Your World First The Public Policy Exception under Art. V (2) (b) of the New York Convention Dr....

Your World First

The Public Policy Exception under Art. V (2) (b) of the New York Convention

Dr. Anton G. Maurer, LL.M.

CMS Hasche Sigle

Schoettlestr. 8

D 70597 Stuttgart

[email protected]

Tel: +49 172 7333696

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Art. V (2) (b)

" 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:

(a) the subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b) the recogniton or enforcement of the award would be contrary to the public policy of that country"

The Public Policy Exception |11. April 2023 Dr. Anton G. Maurer

The Public Policy Exception |22. Juni 2014 Dr. Anton G. Maurer

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Interpretation of Art. V (2) (b)

The public policy exception was discussed controversely and extensively during the drafting of the New York Convention, especially between the civil law country and the common law country representatives.

How is the public policy exception to be interpreted?

Is it "international public policy"?


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The Public Policy Exception

Final result:

It must be interpreted narrowly!

This was unanimously approved by the Working Party No. 3 which drafted the final wording of Art. V.

It is not "international public policy", but a narrow interpretation of domestic public policy.However, some countries apply an even narrower international public policy standard!


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Narrow Interpretation

Report by Mr. de Sydow for Working Party No. 3:

As regards Art. V (2) (b) "the Working Party felt that the provision allowing refusal of enforcement on grounds of public policy should not be given a broad scope of application.

It therefore agreed to recommend the deletion of references to the subject matter of the award and to fundamental principles of law."(Summary Record of the 17th Meeting, U.N. DOC E/CONF. 26/SR. 17 at 3)


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International Standard: Parsons & Whittemore Overseas Inc. v. Societe

Generale de L'Industrie du Papier

U.S. Court of Appeals for the Second Circuit:

"The general pro-enforcement bias in forming the Convention … points toward a narrow reading of the public policy defense. …We conclude, therefore, that the Convention's public policy defense should be construed narrowly. Enforcement of foreign awards may be denied on this basis only where enforcement would violate the forum's State's most basic notion of morality and justice."

(508 F.2d 969 et seqq. (December 23, 1974)


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Germany

Germany: "Ordre Public International"

Not every violation of mandatory law (ius cogens) will violate German public policy.

"Only severe defects in the arbitral proceeding or the award could violate German public policy. The defects must violate fundamental principles of state and economic life."

Recognition of a foreign award can only be refused if the proceeding or the award suffered a grave defect which is intolerably at odds with the fundamental principles of state and economic life.

Possible erroneous awards must be accepted.


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France

France: International Public Policy

An arbitral award shall be recognized if it is "not manifestly contrary to international public policy."

The violation must be blatant, actual, and concrete.

When all of the parties, the members of the arbitral tribunal, and even the members of the ICC Court of Arbitration have failed to see the alleged violation, French courts did hold that the alleged violation was not blatant, real, and concrete.


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China

China: Chinese Public Policy is violated when an award may be deemed to violate the social

and public interesto When the award violates the basic principles reflected/regulated in the

Constitution or the Four Fundamental Principles of China;

o Will damage the sovereignty or State security of China;

o Is in violation of the fundamental rules of Chinese law;

o Is against China's obligations under international treaties;

o Is against the principles of fairness and justice in international law. The Four Fundamental Principles are:

Adhere to (a) the socialist road, (b) the people's democratic dictatorship, (c) the leadership of the Communist Party, and (d) to Marxism-Leninism and Mao's thought.


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Russia

Russia: Public Policy of the Russian Federation

Awards may be found to be against the public policy of the Russian Federation when, as a result of the enforcement of the award, acts are affected that are directly prohibited by law or harm the sovereignty or the

security of the State; affect the interest of a large social group; are incompatible with the principles of constructing the

economic, political and legal systems of the State; harm the constitutional rights and freedom of citizens; or are against the basic principles of the civil State, such as the

equalitiy of its members, the inviolability of property and freedom of contract.

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Your World First The Public Policy Exception under Art. V (2) (b) of the New York Convention Dr....

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