In a ruling dated 12 April 2024, the Belgian Court of Cassation rendered a ruling on the extent of the review of arbitral awards concerning public policy.

According to Article 1717, § 3, b), ii) of the Belgian Judicial Code, an arbitral award can be set aside if the court of first instance finds that it is contrary to public policy.

The intensity of the review that may or should be carried out by the court of first instance in this regard has been the subject of much debate.

How can the judge assess whether the award violates public policy? Should the judge examine whether the award itself breaches public policy? Or should the judge verify whether the rules concerning public policy were correctly applied by the arbitral tribunal?

The distinction between what the judge could and could not do is, certainly, difficult to delineate; and undoubtedly even more difficult to apply in concrete cases.

In the case at hand, an arbitral tribunal constituted under a bilateral investment treaty between the United States and Poland (“Treaty between the United States of America and the Republic of Poland Concerning Business and Economic Relations” dated March 21, 1990) had found that an investment company based in New York had been subjected to discriminatory and arbitrary treatment.

The peculiarity is that, according to the arbitral tribunal, Poland had failed its obligation of fair and equitable treatment provided in the bilateral investment treaty by committing a denial of justice.  The context leading to the denial of justice was not, as one might initially assume, an absence of judicial remedy in a specific dispute, but rather a proliferation of judgments and rulings, including by the Supreme Court of Poland.

In its award, the arbitral tribunal specifically highlighted that in three appeals brought before it, the Supreme Court of Poland had not applied the same procedural rules.  In two of the appeals, the Supreme Court of Poland considered itself bound by the factual findings of the court of appeal; in one of the appeals, the Supreme Court of Poland did not consider itself bound by the factual findings of the court of appeal.  According to the arbitral tribunal, the issue was not whether the Supreme Court had committed a procedural error, but whether the error had been committed selectively to justify a justify a finding against the investment company (para. 480 of the award – the arbitral tribunal this situation remained unexplained and concluded to the arbitrary nature of the differentiated treatment of Polish nationals and foreign investors).

Poland moved to set aside the arbitral tribunal’s decision. By a judgment dated 18 February 2022, the (French-speaking) court of first instance of Brussels annulled the arbitral award for violation of public policy.

The court of first instance found that there could be no question of a denial of justice. According to the court of first instance, “the criticizable or erroneous nature of a single judicial decision is not, in itself, sufficient to demonstrate the failure of a judicial system as a whole, nor even manifest discrimination indicative of a denial of justice under international law” (p. 20 of the judgment). Consequently, “because it condemns Poland for a denial of justice by its Supreme Court, which is clearly not established, the arbitral award infringes Belgian international public policy” (p. 20 of the judgment), and the court of first instance set aside the award.

Seized of an appeal against this judgment (pursuant to Article 1717, § 2 of the Judicial Code, the decision of the court of first instance ruling on a request to set aside an arbitral award may not be appealed before the court of appeal but only before Belgium’s supreme court), the Court of Cassation overturned the decision and referred the case to the court of first instance of Liège.

According to the Court of Cassation, Article 1717, § 3, b), ii) of the Judicial Code does not imply that the judge ruling on the setting aside of an arbitral award can reassess the dispute in light of the public policy provisions applied by the arbitral tribunal. On the contrary, the the judge must check whether the award itself contradicts public policy.

Consequently, the judgment that annulled the arbitral award for the reasons presented above, “without examining the effects of this award on public policy,” violates Article 1717, § 3, b), ii) of the Judicial Code.

In addition to its interest in the controversies related to the extent of the review of arbitral awards, the ruling of 12 April 2024, presents an interesting paradox.

For decades, international treaties and national legislations have limited the control of state judges over arbitral awards. But it now appears that it is arbitral tribunals that are reviewing the decisions rendered by state courts, including supreme courts.

Gautier Matray