The public policy exception and international arbitration
The recent arbitration laws passed in Bahrain, Saudi Arabia and Qatar, and the announcement in September 2015 that Oman intends to establish its own centre for commercial arbitration in the Sultanate at the beginning of 2016, clearly indicate a recognition within the regional body politic of the benefits of arbitration as a private, expedited dispute resolution process that benefits both local businesses/entities and international investors.
Whilst the exponential growth in arbitral cases in the GCC has seen the establishment of numerous regional arbitration centres, of which the Omani Commercial Arbitration Centre will shortly become the latest, the issue of enforcement of arbitral awards remains a global concern of which users of such centres should be aware before commencing or engaging in proceedings.
The report on the Public Policy Exception in the New York Convention (the “Report”) issued by the International Bar Association (the “IBA”) in October 2015 has further highlighted this issue (although out of the 40 jurisdictions surveyed the Report only considered the U.A.E. from the GCC region).
The “public policy exception” is one of the few exceptions open to domestic courts for refusing the recognition or enforcement of a foreign arbitral award under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”).
Article V(2)(b) of the New York Convention states that “recognition and enforcement of an arbitral award may also be refused if the competent authority in the country finds that… the award would be contrary to the public policy of that country…”.
The Report points out that “public policy” was intentionally never defined by the Convention and therefore the definition of what might constitute a public policy exception varies greatly from country to country (as it is left to each jurisdiction’s enforcement courts to apply their own definition).
The Report’s stated aim is to try to find a closer global definition of “public policy” so that an international consensus of what properly constitutes a public policy exception can be arrived at.
The Report notes that whilst there is no clear international uniformity as to what would constitute a “public policy exception”, similarities between certain categories of country do exist.
The civil law countries surveyed for the Report had a general requirement that any breach of public policy justifying the refusal to enforce an arbitral award had to breach one of a (wide) criteria of “fundamental values” including social, moral, political or economic values (ie Argentina, Austria, Finland, Italy, Poland etc.).
The common law countries surveyed tended to refer to more specific “fundamental values” such as “principles of justice and fairness” (Canada) or “norms of justice and fairness” (Australia).
Finally, in a minority of jurisdictions, the concept of public policy was given a much broader context, sometimes linked to the country’s written constitution and more often to “the national interest…” (see for example, Kenya, Indonesia, Nigeria and India).
The place of the GCC countries in this debate is interesting, as the traditional considerations of national interest must also be viewed in the context of Shar’iah principles.
It is perhaps a shame that the Report did not provide analysis of the enforcement regimes of such an important region where the issues considered are undoubtedly prescient.
Despite the steps taken in the last decade by all GCC governments to embrace and codify in law the principles of international arbitration, the perception that the enforcement of arbitral awards in the GCC is problematic, (a view dating back to even before the Bechtel case in Dubai) to some extent remains.
This perception is not assisted by more recent examples of domestic courts widely defining the scope of their own review/ their definition of “public policy exception”, which has led to arbitral awards being struck down for relatively minor procedural failure (see, for example, last year’s decision by the Qatari Court of Cassation in Petition n. 211 of 2014) or even completely reversed (see Jadawel International v Emaar Property in Saudi Arabia in 2012).
As such it remains uncertain how local courts treat arbitral awards going forward.
In that context the “public policy” exception in the enforcement of awards in the GCC remains a live issue that all parties participating in an arbitral proceeding must be aware of, as the global trend towards conformity of consideration on this issue still remains some way off.
This article was written by Gareth Mills. For more information, please contact Gareth on +973 17 133208 or email@example.com.