“International Commercial Arbitration: Enforcement Challenges and Jurisprudential Divides.”
Introduction: The Promise and the Practice
International commercial arbitration is often introduced to law students as the great equaliser of cross-border dispute resolution. It establishes a neutral forum, a single binding award, and due to the presence of the New York Convention, there lies near-universal enforceability. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, concluded at New York on 10th June 1958, is responsible for binding more than 170 states and is widely regarded as the most successful private international law treaty of the twentieth century. Yet the brevity that made it adoptable, a handful of articles setting out grounds on which enforcement “may” be refused, has left the door open for national courts to fill massive interpretive gaps on their own. What has resulted is not a single harmonised law of enforcement but a patchwork of conflicting jurisprudential philosophies with each being defensible on its own terms and each capable of producing opposite outcomes on materially identical facts. This piece maps and encompasses three such fault lines: the treatment of annulled awards, the scope of judicial review over jurisdictional findings, and the content of the public policy exception, and asks what they mean for the Convention’s promise of predictability.
The New York Convention’s Enforcement Architecture
Articles III to V of the Convention supply the operative machinery. Article III obliges contracting states to recognise arbitral awards as binding and to enforce them under the procedural rules of the forum which is subject only to the conditions set out in the following articles. Article IV is largely a formal article, which states that the party seeking enforcement produce the award and the arbitration agreement. The real battleground is Article V, which is responsible for setting out an exhaustive list of grounds which can result in denial of enforcement. Article V(1) provides the grounds through which a party can stop the enforcement process. The burden of proof entirely on the party seeking to set aside the enforcement. The grounds are: incapacity or an invalid arbitration agreement, lack of notice or an inability to present one’s case, an award exceeding the scope of submission, an improperly constituted tribunal. Article V(2) further establishes that the competent authority where the enforcement is sought has the power to deny enforcement if it finds that: the matter cannot be arbitrated under the law of that country or the enforcement shall be against the public policy. Two drafting choices drive much of the divergence explored below. First, the chapeau to Article V(1) provides that recognition “may” be refused. The word “may” has given rise to various debates by the courts and commentators for decades. The subject being whether the interpretation was permissive discretion or an invitation to narrow, pro-enforcement construction. Furthermore Article VII preserves any more-favourable right available under the domestic law of the enforcing state, allowing states to enforce awards on grounds even more generous than the Convention itself supplies. Between “may” and “more favourable,” national courts have found considerable room to interpret their reasoning.
- The Territoriality-Delocalisation Divide: Enforcing Annulled Awards
Article V(1)(e) states “The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.” French courts, however, have readily declined to treat annulment at the seat as fatal. In Hilmarton v Omnium de Traitement et de Valorisation, the Cour de cassation enforced a Geneva-seated ICC award notwithstanding its annulment by the Swiss Federal Tribunal, reasoning that an international award is not anchored in the legal order of any single state and that Article VII entitled the winning party to rely on French domestic law, which does not list foreign annulment among its own grounds for refusal. The Cour de cassation extended this delocalised theory further in the case of Putrabali by treating an international award as a decision of international justice whose validity is assessed only by reference to the rules of the state where recognition is sought.
The American judiciary has generally maintained a more guarded stance regarding transnational award recognition. The District Court for the District of Columbia’s decision in Chromalloy Aeroservices v Arab Republic of Egypt enforced an Egyptian-annulled award by treating Article V(1)(e) as permissive and Article VII as a mandatory floor of enforceability. The Second Circuit pulled back shortly afterward in Baker Marine, declining to enforce a Nigerian-annulled award, and the D.C. Circuit followed a similar path in TermoRio, treating deference to the annulling court as the default rule. It took about two decades and an unusual set of facts for the pendulum to swing back. In Corporación Mexicana de Mantenimiento Integral v Pemex-Exploración y Producción, the Second Circuit Court of Appeals upheld a $300 million arbitration award, despite a Mexican court having annulled it. The court reasoned that enforcing the retroactive Mexican legislation which resulted in stripping the claimant of a legal forum, resulted in violation of fundamental U.S. notions of justice. The court framed its judgement as an exceptional application of the public-policy safety valve rather than a wholesale adoption of the French approach. The practical effect of this framework is a tripartite split in enforcement: the vacated award is unenforceable under English law, enforceable as a matter of principle in France, and enforceable in the Second Circuit only under unusually compelling facts satisfying the public policy exception.
One Award, Two Outcomes: Dallah and the Jurisdictional Puzzle
The Convention’s promise of a single, portable award is tested even more starkly when two national courts examine an identical jurisdictional question and reach opposite conclusions. In Dallah Real Estate and Tourism Holding Co v Government of Pakistan, an ICC tribunal seated in Paris held that the Government of Pakistan, although not a signatory, was bound by an arbitration agreement entered into by a trust it had established. Applying French law as the law of the seat, the UK Supreme Court conducted a full, independent re-examination of the jurisdictional question and concluded that there was no common intention in existence to bind the Government thereby refusing enforcement under section 103(2)(b) of the Arbitration Act 1996, which directly mirrors Article V(1)(a) of the Convention. Weeks later, applying the same French law to the same facts, the Paris Court of Appeal reached a totally opposite conclusion and declined to set the award aside. Thus, Dallah was left holding an award that was enforceable in France but was valueless in England. This therefore is a result the Convention’s drafters, who envisaged a single seat-court determination commanding respect elsewhere, plainly did not anticipate happening. The case is a favourite in arbitration seminars precisely because it exposes the fiction that applying the same governing law guarantees the same outcome: French law as found by an English court and French law as found by a French court are not always the same law in practice.
The Public Policy Fault Line
If annulment and jurisdiction expose divergence in the mechanics of enforcement, public policy exposes divergence in substance. The drafting history and case law under Article V(2)(b) reflect a broad international consensus that the ground should be construed narrowly and invoked only in exceptional circumstances. India’s experience illustrates how quickly that consensus can fracture at the domestic level. In Renusagar Power Co v General Electric Co, the Supreme Court of India confined public policy under the then-applicable Foreign Awards Act to violations of the fundamental policy of Indian law, India’s interests, or justice and morality, a formulation closely tracking the Convention’s restrictive international mood. A decade later, in Oil and Natural Gas Corporation Ltd v Saw Pipes Ltd, the same Court added “patent illegality” as a further and considerably more elastic head of public policy, permitting courts to set aside awards that merely misapplied substantive law or departed from contractual terms. Although Saw Pipes concerned a domestic award, subsequent decisions risked importing the same expansive review into the enforcement of foreign awards. The Indian Parliament’s 2015 amendment confined “patent illegality” to domestic awards and restore something closer to the Renusagar standard for foreign ones. The episode is a useful caution for any jurisdiction positioning itself as an arbitration-friendly seat: a single expansive reading of public policy can unsettle years of doctrinal convergence with the Convention’s pro-enforcement architecture.
Conclusion: Towards Convergence?
Thus it can be established that disagreements in interpreting and understanding the 65-year-old New York Convention stem from ever varying judicial interpretations rather than bad faith. This highlights that global uniformity in international arbitration still remains a goal rather than a reality. Bodies such as UNCITRAL and the International Council for Commercial Arbitration continue to press for harmonised guidance and national legislatures all around the globe. India’s 2015 amendment seeked to follow the harmonised guidance by periodically course-correcting toward the Convention’s pro-enforcement centre of gravity.
