutical Co Ltd, YB Comm Arb XXXIV (2009) at 478
et seq, Intermediate People's Court of Shangdong Province, Jinan, 27 June 2008.
24) See, however, Gao Haiyan v Keeneye Holdings Ltd [2012] 1 HKC 335, in which the Hong Kong
Court of Appeal enforced a Chinese arbitral award notwithstanding issues raised
concerning the tribunal's attempts to mediate in the presence of only one party.
25) Indonesia: Bankers Trust Company and Bankers Trust International Plc v PT Mayora Indah
Tbk, and Bankers Trust Company and Bankers Trust International Plc v PT Jakarta
International Hotels & Development (2000) CJDC Decisions Nos 01 and
02/Pdt/Arb.Int/1999/PN.Jkt.Pst, conjoined with No 02/Pdt.P/2000/PN.Jkt.Pst, 3 February
2000.
26) Failure to give proper notice of appointment of an arbitrator or of instigation of
proceedings or inability to present one's case.
27) Irregular composition of the arbitral tribunal.
28) In the light of such an overlap, the grounds for annulment under art 52(1) of the ICSID
Convention do not include public policy.
29) See IBA Report, pp 13-14.
30) Westacre (note 17 above), per Waller LJ. See also the ILA Report (note 3 above) at p 22.
31) See also van den Berg, op cit (note 21 above) at p 86.
32) YB Comm Arb XI (1986) 502, High Court of Delhi, India, 12 July 1985.
33) 573 F Supp 2d at 775, aff'd, 91 F Appx 716 (2d Cir 2004).
34) Gary B Born, International Commercial Arbitration (2014) Vol III, p 3675.
35) Judgment of 11 July 1997, 51 Minshu (6) 2573.
36) Anton G Maurer, The Public Policy Exception under the New York Convention (2013, JurisNet
LLC) at pp 132-133 and 138.
37) 2001 WL 637446 (ND Cal), 1 June 2001, YB Comm Arb XXVII (2002) 617.
38) Note 18 above.
39) Redfern & Hunter, op cit (note 7 above) at p 645.
40) Michael Hwang & Shaun Lee, Survey of South East Asian Nations on the Application of the
New York Convention (2008) 25(6) J Int'l Arb 892.
41) Ibid at 892.
42) Van den Berg, op cit (note 21 above) at p 94.

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