THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.THE IMPACT OF PUBLIC POLICY ON COMMERCIAL ARBITRATION IN VIETNAM.
INTRODUCTION
Research rationale
The thesis on the impact of public policy on commercial arbitration, with a particular emphasis on the recognition and enforcement of foreign arbitral awards in Vietnam, is crucial for a number of compelling reasons.
First, this research is important because it contributes to the development and improvement of the legal framework that governs international commercial arbitration in Vietnam This study fills an important void by shedding light on the complexities and challenges associated with the application of public policy in the jurisdiction, thereby contributing to the refinement of the legal framework and its alignment with international standards Examining the role of public policy in the recognition and enforcement of foreign arbitral awards, this study addresses a crucial aspect of the enforcement regime that has far-reaching implications for domestic and international parties A robust and effective legal mechanism for enforcing arbitral awards is essential as Vietnam continues to position itself as an attractive location for international investments and cross-border transactions
In addition, the evolving nature of commercial arbitration in a global context necessitates this thesis The recognition and enforcement of foreign arbitral awards is a topic of significant global interest and importance, as it has a direct bearing on the enforceability and efficacy of arbitration as the preferred method of dispute resolution in international commercial transactions By examining international understandings and applications of public policy, this study provides valuable insights into the various approaches adopted by various jurisdictions This comparative analysis enriches the academic discourse surrounding public policy and contributes to a broader understanding of the challenges and best practices associated with enforcing foreign arbitral awards internationally.
Vietnam’s ever-changing legal landscape also highlights the importance of this research As the nation continues to undergo legal reforms and align its legal system with international standards, the regime for enforcing foreign arbitral awards requires careful analysis and evaluation This research captures the current state of the enforcement framework in Vietnam and explores its implications for the recognition and enforcement of foreign arbitral awards by analysing recent legal developments and reforms This analysis would be a vital resource for policymakers, practitioners, and scholars involved in formulating and implementing legal reforms in Vietnam, facilitating informed decision-making, and advancing the legal system.
Moreover, the current research is important because of the practical implications it has for businesses and investors engaged in cross-border transactions involving Vietnam The recognition and enforcement of foreign arbitral awards have a direct bearing on the enforceability of contractual obligations, the protection of investments, and the general stability of the business environment By providing insights into Vietnam’s approach to the recognition and enforcement of foreign arbitral awards, this research equips stakeholders with a thorough understanding of the legal landscape and potential obstacles Businesses, practitioners, and investors who wish to navigate the complexities of international arbitration, plus make informed decisions when entering into contracts and resolving disputes should possess this knowledge.
In conclusion, the significance of this thesis – “Impact of Public Policy on Commercial Arbitration in Vietnam” stems from its contributions to the development of the legal framework for the recognition and enforcement of foreign arbitral awards in Vietnam, its insights into international practices and standards, its analysis of recent legal developments, and its practical implications for businesses and investors.
By addressing these vital aspects, this research serves as a foundational resource that enriches academic discourse, informs policy decisions, and facilitates the effective operation of the Vietnamese arbitration regime.
Literature review
Commercial arbitration offers a robust alternative to traditional dispute resolution Its recognition and enforcement are pivotal to foster international trade and investment by providing a reliable mechanism for resolving disputes Public policy, a key consideration in enforcing foreign arbitral awards, safeguards against the enforcement of judgments that contravene core legal principles Understanding public policy in Vietnam's legal context and its alignment with international standards is essential for its effective implementation in ensuring the recognition and enforcement of arbitral awards.
To grasp the concept of public policy in international commercial arbitration, the author conducted a thorough literature review This review included academic commentaries, case laws, and legislative reforms These resources provided valuable insights into how public policy is interpreted and applied in this context, contributing to a comprehensive understanding of its role in foreign arbitral awards.
The concept of public policy in the context of international commercial arbitration has been the subject of extensive debate, garnering a great deal of scholarly and professional interest These discussions have resulted in a wealth of international commentary on various aspects of public policy, including its conceptual framework, definition, and application in arbitration across different jurisdictions
Notably, the works of renowned lawyer and legal researcher Gary Born have provided valuable insights into this topic His article “The New York Convention: A Self-Executing Treaty” explores the significance and implementation of the New York Convention, which is highly relevant to the topic of recognition and enforcement of foreign arbitral awards Additionally, his publications “International Commercial Arbitration: Commentary and Materials,” “International Arbitration: Cases and Materials (3rd edition),” and “International Arbitration: Law and Practice (3rd edition)” offer comprehensive commentary and analysis of various aspects of international arbitration, specifically international commercial arbitration These works provide valued perspectives that align with the research objectives of this thesis, making them important references in the exploration of public policy in the context of foreign arbitral awards in Vietnam.
Moreover, Akosua Serwaah Akoto’s article “Public Policy: An Amorphous Concept in the Enforcement of Arbitral Awards”, published in 2021, has played a crucial role in simplifying and consolidating the understanding of public policy, clarifying the complexities surrounding the concept, and thus providing a cohesive and accessible explanation To further explore the application of public policy across different jurisdictions, the book “Recognition and Enforcement of Foreign Arbitral Awards - The Interpretation and Application of the New York Convention by National Courts” by George A Bermann, in collaboration with over 60 other authors, offers a comprehensive comparative analysis Additionally, studies conducted by Ammara Sharif, Sameer Sattar, and Lafi Mohammad MousaDaradkeh provide specific comparisons between different jurisdictions, shedding light on the variations in public policy application Moreover, research by international organisations like the International Finance Corporation (“IFC”), the
United Nations (“UN”), and international conference reports has contributed valuable insights into public policy in the context of international commercial arbitration.
Within the Vietnamese context, several noteworthy literary works have contributed to the understanding of commercial arbitration and its related topics Dr. Tran Minh Ngoc’s book “Pháp luật về trọng tài thương mại” (Law on Commercial Arbitration), published in 2009, serves as a comprehensive resource on the legal framework of commercial arbitration in Vietnam Notably, it has also been adopted as teaching material at Hanoi Law University, highlighting its authoritative status and relevance in academic settings
The adaptation of public policy as “the fundamental principles of Vietnam’s law” has sparked significant discussions in Vietnamese literature The extensive book “Vietnam’s Civil Procedure Code, Law on Commercial Arbitration: Commentary and Adjudication Practice” by Tuong Duy Luong, former Deputy Chief Justice of the Supreme People’s Court, delves deeply into the interpretation of public policy in relation to commercial arbitration in Vietnam This work serves as a valuable resource for understanding the Vietnamese perspective on this topic. Furthermore, Do Hai Ha’s contribution, “Bình luận quyết định không công nhận và cho thi hành quyết định của trọng tài nước ngoài” (Commentary on the Decisions not to Recognise and Enforce Foreign Arbitral Awards), offers valuable analysis and commentary on decisions related to the recognition and enforcement of foreign arbitral awards Additionally, Nguyen Hong Hai’s article on court precedents in Vietnam sheds light on the building of the 2015 Civil Code and its implications for arbitration These Vietnamese literature sources, among others, provide important insights and perspectives that enhance the understanding of commercial arbitration and its application in the Vietnamese legal context.
Vietnam's government has played a significant role in advancing research on public policy implementation through its database and reports While these resources provide valuable insights, the existing literature in Vietnam may not always offer the depth of analysis necessary for a comprehensive examination of the subject Vietnamese commentators often concentrate on specific instances or offer restricted interpretations of a few chosen cases, highlighting the need for more granular and comprehensive research in this area.
Le, Logan Leung, and Nguyen Manh Thang These studies also exhibit a deficiency in providing comprehensive analyses of the international approach to the application of public policy as well as the potential lessons that Vietnam can learn from these approaches As a result, there is a need for further research that offers a more holistic view of public policy internationally and in the Vietnamese context, as well as its implication on the recognition and enforcement of foreign arbitral awards in the jurisdiction.
Overall, the combination of international and Vietnamese literature, including scholarly works, books, articles, and research conducted by international bodies and the Vietnamese government, forms the foundation for this thesis research By synthesising international perspectives and incorporating Vietnamese legal texts and case law, this research tries to fill the void in the literature by offering a more comprehensive and in-depth examination of public policy’s impact on the recognition and enforcement of foreign arbitral awards in Vietnam.
Research objectives
The primary goal of this thesis is to investigate the systemic impact of public policy on commercial arbitration in Vietnam, particularly its implications for foreign arbitral awards Through comprehensive practical studies conducted in various countries, the research delves into this relationship and seeks to derive recommendations for improving the legal framework surrounding this issue within Vietnam Ultimately, the thesis aims to shed light on the practical implications of public policy in commercial arbitration and provide valuable insights for policymakers and legal practitioners alike.
- To provide a thorough overview of commercial arbitration, arbitral awards, as well as the concept of public policy in international arbitration and the link between commercial arbitration and public policy.
- To analyse different countries’ viewpoints and approaches to public policy as a ground for refusing recognition and enforcement, as well as to examine relevant case studies from different jurisdictions in both common and civil legal systems.
- To analyse the understanding and interpretation of public policy in Vietnamese legal texts, and to incorporate academic perspectives on public policy and the enforcement of foreign arbitral awards in Vietnam.
- To assess Vietnam’s approach to the recognition and enforcement of foreign arbitral awards of public policy in refusing enforcement, and exploring notable Vietnamese cases that provide insights into the practical application of public policy considerations.
- To compare the Vietnamese approach with international standards and practices, draw lessons and recommendations.
Subject matter and scope of research
The subject matter of this thesis revolves around the impact of public policy on the recognition and enforcement of foreign arbitral awards in Vietnam This study draws on international and comparative practices as a foundation for providing recommendations specific to Vietnam By adopting an interdisciplinary approach, incorporating legal, comparative, and academic perspectives, the thesis aims to comprehensively explore the conceptual framework, practical implementation, and recent advancements of public policy within the realm of international commercial arbitration law and within the jurisdiction
As for the substantive scope, the thesis would be focused specifically on the impact of public policy on the recognition and enforcement of foreign arbitral awards in Vietnam While public policy may have broader implications in the realm of commercial arbitration in Vietnam, this research narrows its focus to the specific aspect of recognising and enforcing foreign arbitral awards.
As for the geographical scope, the research includes an examination of international concepts and applications of public policy in the recognition and enforcement of foreign arbitral awards This involves analysing the perspectives and practices of various countries, namely the United States, the United Kingdom, India, Germany, and France, and international bodies in interpreting and applying public policy as a ground for refusing enforcement Then it is centred on Vietnam, with a primary emphasis on the Vietnamese legal system and its approach to the recognition and enforcement of foreign arbitral awards.
