Editor’s Note: The Fourth Seminar of the International Commercial Expert Committee of the Supreme People’s Court and Reappointment (New appointment) Ceremony of Expert Members was held successfully on September 25, 2024. Over 40 experts from more than 20 countries and regions focused on the theme of the “Collaborative Dialogue, Diverse Integration, Peaceful Development” during the seminar. Extensive and in-depth discussions were held within the framework of four specific issues. The texts of speeches delivered by the members of expert committee and distinguished guests during the discussion session on Topic Two International commercial transactions from a comparative law perspective: navigating legal intersections of international and domestic law would be posted on the CICC’s website.

International Commercial Transactions from a Comparative Law Perspective——Navigating Legal Intersections of International and Domestic Law

Anselmo Reyes

International Judge of the Singapore International Commercial Court

Former Representative of the Hague Conference on Private International Law’s Regional Office Asia Pacific

1. Domestic law frequently impacts on international commercial litigation.  

2. An obvious example is domestic public policy. Under Article V(2)(b) the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (to which China is a party), a court may refuse to recognise and enforce an arbitral award when recognition and enforcement will be contrary to domestic public policy.  Similarly, under the civil procedure of most jurisdictions, whether common law or civil law, a court may refuse recognition and enforcement of a foreign judgment if recognition and enforcement will be contrary to the public policy of the state or country in which the court is located.  

3. In both situations (that is, whether transnational commercial arbitration or litigation), recognition and enforcement will be “contrary to public policy” if the relevant award or judgment is repugnant to the fundamental moral, social, cultural, or legal norms of the state or country in which enforcement is sought.

4. A question that is increasingly turning up is the degree to which a court may refuse recognition or enforcement of a foreign award or judgment which has wrongly decided that a matter is perfectly legal under the domestic law of the state in which enforcement is sought.  That is what I propose to focus on in the five minutes allotted to me.

5. Consider first the position in arbitration.  

6. As a general principle of transnational commercial law, a mere error of law by an arbitral tribunal would not be enough to justify refusal of recognition or enforcement by an enforcing court.  That is because, by entering into an arbitration agreement, the parties agreed to be bound by the award even if the tribunal makes a mistake of law in reaching its decision.  

7. There will be times, however, when a party contends that recognition and enforcement of an award would mean condoning illegality under the governing law a commercial contract. That governing law may be the law of the enforcing state. The allegation in the latter situation will typically be that, because of alleged illegality (for instance, bribery, corruption), the underlying contract has been rendered void or unenforceable of the enforcing state. In the case posited, how should the court proceed?  

8. The standard approach might begin by distinguishing between errors of fact and errors of law in arbitral awards. If there is purely a question of fact, then the enforcing court should not normally engage in a review of merits.  An error may be one of mixed fact and law. But judges are trained to disentangle law from fact where the two are intertwined, so this difficulty is not insurmountable. Where there has been an error of law, the enforcing court may safely be assumed to know its own law. But is it any error by an arbitral tribunal with regard to the enforcing state’s law that will entitle the enforcing court to refuse recognition and enforcement of an award?  Should (say) the enforcing court refuse recognition because the arbitral tribunal wrongly applied the law on consideration in holding a commercial contract to be valid?  That would hardly seem to meet the public policy test of being repugnant to an enforcing state’s fundamental norms.  

9. Instead, in my submission, the award should only be refused recognition and enforcement as a matter of public policy where there is ‘palpable and indisputable illegality’ (that is, obvious criminality) on the face of the award, it may be appropriate for the supervising court to set the award aside as a matter of public policy. I fully appreciate that what constitutes ‘palpable and indisputable illegality on the face of an award’ is a vague expression. But I do not think that one can be more precise and a court dealing with this situation will effectively have to make a ‘judgment call’ on which side of the line the specific facts of a case fall. One situation in which there is obvious criminality under the law of most countries would be where there has been bribery and corruption in the obtaining of a contract.  

10. But the analysis cannot stop there.  

11. That is because the tribunal will likely itself have right appreciated that the governing law (in our situation, the law of the enforcing state) treats bribery and corruption as illegal.  The tribunal may then have investigated the surrounding circumstances and concluded that the evidence before it did not justify a finding of bribery and corruption.  If so, would it be open to the enforcing court to review the factual circumstances and evidence to determine whether there has been corruption and bribery?  This would be tantamount to a review of the merits of at least part of the award.  In other words, to what extent does the public policy exception in the New York Convention permit an enforcing court to review the tribunal’s evaluation of the facts and evidence?  Is the enforcing court bound by the tribunal’s findings of fact?

12. In Belokon v. Kyrgyzstan, Pourvoi No. 17-17.981 (23 March 2022) the French Cour de cassation held that the court is entitled to look at matters afresh where illegality (allegations of money laundering) is concerned.  The underlying arbitration was seated in Paris.  But to the extent that Belokon is a guide to the right approach, similar reasoning must apply to applications for the recognition and enforcement of awards.  The Belokon approach is not universal.  Other courts may adopt a different viewpoint.  See, for instance, at common law, Alexander Brothers Ltd. v. Alstom Transport SA and Alstom Network UK Ltd [2020] EWHC 1584 (Comm) where in an international commercial arbitration case the English court confirmed enforcement of an award despite allegations of corruption.

13. In a lecture delivered at the Hague Academy in August 2023, I queried the Belokon approach. I argued that arbitration is supposed to be a cost-effective and time-efficient means of resolving disputes.

14. Assume now that on every application by (say) a state to set aside an investment treaty award or to resist its enforcement, a court can reopen the tribunal’s findings as to the non-existence of extrinsic corruption and review the same afresh in the interests of stamping out corruption as a matter of international or domestic public policy. In such a world, there could potentially be no end to the time and money that an investor must put in just to enforce an award for a diverted investment. That cannot be right. Treating initial corruption in the obtaining of an investment contract as a matter going towards admissibility would (I suggest) be a principled means of addressing the problem. if illegality is seen as a question of admissibility, the enforcing court would be (1) bound by the tribunal’s findings of fact and (2) confined to checking whether on the facts as found by the tribunal the enforcing state’s domestic law against corruption and bribery was rightly applied.

15. Consider now the position in relation to the recognition and enforcement of foreign judgments.

16. I will assume that the foreign judgment complies with requirements such as indirect jurisdiction, due process, finality and reciprocity.  One might assume that the enforcement court would then be less constrained, so that it would be open to the enforcing court to revisit findings of fact and law in the name of domestic public policy.  After all, save where there is a choice of court clause, the parties will not have bound themselves to be bound by the originating court’s decision whether right or wrong.

17. But I suggest that the position should be analogous to that in respect of an arbitral award. This should be the case whether one deals with the common law or the civil law. An enforcing court should generally not engage in a review of a foreign judgment on the merits.  There should be no wide-ranging revision au fond. Instead, unless there is obvious criminality under the governing law (that is, the law of the enforcing jurisdiction), the foreign judgment should be enforced. A foreign judgment should not be refused recognition as a matter of public policy merely because the originating court misapprehended the nature of the governing law. Further, just as with arbitral award, where the originating court rightly apprehended the substance of the governing law, the originating court’s findings of facts should be binding.  The enforcing court should confine itself to evaluating whether on those findings there is obvious illegality (in a criminal sense) under the law of the enforcing state.

*The original text is Chinese and has been translated into English for reference only. If there is any inconsistency or ambiguity between the Chinese version and the English version, the Chinese version shall prevail.