Lloyd's Maritime and Commercial Law Quarterly
ILLEGALITY UNDER THE LAW OF THE PLACE OF PERFORMANCE AND THE ENFORCEMENT OF ARBITRATION AWARDS
Omnium de Traitement et de Valorisation
v. Hilmarton
1
An English court will not enforce an arbitration award—whether an English award,2
a New York Convention award3
or a foreign award which might otherwise be entitled to enforcement at common law4
—if to do so would be contrary to English public policy. While it is accepted that public policy should be narrowly circumscribed,5
it may be relied upon where there is some element of illegality.6
In recent years the courts have been confronted by a number of cases in which the enforcement of an arbitration award has been resisted on grounds of public policy, it being alleged that performance of the underlying contract, which has been upheld by the arbitral tribunal, was (or would have been) illegal.7
A number of points emerge from these cases. First, the fact that performance of the underlying contract is illegal under the law of a
foreign country is not ipso facto
enough to render enforcement of an arbitration award upholding the contract contrary to English public policy. It is an established principle of English private international law that a contract which is valid according to its governing law does not cease to be enforceable because its performance is illegal under the law of a foreign country which is not the place of performance.8
It follows that it cannot be contrary to public policy to enforce an arbitration award which upholds a contract which is illegal
2. Arbitration Act 1996, s. 68(2).
3. Arbitration Act 1996, s. 103(3) (replacing Arbitration Act 1975, s. 5(3)).
4. Dalmia Dairy Industries Ltd
v. National Bank of Pakistan
[1978] 2 Lloyd’s Rep. 223.
5. See Parsons & Whittemore Overseas Co. Inc.
v. RAKTA
(1974) 508 F. 2d 969 (2d Cir).
6. Deutsche Schachtbau
v. Shell International Petroleum Co. Ltd
[1990] 1 A.C. 295, 316, per
Donaldson, M.R.
7. For the purposes of the discussion which follows “illegality” means initial illegality, rather than subsequent illegality. For consideration of the importance of the distinction see J.Hill, International Commercial Disputes,
2nd edn (1998), paras 15.4.39–15.4.48.
8. Kleinwort, Sons & Co.
v. Ungarische Baumwolle Industrie AG
[1939] 2 K.B. 678.
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