As for the temporal scope, while this research examines the historical perspective of the application of public policy in Vietnam and around the world, it primarily focuses on recent legal developments and reforms This temporal scope allows for an analysis of the current legal framework, judicial practices, and emerging trends in the recognition and enforcement of foreign arbitral awards inVietnam.
Methodology
In this thesis, the author has adopted a comprehensive research approach that combines library-based research and case-law analysis This dual approach allows the author to explore the topic from both theoretical and practical perspectives, providing a more well-rounded understanding of the subject matter.
The theoretical viewpoint of this research involves delving into the works of scholars, experts, and practitioners who have contributed to the fields of public policy and international arbitration By consulting books, articles, and projects developed by relevant public and private international organisations, the author gains insights into the various solutions and perspectives proposed by these experts. This theoretical foundation helps the author establish a conceptual framework for understanding public policy and its implications in the context of international arbitration.
The practical aspect of this research examines judicial interpretations of relevant legal regimes in real-world scenarios Case law, particularly decisions involving foreign arbitral awards, provides insights into how public policy is interpreted and applied This analysis reveals the actual outcomes and implications of public policy considerations in international arbitration within Vietnam's jurisdiction.
By combining theoretical and practical perspectives, this research aims to bridge the gap between legal theory and its practical implementation This approach not only enhances the depth of this analysis but also provides valuable insights into the dynamics and challenges associated with the recognition and enforcement of foreign arbitral awards in Vietnam.
Research disposition
The thesis, along with charts, references, and appendices, includes the main contents as follows:
Chapter 3: Impact of Public Policy on the Recognition and Enforcement of Arbitral Awards on an International Level
Chapter 4: Impact of Public Policy on the Recognition and Enforcement of Foreign Arbitral Awards in Vietnam
Chapter 5: Lessons and Recommendations for Vietnam on the Recognition and Enforcement of Foreign Arbitral Awards with Public Policy Implication.
THEORETICAL FRAMEWORK
Overview of commercial arbitration
With globalization fostering a surge in cross-border transactions, commercial disputes have inevitably increased While litigation remains the traditional approach, its drawbacks have led to the adoption of alternative dispute resolution methods Arbitration, in particular, has gained prominence as an effective and efficient means of resolving commercial disputes.
First , it is important to understand the definition of commercial arbitration.
Commercial arbitration has emerged as the prevailing approach for resolving international commercial disputes, garnering weighty attention and study in universities and law schools due to its dynamic evolution in both legal principles and practical applications (Redfern 2004, p 5) As Born stated, “there are almost as many other definitions of arbitration as there are commentors on the subject” (Born 2021, p 4) Arbitration is recognised as a type of ADR (alternative dispute resolution) The phrase ADR encompasses a range of procedures other than litigation that are designed to resolve conflicts The World Intellectual Property Organisation defines arbitration as “a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court” (WIPO 2023) In more simple terms, the
Legal Information Institute of Cornell Law School refers to arbitration as “an alternative dispute resolution method where the parties in dispute agree to have their case heard by a qualified arbitrator out of court” (LII 2023) The Black’s
Law Dictionary, one of the most recognised legal dictionaries there is, defines arbitration as the investigation and determination of a matter or matters of difference between contending parties by one or more unofficial persons, chosen by the parties, and called “arbitrator knowledge” or “referees” (Garner 2019, p.
Vietnam’s approach to arbitration definition shares similarities with international scholars Although there are many different definitions, in general in Vietnam, arbitration could be understood as: “a non-state (non-governmental) jurisdictional dispute resolution method chosen by the parties’ agreement to resolve commercial disputes The main arbitrator is a third intermediary selected by the disputing parties to help the parties resolve their conflicts and disagreements on the basis of ensuring the parties’ right to self-determination The arbitration method originates from the agreement of the parties on a voluntary basis In arbitration, after considering the facts, the arbitrator can issue an award that is enforceable against the parties.” (Vietnam Coordinate Council of Law
As can be seen, Vietnam recognises commercial arbitration exclusively, distinguishing it from general arbitration General arbitration can encompass a wide range of matters, including both commercial and non-commercial issues (Lew et al.
2003, p 50–57) In the field of arbitration, there is no fixed definition of
“commercial” at an international level Which disputes are categorised as
Commercial arbitration encompasses the resolution of business-related disputes through arbitration The term "commercial" is broadly defined to include a wide range of contractual and non-contractual relationships arising from commercial activities, varying across jurisdictions and geographies Accordingly, commercial arbitration serves as a process for resolving disputes within this broad commercial context.
While scholars may offer varying definitions of commercial arbitration, there is a broad consensus regarding its fundamental characteristics For the purpose of this thesis, the writer would define commercial arbitration as: a method of dispute resolution that is consensual-based, by which commercial disputes can be definitely resolved by independent, non-governmental decision-makers.
Domestic arbitration, governed by national laws, occurs within a country's borders In contrast, foreign arbitration transcends geographical boundaries, subject to foreign legal frameworks and arbitrators from outside the country Understanding this distinction is crucial in arbitration practice.
“national” by the country In Vietnam, foreign arbitration is an arbitration established in accordance with the foreign arbitration law selected by agreement by the parties to settle disputes outside of Vietnam or within the territory of Vietnam (IFC 2017, p 23).
Third, another term that is usually discussed on the topic of arbitration is international commercial arbitration International commercial arbitration’s primary purpose is to address disputes arising from international commercial transactions and provide parties from different jurisdictions with a neutral forum for resolution (Born 2021, p 2) Through theory and practice, the internationality of arbitration is often expressed through two aspects: the nature of the dispute, which involves cross-border elements, and the identity of the parties, considering differences in nationality or permanent residence.
From the above definitions, most agree that commercial arbitration possesses distinct features, including:
1 Consensual Basis: Arbitration is based on the voluntary agreement of the parties involved It is a private dispute resolution method that the parties themselves choose and concur upon, typically by including an arbitration clause in their contract Therefore, it allows the parties to shape the arbitration proceedings according to their specific needs and preferences
2 Definitive Dispute Resolution: Arbitration serves as a mechanism for the conclusive resolution of disputes It offers parties a means to reach a final and binding decision on their disagreements.
3 Independence and Non-Governmental Decision-Makers: Arbitration involves the appointment of impartial decision-makers who are independent of the state or government The parties choose these arbitrators, who are typically one or an odd number, and give them the authority to make impartial decisions.
Arbitration’s characteristics make it an attractive method of dispute resolution alongside traditional litigation Some of the advantages of commercial arbitration could be listed below (Mazirow 2008, p 1–2; Edwards 2016, p 18–26; Moses
First, arbitration provides flexibility and party autonomy, allowing the parties to tailor the arbitration process to their specific needs and preferences They can select the arbitrators, determine the procedural rules, and agree on the timeline for resolving the dispute For example, commercial arbitration allows parties to choose arbitrators with expertise and experience specifically tailored to the subject matter of the dispute This flexibility promotes efficiency and ensures that the arbitration proceedings are conducted in a manner that best suits the parties
Second, unlike court proceedings, which are generally public, arbitration, with its private characteristics, offers confidentiality, providing a private and discreet forum for resolving disputes This confidentiality protects sensitive information and allows parties to maintain their reputations and relationships
Overview of public policy
Public policy is a concept that has long been ingrained in legal systems across various jurisdictions (Ellenbogen 1952, p 663) While the expression of public policy may not be new, its interpretation and application in specific contexts, such as commercial arbitration, continue to evolve and adapt to the changing needs and expectations of society The notion of public policy is a significant and frequently discussed aspect in the context of arbitration within international commercial law (Kronke et al 2015, p 365–367; Tosun 2019, p 33–36)
The Black’s Law Dictionary defines “public policy” as:
“1 Broadly, principles and standards regarded by the legislature or by the courts as being of fundamental concern to the state and the whole of society Courts sometimes use the term to justify their decisions, as when declaring a contract void because it is “contrary to public policy
2 More narrowly, the principle that a person should not be allowed to do anything that would tend to injure the public at large.”
Further, Black’s Law Dictionary also cites the definition of “public policy” as borrowed from authoritative sources: “The policy of the law, or public policy, is a phrase of common use in estimating the validity of contracts Its history is obscure; it is most likely that agreements that tended to restrain trade or to promote litigation were the first to elicit the principle that courts would look to the interests of the public in giving efficacy to contracts.” (Garner 2019, p 965).
Public policy's application in arbitration is debated among scholars and legal authorities Its interpretation varies across jurisdictions, complicating analysis and award enforcement Common to various theories is the understanding that public policy embodies fundamental principles of morality, society, economics, and law.
According to Mark A Buchanan, public policy is the final perimeter of the law that is reflected in and often expressed by statutory and constitutional statements of law Public policy primarily exists at the domestic level within each individual state.
At the national level, it encompasses the fundamental principles and values of a particular country, including societal norms, ethics, and legal standards aimed at protecting public interests Its purpose is to safeguard the integrity and welfare of the nation’s legal system Public policy places restrictions on the parties’ ability to contract by establishing rigid standards or rules that they cannot change or disregard It draws a line between private and public autonomy, where, for example, mandatory rules of that jurisdiction disregard private autonomy (Buchanan 1988, p. 21).
What is understood as public policy at a national level is not necessarily public policy at an international level Indeed, the concept of public policy can differ between these levels What is considered public policy in one jurisdiction may not necessarily align with the public policy concerns of another jurisdiction Moreover, international public policy is recognised to be more limited compared to national public policy because not every domestic public policy rule is automatically part of international public policy Many states would not strictly impose all of the constraints of their public policy upon international trade, where more freedom and flexibility are often regarded as a requirement Essentially, international public policy is usually a state’s objectives or values that govern international relations, which are subjective to each state (Buchanan 1988, p 3–4; IFC 2017, p 140; Akoto 2021, p 54; Sharif et al 2021, p 1766).
Another concept often linked to public policy is that of transnational or truly international public policy Transnational public policy refers to principles that represent a universal agreement on collective norms and presumed standards of conduct that should always be applied (Pryles 2007, p 1–7) Such public policy is well-defined as evolving out of an international consensus involving universal standards that are widely recognised and deemed unacceptable in most civilised countries, such as bribery, corruption, slavery, religious discrimination, murder, and terrorism Therefore, transnational public policy is considered to have a narrower scope than international public policy, reflecting a more restrictive set of principles and standards (Ryabinin 2018, p.5)
For the purpose of this thesis, public policy would be referred to as a set of fundamental principles, values, and legal standards that a country deems essential for the well-being and moral order of the nation These principles are typically reflected in laws, regulations, and judicial decisions In the context of arbitration, the concept of public policy could be invoked to ensure that arbitral awards do not violate fundamental principles or values that are considered sacrosanct by this particular jurisdiction When an award is said to be against public policy, it may be subject to annulment or refusal of enforcement by the national courts
The thesis would also acknowledge that public policy can vary from one jurisdiction to another, reflecting the cultural, social, and legal norms of each society The understanding and actual application of public policy, whether domestic, international or transnational would be further discussed in later parts of this thesis.
