ARTICLE 5 – GROUNDS FOR REFUSING TO GRANT RELIEF

2. The competent authority of the Party to the Convention where relief is sought under article 4 may also refuse to grant relief if it finds that:

(a) Granting relief would be contrary to the public policy of that Party; or

Find the introduction and context of this blog series on the Singapore Convention here.

Click here for the complete annotation in Portuguese (Anuário – Ano 3).

André Seromenho

Telma Nabais

1. Scope of application; 2. The concept of public policy and the thinking of the Working Group; 3. International public policy; 4. Procedural and substantive public policy; 5. Conclusion.

1. The exhaustive list of Article 5, alluding to the grounds for refusal of the measures of execution of the mediated agreement, includes the cases where granting relief would be contrary to the public policy of the country (paragraph 2 a). This ground may be analysed by the competent authority of its own motion[1], without prejudice of the possibility of being invoked as a defence by the party.

Contradiction to the public policy will have to be filtered by the Signatory Party where recognition or enforcement of the mediated agreement is sought. The legal system where the mediation took place, and the agreement was concluded is not relevant in this context. In this sense, the definition of public policy is referred to the competent authorities of the State Party before which the enforcement measures have been requested.[2]

As is clear from the wording of the article, the control of public policy as an impact on the enforcement measures requested by one of the parties and not on the content of the mediated agreement. The aim is thus to safeguard the parties’ freedom of choice, while preserving the validity and existence of the agreement itself, even if the enforcement measures are refused on the grounds that they are contrary to public policy.[3]

2. This provision replicates what is already provided for in Article V(2)(b) of the New York Convention[4] for arbitration, which similarly provides for refusal of recognition or enforcement of an arbitral award in cases where the competent authorities find that recognition or enforcement “would be contrary to the public policy of that country”.

Both provisions refrain from defining the concept of public policy. Although some delegations proposed the inclusion of the term “international”, the Working Party which drafted the Singapore Convention deliberately did not include the term in order to ensure uniform language in line with the New York Convention. It is thus necessary to rely on the more developed arbitration case law in the implementation of the notion of public policy[5]. In addition, some delegations expressed a preference for national courts to have jurisdiction to determine the content of the notion of public policy.[6]

In turn, the New York Convention avoided any effort to harmonize the concept of public policy, ignoring a possible universal content by referring its definition to each State, since the recognition and enforcement of foreign arbitral awards falls within the scope of state sovereignty[7]. Underlying this thinking is the generic understanding that public policy is a “concept sensitive to the legal system in which it is embedded”[8], as well as adaptable and volatile to ethical, political, social, historical, economic and geographical contexts[9].

Because the Singapore Convention departed from the thinking reflected in the New York Convention, particularly regarding the grounds for refusal, it is important to understand the meaning of public policy in international arbitration.

3. It is the understanding of the doctrine[10] that the New York Convention is concerned with the exception or reservation of international public policy, as it is about the “recognition of decisions of foreign state courts and arbitrators based abroad”[11] and not about ascertaining the validity of the arbitral award within the legal order in which it was made[12] .

Thus, the reserve of international public policy is a general clause, definable on a case-by-case basis, which acts as a limit on the effectiveness of a foreign arbitral award, serving as an escape valve[13] which allows the national judge to refuse recognition of the award when it violates fundamental principles of its legal system. Given this relativity in the face of the specific case, to which must be added the difficulty of exhaustively listing the fundamental principles of each legal system[14] , changeable in time and space, it is difficult for the interpreter to determine a priori the content of this ground for refusal[15] .

It should be noted, notwithstanding the difficulty of establishing a prior concept, that the public policy reservation is exceptional in nature. Thus, in order to safeguard the purposes of the Singapore Convention by promoting the harmonious development of international economic relations, the application of the public policy reservation will be made when the enforcement measures produce a “manifestly intolerable” result[16] in the State where enforcement is sought.

Although in article V (2) (b) of the New York Convention the term “manifestly” is not used, consequently excluded from the Singapore Convention[17], the doctrine has followed a restrictive reading, basing itself on the verb “may”, instead of “must”, used in the Conventions. That is, a foreign arbitral award or an international mediation agreement can violate one of the principles that compose the public international policy of a certain State and, even so, be recognized or executed in that State because the violation is not manifest[18]. To this end, it is necessary to look at the result of the recognition of the arbitral award or, as mentioned in point 1, at the result of the enforcement measures of the mediated agreement, and not at its content, to ascertain whether there is a manifest incompatibility with the fundamental values and principles of international public policy[19].

4. Adding to the aforementioned characteristics, it should also be noted that the International Law Association (ILA)[20] has pointed to a dual aspect of public policy, containing principles of a procedural nature (as to the formative procedure) and of a substantive nature (as to content).

