New Spanish Open-Access Book on Circulation of International Arbitral Awards

The author of this post is  Javier Carrascosa González who is a Professor of Private International Law at the University of Murcia.

Dr. Carmen María Noriega Linares has published a book on The Free Cross-Border Circulation of Arbitral Awards and International Public Policy (“Libre circulación transfronteriza del laudo arbitral y orden público internacional“) with Editorial Colex (Spain). The full text of the book can be accessed here.

The work is based on an indisputable fact: the free worldwide circulation of arbitral awards is one of the cornerstones of free trade on a global scale. This is consistent with international legal certainty, the protection and performance of private agreements and the effective enforcement of decisions by arbitral tribunals in any State.

However, as explained throughout the text, the free international circulation of arbitral awards may be hindered by the commonly named exception of the forum’s public policy. This constitutes grounds for refusing to recognise an arbitral award, as set out in Article V.2(b) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958): ‘Recognition and enforcement of an arbitral award may also be refused if the competent authority of the country in which recognition and enforcement are sought considers that: … (b) the recognition or enforcement of the award would be contrary to the public policy of that country”.

Carmen María Noriega’s work deals with the nature and scope of (international) public policy within this legal context. Public policy operates as an exception and should therefore not be applied systematically to refuse exequatur for a foreign arbitral award. Conversely, the general rule is the recognition of foreign arbitral awards, and international public policy will only be invoked when such awards violate essential principles of the law of the State in which the enforcement of the arbitral award has been sought. There is not, therefore, a hierarchical relationship between the free international circulation of arbitral awards and the public policy of the forum, but rather a relationship of coexistence between the two.

The text emphasizes that the State corresponding to the seat of arbitration has significant prerogatives regarding the award. It is the country in which an application for the setting aside of the award may be made. For this reason, states seek to present themselves as ‘attractive seats’ for operators in international trade and, to that end, enact efficient laws that promote swift, secure and effective arbitration. Key players in international trade do not choose a seat where arbitration is subject to strict judicial oversight. On the contrary, they certainly prefer free, flexible and independent arbitration, so that the courts cannot rule on the merits of the case and are limited to supervising the correct handling of procedural matters specific to arbitration.

Chapter I of this work addresses the general legal framework of international private arbitration, as well as the legal consequences of the setting aside of an award. It also contains an in-depth analysis of international public policy: its content, types, scope and its threefold origin -national, European and transnational public policy-. The application of lois de police in arbitration and the arbitrability of the subject matter are two key issues that are also examined in depth in the first chapter.

The second chapter explores the scope of public policy and the thorny question of whether it should apply solely in relation to the content of the award and its ruling, or whether it should also affect the process of reaching the award, that is, the arbitral proceedings. Partial, mitigated and proximity international public policy are also accurately discussed here.

At this point, attention is given to various scenarios of practical importance, such as the case of awards that breach European Union competition law and that of awards which admit the existence of onerous loans.

Finally, Chapter III of the work examines the procedural aspect of international public policy, an area in which case law has focused its greatest argumentative efforts. Issues of relevance include the inclusion of the right to a fair hearing within international public policy, as this constitutes an independent ground, set out in Article V of the New York Convention, for refusing to grant exequatur to an award. It also analyses, with rigour and precision, the reasoning behind the award, international lis pendens between arbitration and the courts, and the costs arising from the arbitral proceedings, as factors that could trigger the application of international public policy.

The analysis presented in the text strikes a balance between the provisions of both domestic and supranational private international law, the contributions of academic literature and case law from Spain and many other countries. Accordingly, the reader may gain both a theoretical and practical understanding of the situation.

In short, this is a highly recommended work for all legal practitioners and academics who, on a daily basis, explore the complex relationship between the free cross-border circulation of arbitral awards and international public policy. When two worlds collide, only those with a sophisticated understanding of private international law know what they must do…