Public policy could be interpreted in two different classifications The International Law Association (“ILA”) Resolution of 2002 provides a useful framework for understanding the concept of public policy in the context of international arbitration, distinguishing between procedural public policy and substantive public policy, each serving distinct purposes in the arbitration process
Procedural public policy concerns the fairness and integrity of the arbitration procedure itself It focuses on ensuring that fundamental principles of due process are upheld throughout the arbitration proceedings This includes principles such as the right to be heard, equality of the parties, and the absence of any fraudulent or deceptive conduct by the arbitrator Procedural public policy safeguards the integrity of the arbitration process and guarantees that the parties are given a fair opportunity to present their case and have their arguments considered (Sharif et al.
On the other hand, substantive public policy pertains to the merits of the disputes being resolved through arbitration It encompasses principles and values that are considered fundamental to the legal system of a particular jurisdiction Substantive public policy is concerned with preventing the enforcement of arbitral awards that are manifestly contrary to the fundamental legal principles or values of a country (Shepard, 2003, p 230).
By distinguishing between procedural and substantive public policy, the ILA Resolution acknowledges the need to ensure fairness in the arbitration process while also protecting the fundamental principles and values that underpin the legal system It underscores the importance of adherence to due process principles in arbitration proceedings and the need to prevent the enforcement of awards that would undermine the integrity or violate the core values of a jurisdiction Providing a clear distinction between procedural and substantive public policy, the Resolution offers guidance on how public policy considerations should be assessed and applied by national courts when reviewing arbitral awards.
The link between commercial arbitration and public policy
As generally argued and discussed in the previous part of this thesis, international arbitration has emerged as the preferred method of cross-border trade and investment dispute resolution However, it is known that international commercial arbitral awards are enforceable only through the domestic legal systems and to the extent that the foreign arbitral awards are compatible with national principles and standards (Emelonye and Emelonye, 2021, p 267) in cases of non-comformity Even parties who consent to international commercial arbitration must ultimately petition the national court system for the enforcement of the arbitral award; they will come face- to-face with the public policy exception (Tosun, 2019, p 1–2) The enforceability and recognition of arbitral awards are subject to the scrutiny of national courts, which must balance the principle of party autonomy with the safeguarding of public policy interests (Cordero-Moss 2015, p 187).
One of the fundamental aspects of the link between commercial arbitration and public policy lies in the enforceability of arbitration agreements Courts, cognizant of the need to alleviate the burden on the overloaded court system and promote efficient dispute resolution, generally recognise and uphold arbitration agreements as a matter of public policy (Lew et al 2003, p 157) By recognising the validity and enforceability of arbitration agreements, courts support the principle of party autonomy, which is considered as a manifestation of public policy, allowing parties to choose their preferred method of dispute resolution (Emelonye and Emelonye,
However, public policy considerations could serve as a limitation on the scope of arbitration While private parties have the freedom to choose arbitration as a dispute resolution mechanism, certain matters of public interest cannot be subjected to arbitration Public policy may exclude specific types of disputes from arbitration, such as those involving labour law, consumer protection, antitrust, or intellectual property issues These limitations ensure that important public policy concerns, such as protecting vulnerable parties or preserving fair competition, are not compromised by private arbitration (Cordero-Moss, 2015, p 185; Tosun 2019, p. 54).
Moreover, the judicial review of arbitral awards holds significant implications for public policy considerations Courts exercise a supervisory function to ensure that arbitral awards do not contravene fundamental principles of public policy This control mechanism prevents arbitration from becoming a vehicle for the enforcement of awards that are contrary to public policy considerations, such as those tainted by corruption, fraud, or human rights abuses (Landolt 2014, p 92). Furthermore, the public policy exception is enshrined in both international and national legal frameworks governing arbitration The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, a cornerstone of international arbitration, incorporates a public policy exception that allows courts to refuse the recognition and enforcement of foreign arbitral awards that violate public policy (Schreuer et al., 2018, p 3; Van den Berg, 2017, p 47) Courts may set aside or refuse enforcement of arbitral awards if their enforcement would be contrary to public policy considerations (Junita 2015, p 141–142).
In the international context, where disputes involve parties from different jurisdictions, the harmonisation of public policy considerations becomes vital.Divergent public policy norms across jurisdictions can present challenges to the enforcement of arbitral awards International arbitration instruments and conventions aim to reconcile these disparities and promote uniformity in the recognition and enforcement of arbitral awards By incorporating a public policy exception, these instruments strike a delicate balance between respecting party autonomy and safeguarding public policy interests (Armo 2014, p 11).
Arbitral institutions and rules guide arbitrators in navigating public policy considerations during arbitration, ensuring alignment with societal interests and legal principles By incorporating public policy safeguards into arbitral procedures, awards respect public policy while honoring parties' intentions Arbitrators, as impartial decision-makers, are responsible for issuing such awards, balancing the need to consider public interests with the parties' wishes.
In conclusion, the interplay between commercial arbitration and public policy is a crucial aspect of the international dispute resolution landscape While arbitration offers parties flexibility, efficiency, and party autonomy, public policy considerations serve as important limitations on the scope and enforceability of arbitral awards National courts play a pivotal role in reviewing arbitral awards for compatibility with public policy, striking a balance between respecting party autonomy and safeguarding the broader public interest International instruments and conventions contribute to the harmonisation of public policy considerations across jurisdictions, ensuring uniformity and predictability in the recognition and enforcement of arbitral awards By upholding public policy while respecting party autonomy, the international arbitration framework strives to provide an effective mechanism for resolving cross-border disputes in a manner that is consistent with the principles and values of different legal systems The impact of public policy on the recognition and enforcement of foreign arbitral awards will be further discussed in the next sections of this thesis.
IMPACT OF PUBLIC POLICY ON COMMCERCIAL
Overview of the legal framework in international conventions on the
recognition and enforcement of foreign arbitral awards
The foundations of the contemporary legal regime for international commercial arbitration were laid at the turn of the 20 th century (Born 2021, p 37). During this time, major developments took place that established the basic legal framework for international arbitration, particularly concerning the recognition and enforcement of foreign arbitral awards The 1923 Geneva Protocol and the
1927 Geneva Convention played crucial roles in shaping this framework. However, it was during the latter half of the 20 th century that the current legal regime for international commercial arbitration truly took shape (Schinazi 2021, p.
116) Countries from all around the world began entering into international arbitration conventions, with the new New York Convention of 1958 being a landmark instrument (Born 2021, p 39) This convention aimed to facilitate the recognition and enforcement of foreign arbitral awards, and its widespread adoption by numerous countries solidified its significance in international arbitration
3.1.1.1 Geneva Protocol and Geneva Convention
In the 1920s, there was a growing recognition among businessmen and lawyers in developed countries about the need for legislation to facilitate the use of arbitration in resolving both domestic and international commercial disputes The expansion of international trade and investment further underscored the need for a robust legal framework in this regard (Born 2021, p 33–34, Benson 1995, p 491).
To address these concerns, negotiations were undertaken in 1923 under the auspices of the newly formed International Chamber of Commerce (“ICC”), with the astounding result of the Geneva Protocol on Arbitration Clauses in Commercial Matters While sometimes underappreciated, the Geneva Protocol played a critical role in the development of the legal framework for international commercial arbitration
Indeed, the Geneva Protocol, despite its brevity, addressed significant issues that were hindering the development of international commercial arbitration at the time.
The Geneva Protocol has played a pivotal role in the development of international arbitration law Its provisions established the presumption of validity for arbitration agreements, obligated national courts to enforce these agreements and arbitral awards, and laid the groundwork for the modern legal framework governing international commercial arbitration The principles introduced in the Geneva Protocol have been consistently referenced and enshrined in subsequent conventions and national laws, shaping the field of international arbitration to this day.
The Geneva Protocol of 1923 garnered significant international support and was ratified or acceded to by thirty states, many of which were influential members of the international trading community at that time These included countries with strong economic activity and commercial ties such as Brazil, the British Empire, France, Germany, India, Italy, Japan, and Switzerland (Fouchard & Goldman 1999, p 121) The wide participation of major trading nations demonstrated the recognition of the importance of facilitating international commercial arbitration for promoting global trade and resolving cross-border disputes.
Yet, the Geneva Protocol of 1923 reflected a somewhat limited perspective on international commercial arbitration prevalent at that time The language of the Protocol demonstrated a territorial mindset, primarily focusing on the enforcement of arbitral awards made within the territory of each contracting state 4 , without explicitly addressing the recognition and enforcement of foreign awards This approach to enforcement indeed made the commitment to enforce arbitral awards dependent on the domestic arbitration legislation of each state Thus, even with arbitral proceedings that were conducted in a member nation, there was no guarantee of enforcement if the place of the award was not the place of enforcement (Schooler 2019, p 2) Hence, the effectiveness and consistency of enforcement could vary from one jurisdiction to another, depending on the specific domestic provisions and interpretations of the national laws.
This treatment of arbitral awards in Article 3 of the Geneva Protocol has been subject to debate and criticism It has been argued that this provision was somewhat tentative and incomplete, failing to provide a comprehensive and harmonised framework for the enforcement of arbitral awards The limitations of the Geneva
1 Geneva Protocol on Arbitration Clause in Commercial Matters, 1923, Article 1
4 Geneva Protocol on Arbitration Clause in Commercial Matters, 1923, Article 3, “Each Contracting State undertakes to ensure the execution by its authorities and in accordance with the provisions of its national laws of arbitral awards made in its own territory…”
Protocol’s enforcement mechanism became apparent over time (Contini 1959, p. 289–291), prompting the need for further developments in the field of international arbitration.
The Geneva Convention of 1927 significantly addressed the recognition and enforcement of foreign arbitral awards by expanding upon the Geneva Protocol of 1923 While the Protocol had limitations, the Convention required contracting states to recognize and enforce awards rendered under arbitration agreements covered by the Protocol This extended the scope and enforceability of foreign arbitral awards, enhancing the effectiveness of international arbitration.
Additionally, the Convention introduced an important provision that prohibited substantive judicial review of the merits of arbitral awards during recognition proceedings 6 This meant that courts in the enforcing state could not re-examine the merits of the award but were instead limited to reviewing certain procedural aspects and ensuring compliance with public policy Public policy was explicitly recognised as a ground for refusing recognition and enforcement of arbitral awards, allowing the courts of the enforcing state to assess whether the enforcement of an award would be contrary to its fundamental principles of justice and morality 7 Nevertheless, because of its structural deficiencies, this Convention did not meaningfully resolve the issue of enforcement of an award (Volz & Haydock 1996, p 874–876) At that time, the domestic law of the enforcing country was still usually governing the enforcement of foreign arbitral awards (Senger-Weiss 1998, p 3).
