THE COMMON LAW APPROACH TO PUBLIC POLICY IN INTERNATIONAL ARBITRATION - Stockholm International Arbitration Review (SIAR) 2008 No. 2
Jeffrey M. Hertzfeld
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Originally from: Stockholm International Arbitration Review
THE COMMON LAW APPROACH TO PUBLIC POLICY IN INTERNATIONAL ARBITRATION
Jeffrey M. Hertzfeld
My short presentation this morning will highlight some of the recent cases decided in two of the leading common law jurisdictions – England and the United States, in which public policy issues have arisen in the context of arbitration of business disputes. As you will see, both English and US courts take a very restrictive view of public policy objections to arbitral awards. This is particularly true in the context of international arbitrations, where upsetting an award on public policy grounds is, in practice, a rare phenomenon. Before turning to the case law, however, let me briefly summarize some of the relevant English and US legislation bearing on the subject. Section 68(2)(g) of the 1996 English Arbitration Act provides that an arbitral award may be challenged if it is obtained by fraud or if the award, or the way in which it was procured, is contrary to public policy and this causes a substantial injustice to the applicant.1 As regards New York Convention awards in particular, Section 103(3) provides for refusal of recognition or enforcement where “the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to recognize or enforce it.” However, since neither the Arbitration Act nor the Convention defines public policy, it remains subject to judicial interpretation.
In the United States, the Federal Arbitration Act, set out in Title 9 of the US Code, applies to all contracts in so-called interstate commerce (which includes international contracts as well as those involving more than one state of the United States). Section 10 lists various grounds on which a court may reject an arbitral award. A number of these grounds “sound” in public policy, without however using that term.