Interpretation of Article V (2)(b) - Chapter 4 - The Public Policy Exception under the New York Convention: History, Interpretation and Application - Second Edition
Dr. Anton G. Maurer, LL.M., FCIArb has been actively involved in international arbitration for more than 30 years, concentrating on commercial, post M&A, and corporate disputes, and the enforcement of foreign arbitral awards. He is also actively involved in international litigation and has been professionally involved in disputes or transactions in more than 65 countries and in over 90 jurisdictions. He graduated with a law degree as well as a PhD in public international law from the University of Tübingen, Germany, a Master of Laws in U.S. and Global Business Law from Suffolk University, Boston, MA, and a CIArb Diploma in International Arbitration.
Anton Maurer is an independent arbitrator, and the managing director of Anton Maurer International Legal Services GmbH which is seated in St. Moritz, Switzerland, and Anton Maurer International Legal Services Rechtsanwaltsgesellschaft mbH which is seated in Stuttgart, Germany. He frequently is appointed as an arbitrator.
The question is how Article V(2)(b) of the New York Convention is to be interpreted.
As explained above, each party to the New York Convention has to interpret its obligations under the Convention in good faith in accordance with the natural and ordinary meaning to be given to the terms of the treaty in the context and in light of its object and purpose. Thereby, the preamble and annexes and any instrument drawn up in connection with the conclusion of the Convention must be included.
Any analysis has to start by recognizing that Art. III of the New York Convention imposes on each party to the Convention the duty to recognize and enforce a foreign award if it is not entitled to refuse such recognition or enforcement under Art. V. Obviously Art. V is an exception to the general duty to recognize and enforce a foreign award. Under general interpretation rules applicable in civil law countries exceptions have to be interpreted narrowly. But this rule does not generally demand a narrow interpretation of the terms stipulated in Art. V; this term has to be interpreted in light of its object and purpose and the intention of the parties. By qualifying the term public policy with “of that country“ it has to be accepted that the Conference did not try to find a transnational meaning of public policy.
I. Limitation of Grounds
A. Literal Interpretation
The wording of the New York Convention is clear. Any Convention State shall recognize and enforce a foreign award; the Convention permits the parties to the New York Convention—but does not demand so—to refuse recognition and enforcement of an award, but only if one out of seven grounds is given. This is explicitly stipulated in Art. V; paragraph (1) says that enforcement may be refused “only” and paragraph (2) stipulates that enforcement “may also” be refused. The New York Convention does not allow any party to add additional grounds to justify the refusal of recognition and enforcement.
B. Confirmed by Drafting History
Pakistan had suggested omitting the word “only” but did not succeed. Therefore, it is very surprising to rather often read discussions on whether parties to the Convention could refuse enforcement also on grounds not listed in Art. V.
This limitation to seven grounds on which the recognition and enforcement may be refused is one of the greatest strengths of the Convention.
II. Contrary to the Public Policy “of That Country”
A. Literal Interpretation
The language of this phrase is clear. Applying the abovementioned rule of interpretation, it is clear that only the public policy of that country where recognition and enforcement is sought is to be considered.
B. Not Governing Law Nor Lex Arbitri
The court deciding recognition and enforcement of a foreign arbitral award is not permitted to resort additionally to the public policy applicable to the contract in dispute or the law governing the arbitration agreement if such law is different from the law applicable to the contract in dispute.
The court deciding upon recognition and enforcement of a foreign arbitral award is also not permitted to resort to the public policy of the law governing the arbitration procedure (lex arbitri).