The Geneva Protocol and Convention laid the foundation for modern international commercial arbitration law They enshrined principles of arbitration agreement validity, award enforceability, and party autonomy in selecting governing law and procedures These principles have shaped subsequent developments and continue to underpin the legal framework for resolving international commercial disputes.
5 Geneva Convention on the Execution of Foreign Arbitral Awards, 1927, Articles 1–4
The New York Convention, a paramount international treaty in commercial arbitration, establishes a robust framework for recognizing and enforcing foreign arbitral awards This widely ratified treaty provides a uniform pro-arbitration regime that promotes the finality and enforceability of awards Its broad principles have influenced national courts and tribunals, enabling the development of effective mechanisms for enforcing international arbitration agreements and awards.
The drafting process of the New York Convention began with ICC in 1953 The ICC recognised the need for an updated and improved legal regime for international arbitration, stating that the Geneva Convention of 1927 “no longer fully met the requirements of modern economic needs” The objective was to establish a new international system for the enforcement of arbitral awards Therefore, the New York Convention was designed to facilitate the enforcement of international arbitration agreements and ensure the effective recognition and enforcement of arbitral awards across national borders (ICC 1953)
Impact of public policy on commercial arbitration in the common law
The United States became a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1970 To give effect to
13 See part 3.2 of this thesis. the Convention, Congress incorporated its provisions into Chapter 2 of the Federal Arbitration Act (the “FAA”) as “The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, shall be enforced in United States courts in accordance with this chapter” 14 This incorporation by reference ensures that the Convention is enforceable in U.S courts in accordance with the rules and procedures set forth in the FAA.
Since this incorporation, the courts in the United States have generally adopted a conservative approach when it comes to interfering with international arbitration and addressing public policy concerns Indeed, the case of Scherk v Alberto-Culver
Co 15 is widely regarded as a landmark decision highlighting pro-arbitration public policy in the United States
In Scherk v Alberto-Culver Co., the Supreme Court recognised that enforcing an arbitration agreement is essential for fostering international business relationships A parochial approach, which would invalidate such agreements and require disputes to be resolved exclusively in domestic courts, would be detrimental to international trade, the Court emphasised The Court acknowledged the need for a global framework that permits parties to settle their disputes through arbitration, recognising that international trade and commerce cannot flourish if every dispute is subject to the laws and jurisdiction of a single nation (Sattar 2011, p 5)
A notable illustration of the pro-arbitration stance of US courts is the case of
American Construction Machinery & Equipment Corporation Ltd v Mechanised Construction of Pakistan Ltd 16 In this instance, the Southern District of New York disregarded the Pakistani court’s disapproval of the arbitration agreement and the ICC arbitral award Instead, the court emphasised the significance of enforcing the arbitral award, citing the possibility of a violation of American public policy if it was not enforced This case is significant because it exemplifies the pro-arbitration stance of American courts, which prioritises the enforcement of arbitral awards over considerations of comity It showcases the court’s willingness to uphold arbitration agreements and safeguard the integrity of the arbitral process, even in the face of conflicting decisions from foreign courts (Sharif et al 2021, p 1768–1770).
Furthermore, one significant case that has had a profound impact on the interpretation of public policy and the enforcement of arbitral awards is Parsons &
Whittemore Overseas Co., Inc v Société Générale de l’Industrie du Papier (RAKTA) 17 , which is frequently cited in all research regarding this topic In this case, the appellant, Parsons & Whittemore, was a United States national who sought to halt the execution of an ICC arbitral award obtained by an Egyptian company, RAKTA The case was brought before the Second Circuit Court of Appeals, where Judge Smith rendered the court’s decision He underscored that a court should only refuse to enforce a foreign arbitral award on public policy grounds if its execution would violate the state’s most fundamental moral and equitable principles Judge Smith argued that adopting a broad interpretation of public policy would undermine the primary goal of the New York Convention, which is to eradicate obstacles to the enforcement of arbitral awards According to the decision, the purpose of the Convention would be best served by interpreting the public policy defence as a narrow mechanism to safeguard the political interests of the state Although the Parsons case did not specify the precise moral and legal principles that would activate the public policy defence, subsequent US courts have adopted its limited interpretation as the prevalent standard This approach has significantly influenced the practice of U.S courts when evaluating arguments based on public policy in relation to the enforcement of foreign arbitral awards.
Subsequently, in the case of Court of International Navigation Ltd v Waterside
The New York Convention aims to facilitate the enforcement of international arbitral awards by establishing uniform criteria As established in Ocean Navigation Co Inc 18, the court emphasized that the public policy defense should only be invoked when enforcing an award would violate fundamental moral and legal principles of the forum state, echoing the approach taken in Parsons & Whittemore This highlights the importance of respecting the intent of the Convention in ensuring the validity of international arbitral awards.
In more recent cases, the US courts have consistently maintained this restrictive approach to the public policy defense in international arbitration They have emphasised that any intervention by national courts on this ground should be limited, even considered taboo (Sattar 2011, p 8), and the public policy defence under the New York Convention should be narrowly interpreted This stance has remained unchanged since the landmark Parsons & Whittemore case, as exemplified by the decision in Telenor Mobile Communications v Storm LLC 19
In the Telenor Mobile Communications case, the Southern District of New York rejected the argument that public policy warranted the refusal to enforce a foreign arbitral award that had been overturned by a colluding foreign court The court emphasised that for enforcement to be declined, the foreign decision would have to directly contradict the foreign law in such a manner that compliance with one would violate the other The court placed significant emphasis on the public policy rationale in favour of promoting arbitration and upholding arbitration awards.
It is clear that the United States has consistently demonstrated a pro-enforcement stance when it comes to public policy considerations in the enforcement of foreign arbitral awards The American courts prioritise the finality and enforceability of arbitral awards, recognising them as binding and deserving of deference This pro- arbitration attitude aligns with the broader objective of fostering international trade and commercial relationships In cases where public policy concerns are raised, the courts have interpreted the public policy defence in a narrow manner They require a direct and clear contradiction between the foreign arbitral award and the fundamental moral and legal principles of the forum state in order to refuse enforcement, meaning that mere inconsistencies or disagreements with foreign law or decisions of foreign courts are not deemed sufficient to invoke the public policy defence The unwavering stance of the United States reinforces its commitment to prioritise the advancement of international arbitration and the enhancement of global commercial relationships, placing them above concerns of public policy when it comes to enforcing foreign arbitral awards.
It appears that the United Kingdom’s case law regarding the enforcement of foreign arbitral awards based on the New York Convention is not as extensive as that of other nations, such as the United States or Germany This is due, in part, to the widespread preference for London as a venue for commercial arbitration disputes Due to London’s prominence as an arbitration centre, the enforcement of foreign arbitral awards in the United Kingdom is frequently viewed as a
Despite perceptions that the enforcement of foreign arbitral awards in the United Kingdom is a "secondary" issue, the UK maintains a robust legal framework based on the New York Convention and Arbitration Act of 1996 The UK courts have consistently demonstrated their pro-enforcement stance and uphold party autonomy, displaying a willingness to enforce valid foreign arbitral awards unless there are exceptional circumstances or legal justifications for refusal.
In Section 103 of the Arbitration Act 1996, the grounds for refusing recognition or enforcement are set, which include public policy 20 The Act does not provide a specific definition of public policy, leaving it open to judicial interpretation Thus, the interpretation of public policy in relation to arbitral awards can vary among UK courts and even between individual justices Each case is evaluated on its own merits, taking into consideration the particular circumstances and the prevalent legal and societal norms This methodology ensures that public policy can be interpreted in light of contemporary societal standards and expectations (Daradkeh 2005, p.
In the common law system of the United Kingdom, case law precedents serve as binding authority and provide guidance for future cases This implies that while there is some room for flexibility, the fundamental objective of the prior application of public policy within the realm of commercial arbitration will still be respected. Several landmark cases that have shaped the law in this area illustrate the pro- arbitration stance of the United Kingdom, particularly with regard to public policy. The landmark case Westacre Investments Inc v Jugoimport-SPDR Holding Co.
Ltd 21 exemplifies this pro-arbitration perspective In this case, Westacre Investments Inc (“Westacre”) challenged the enforcement of an arbitral award issued by a Serbian tribunal with its seat in Belgrade Westacre argued that the award’s enforcement would violate public policy They claimed that the parties’ underlying contract was compromised by corruption and bribery.
In analysing the issue, the Court of Appeals emphasised the significance of promoting a pro-enforcement approach in arbitration matters The court acknowledged that public policy should not be invoked carelessly to undermine the finality and effectiveness of arbitration It held that a narrow and circumspect approach should be taken when evaluating challenges based on public policy to
Impact of public policy on commercial arbitration in the civil law
In Germany, the German Arbitration Act (“GAA”) primarily governs the legal framework for arbitration The GAA provides an environment conducive to arbitration and upholds the principle of party autonomy in dispute resolution. Similar to numerous other jurisdictions, Germany recognises public policy as a basis for refusing to recognise and enforce arbitral awards.
In German arbitration law, “public policy” is known as “ordre public” Article 1059(2)(2) of the German Code of Civil Procedure (“Zivilprozessordnung”) provides that an arbitral award may be set aside if its recognition or enforcement would be contrary to the fundamental principles of German law Nonetheless,
28 A Conultation Paper, Proposed Amendments to the Arbitration & Conciliation Act, 1996
German courts have adopted a restrictive interpretation of public policy, imposing a high bar for its application.
Under German law, the concept of public policy is not broad and all- encompassing It is limited to fundamental norms and principles that have a significant impact on public or economic life, as well as elementary principles of justice The defence of public policy can be invoked in relation to both substantive law (substantive public policy) and procedural law (procedural public policy) It’s important to note that mere errors in the interpretation or application of the law by the arbitral tribunal are not sufficient grounds for refusing enforcement based on public policy in Germany The focus is instead on whether the minimum standards of the German legal system regarding a fair trial have been met In other words, German courts will not interfere with the enforcement of a foreign arbitral award simply because there are differences in the interpretation or application of the law. The emphasis is on ensuring that the arbitral process adheres to the fundamental principles of fairness and due process Only in exceptional cases where there are significant procedural irregularities or a clear violation of fundamental principles of justice will German courts consider refusing the recognition and enforcement of a foreign arbitral award based on public policy grounds (Solomo 2017, 364–367). Regarding the public policy defence in the recognition and enforcement of foreign arbitral awards, German courts adhere to a limited standard of review known as the “ordre public international” as opposed to the broader “ordre public interne.” This restrictive approach is consistent with the philosophy of the New York Convention, which stresses the significance of recognising and enforcing foreign arbitral awards Additionally, in Germany, the evaluation of a violation of public policy is impacted by the existence of a sufficient connection to the forum, known as “Inlandsbeziehung.” This implies that the level of scrutiny applied to a foreign arbitral award will hinge on the degree to which it is connected to Germany.
