which sets out the legal ground for the public policy exception as follows:

Transcription

1 To: Members of the IBA Recognition and Enforcement of Awards Subcommittee, IBA Arbitration Committee From: Dr Cosmin VASILE, Violeta SARANCIUC Date: 12 January 2016 Subject: Country Report Romania: Public policy as defined under Romanian law in the contet of recognition and enforcement of foreign arbitral awards and in proceedings for setting aside arbitral awards A. Legal framework 1. Romania applies the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards since 1961 and therefore the state courts view Article V(2)(b) of the 1958 New York Convention as the main source for the public policy eception in the contet of recognition and enforcement of arbitral awards. Nevertheless, the courts recognise the more-favourable-right rule provided in Article VII(1) of the 1958 New York Convention, which allows domestic law or other treaties applicable in Romania to prevail whenever the latter prove to be more favourable. 2. The Romanian New Code of civil procedure ( NCPC ) 1 refers to public policy in Article 1.124, which sets out the legal ground for the public policy eception as follows: Any award of those provided in Article is recognised and may be enforced in Romania if its subject-matter is a dispute capable of settlement by means of arbitration in Romania and if the award does not contain provisions that are contrary to the public order of the Romanian private international law. 3. Hence, for the purpose of dealing with foreign arbitral awards, the Romanian legislator eplicitly adopted the concept of international public policy, which is addressed as the public order of the Romanian private international law. 1 The New Code of civil procedure came into force on 15 February 2013, enacted by the Law no. 134/2010. From the date of its entry into force, it repealed the former Code of civil procedure, which had been in effect since Further, as concerns the legal framework that governs arbitration, the New Code of civil procedure repealed certain provisions contained in the Private International Law no. 105/1992, becoming thus a unified body of law applicable to domestic and international arbitration, as well as regarding the legal effects of the foreign arbitral awards in Romania. 12 Plantelor St., District 2, Bucharest RO , Romania Phone: Fa: office@zrp.ro Registered with ANSPDCP under no

2 4. In the contet of proceedings for setting aside domestic arbitral awards, NCPC apparently refers to a less liberal notion of public policy among the grounds for annulment of arbitral awards. Specifically, Article 608(1)h) of the NCPC provides that: [t]he arbitral award may be set aside only by means of an action for annulment for one of the following reasons: [ ] the arbitral award violates public order, good morals or mandatory provisions of law 5. In line with Article I(1) of the 1958 New York Convention 2, according to Article of NCPC, any arbitral awards made in another state, either in domestic or international arbitration, qualify as foreign arbitral awards, provided that such are not considered national judgments in Romania. According to a prevailing view, the arbitral awards made in domestic or international arbitrations seated in Romania are domestic awards, unless their foreign elements are predominant to such an etent, as to eclude them being held national judgments 3. Given the legal framework in place, we find that an award should qualify as domestic whenever it is rendered in proceedings seated in Romania, irrespective of whether the arbitration was national or international. In this respect, one should avoid making a confusions between the questions whether the arbitration is of a national or international nature and whether the award is domestic or foreign. Regardless of theoretical concerns, courts usually take as domestic and subject to setting aside proceedings all the awards rendered in arbitrations seated in Romania, irrespective of whether such have been conducted under the purview of an international arbitral institution In view of the legal framework in force, depending on the specific procedural setting that requires a public policy test, the courts usually apply a different concept of public policy in each of the two contets the public policy of the Romanian private international law in the recognition and enforcement proceedings, in relation to foreign arbitral awards, and the domestic public policy in the setting aside proceedings, in relation to domestic awards. 7. It is worth mentioning that the Romanian case law and legal authority regarding the public policy eception has consolidated over the years on the basis of the previous legal framework in effect until 15 February , which assimilated the foreign arbitral awards in what concerned their recognition and enforcement to foreign judgments under the combined application of the former 1865 Code of Civil Procedure and the relevant provisions of the Private International Law no. 105/1992. Nevertheless, as regards particularly the grounds for resisting recognition and enforcement of arbitral awards and the related substantive issues that come into question in the contet of dealing with foreign arbitral awards, the New Code of civil procedure should not be regarded as novelty, since both before and after its entry into 2 Notably, however, Romania made a reservation to the 1958 New York Convention to the effect that the Convention applies only in respect of recognition and enforcement of awards made on the territory of another Contracting State. 3 Ion Deleanu, Sergiu Deleanu, Arbitrajul intern și internațional, Rosetti (2005), p. 480; Viorel Roș, Arbitrajul comercial internațional, Monitorul Oficial (2000), p High Court of Cassation and Justice, Sec. II Civ., Dec. 490/ ; High Court of Cassation and Justice, Sec. II Civ., Dec. 3155/ ; High Court of Cassation and Justice, Sec. Com., De. 1645/ As mentioned in footnote o 1 above, the New Code of civil procedure repealed the previous enactments concerning arbitration as of 15 February Nevertheless, certain rules regarding the application in time of the New Code of civil procedure provide for an ultra-active effect of the previous law, meaning that any arbitration-related court proceedings follow the previous legal framework whenever the arbitration commenced prior to the entrance into force of the New Code of civil procedure. 2

