Both the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the UNCITRAL Model Law on International Commercial Arbitration provide that a state may refuse to enforce an arbitral award if it is contrary to the public policy of that state. However, public policy is not defined. It is left to the contracting states to define the scope of public policy in its legislation. It is therefore incumbent on an arbitrator to ensure, to the best of his or her ability, that the award he or she is going to render is not in conflict with the public policy of the jurisdictions of the parties. This article will examine how various jurisdictions construe the scope of public policy as a bar to enforcement. I will start by examining Malaysia where we have a recent decision from the apex court of Malaysia on the scope of public policy as a bar to enforcement.
In 2018, the Malaysian Arbitration Act 2005 was amended to remove the right of any party to refer to the High Court any question arising out of an award.1 Under the Arbitration Act 2005, an award is in conflict with the public policy of Malaysia where the award was induced or affected by fraud or corruption or a breach of the rules of natural justice occurred during the arbitral proceedings or in connection with the making of the award. The Malaysian apex court recently in the 2018 case of Jan De Nul (Malaysia) Sdn Bhd & Anor v Vincent Tan Chee Yioun & Anor2 delivered its decision on an application to set aside an arbitral award for breach of public policy of Malaysia because there was a breach of the rule of natural justice about the making of the award. The apex court approved the following passage of the Singapore Court of Appeal in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA3: -
"… the general consensus of judicial and expert opinion is that public policy under the Act encompasses a narrow scope. In our view, it should only operate in instances where the upholding of an arbitral award would 'shock the conscience' … or is 'clearly injurious to the public good or… wholly offensive to the ordinary reasonable and fully informed member of the public'… or where it violates the forum's most basic notion of morality and justice."
The apex court went on to say:-
"… However, it must be appreciated that the concept of public policy generally is itself a broad concept. But in applying the concept for the purpose of setting aside an award …, the concept of public policy ought to be read narrowly and more restrictively. The court's intervention should be sparingly used. The court must be compelled that a strong case has been made out that the arbitral award conflicts with the public policy of Malaysia … "The concept of public policy must be one taken in the higher sense where some fundamental principle of law or justice is engaged, some element of illegality, where enforcement of the award involves clear injury to public good or the integrity of the court's process or powers will be abused."
The legal position in UK is similar to the legal position in Malaysia. The UK courts take the view that public policy as a bar to enforcement ought to be read narrowly. In the recent 2018 case of RBRG Trading (UK) Ltd v Sinocore International Co Ltd,4 the English Court of Appeal said: -
"… As is emphasised in Dicey, Morris & Collins, it is widely accepted that the public policy ground should be given a restrictive interpretation. This is recognised in the English law authorities – for example, Sir John Donaldson MR in Deutsche Schachtbau v National Oil  3 WLR 1023 at p1035D – "Considerations of public policy can never be exhaustively defined, but they should be approached with extreme caution"; Gross J in IPOC (Nigeria) v Nigerian National Petroleum  2 Lloyd's Rep 326 at  – "…there can be no realistic doubt that section 103 of the Act embodies a pre-disposition to favour enforcement of New York Convention Awards, reflecting the
underlying purpose of the New York Convention itself; indeed, even when a ground for refusing enforcement is established, the court retains a discretion to enforce the award: Mustill & Boyd, Commercial Arbitration, 2nd edn, 2001 Companion, at page 87".
The Singapore courts also agree that public policy as a bar to enforcement should be interpreted in a restrictive manner. In Coal & Oil Co LLC v GHCL Ltd5, the Singapore High Court in 2015 followed the earlier Singapore Court of Appeal's decision in PT Asuransi Jasa Indonesia (Persero) v Dexia Bank6 which ruled: –
"… it is only in exceptional cases where the "upholding of an arbitral award would 'shock the conscience' …, or is 'clearly injurious to the public good' or … 'wholly offensive to the ordinary reasonable and fully informed member of the public' …, or where it violates the forum's most basic notion of morality and justice"… that it would be set aside on the grounds of public policy."
The approach of the Chinese courts to interpreting public policy as a bar to enforcement appears to be not settled. In a 1997 case of USA Productions and Tom Hulett & Associates. v China Women Travel Service, the Supreme People's Court of China refused to enforce an arbitral award on the basis that heavy metal music was "contrary to China's actual conditions and thus contravened China's socio-public interests."7 In order to have a more unified approach towards enforcement of arbitral award and make it harder for the Chinese courts to deny enforcement, China has since introduced an automatic appeal process. Under the process, when a court refused to enforce an arbitral award, the case will be forwarded to a high court. If the high court confirms the decision, the case will be submitted to the Supreme Court.8
Gao Xiaoli, the Senior Judge of the Supreme People's Court of People's Republic of China, in a report to the International Bar Association Sub-committee on Recognition & enforcement of Awards dated 10 March 2015 said that: –
"Neither Chinese law nor Judicial Interpretation of the Supreme People's Court of China (SPC) explicitly defines what public policy is. Instead, public policy was interpreted and elaborated on a case-by-case basis by the SPC… Generally speaking, Chinese courts interpret public policy in a very narrow way and did not categorize it. It is triggered only if the award is manifestly contrary to the principle of the law, fundamental interests of the society, safety of the county, sovereignty, or good social customs."9
In a 2016 case of Taizhou Haopu Investment Co. Ltd v Wicor Holding AG10, the Chinese Taizhou Intermediate People's Court ("Taizhou Court") refused the enforcement of an International Chamber of Commerce ("ICC") award on the ground of public policy.