The assessment of public policy violations varies based on the significance of a case's connection to Germany Cases with limited ties may face a more lenient evaluation, while those with substantial connections will encounter a stricter review This varying standard of evaluation aims to protect Germany's public policy interests and ensure that foreign decisions align with German legal principles.
By employing this strategy, German courts strike a balance between upholding the principles of fairness and justice and recognising the finality and efficacy of arbitration It provides a framework for the judicious application of public policy defence, taking into account the particulars of each case and the degree of connection to German law.
When determining whether or not to recognise or enforce an arbitral award, German courts take into account a variety of substantive public policy factors. Contracts involving illicit activities, such as bribery, may be deemed contrary to public policy, resulting in their refusal to be recognised or enforced Additionally, mandatory economic laws, such as antitrust and competition law, are regarded as part of Germany’s public policy, and violations of these laws may result in the same consequence
Notably, German courts do not conduct a thorough examination of the merits of an arbitral award (known as “révision au fond”) This means that they will not reverse an arbitral tribunal’s decision merely because they disagree with it or believe it to be incorrect The limited review scope highlights the finality and independence of arbitral awards, whether domestic or foreign.
This pro-arbitration approach is demonstrated in the famous decision of the Oberlandesgericht Karlsruhe (Higher Regional Court of Karlsruhe) on 04 January
2012 29 In this case, the claimant sought to enforce a favourable arbitration award obtained through proceedings at the International Chamber of Commerce in San Diego The respondent argued that the award violated public policy and raised numerous objections, including the alleged incorrect interpretation and application of the law by the arbitral tribunal, the conduct of oral hearings at a location other than the seat of arbitration, the exceeding of the time limit for rendering the award, one arbitrator allegedly falling asleep during the proceedings, and the allocation of costs to the respondent.
The Oberlandesgericht Karlsruhe rejected all objections from the respondent and granted enforcement The court reasoned that the respondent could have cited these arguments in the annulment proceedings under the United States Federal Arbitration Act but failed to do so within the applicable time limits, thereby precluding them from doing so in the current enforcement proceedings
The court also emphasised that violations of international public policy in international arbitration awards were to be evaluated solely based on the international public policy standard Accordingly, a refusal of enforcement based on considerations of public policy would only be justified if the arbitral proceedings exhibited a severe flaw that fundamentally affected the public or economic life in Germany The Oberlandesgericht Karlsruhe determined that none of the
29 9 Sch 02/ 09. respondent’s alleged violations of public policy met the required standard and were with merit.
Due to legal constraints prohibiting the review of the award's substance, the arbitral tribunal was unable to assess the alleged misapplication of German law.
This decision exemplifies the restrictive approach of German courts to public policy defence Again, the court emphasised that violations of public policy must have a substantial impact on the foundations of public and economic life in Germany for enforcement to be denied.
Overall, in their approach to public policy, German courts demonstrate a commitment to equity, equal treatment, and the rule of law They prioritise upholding fundamental procedural principles while avoiding interference with merit-based arbitral awards To refuse recognition and enforcement of arbitral awards, German courts have traditionally taken a restrictive stance on matters of public policy, requiring obvious violations of fundamental German legal principles and protecting the independence of arbitration while recognising the significance of preserving public policy considerations This measured approach is aligned with the legal framework of Germany and contributes to its reputation as an arbitration- friendly jurisdiction (Solomon 2017, p 369) To elaborate, the combination of a strong legislative framework and consistent court procedures strengthens Germany’s reputation as a dependable venue for international arbitration. Germany’s ongoing efforts to strike a balance between arbitration autonomy and public policy protection demonstrate its commitment to providing parties engaged in international arbitration with a reliable and effective dispute resolution mechanism.
France is an essential jurisdiction for the recognition and enforcement of arbitral awards on account of its well-established legal framework and long- standing tradition of arbitration In this context, the French legal system recognises the importance of public policy (“l’ordre public”) considerations and seeks to strike a balance between respecting party autonomy and protecting fundamental societal interests, morality, and the public interest This approach will be further discussed below.
The French Code of Civil Procedure (“FCPC”) and the French Arbitration Law are primarily responsible for governing the recognition and enforcement of arbitral awards in France Specifically, Title VI, Articles 1498 to 1507 of the FCPC incorporate the New York Convention into French law This demonstrates France’s commitment to international arbitration and the principles of the Convention
Evaluation of public policy’s impact on commercial arbitration on an
Widely regarded as a cornerstone of the international arbitration regime, theNew York Convention provides a robust framework for the worldwide recognition and enforcement of arbitral awards It promotes the global enforceability and effectiveness of arbitral awards by facilitating mutual recognition between contracting states By means of the Convention, parties can confidently seek enforcement in foreign jurisdictions, knowing that their awards will be recognised and enforced This enhances the credibility and desirability of arbitration as the preferred method for resolving disputes in international transactions.
In tandem with the adoption of international conventions, a number of nations have enacted national arbitration statutes that are consistent with the underlying principles of these international instruments These domestic laws frequently incorporate provisions from international conventions and are intended to facilitate and streamline arbitration within their respective jurisdictions National courts also play a crucial role in implementing these legislative instruments by interpreting and applying the laws in a manner that encourages arbitration Public policy remains a vital ground for rejecting the recognition and enforcement of arbitral awards, underscoring its enduring significance in shaping the worldwide landscape of arbitral award recognition and enforcement.
International public policy evaluation for the recognition and enforcement of foreign arbitral awards varies significantly by country Analysing specific jurisdictions highlighted in the article, including the United States, United Kingdom, India, Germany, and France, reveals diverse approaches to public policy assessment This comparison provides valuable insights into the varying interpretations of public policy across different legal systems.
In common law systems, starting with the United States, it is evident that U.S. courts have adopted a pro-arbitration stance, robustly enforcing arbitration agreements and arbitral awards The U.S courts have recognised the limited scope of the public policy ground for refusing enforcement under the New YorkConvention, construing it narrowly and emphasising the policy favouring the enforcement of international arbitration agreements and awards Moving on to theUnited Kingdom, similar pro-arbitration trends are observed The UK courts have demonstrated a favourable attitude towards the enforcement of foreign arbitral awards, and the application of public policy as a ground for refusal is narrowly interpreted The courts prioritise the parties’ agreement to arbitrate and the international nature of arbitration, acknowledging the importance of upholding the finality and enforceability of arbitral awards In India, the approach to public policy considerations in the recognition and enforcement of foreign arbitral awards has undergone notable developments While India has historically adopted a more interventionist stance in relation to public policy, recent reforms have aimed at striking a balance between ensuring public interest and promoting a pro-arbitration environment Indian courts have shown a greater willingness to recognise and enforce foreign awards, taking into account the principles of international comity and the restrictive interpretation of public policy grounds.
Focusing on Germany, a civil law jurisdiction, the pro-arbitration approach is also evident German courts recognise the importance of international arbitration and have adopted a restrictive interpretation of public policy as a ground for refusing enforcement The courts emphasise on upholding the enforceability of foreign arbitral awards while considering the limited circumstances in which public policy can be invoked France, another civil law jurisdiction, has embraced a pro-arbitration stance, and its courts have played a significant role in promoting the recognition and enforcement of foreign arbitral awards French courts have interpreted public policy narrowly and have shown a strong inclination to enforce awards, prioritising the efficacy and credibility of the arbitral process.
Overall, the evaluation of the international application of public policy on the recognition and enforcement of foreign arbitral awards highlights a general trend towards a pro-arbitration approach in many jurisdictions Courts in these countries have recognised the limited scope of public policy grounds for refusal and have emphasised the importance of upholding the finality and enforceability of arbitral awards, regardless of the legal system they are in This approach seems to promote international trade and provide parties with a reliable and efficient means of resolving their disputes through arbitration However, it is worth noting that the precise interpretation and application of public policy may still vary to some extent depending on the specific circumstances and the jurisprudence of each jurisdiction. More or less, the national courts still hold the power to refuse a foreign arbitral award if the award is tainted by illegal activities that cannot be recognised or enforced.
IMPACT OF PUBLIC POLICY ON COMMERCIAL
Overview of the legal framework of public policy on the recognition and
As a result of history, the Vietnamese legal system was based on and is considered to be part of the civil law system The French civil legal system had a profound impact on various aspects of Vietnamese law, including the understanding and interpretation of key legal concepts (Hoa 2017, p 145, Huong 2019, p 4, CACJ
2023) By recognising the historical influence of the French civil legal system on the Vietnamese legal framework, a comprehensive context is established for the analysis of the concept of public policy in relation to the recognition and enforcement of arbitral awards This understanding of historical foundations and ideological influences enables a deeper comprehension of how the Vietnamese legal system approaches and interprets public policy within the realm of international arbitration.
Vietnam's legal system has evolved to align with international standards and incorporate diverse legal systems To address the complexities of modern society, particularly those involving foreign elements, the government has expanded its legal framework by recognizing case law, customary law, and international treaties These sources complement the traditional foundations of the Vietnamese legal system and serve as evidence of the country's commitment to adaptability and engagement with global legal norms.
In the following sections of this thesis, we will delve further into the concept of public policy within the Vietnamese legal system, exploring its definition,application, and implications for the recognition and enforcement of foreign arbitral awards By examining the historical and legal foundations of public policy, we can gain insights into its role and significance in the Vietnamese legal framework and its impact on the recognition and enforcement of arbitral awards in the jurisdiction.