3 force, the main source for the public policy eception was and remains, as previously mentioned, the 1958 New York Convention and therefore, the issues addressed in court proceedings have not varied a lot. B. Public policy defined in the contet of recognition and enforcement of foreign arbitral awards B.1. The concept of public order of private international law 8. As mentioned in the previous section, under Romanian law, two distinct concepts of public policy alternate in various contets, namely, the more general concept of domestic public order and the narrower notion called public order of private international law. The latter applies, inter alia, for the purpose of recognition and enforcement of foreign arbitral awards. Further, the traditional view of the Romanian courts of law is that, for the purpose of dealing with foreign arbitral awards in recognition and enforcement proceedings, this latter notion of public policy must be construed narrowly and applied restrictively. Altogether, the so-called public order of private international law ends-up being limited to what is generally regarded in many other legal systems as international public policy. 9. From a conceptual point of view, the international public policy is defined by reference to the Romanian private international law concept of public order, which, according to a pillar definition in the Romanian private international law doctrine, consists of all fundamental principles of law of the Romanian state that apply in the legal relationships with a foreign element 6. This definition, in a further elaborated form, resides now in Article (2) of the New Civil Code (in force as of 1 October 2010), which provides that: [t]he application of the foreign law violates the public order of Romanian private international law to the etent that it leads to a result that is incompatible with the fundamental principles of the Romanian law, or of the European Union law and fundamental human rights. 10. The concept of public order of private international law is applied in dealing with foreign arbitral awards, particularly since the latter involve, by definition, a foreign element and therefore pertain to private international law 7. Scholars say that the public order of private international law acts as a barrier that prevents the application in Romania of a foreign law governing the merits of the dispute or the recognition and enforcement of an award 8. It is further held that the etraterritorial effects of the foreign award are barred in Romania either if the award in question violates the public order of international private law, or if the mere enforcement of the same award in Romania would be contrary to public order A milestone judgment that outlines the scope and functions of the public policy eception in the contet of recognition and enforcement proceedings, by relation to the concept of public order of international private law, dates back to 1985, when the then eistent Supreme Tribunal held that the public order of international private law is violated in two main cases, namely when the foreign arbitral tribunal reasons its decision on the basis of a legal provision 6 Dragoș-Aleandru Sitaru, Drept internațional privat, Lumina Le Publishing (2000), p Viorel Roș, op.cit., p Victor Babiuc, Ordinea publică de drept internațional privat în practica arbitrală română și străină (I), Romanian Arbitration Journal no. 3/2007, p. 1 9 Viorel Roș, op.cit., p

