A judicial interference in the enforcement of arbitral awards is required in a case of non-compliance with the award by any relevant party. From the both practical and theoretical viewpoint courts of all jurisdictions may refuse to enforce arbitral awards if such enforcement would be contrary to the public policy of their countries. This is known as 'the public policy defense to the enforcement of arbitral awards'. The legal rationale for the public policy defense is established in the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 and the UNCITRAL Model Law on International Commercial Arbitration 1985, which are two of the most important international legal documents in promoting and regulating international commercial arbitration. The public policy defense is one of the most controversial exceptions to the enforcement of arbitral awards, causing judicial inconsistency, therefore unpredictability in its implementation. The present research paper explores the main controversies and complexities in the judicial implementation of the public policy defense from comparative perspective of both developed and developing countries.

A trend toward delocalization of arbitral law has been underway for the last 50 years, starting with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Many courts recognizing the merits of arbitration have exercised significant deference toward arbitral awards, reflecting a modern and light-handed attitude and narrow view of the public policy defense to enforcement of international arbitral awards. At the same time, however, the expanding scope of claims that may be submitted to arbitration accentuates emerging concerns about issues of mandatory public law arising in arbitration. There is increased discussion over the authority and obligation of arbitral tribunals to consider issues of public law within the arbitration procedure itself. Further, there is a call for recognition that the liberalization of arbitrable subject matter comes necessarily at the price of some increase in judicial ex post control of the compatibility of the arbitrators' product with public policy, as the second-look doctrine raised by the U.S. Supreme Court in the Mitsubishi case suggests. From time to time it is appropriate to revisit the question of public policy as a bar to enforcement of international arbitration awards. Public policy, by nature, is a dynamic concept that evolves continually to meet the changing needs of society, including political, social, cultural, moral and economic dimensions. My article focuses on how considerations of mandatory public law play into the concept of public policy as a defense to enforcement of international arbitral awards. My claim is that mandatory public law poses a challenge to international arbitration and, in response, in order to sustain the balance and legitimacy of the international arbitral system, a reformed concept of substantive public policy is needed. I do not argue in favor of lowering the standard to be applied - that is, in balancing between finality and justice, a reviewing court should continue to reflect a pro-enforcement bias and refuse enforcement only in "exceptional circumstances." In this respect, I agree with the detailed recommendations that are intended to guide an enforcement court's discretion, which are contained in the International Law Association Committee on International Commercial Arbitration's 2002 Final Report on Public Policy as a Bar to Enforcement of International Arbitral Awards. However, in my view, the scope of public policy as defined in the Final Report is too narrow because it recommends that an enforcement court exclude consideration of the public policies that may be relevant at the place of the underlying performance of the contract. I contend that the public policy standard should permit a supervising court to consider fundamental public policy not only of the enforcement forum, but also at the place with the closest connection to an underlying contract, where the transaction in question has its greatest societal impact. This approach provides proper incentives for the parties and arbitrators to consider relevant issues of mandatory public law during arbitral proceedings and determine whether they are sufficiently fundamental. It also enables courts at a remove from the place of performance to give due regard to the important public policies of another State, reflecting that State's sovereignty and societal values. In this way, public policy mediates between the interests of transnational business and those of the State with closest connection to the contract. While building legitimacy and trust can be complicated and may require balancing paramount interests of arbitral finality against fundamental State principles, the public policy defense is the appropriate mechanism to achieve this counterpoise.

For over fifty years, the Supreme Court has declined to establish a standard of review for errors of law in arbitration awards. Decided in 1953, Wilko v. Swan confused the courts with a cryptic statement suggesting that a court could not vacate an award for errors “in the interpretations of the law by arbitrators” unless the arbitrator manifestly disregarded the law. Despite this statement's ambiguity, the federal courts recognized the “manifest disregard” standard, which the courts interpreted to permit vacatur when the arbitrator knew the law and deliberately flouted it. Thirty-four years after Wilko, the Supreme Court in McMahon v. Shearson/Lehman suggested a broader scope of review to ensure that the requirements of federal statutory law were enforced. Nevertheless, the federal judiciary continued to apply the manifest disregard standard as if the high Court had never decided McMahon. In 2008, the Hall Street Associates v. Mattel decision heightened the confusion by offering several alternative interpretations of the dicta in Wilko, scrambling words like eggs in a skillet. The confusion intensified in 2010, when the Supreme Court in Stolt-Nielsen v. AnimalFeeds International seemed to apply de novo review to an arbitration award. Then, inexplicably, only one year later, the high Court, in AT&T Mobility v. Concepcion, suggested that it viewed the manifest disregard standard with disfavor. This melee of contradictory decisions creates the need and opportunity to reconsider what the scope of judicial review of arbitral awards should be. That discussion should take into account the purposes of the FAA, its legislative history, and the current role of arbitration as a popular method of dispute resolution. Based on these considerations, this article proposes a new framework for the judicial review of arbitration awards. Awards deciding federal statutory rights such as rights prescribed in civil rights law and securities law should be reviewed for any errors of law. As Wilko and McMahon recognize, federal statutory rights require protection, even in arbitration. Similarly, courts should correct awards that violate well-defined federal public policy, particularly those that endanger public health, safety or welfare, or condone unlawful acts. Awards that do not implicate important federal policy may be subject to review by the state courts, but they should not be reviewed for errors of law or even manifest disregard of the law by the federal courts.

"The Public Policy Exception under the New York Convention: History, Interpretation, and Application, Second Edition describes in detail the drafting history of the public policy exception of Article V (2) (b) of the New York Convention and the purpose the signatory states wanted to achieve with this clause. The book explains how this clause is applied by the courts in many economically relevant states, especially in Brazil, Russia, India, and China. Since the release of the first edition in 2013, some countries have enacted new or amended existing arbitration laws, and many new decisions have been released especially by courts in Brazil, China, India, and Russia, which prompted the publication of this second edition. The book is important for internationally active companies as well as for lawyers and courts, as it aids lawyers and companies in drafting arbitration clauses and in enforcing foreign arbitral awards. Judgments often will not be enforced abroad, and this is especially true with respect to the enforcement of foreign judgments in the BRIC countries. For this reason, while useful to scholars and students, the Public Policy Exception, Second edition is of particular use to internationally active companies and their advisors as the book provides guidance on whether and where foreign arbitral awards will be more likely to be enforced in their favor abroad."-- from publisher's website.