Realising the importance of the recognition of foreign arbitral awards for integration and development, at the very beginning of the renovation (Doi moi) era, Vietnam acceded to the New York Convention on September 12, 1995, creating an important legal basis for the recognition and enforceability of a lawful arbitration award made in another Member State
Then, Vietnam’s first legal document governing the recognition and enforcement of foreign arbitral awards was the 1995 Ordinance on Recognition and Enforcement of Foreign Arbitral Awards (Ordinance 1995) This Ordinance’s structure and content were quite similar to the New York Convention and contained important provisions such as the definition of a “foreign arbitral decision” Moreover, the Ordinance showed a peculiar resemblance to the provisions concerning the grounds for refusing recognition of a foreign arbitral award in this legal text; that is, Vietnam had absorbed the legal ideologies of long-standing civil law systems, especially French, and internally codified “public policy”, a ground for refusal, similarly to
“l’ordre public” (Husserl, 1938), as “the basic principles of Vietnam’s law” 32 For the purpose of this thesis, “Vietnam’s public policy” and “the basic principles of Vietnam’s law” would be considered interchangeable
In 2003, Vietnam’s government enacted the Ordinance on Commercial Arbitration (“Ordinance 2003”) and, subsequentially, the Civil Procedure Code in
2004 (“CPC 2004”) A chapter 33 of this Code was dedicated to the matter of recognising and enforcing foreign arbitral decisions in Vietnam Once again, public policy’s contravention, or the violation of the basic principles of Vietnam’s law, was codified as a ground for non-recognition consideration 34 At present, the Law on Commercial Arbitration 2010 (“LCA 2010”) and the Civil Procedure Code 2015 (“CPC 2015”) have superseded the preceding legal instruments, establishing the criteria for recognising and enforcing arbitral awards along with the corresponding procedures Importantly, public policy continues to serve as a significant basis for refusing recognition and enforcement of arbitral awards This showcased how public policy has always been a vital factor affecting the recognition and enforcement of foreign arbitral awards in Vietnam.
32 Vietnam’s Ordinance on Recognition and Enforcement of Foreign Arbitral Awards 1995, Article 16.
33 Vietnam’s Civil Procedure Code 2004, Chapter XXIX.
4.1.2 Public policy as a refusal ground of the recognition and enforcement of foreign arbitration awards
Article 459(2)(b) of Chapter XXXVII CPC 2015 stipulates an important ground for the refusal of a foreign arbitral award as follows:
“Article 459 Cases of non-recognition
2 The foreign arbitrator’s award shall not be recognised is the Vietnam’s Court deems that: b) The recognition and enforcement in Vietnam of foreign arbitrator’s award are contrary to basic principles of law of the Socialist Republic of Vietnam.”
It is worth noticing that since 2010, Vietnam has specified the definitions of
“foreign arbitration” 35 and “foreign arbitral awards” 36 , as well as stipulated the distinction between “arbitral awards” (a decision of the arbitration council settling the entire dispute and terminating the arbitral proceedings 37 ) and other types of
“arbitral decisions” (decisions of the arbitration council issued during the process of dispute settlement 38 ) This newer approach aligns with the universally recognised understanding of arbitral awards in the New York Convention 1958 (Uncitral Secretariat et al 2017, p 17).
Additionally, the CPC 2015 recognises and upholds the conclusive and binding nature of a foreign arbitral award, aligning with the commonly agreed-upon fundamental principle of arbitration as an alternative means of dispute resolution. Its Art0cle 458(4) explicitly states that the national court will refrain from reopening or rehearing the underlying dispute during the recognition and enforcement process of a foreign arbitral award:
“4 When considering the application for recognition and enforcement, the Panel shall not conduct re-trial over the dispute when the foreign arbitrator’s award has been issued The Court shall be only entitled to check and compare the foreign arbitrator’s award and accompanying papers and documents with provisions of Chapter XXXV and Chapter XXXVII of this Code, other relevant Vietnam’s law provisions and international treaties to which the Socialist
35 Law on Commercial Arbitration 2010, Article 3(11), “Foreign arbitration means an arbitration formed under a foreign law on arbitration and selected as agreed by the parties to settle a dispute outside or within the Vietnamese territory”.
36 Ibid., Article 3(12), “Foreign arbitral award means an award pronounced by a foreign arbitration outside or within the Vietnamese territory that is selected as agreed by the parties to settle their disputes”.
Republic of Vietnam is a signatory to form the basis for the issuance of decision to recognise and enforce such award.”
This attitude promotes the efficiency and effectiveness of arbitration, as it avoids duplication of proceedings and ensures a swift and final resolution.
Practical application of public policy on commercial arbitration in Vietnam
As was previously mentioned, the notion of public policy or the fundamental principles of Vietnamese law substantially affects the recognition and enforcement of arbitral awards in Vietnam This premise functions as a safeguard to ensure that awards that violate the nation’s public policy or fundamental legal principles are not recognised and enforced Through upholding fundamental legal principles reasonably, Vietnam ensures that the recognition and enforcement of arbitral awards are conducted in a manner that upholds justice, fairness, and the overall well-being of society
As a narrower interpretation of public policy becomes the norm, a country’s high rate of refusal to recognise and enforce foreign arbitral awards without valid grounds may negatively impact its commercial standing in the international market Therefore, it is essential to assess whether Vietnam’s approach to public policy in relation to the recognition and enforcement of foreign arbitral awards aligns with international standards Analysing the practical application of this ground will help determine the consistency and compatibility of Vietnam’s practices with global norms and facilitate a harmonious integration into the international business community.
The absence of systematic data and thorough statistical monitoring on the recognition and enforcement of foreign arbitral awards in Vietnam has hindered research and evaluation efforts Despite the enactment of the Ordinance on Recognition and Enforcement of Foreign Arbitral Awards, the lack of comprehensive information has limited the ability to assess the effectiveness and challenges associated with this process.
1995, systematic data collection and analysis have been limited The number of requests for recognition and enforcement has typically been relatively low, which has resulted in a lack of attention and follow-up in terms of data gathering (Quang et al.
2021) Furthermore, the process of reviewing the recognition and enforcement of foreign arbitral awards in Vietnam can be lengthy and involve multiple intermediary agencies This complexity has made it difficult to establish close and specific statistical monitoring mechanisms
Presently, the Statistics Department of the Supreme People’s Court only records the number of requests for recognition and enforcement at the first-instance court, as well as the number of decisions that are appealed or protested against Yet, the results of these requests and the reasons for denying an arbitral award are not consistently recorded Also, the Statistics Department has only started keeping data on these matters since 2012, after the 2010 LCA took effect As a result, research and practical evaluations of the recognition and enforcement of foreign arbitral awards in Vietnam, particularly regarding public policy issues, face significant difficulties and remain incomplete.
Luckily, in 2020, recognising the significance of evaluating the actual situation of recognition and enforcement of foreign arbitral awards in Vietnam, as well as the conformity of Vietnam’s arbitration law with the standards of the Vietnamese and international arbitration systems, the Ministry of Justice published a database
(“Database”) containing basic information on the recognition and enforcement of foreign court judgments and decisions and arbitral awards in Vietnam that were rendered from 1 January 2012 to 30 September 2019 (MOJ 2020) Never before have Vietnamese courts been this open about their views and opinions of foreign dispute resolution forums The Database comprises the decisions of Vietnamese courts on 83 foreign arbitral awards Still, it is now 2023, and although the Supreme People’s Court of Vietnam has been publishing judgments and decisions of courts at various levels and recognising and publishing case laws since 2017 55 , this database has not yet gotten an update
Later in 2021, the Ministry of Justice and the United Nations Development Programme Vietnam have engaged a team of experts to conduct research activities Dr.
Vu Duc Long, an independent expert, Lawyer Chu Thu Hien from the Vietnam Bar Association, and Professor Richard L Garnett from the University of Melbourne, Australia, have been involved in developing a report titled “Evaluation and Comparison of Vietnamese Legal Regulations on Accreditation and Enforcement of Arbitral Awards with the UNCITRAL Model Law on International Commercial Arbitration, suggesting the Applicability of the Model Law in Vietnam” (the “Report”). Importantly, this Report provides valuable commentary on the shortcomings of the recognition and enforcement process in Vietnam, offers an in-depth analysis of the reasons behind these shortcomings, and provides insightful suggestions and recommendations for improvement.
While the Report may not be fully comprehensive due to the limitations of incomplete statistics in Vietnam, it still provides valuable insights into the reality of recognising and enforcing foreign arbitral awards in the country By combining the findings of this Report, the Database, with other available records and information from various sources, along with an analysis of notable cases, one can delve into the practical application of public policy in Vietnam concerning the recognition and enforcement of foreign arbitral awards Such analysis can contribute to a better understanding of how public policy is applied in practice and its impact on the recognition and enforcement of foreign arbitral awards in Vietnam
Based on the Database and the Report, from January 1 st , 2012 to September 30 th ,
2019, only 49% of foreign arbitral awards (41 of 83) were recognised and enforced in Vietnam, and 36% of foreign arbitral awards (30 of 84) were rejected to be
Decision No 03/2017/NQ-HĐTP, governing the publication of court decisions and judgments on the Court's Portal, plays a crucial role in ensuring that legal principles are upheld This decision has been cited in numerous cases, with a remarkable 10 mentions involving non-compliance with the basic principles of Vietnam's law Notably, this figure constitutes over 30% of the reasons for refusal within these cases.
Figure 3.1 Overview of the foreign arbitral awards’ acceptance rate in Vietnam in the Period from 1 January 2012 to 30 September 2019
The success rate of foreign arbitral award recognition and enforcement exhibits variability, with annual fluctuations A database chronicles the statistics of such cases from 2012 onward, reflecting the changing landscape of arbitration outcomes.
2019 are shown in the chart below:
Figure 3.2 Recognition and Enforcement of Foreign Arbitral Awards in the Period from 1 January 2012 to 30 September 2019 (Bang 2021).
Based on the chart provided, it is evident that the acceptance rate of Vietnamese recognition and enforcement of foreign arbitral awards has experienced significant fluctuations over the years The data shows a range of acceptance rates, with the lowest recorded at 17% in 2014 and the highest at 85% in 2019 Although there appears to be an upward trend in recent years, the overall acceptance rate inVietnam remains relatively low (Le 2021) Compared with other countries that are parties to the New York Convention, the rate of non-recognition is still unusually high (Ngan 2021) The Database also shows that request for recognition and enforcement of awards originated from several different countries This diverse range of countries affected by Vietnam’s low acceptance rate of foreign arbitral awards underscores the global implications and significance of the issue This highlights the challenges and inconsistencies in the recognition and enforcement processes, indicating the need for improvements and reforms to ensure a more favourable and reliable environment for international arbitration in Vietnam.
According to the Report, concerns have been raised by international partners regarding the recognition and enforcement of foreign arbitral awards in Vietnam. The perceived low rate of recognition and enforcement, as well as the inconsistency with the New York Convention, have been emphasised by various countries and organisations, such as the United States, the United Kingdom and Northern Ireland, Switzerland, and the ICA Particularly at the beginning of 2013, six out of seven foreign arbitral awards from the ICA were denied recognition and enforcement by the first-instance courts, raising doubts and protests in international relations These worries have been expressed repeatedly through letters and meetings with Vietnamese agencies and in the countries’ joint committee meetings Furthermore, these concerns have been recognised as an inadequacy in the Vietnamese justice system, and efforts are being made to find solutions The 2019 White Book on Trade, Investment, and Recommendations of the European Trade Council in Vietnam has identified this issue and made recommendations for improvement The impact of this problem goes beyond the interests of the parties involved in arbitration; it also affects the investment environment in Vietnam and can potentially harm the country’s reputation in the international community Failure to recognise foreign arbitral awards consistent with the New York Convention may lead to legal action against the Vietnamese government under investment protection agreements and other international treaties Therefore, addressing these concerns is crucial to maintaining a favourable investment climate and avoiding potential consequences in terms of resources and reputation for Vietnam (Dridi 2023).