4 that is incompatible with the legal system of the state on which territory the recognition and enforcement is sought and when the foreign arbitral tribunal renders an award that contradicts blatantly the local ideas of equity and justice Regarding the limited scope of the so-called public order of international private law, scholars stress that, whilst there is a domestic public policy encompassing mandatory public order provisions of Romanian law and good morals, nevertheless the private international law deals with a distinct concept, which is more liberal 11, less rigid and therefore narrower than the former and is aimed to prevent the application of a foreign law only when it is contrary to the fundamentals of the Romanian legal system. 13. The High Court of Cassation and Justice outlined the difference between the domestic and international dimensions of the public order (i.e. the two distinct notions we have referred to earlier, at the beginning of this section) as follows: First, the scope of the two notions is different, to the effect that not all the rules that are of public order in the domestic law are also of public order in the private international law. Secondly, each notion fulfils a different function. In domestic law, the public order indicates the limits of the domain left to parties freedom of legal initiative, whereas the public order of private international law indicates the limits of application of the foreign law. 14. Further, the High Court held that a violation of the public order of international private law implies: the eistence of fundamental, essential normative disparities between the Romanian law and the foreign law To the same effect, according to established Romanian commentaries, for the purpose of recognition and enforcement of foreign awards, the public order of international private law acts only where a comparison between the Romanian legal system and the foreign law applicable in a particular dispute reveals a contrast that is so significant between the two laws that it renders impossible the application of the foreign law When eamining an application for recognition and enforcement of a foreign arbitral award, the courts assess, therefore, only the compatibility of the award with the fundamental principles 14, without performing a scrutiny with regard to whether the arbitral tribunal correctly applied the law in a given case 15 or as to whether the arbitral tribunal committed 10 Trib. Suprem, dec. 332/1985, not published, quoted in Victor Babiuc, Ordinea publică de drept internațional privat în practica arbitrală română și străină (II), Romanian Arbitration Journal no. 4/2007, p Octavian Căpățână, Circulația transnațională a sentințelor arbitrale, RDC 3/1998, p High Court of Cassation and Justice, Sec. II Civ., Dec. 3181/ Viorel Roș, op.cit., p High Court of Cassation and Justice, Sec. II Civ., Dec. 2318/2013, Bucharest Court of Appeals, sect. VI civ., dec. civ. 822/2014; the compatibility test was first mentioned by scholars, see Octavian Căpățână, op.cit., p Bucharest Court of Appeals, Decision no. 182/2014, upheld by the High Court of Cassation and Justice by Decision no. 293/2015; Neamt Tribunal, Decision no. 61/2014 (final judgment) 4

5 regular procedural flaws during the proceedings 16. In fact, within the limits of the proceedings for recognition and enforcement of foreign arbitral awards, it is held that the courts may not reopen the case as no révision au fond is allowed. It is admitted though that, depending on the particular plea raised by the resisting party, the court may need to look at the merits of the dispute, but only insofar as it is necessary in order to assess the compatibility with the public policy rule, on which basis it either grants or denies recognition, maintaining however the award intangible Altogether, the narrow scope and minimalist standard of review described above are regularly replicated in the recent judgments of the Romanian courts, as the courts generally hold that: [ ] the public policy of international private law has an eceptional character from the rule that the foreign law applies to a relationship entailing a foreign element, it being of strict interpretation cannot be construed etensively, but only narrowly. The public policy of international private Romanian law prevents the foreign law to produce effects on the territory of Romania only to the strict etent that such effects are contrary to the fundamental principles of the Romanian law. 18 It does not matter how the foreign law was applied, what is indeed important is that its effects that are contrary to the public policy of Romanian international private law may not occur. In particular, the public policy of Romanian private international law could be violated only by application of a foreign law the provisions of which are incompatible with the fundamental principles of the Romanian law such as are applicable to legal relationships with a foreign element. 19 The public policy must not be confused with the mandatory Romanian rules of law [ ]. 20 [ ] the award made subject to recognition on the territory of Romania does not contain provisions contrary to the public policy of international private law, since the application of the foreign law that governed the legal relationships between the parties is not incompatible with fundamental principles of Romanian law that apply to legal relations with a foreign element High Court of Cassation and Justice, Decision no. 3181/2009; Bucharest Court of Appeals, Decision no. 182/2014, upheld by the High Court of Cassation and Justice by the Decision no. 293/ Victor Babiuc Ordinea publică de drept internațional privat în practica arbitrală română și străină (II), op.cit., p Bucharest Court of Appeals, sect. VI civ., dec. civ. 182/2014, upheld by the HIgh Court of Cassation and Justice by decision 293/ High Court of Cassation and Justice, sect. II civ., dec. civ. 3181/ Bucharest Court of Appeals, sect. VI civ., dec. civ. 822/ idem. 5