As mediation is a flexible process, characterised by the full control of the parties (or empowerment), the reference to procedural public order will be based on the structuring principles of the concept of mediation, such as: voluntariness, confidentiality, equality, impartiality, or independence. For example, if the mediator, in collusion with one of the mediated parties does not informing the other party of an existing personal relationship, he violates the principle of impartiality. Note that situations of violation of procedural public policy necessarily fall within the scope of paragraphs e) and f) of Article 5(1) of the Singapore Convention, referring to violation of the duties of conduct of the mediator, as well as the rules of mediation, and/or violation of the principles of independence and impartiality.

Therefore, no other principle of procedural public policy remains that is not already reflected in the subparagraphs of Article 5(1), so that the parties may follow two different avenues of argumentation. This duplicity means that any violation of the fundamental principles of mediation and of the duties of conduct of the mediator may be known ex officio by way of the subparagraph under annotation, unlike the grounds for refusal of paragraph 1 (which require allegation by the parties).

It seems to us, however, that it will be difficult for the judge to know of his own motion the violation of the procedural public order, since the access to the agreement, to consider the requested execution measures, does not allow him to know the procedure adopted or the conduct of the parties and the mediator during the mediation sessions. Thus, at the outset, it will depend on the argument of the parties.

As regards substantive international public policy, taking into account the analysis already made in point 3, it has the following characteristics: “(i) imprecision; (ii) the national nature of its requirements (which vary from State to State, according to the dominant concepts in each of them); (iii) exceptionality (as it is a limit to the recognition of an arbitral award putatively founded on the principle of private autonomy); (iv) fluctuation (depending on the prevailing concepts at the time of the judgment in the country where the issue arises); and (v) relativity (depending on the circumstances of the case and particularly the intensity of the ties between the legal relationship in question and the Portuguese State)”[21]. It is not possible, therefore, to determine a fixed and definitive list of the principles that make up the concept of (substantive) international public policy. Even so, it is worth highlighting the various attempts to concretise the content of this undetermined concept.

Sampaio Caramelo[22] considers the following principles: (a) pacta sunt servanda; (b) good faith; (c) prohibition of abuse of rights; (d) proportionality; (e) prohibition of discriminatory or spoliatory measures; (f) protection of the civilly incapable; (g) prohibition of perpetual ties; (h) prohibition of punitive damages in civil matters; (i) legal rules designed to protect weaker contracting parties. It also considers non-recognition in cases of (j) trafficking in drugs, weapons, people or human organs or other forms of human rights violations; or in cases of (l) money laundering or practices seriously damaging to the environment or cultural heritage.

In the same vein, Lima Pinheiro[23] lists the following principles: (a) good faith; (b) prohibition of racial discrimination or slavery; (c) respect for human rights and protection of cultural heritage; (d) protection of the environment. The author adds (e) corruption and (f) trafficking in drugs or weapons.

At the level of jurisprudence, we highlight, as examples, the case of Eco Swiss v. Benetton[24], in which the ECJ decided for the integration in the international public policy of the Member States of the rules of EU competition law, and the case of Daiichi Sankyo Company Limited v Malvinder Mohan Singh and others, in which the High Court of New Delhi refused to enforce an international arbitration award binding children to jointly and severally pay an amount exceeding EUR 460 million[25].

5. Notwithstanding the importance of the concept of international public policy in arbitration for the interpretation of the Singapore Convention, under this Convention, the interpretation needs to be more circumscribed, since the self-determination, autonomy and freedom of the parties is exercised to a greater extent in mediation than in arbitration[26]. Unlike arbitration, which by nature is an adjudicatory process, mediation is based on the empowerment and decision-making capacity, free and informed of the parties, so that the measures defined in the mediation agreement deserve greater protection on behalf of the will and consensus of the parties.

[1] Bárbara Sánchez López, “La Eficacia Transfronteriza de los Acuerdos de Mediation y la Convención de Singapur: ¿Grandes Esperanzas?”, Cuadernos de Derecho Transnacional, volume 12, no. 2, 2020, p. 1439. Timothy Schnabel, “The Singapore Convention on Mediation: A Framework for the Cross-Border Recognition and Enforcement of Mediated Settlements”, Pepperdine Dispute Resolution Law Journal, volume 19, no. 1, July 2019, p. 42.

[2] Dorcas Quek Anderson, “The Singapore Convention on Mediation: Supplying the Missing Piece of the Puzzle for dispute Resolution”, Review Paper, 2020, available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3304587, pp. 18-19.

[3] Bárbara Sánchez López, “La Eficacia Transfronteriza de los Acuerdos de Mediación y la Convención de Singapur: ¿Grandes Esperanzas?”, 2020, p. 1439.

[4] Convention on the Recognition and Enforcement of Foreign Arbitral Awards, New York 10 June 1958.

[5] Dorcas Quek Anderson, “The Singapore Convention on Mediation: Supplying the Missing Piece of the Puzzle for dispute Resolution”, 2020, pp. 18-19; Eunice Chua, “The Singapore Convention on Mediation and the New York Convention on Arbitration: Comparing Enforcement Mechanisms and Drawing Lessons for Asia”, Asian International Arbitration Journal, volume 16, no. 2, 2020, p. 133.