As previously mentioned, courts seemingly frequently used public policy as a justification to deny the recognition and enforcement of foreign arbitral awards.However, the lack of a solid legal basis in the court judgments pertaining to the non-recognition is a cause for concern and generates significant apprehension within the overall context In the following section of this thesis, a detailed examination of specific case studies will be conducted to illuminate this issue and analyse the manner in which Vietnamese courts have historically and presently applied the ground of refusal based on public policy.
Evaluation of public policy’s impact on commercial arbitration in Vietnam
From the cases above, it can be said that during the initial implementation of theNew York Convention and the 1995 Ordinance, Vietnamese courts did invoke public policy considerations in their decisions, resulting in the rejection of numerous arbitral awards due to alleged violations of public policy At that time, public policy exerted a significant influence on the process of recognising and enforcing arbitral awards in Vietnam On the other hand, the broad interpretation of public policy violations or violations of Vietnamese legal principles during this period raised doubts and objections from international partners, adversely impacting the reputation and image of the Vietnamese legal system (VLA 2009).
Under the LCA 2010, the CPC 2015 and Resolution No 01/2014/NQ-HDTP, and with the effort to educate judges of the Ministry of Justice and the Supreme People’s Court 57 , the approach to public policy violations has gradually become more refined and aligned with international standards, demonstrating Vietnam’s commitment to enhancing its legal system regarding commercial arbitration By adopting a more focused and adaptive interpretation of public policy, Vietnam aims to foster greater confidence and trust in its legal system for the recognition and enforcement of foreign arbitral awards.
Even with the narrowed interpretation of public policy in the recognition and enforcement of foreign arbitral awards in Vietnam, its significance in safeguarding national interests and upholding justice remains paramount Public policy serves as a vital mechanism to ensure that the enforcement of foreign arbitral awards does not contravene fundamental principles and values that are considered essential to the Vietnamese legal system Vietnam also seeks to safeguard its core societal and economic interests by incorporating public policy considerations The recognition and enforcement of foreign arbitral awards must be consistent with the country’s central values, ensuring that the outcomes do not violate principles deemed crucial for maintaining social order, public welfare, and economic stability It permits the Vietnamese legal system to intervene when enforcement of an award would be fundamentally contrary to the nation’s fundamental values or established legal principles Moreover, public policy serves as a means to uphold justice It enables courts to assess the fairness and equity of the arbitral award and prevent its enforcement in situations where it would lead to manifestly unjust outcomes By examining whether the award aligns with principles of fairness, equity, and due process, public policy ensures that the enforcement process is consistent with notions of justice as perceived within the Vietnamese legal system.
57 Online training on June 25, 2018 of the Supreme People’s Court on the Recognition and Enforcement of Foreign Arbitral Awards in Vietnam (SPC 2018)
Despite Vietnam's efforts, the application of public policy in arbitral matters remains imperfect The low recognition and enforcement rate of foreign arbitral awards compared to international benchmarks highlights this issue Resolution No 01/2014/NQ-HDTP provides some guidance, but its lack of clarity impedes consistent application by national courts The vague language allows for subjective interpretations, leading to arbitrary applications and a higher risk of foreign arbitral awards being overturned, even for relatively minor public policy concerns.
It is worth noticing that the arguments and insights regarding the definition of public policy in relation to the LCA 2010 and the Resolution are based on research conducted by former judges, scholars, and legal specialists rather than being derived from an authoritative body In Vietnam, the legal system follows a civil law tradition, not a common law system As a result, previous court decisions only serve as persuasive precedents rather than binding authorities This might mean there could be a more unpredictable application of the law in the future, creating opportunities for its potential abuse and contributing to the challenges in ensuring a dependable and uniform approach in interpreting and applying the concept of public policy in the recognition and enforcement of foreign arbitral awards
At the moment, there is no clear guidance on how to define and apply public policy when it comes to recognising and enforcing foreign arbitral awards in Vietnam The fact that “arbitral award contrary to basic principles of Vietnamese law” is a vague and unclear standard also makes its application seem random. Additionally, given the characteristics of the civil law system in Vietnam, judges heavily rely on written instructions in legal texts, further highlighting the shortcomings of the application of public policy in the absence of specific legal provisions.
The need for specific provisions to address the abuse of grounds for annulment of arbitral awards is indeed crucial The general and ambiguous nature of grounds such as “the award is contrary to the basic principles of Vietnamese law” can be exploited by parties seeking to annul arbitral awards This current unclear nature of the basis for “arbitral award contrary to basic principles of Vietnamese law” inevitably leads to arbitrary application It is worth noting that almost all Codes andLaws in Vietnam have provisions or dedicated chapters on “basic principles.” This allows the requesting party to easily invoke the ground that an arbitral award is
“contrary to the basic principles of the law in Vietnam.”
Recognizing and enforcing foreign arbitral awards, especially those involving public policy concerns, demands specialized expertise Judges handling such cases require both domestic legal proficiency and a comprehensive understanding of international law and treaties However, Vietnamese domestic staff often lack these qualifications, including knowledge of international law and foreign language proficiency This deficiency affects the outcomes of recognition and enforcement requests, particularly in complex cases involving public policy interpretation and application.
2023) Public policy, in this case, could be subjected to misapplication and therefore would have negative impact on commercial arbitration in Vietnam
In some instances, courts may lack a comprehensive understanding of the significance of recognising and enforcing foreign arbitral awards, as well as the broader implications for investment and the business environment in Vietnam This lack of awareness may undermine foreign partners’ trust in Vietnam’s judicial system In addition, relevant authorities’ agencies have not taken sufficient and decisive actions to allocate resources and invest in developing the necessary expertise and capacity in this field (Vân 2016) This might have a negative impact on public policy regarding the recognition and enforcement of foreign arbitral awards in Vietnam, as previously explored.
In conclusion, Vietnam has exhibited a tendency toward a narrower interpretation of public policy, conforming to international arbitration standards. While this is a positive development, there is still room for improvement in how specific legal texts and provisions address this movement The subsequent section of the thesis will concentrate on drawing lessons and providing recommendations for Vietnam regarding the recognition and enforcement of foreign arbitral awards, particularly in relation to public policy The objective is to ensure that the influence of public policy on this procedure remains rational and positive, thereby promoting a more consistent and transparent approach to the recognition and enforcement of foreign arbitral awards in Vietnam Vietnam can further strengthen its position in the international arbitration community and foster a favourable environment for international investments by addressing these issues.
LESSONS AND RECOMMENDATIONS FOR VIETNAM ON
Lessons from other countries
Vietnam's approach to foreign arbitral awards has undergone significant evolution, moving towards international alignment and a pro-enforcement stance Recent reforms have sought to adapt the arbitration regime to international norms However, the scope and application of public policy in enforcement decisions remain subject to interpretation, leaving discretion to the courts While the shift towards pro-enforcement is evident, the potential for different interpretations may present practical challenges.
The United States, the United Kingdom, India, France, and Germany provide valuable lessons for Vietnam based on their pro-arbitration stances and limited scope of public policy application Most of these jurisdictions have established strong legal frameworks that promote the recognition and enforcement of foreign arbitral awards, making them highly regarded and sought-after for arbitration proceedings Vietnam can take inspiration from their approaches, which have contributed to their reputation as trustworthy jurisdictions in the field of arbitration, as shown below:
The United States' strong support for arbitration is evident in its rigorous enforcement of arbitration agreements and awards US courts prioritize enforcing awards, intervening only for compelling public policy reasons This approach promotes legal certainty, incentivizing parties to embrace arbitration as a preferred dispute resolution mechanism Vietnam can draw inspiration from the US by embracing a similar pro-enforcement stance, recognizing the critical importance of upholding arbitration agreements and awards to foster a conducive legal environment for arbitration.
The United Kingdom supports arbitration, as evidenced by its arbitration-friendly legal system Its courts prioritise the enforcement of foreign arbitral awards and interpret public policy narrowly By offering a favourable legal environment, theUnited Kingdom encourages international parties to select London as the site of arbitration Vietnam could benefit from adopting similar measures to attract international arbitration and promote its status as a jurisdiction that is amenable to arbitration.
Recent reforms in India have sought to strengthen the enforcement of arbitral awards and restrict the applicability of public policy considerations The Indian judicial system has adopted a more pro-enforcement stance, in line with international norms Vietnam can learn from India’s example by implementing reforms that strike a balance between public policy concerns and the requirement for effective recognition and enforcement of foreign arbitral awards.
France and Germany, as prominent civil law jurisdictions, have embraced pro- arbitration tendencies and developed legal frameworks that prioritise the enforcement of foreign arbitral awards These countries adhere to a strict interpretation of public policy, reserving refusal of enforcement for truly exceptional cases This trend is not limited to common law systems; leading civil law nations also demonstrate a similar approach Given French law’s historical influence on Vietnam’s law and its civil law system, Vietnam could consider following this path by restricting the scope of public policy in the recognition and enforcement of foreign arbitral awards Such an approach would be fitting for Vietnam.
In the United States, the Federal Judicial Centre (FJC) provides specialized training programs for judges on international arbitration, including workshops, seminars, and online courses The United Kingdom's Judicial College offers similar programs, while in Germany, the Deutsche Richterakademie (German Judicial Academy) provides training for judges on the recognition and enforcement of foreign arbitral awards Additionally, judges in these countries undergo ongoing legal education that includes specialized courses on international arbitration, ensuring their knowledge remains up-to-date.
The École Nationale de la Magistrature (ENM) is France's national institution for training judges and prosecutors, offering specialized programs and courses in various legal fields, including international arbitration and recognition of foreign arbitral awards In 2023, ENM incorporated international arbitration into the official Skills in Civil Justice program, further enhancing its curriculum for legal professionals.
25) This highlights the continuous emphasis on international arbitration and underscores the effort to encourage judges to adhere to international standards in the application of public policy.
In addition to formal training, these leading arbitration-friendly nations also display a commitment to engaging in international conferences, seminars, and workshops that centre on arbitration These events serve as valuable opportunities for judges to learn from global experts, exchange knowledge, and gain insights into international arbitration practices (ICC 2023).
