UC Berkeley

Arbitration is a popular dispute resolution method. It is distinct from a typical proceeding in that it is a consensual procedure in which the parties select individuals or institutions to render a judgment in a dispute. Thus, parties enjoy a certain level of autonomy in the arbitral settlement proceedings. arbitration is preferable in international commerce because it enables parties to avoid the risk of different national legal cultures that might prevent them from transacting with one another.

When a dispute arises, in the light of the complex nature of international trade, question may arise as to whether a dispute is an international or national one. But this is a secondary point. The more critical issue is that an arbitral award is enforceable in different jurisdictions.

For a long period, the lack of public interest and lack of a strong judicial enforceability kept international arbitration unpopular and thus negatively impacted international commerce. To promote arbitration and thus international commerce, the international community began ratifying international conventions to improve arbitration perception. In that regard, a watershed moment was the adoption of The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), which took a pro-enforcement stand. Many countries adopted the New York Convention. This in turn created predictability in the enforcement of arbitral awards, which in turn began to engender more and more confidence in international arbitration.

But the New York Convention did provide a framework for national courts to refuse enforcement of arbitral awards based on “irregularities” related to the status of the award, the conduct of the arbitral proceedings, and validity of the arbitration agreement.

Public policy is also one of the irregularities that the New York Convention lists as a manner of denying the enforcement of arbitral awards. It allows national courts not to give effect to an award that contradicts the fundamental principles of the forum state’s legal system. The public policy exception is the focus of this study.

Since the New York Convention entered into force, national courts have formulated wide-ranging interpretations of public policy. The public policy exception presents a safety zone in which the national courts can decide whether an arbitral award and its recognition or enforcement is contrary to the public policy of the forum State where its enforcement is being sought. The New York Convention’s language allows state courts to enjoy wide discretion on the application of public policy. Public policy is subject to moral, cultural, economic and social essentials of each state. However, as social construction of nations has inevitably changed extremely in the last century, the criteria of public policy is subject to the same progressive manner. But the realities of today’s international transaction require a fully functional arbitration system and the finality of an arbitral awards. The more ambiguity there is in the ability to enforce an award based on various states’ public policy, it creates the more uncertainty it pertains to the law.

This study preliminary focuses on the concept of public policy, whether its application has contravened the New York Convention’s pro-enforcement stance, and how the exception has impacted international arbitration and international commerce. This paper also looks into whether there is a standardized application of the public policy globally.