[6] Héctor Flores Sentíes, “Grounds to Refuse the Enforcement of Settlement Agreements Under the Singapore Convention on Mediation: Purpose, Scope, and Their Importance for the Success of the Convention”, Cardozo Journal of Conflict Resolution, volume 20, no. 4, 2019, p. 1251.

[7] Manuel Pereira Barrocas, “The Public Bar in Arbitration”, Revista da Ordem dos Advogados, year 74, 2014, p. 58.

[8] António Pedro Pinto Monteiro, “Da Ordem Pública no Processo Arbitral”, in Studies in Homage to Prof. Doctor José Lebre de Freitas, Coimbra Editora, 2013, p. 595.

[9] Jorge Morais Carvalho, Os Contratos de Consumo – Reflexão sobre a Autonomia Privada no Direito do Consumo, PhD dissertation, 2011, available at https://run.unl.pt/bitstream/10362/6196/1/Carvalho_2011.pdf.2011, p. 661.

[10] António Sampaio Caramelo, The Recognition and Enforcement of Foreign Arbitral Awards: before the New York Convention and the Voluntary Arbitration Law, Almedina, 2016, pp. 203 et seq.

[11] António Sampaio Caramelo, The Recognition and Enforcement of Foreign Arbitral Awards: before the New York Convention and the Voluntary Arbitration Law, 2016, p. 204.

[12] It is only when deciding on the setting aside of an arbitration award made in the territory of the State that the distinction between domestic public policy and international public policy is taken into account. In fact, “international public policy has a more restricted content than domestic public policy because the needs of international trade mean that when the subject of the dispute has connections with other legal systems, the legal system of the State of the seat of arbitration is less demanding in terms of controlling the compliance of the arbitral award with its basic principles than it would be in a purely internal situation. António Sampaio Caramelo, The Recognition and Enforcement of Foreign Arbitral Awards: before the New York Convention and the Voluntary Arbitration Law, 2016, p. 204, footnote 611.

[13] António Pedro Pinto Monteiro, “Da Ordem Pública no Processo Arbitral”, 2013, p. 614. The author refers to a “right of veto” against the recognition of a foreign arbitral award offensive to the fundamental values and principles of a legal order.

[14] Notwithstanding the misleading term “international”, the concept is analysed in the light of national law. In this sense, Luís de Lima Pinheiro, Direito Internacional Privado, volume I, 3rd edition recast, Almedina, 2014 , p. 660: “International public order is national […]”. Manuel Pereira Barrocas, “A Ordem Pública na Arbitragem”, 2014, p. 39.

[15] Luís de Lima Pinheiro, Private International Law, 2014, p. 659.

[16] Luís de Lima Pinheiro, Private International Law, 2014, p. 668.

[17] Héctor Flores Sentíes, “Grounds to Refuse the Enforcement of Settlement Agreements Under the Singapore Convention on Mediation: Purpose, Scope, and Their Importance for the Success of the Convention”, 2019, p. 1251. The author clarifies that the inclusion of the term “manifestly” was also excluded for the purpose of not confusing courts in view of the departure it would imply from the language used in the New York Convention, which is intended to be uniform.

[18] Manuel Pereira Barrocas, “Public Order in Arbitration”, 2014, p. 57.

[19] Luís de Lima Pinheiro, “Development Trends in the Recognition of “Foreign” Arbitral Awards under the New York Convention”, Revista da Ordem dos Advogados, year 78, 2018, p. 224.

[20] Recommendations of the International Law Association (ILA) on the application of public policy as a ground for refusal of recognition or enforcement of international arbitral awards (adopted on 2-6 April 2002 at the association’s 70th conference in New Delhi), welcomed by the International Council for Commercial Arbitration (ICCA). Available at: https://www.arbitration-icca.org/iccas-guide-interpretation-1958-new-york-convention.

[21] Supreme Court Judgment; 26.09.2017, 1008/14.4YRLSB.L1.S1, available at: www.dgsi.pt.

[22] António Sampaio Caramelo, “Anulação de Sentença Arbitral contrária à Ordem Pública”, Revista do Ministério Público, no. 126, 2011, p. 172.

[23] Luís de Lima Pinheiro, ” Ordem Pública Internacional, Ordem Pública Transnacional e Normas Imperativas que Reclamam Aplicação ao Mérito da Causa “, Revista Internacional de Arbitragem e Conciliação, No. 5, 2012, p. 129.

[24] Judgment of the Court of Justice of the European Union of 01.06.1999, Case No C-126/97 (Eco Swiss China Time, Ltd. Vs. Benetton International NV), available at: www.curia.europa.eu.

[25] Nadja Alexander and Shouyu Chong, “An Introduction to the Singapore Convention on Mediation – Perspectives from Singapore”, Nederlands-Vlaams tijdschrift voor mediation en conflictmanagement, volume 22, 2019, p. 48.

[26] Dorcas Quek Anderson, “The Singapore Convention on Mediation: Supplying the Missing Piece of the Puzzle for dispute Resolution”, 2020, pp. 18-19.