Furthermore, international cooperation initiatives encompass programmes like International Judicial Exchanges For example, certain judges in the UK participate in international judicial exchange programmes that afford them the opportunity to immerse themselves in the legal systems of other countries This exposure allows judges to familiarise themselves with diverse approaches to arbitration (Courts and Tribunals Judiciary 2023)
In sum, these countries not only prioritise specialised education and training for judges in the field of international arbitration but also actively engage in international forums and cooperative programmes, thereby enhancing their expertise and contributing to the development of a robust arbitration ecosystem Vietnam, too, could derive invaluable lessons from participation in such programmes.
Additionally, in certain jurisdictions, matters pertaining to arbitration are adjudicated by specialised courts Notably, the Commercial Court and ArbitrationDivision in London has established a dedicated segment to address arbitration-related issues This specialised court is staffed by judges possessing extensive experience in matters of international arbitration, thereby ensuring the expeditious and precise resolution of cases A primary function of this court is the adjudication of applications pursuant to Section 101 of the Arbitration Act 1996, particularly those seeking the recognition and enforcement of arbitral awards originating from foreign states that are parties to the New York Convention Given the benefits of this specialised approach, there is growing expectation in Europe for the emergence of specialised commercial courts designed to compete with the United Kingdom in this regard (Chessa 2023) Vietnam, as a jurisdiction seeking to enhance its arbitration framework, may find valuable insights in this specialised court model for its own legal system.
In addition to their dedication to facilitating the framework for the recognition and enforcement of foreign arbitral awards, the aforementioned countries also prioritise the monitoring and evaluation of this process, including the aspect of applying public policy considerations These leading arbitral nations recognise the importance of providing resources and information to all parties involved in arbitration (Mistelis and Baltag 2008, p 320–321) Notably, in both the United Kingdom’s and the United States’ jurisdictions, court decisions related to the recognition and enforcement of foreign arbitral awards are routinely published and accorded the status of legal precedents These precedents serve as authoritative guides for future cases, offering clarity, transparency, and predictability within the process Specifically, the UK annually publishes its Commercial Court Report, providing comprehensive statistics for each year This report offers valuable insights and facilitates a deeper understanding of arbitral commercial court proceedings, including those related to the recognition and enforcement of foreign arbitral awards (Courts and Tribunals Judiciary 2023) Prominent platforms such as Westlaw, LexisNexis, and Justis also compile and disseminate UK case law, including arbitration-related judgements These resources are extensive and readily accessible online In contrast, Vietnam may face challenges in terms of ease of access to similar resources, given potential variations in legal infrastructure and available online platforms Access to comprehensive databases, legal research portals, and published court decisions related to international arbitration may be less prevalent or less centralised in certain jurisdictions, as explained in the previous parts of this thesis Therefore, in this case, Vietnam has the potential to derive substantial advantages from aligning its practices with those of leading arbitral countries
By adopting and applying the lessons outlined, Vietnam can enhance its arbitration system, contributing to economic prosperity An effective arbitration framework facilitates swift resolution of commercial disputes, fostering a stable business climate This attracts investments and stimulates economic growth Striking a balance between safeguarding public interests and facilitating the recognition and enforcement of foreign arbitral awards strengthens legal certainty, bolstering confidence in Vietnam's arbitration regime.
Recommendations for Vietnam
Vietnam may stand to gain substantial advantages by adopting a narrower interpretation of public policy and limiting its influence on the recognition and enforcement of arbitral awards Conforming to internationally accepted definitions and applications of public policy, consistent with the spirit of the New York Convention, is essential for Vietnam’s development in this field To accomplish this, Vietnam must first strengthen its legal framework regarding the refusal of recognition and enforcement of foreign arbitral awards based on inconsistencies in public policy.
To ensure a consistent and predictable approach to the annulment of awards based on a violation of fundamental principles of Vietnamese law, it is necessary to establish clear guidelines and specific criteria in the CPC 2015 This would aid in preventing potential abuse and promoting a transparent and equitable procedure for recognising and enforcing arbitral awards in Vietnam By providing precise definitions and guidelines, the courts can effectively determine when an arbitral award violates the fundamental principles of Vietnamese law in the context of arbitration Such a strategy would strike a balance between protecting Vietnam’s interests through public policy and fostering an environment conducive to international arbitration.
Furthermore, by establishing a well-defined framework for applying public policy to arbitral awards, Vietnam would enhance the credibility and dependability of its legal system, thereby promoting the expansion of international trade and investment To ensure a fair and transparent procedure for recognising and enforcing arbitral awards in Vietnam, it is vital to move toward a more consistent and predictable application of public policy with clearer guidance and criteria Although public policy will continue to play a role in protecting Vietnam’s interests, its influence will be rationally constrained, yielding more positive than negative results.
To enhance the recognition and enforcement of foreign arbitral awards, it is imperative to prioritize the training and education of judges and court personnel Comprehensive knowledge of international law, foreign legal systems, and relevant treaties must be imparted Moreover, emphasis on language proficiency, particularly in languages prevalent in international arbitration, is crucial By upskilling the personnel involved, Vietnam can elevate the efficiency and accuracy of handling requests for recognition and enforcement This will strengthen the credibility of the judicial system and create a favorable investment and business environment.
Third, it is essential for Vietnamese representatives to actively participate in international seminars, conferences, and training programmes centred on international arbitration These platforms offer Vietnamese legal professionals’ invaluable opportunities to increase their knowledge of the definitions and proper application of relevant principles, including those outlined in the New York Convention and the broader international legal arbitration framework Vietnam can remain informed of the most recent developments and progressive trends in international arbitration by actively participating in these events It enables Vietnamese legal practitioners to exchange knowledge and experiences with experts and professionals from around the world, gaining valuable insights into best practices and effective methods for resolving disputes through arbitration Participation in international seminars also encourages networking and collaboration, allowing Vietnam to establish relationships with international arbitration institutions, renowned arbitrators, and practitioners This can facilitate access to resources, expertise, and support that can further strengthen Vietnam’s arbitration capabilities and contribute to its legal framework’s development In addition, Vietnam’s participation in international seminars demonstrates its dedication to aligning its practices and standards with international norms and best practices It would demonstrate Vietnam’s willingness to be an active member of the international arbitration community and its eagerness to learn from the experiences of other jurisdictions.
Vietnam's decentralized jurisdiction for foreign arbitral awards creates challenges, particularly in provincial courts where judges and staff may lack expertise in managing complex cases This distribution of jurisdiction across the country's provincial courts results in insufficient resources to adequately resolve the unique and complex nature of such cases, leading to difficulties in handling potential violations of public policy.
A potential solution to this problem would be to centralise all requests for recognition and enforcement of foreign arbitral awards within a specific division or specialised court, similar to the UK’s approach Concentrating these cases in a designated division would permit the assignment of devoted and competent personnel who are familiar with the complexities of handling such matters By establishing a specialised division or court, Vietnam can assemble a team of specialists with the knowledge and experience to handle requests for recognition and enforcement of foreign arbitral awards This centralised approach would not only reduce the load on provincial courts but also facilitate a more streamlined and efficient resolution of these cases In addition, it would encourage a more predictable application of public policy considerations, thereby bolstering the credibility and dependability of Vietnam’s legal system with regard to the recognition and enforcement of arbitral awards.
The monitoring and evaluation of the recognition and enforcement of foreign arbitral awards in Vietnam are crucial However, deficiencies in the statistical work of local courts hinder the comprehensive analysis of progress and trends As a result, the statistical analysis to assess public policy in Vietnam remains incomplete and insufficient.
To address this issue, it is essential to improve intersectoral coordination and communication between provincial and higher courts and the Ministry of Justice It is required that courts at all levels provide the Ministry of Justice with complete and timely notifications regarding the final results of requests for recognition and enforcement of foreign arbitral awards in Vietnam Thus, the Ministry of Justice is able to effectively monitor and track the entire procedure, ensuring transparency and accountability.
Enhancing inter-sectoral coordination will not only facilitate a more thorough statistical analysis, but it will also enable the Ministry of Justice to identify any potential issues or obstacles that may arise in the recognition and enforcement of foreign arbitral awards This collaborative approach would enable timely interventions, if necessary, to address any deficiencies or inconsistencies in the application of public policy and foster a more favourable environment for international arbitration in Vietnam.
In conclusion, Vietnam has the opportunity to transform its arbitration landscape and enhance its position on the global stage by drawing valuable lessons from countries known for their pro-arbitration stances and limited scope of public policy application, such as the United States, the United Kingdom, India, France,and Germany By embracing global trends, adopting a focused approach to public policy, centralising the handling of recognition and enforcement requests, and progressively aligning with the pro-enforcement comity of nations, Vietnam’s future in international arbitration is indeed promising This strategic direction would pave the way for Vietnam to fully capitalise on the benefits and advancements of international arbitration, promoting economic growth, and positioning itself as a leading player in the global arbitration landscape.
Commercial arbitration has indeed emerged as a widely accepted and popular method for resolving disputes, offering various advantages over traditional litigation. One of its key attractions is the finality and binding nature of arbitral awards. However, the efficacy of commercial arbitration heavily relies on the ability to enforce arbitral awards, particularly in the context of international economic integration.
The recognition and enforcement of foreign arbitral awards play a crucial role in facilitating cross-border trade and investment Nonetheless, this process can be influenced by several grounds for refusal, and among them, the concept of public policy remains a highly debated and significant consideration In light of these circumstances, this thesis aims to comprehensively examine the impact of public policy on commercial arbitration in Vietnam, with a specific focus on the recognition and enforcement of foreign arbitral awards.
The inquiry commenced with an examination of the concept of public policy in international arbitration, encompassing diverse viewpoints and approaches adopted by different jurisdictions By scrutinising relevant case studies, the complexities and nuances surrounding this contentious ground for refusing enforcement were elucidated Shifting our attention to Vietnam, a meticulous analysis of Vietnamese legal texts has facilitated an understanding of the interpretation and application of public policy within the Vietnamese legal context By incorporating academic perspectives, including the notable contributions of a former judge and many other scholars, a deeper appreciation of the intricacies and challenges inherent in enforcing foreign arbitral awards in Vietnam, especially relating to public policy, has been attained.
Next, the assessment of recent legal developments and reforms underscoresVietnam’s commitment to aligning its legal framework with international standards.Noteworthy legislative changes and evolving judicial practices have demonstratedVietnam’s strides towards harmonising its enforcement regime Particularly significant is the guidance provided by Resolution No 01/2014/NQ-HDTP, issued by the Council of Judges of the Supreme People’s Court, which emphasizes the importance of adhering to the basic principles of Vietnam’s law in determining the enforceability of foreign arbitral awards Moreover, the examination of court decisions has shed light on Vietnam’s approach, revealing instances where public policy has been invoked to refuse enforcement through a detailed analysis of six past instances.