Public policy and the recognition and enforcement of a foreign arbitral award

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The arbitration proceeding is concluded by an award that is final and binding on all parties. The expectation is that the losing party comply with the decision, however, in the present day the losing party will not comply and probably it will challenge the validity of the award. The losing party could also apply for opposing to recognition and enforcement of the award at the court of the place where the enforcement is sought. The grounds for setting aside an award or rejecting its enforcement are specified firstly in the New York Convention and also in the national law on arbitration of each country. The limited grounds for setting aside the award are established to promote arbitration as an effective tool to solve international commercial disputes.

Among the other grounds for refusing the enforcement of an award, there is the public policy of a country. In Thailand, this ground is stated in Section 40, paragraph 3.2.b and Section 44 of the Arbitration Act 2002 that courts have the power to refuse the recognition and enforcement of a foreign arbitral award when this one is contrary to Thailand’s public policy.

The Sections of the Arbitration Act 2002 just mentioned, restate the content of Art. V paragraph 2.b.1 of the New York Convention of the Recognition and Foreign Arbitral Award 1958. The term “public policy” is not defined in the Convention and its meaning is different from country to country, accordingly, national courts have broad discretion in interpreting the public policy. As in the New York Convention, also the Art. 34.2 of the UNCITRAL Model Law does not define “public policy”. It is important to note that the ground of public policy does not need to be raised by a party but the court can do so ex officio.

In the Thai law, the definition of public policy is “peace and good morals of people”. As it is possible to see this definition is not clear and leave room for a broad or narrow interpretation at the discretion of the courts. However, the Supreme Administrative Court, to limit this discretion, issued guidelines for the interpretation. According to these guidelines, the public policy aims to protect the common interest of the country [3] and parties cannot derogate from public policy to protect their interests because in this way they could endanger the security of nation’s economy and the society [4].

Analyzing the past decisions by the Supreme Court and the Supreme Administrative Court concerning public policy, and the refusal of recognition and enforcement of arbitral awards, for this reason, it is possible to highlight the following points:

Public order and good morals of people could be found in the arbitrator appointment proceeding, whenever it concerns the rules applicable to the appointment agreed by the parties and the whole process [6] or the arbitrator’s impartiality and independence in performing his/her duties [5];
Starting a new arbitration on the same issue between the same parties once the final award is rendered in the first arbitration proceeding [7];
When the contract from where the dispute arose is illegal;
When arbitrators wrongfully apply the law or misinterpret the provisions applicable [8] or apply a law that is no more in force [9];
When the contract from where the dispute arose is in principle legal, but the purpose why parties stipulated that contract is illegal [10]. Examples could be found in a loan contract with a prohibited rate of interest [11], contraction contracts breaching building law [12], the wrongful application of prescription [13], violation of the law regulating bankruptcy [14], the participation of private companies in state-own business [15], violation of the law governing telecommunications [16] and when the arbitrators’ decision favours the losing party [17].

The guidelines and the Supreme Court’s decisions do not provide a clear line to follow to identify the “peace and good morals of people”, For these reasons, public policy has to be considered on a case by case basis. Peace and good morals of people are fluid concepts that change from time to time accordingly with the economy, the social conditions and the era when they are considered. For instance, what was considered acceptable in the past, i.e. it was possible to pay for winning a public auction, in the present days, this is considered bribery and forbidden by the law. Such contracts are against the current good morals of people so it has to be considered null and void. Define public policy at an international level is even more difficult due to the different interpretations provided by each country that are hard to reconcile.

Moreover, courts use public policy as an excuse to refuse the award’s enforcement. Often judges consider facts falling outside the scope of public policy to reject the award or to create the opportunity to review the merit of the same [18].

After all, this consideration is essential for national courts to interpret the public policy in the narrowest way possible. Doing so, courts will help to increase the use of arbitration as a method for dispute resolution, parties would rely more on arbitration knowing that enforcement will be easy.

Reference

[1] คำพิพากษาฎีกาที่ 2546/2547 คณะกรรมการเช่าที่ดินเพื่อเกษตรกรรมวินิจฉัยว่าการเช่าที่ดินเพื่อปลูกต้นกล้วยและพืชล้มลุกเป็นการเช่าที่นา ซึ่งขัดกับนิยามที่พระราชบัญญัติการเช่าที่ดินเพื่อเกษตรกรรมฯ กำหนดเอาไว้แล้วโดยเฉพาะ การพิจารณาของคณะกรรมการฯ ที่นำเอาความหมายตามที่พจนานุกรมบัญญัติเอาไว้มาใช้บังคับ จึงไม่สามารถกระทำได้
[2] คำพิพากษาฎีกาที่ 8330/2550
[3] คำพิพากษาฎีกาที่ 840/2561 กรณีเป็นเรื่องการชำระหนี้โดยฝ่าฝืนข้อห้ามตามกฎหมายหรือศีลธรรมอันดี ซึ่งมาตรา 411 แห่งประมวลกฎหมายแพ่งและพาณิชย์ กำหนดว่า บุคคลที่ได้กระทำการเพื่อชำระหนี้ดังกล่าวไปแล้วนั้น จะเรียกร้องให้คืนทรัพยืไม่ได้ การที่อนุญาโตตุลาการชี้ขาดให้มีการคืนทรัพย์ซึ่งขัดกับบทบัญญัติดังกล่าว จึงถือว่าการบังคับตามคำชี้ขาดนั้นย่อมเป็นการขัดต่อความสงบเรียบร้อยหรือศีลธรรมอันดีของประชาชน ศาลชอบที่จะปฏิเสธไม่บังคับตามคำชี้ขาดของคณะอนุญาโตตุลาการได้
[4] คำพิพากษาฎีกาที่ 8265/2559
[5] คำพิพากษาฎีกาที่ 8714/2554
[6] คำพิพากษาฎีกาที่ 2557/2559
[7] คำพิพากษาฎีกาที่ 13535-13536/2556
[8] คำพิพากษาฎีกาที่ 2503/2562
[9] คำพิพากษาศาลปกครองสูงสุดที่ อ.1259/2559
[10] คำสั่งศาลปกครองสูงสุดที่ อ.18/2558
[11] Article V (2) Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that :
- (b) The recognition or enforcement of the award would be contrary to the public policy
[12] Article 34 (2) An arbitral award may be set aside by the court specified in article 6 only if:
- (b) the court finds that :
- (ii) the award is in conflict with the public policy of this state
[13] คำสั่งศาลปกครองสูงสุดที่ 48/2555
[14] คำพิพากษาศาลปกครองสูงสุดที่ อ.1054/2558
[15] คำพิพากษาฎีกาที่ 2231-2233/2553
[16] คำพิพากษาฎีกาที่ 1273/2543
คำพิพากษาฎีกาที่ 11102/2551
[18] คำพิพากษาฎีกาที่ 1985/2541, คำพิพากษาฎีกาที่ 11454/2555, คำพิพากษาศาลปกครองสูงสุดที่ อ.824/2556 และคำพิพากษาศาลปกครองสูงสุดที่ อ.698-699/2558[1] คำพิพากษาฎีกาที่ 1985/2541, คำพิพากษาฎีกาที่ 11454/2555, คำพิพากษาศาลปกครองสูงสุดที่ อ.824/2556 และคำพิพากษาศาลปกครองสูงสุดที่ อ.698-699/2558

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Public policy and the recognition and enforcement of a foreign arbitral award