In this case, Wicor, a Swiss company entered into a joint venture contract with a Chinese company, Haopu. Wicor commenced an ICC arbitration and was granted the final award. However, before the award was issued, there was a related dispute between Wicor and Haopu before the Jiangsu Higher People's Court ("Jiangsu High Court") which held that the arbitration clause of the contract was invalid as it did not specify an arbitral institution. In China, the law requires an arbitration clause in a contract to specify an arbitral institution in order to avoid invalidity.11
It follows that when Wicor applied for enforcement of the arbitral award before the Taizhou Court, the Taizhou Court rejected the application on the basis that the Jiangsu court had already found that the arbitration clause was invalid. The Taizhou Court held that the arbitral award, which was issued under the assumption that the arbitration clause was valid, was in direct conflict with the Jiangsu High Court's decision and therefore violated the public policy of China.
This case was distinguished from an earlier case of Castel Electronic Pty Ltd. v TCL Air Conditioner (Zhongshan) Company Ltd, where the award was issued earlier than the court decision, and the Supreme People's Court of China held that the conflict between the court decision and the award was not a violation to the public policy of China.12
The courts in Indonesia interpreted public policy as a bar to enforcement broadly. Frans Winarta in a report to the International Bar Association Sub-committee on Recognition & Enforcement of Awards in 2015 said that the Indonesian courts' interpretation of what amounts to a violation of public policy is: -
"i. a violation of the prevailing laws and regulations in Indonesia;
ii. endangering the national interest of Indonesia, which includes the local economy; and
iii. a violation against the sovereignty of Indonesia."13
In Astro Group v Lippo Group,14 both parties were engaged in an arbitration in Singapore. In addition, Lippo had also brought a court proceeding against Astro in Indonesia. Astro objected to the court proceeding and was granted an interim award by the arbitral tribunal which ordered Lippo to cease any legal proceedings in Indonesia.15 Astro sought to enforce the interim award at the Central Jakarta District Court ("CJDC"). The CJDC in considering the award which included an order to cease any on-going proceeding in Indonesia, decided that the award violated the sovereignty of Indonesia as "no foreign power could ever interfere with the on-going legal proceedings in Indonesia." Therefore, the CJDC refused enforcement of the award on the basis that it was against the public policy of Indonesia. This was then upheld by the Supreme Court of Indonesia.
Based on the above, we can say that jurisdictions like Malaysia, United Kingdom and Singapore have adopted a restrictive approach in interpreting public policy as a bar to enforcement of arbitral awards. The position is still uncertain in China. In Indonesia, the courts adopted a broad interpretation of public policy as a bar to enforcement.
- Arbitration (Amendment) (No. 2) Act 2018 repealed section 42 of Arbitration Act 2005.
-  1 CLJ 1 at para 53 & 55, Malaysian Federal Court.
-  1 SLR 597.
-  EWCA Civ 838.
-  SGHC 65.
- See Footnote 3.
- Chen Haoqian, Bao Hailin, & Zhang Tianyi 'Piercing the Veil of Public Policy in the Recognition and Enforcement of Foreign-Related Awards in China.' [2 March 2016]. Beijing Law Review, 7, 23-32. http://dx.doi.org/10.4236/blr.2016.71003 at page 28.
- Sormeh Bouzarjomehri and Eisa Amini, 'Public Policy as Ground for Refusal of International Arbitral Awards - A Comparison Between Different Judicial Practices' [30 November 2016] 9 (10) Journal of Politics and Law http://dx.doi.org/10.5539/jpl.v9n10p81 at page 85.
- Gao Xiaoli (Senior Judge of the Supreme People's Court of P.R. China) 'Report of the People's Republic of China on Public Policy as a Ground for Refusal of Enforcement of Arbitral Awards under the New York Convention' [10 March 2015] at page 2.
- Taizhou Haopu Investment Co., Ltd. v Wicor Holding AG, Taizhou Court, P. R. China, Case Docket Number:  Tai Zhong Shang Zhong Shen Zi, No. 00004 (2 June 2016) (Taizhou Intermediate People's Court of Jiangsu Province).
- Jessica Fei, May Tai and Mark Chu (Herbert Smith Freehills), 'Taizhou Intermediate People's Court refuses recognition and enforcement of ICC award on basis of public policy' [16 September 2016] Thomson Reuters Practical Law at page 2.
- See Footnote 9 at page 18.
- Frans H. Winarta, 'Indonesia Country Report on Public Policy for IBA APAG', International Bar Association  at page 2.
- The CJDC Decision No. 05/Pdt.Arb.Int/2009 dated 28 October 2009, upheld by the Indonesian Supreme Court Decision No. 01 K/Pdt.Sus/2010 dated 24 February 2010.
- See Footnote 13 at page 6.