6 by public policy of international private law one understands the fundamental legal principles of the state that apply in the private international law legal relations As regards the notion of public order of private international law, the Romanian courts overtly approach it as part of the Romanian legal order. To this effect, the courts invariably refer to the public order of the Romanian private international law. Consequently, the Romanian case law is less concerned with the concepts of transnational or truly international public policy applied in other legal systems. Nevertheless, scholars discuss the latter concepts and the idea of transnational order is generally admitted in the arbitral practice. B.2. The scope of the public policy eception in the contet of recognition and enforcement of foreign awards as reflected in the case law 19. Otherwise than by reference to abstract limits and eamples, it is virtually impossible to define the notion of public order of private international law. The doctrine is unanimously of the view that the concept is ever fluctuating and needs to be left open-ended and provide the judge with a wide discretion for assessment on a case-by-case basis. 20. As in other legal systems, under Romanian law, the concept of international public policy (the so-called public order of international private law) includes both procedural and substantive rules. However, looking at the relatively recent case law, the distinction seems to be at this point more theoretical and less of a practical relevance, since the courts are etremely reluctant to eamine substantive grounds. Scholars eamine eamples provided in the foreign legal commentaries and thus refer to corruption, pacta sunt servanda principle, force majeure, principle of good faith, prohibition of abuse of right, etc 23. Nevertheless, the case law rejected many of these grounds and considered them a review on the merits. Thus, the Romanian courts usually refuse to include the pacta sunt servanda principle in both domestic and international public policy 24. Likewise, pleas in relation to the force majeure and abuse of right have been invoked unsuccessfully by resisting parties in recent cases 25. Such eclusions should not be regarded as being of an absolute nature. The question is rather one of standard of review, than scope of the public order notion, as the parties frequently tend to seek a reeamination on the merits of the dispute under the disguise of such principles as pacta sunt servanda or other similar ones and, accordingly, courts dismiss this kind of attempts. It remains to be further seen how the courts will react in cases where corruption issues may potentially arise or in discrimination matters. 21. As regards the procedural public policy, the courts are more inclined to consider potential public policy grounds that bar the recognition of foreign arbitral awards in Romania. 22 Bucharest Court of Appeals, secț. V civ., dec. civ. 501A/2014 (not final, second-appeal pending before the High Court of Cassation and Justice) 23 Viorel Roș, op.cit., p Bucharest Court of Appeals, Decision no. 182/2014, upheld by the High Court of Cassation and Justice by Decision no. 293/2015; Iasi Tribunal, Decision no. 403/2014 upheld by the Iasi Court of Appeals in the Decision no. 343/ Neamt Tribunal, Decision no. 61/2014 (final judgment) 6

7 22. For instance, it was held that the principle of parties equal treatment falls within the scope of international public policy 26. In fact, in the rarest cases when enforcement of foreign arbitral awards was denied in Romania, the ground for refusal revolved around a violation of the principle of equal treatment. It is stressed that a reasonable balance should be granted in the arbitral proceedings between the claimant and the respondent parties, particularly in what concerns providing the parties with similar facilities for the purpose of nominating an arbitrator and with relatively corresponding time limits for presenting their pleas and defence It is common ground that the rights of defence (due process, including the right to be heard 28 ) are included in the concept of international public policy 29. Courts are generally responsive to pleas regarding a violation of the right to a fair and impartial trial 30, if the circumstances of the case support the allegations. 24. Likewise, the principle of adversarial proceedings is known among the procedural rules that qualify as international public policy 31 under Romanian law. 25. Res judicata principle is also mentioned among the rules of public order of international private law 32, although, notably, the Bucharest Court of Appeals denied to eamine a res judicata plea in a recent judgment, on the basis that it implies a scrutiny of the arbitral tribunal s decision on the same plea, which the court found inadmissible in the contet of recognition and enforcement of foreign arbitral awards As to the lack of reasons in the award, there is on-going debate. The prevailing view is that, if parties opt for proceedings that require the reasoning of the award, then the lack of reasons in the award constitutes a violation of the international public policy 34. Otherwise, if parties opt for proceedings that do not generally require the reasoning of the award, then the award rendered without reasons in such proceedings should be allowed to produce effects in Romania 35. According to another view, the award rendered in the latter case must additionally enable the state court to at least understand the underlying reasons, from the contents of the file, as available As a matter of principle, the fundamental human rights, whether directly on the basis of the ECHR or as replicated in the Romanian Constitution, are protected within the scope of public order of international private law. Likewise, although no notable case law has been identified in this respect, in view of the general approach towards the matter, we find that the 26 High Court of Cassation and Justice, Decision no. 1834/ Octavian Căpățână, op.cit., p Octavian Căpățână, op.cit., p. 10; High Court of Cassation and Justice, Decision no. 1834/ Radu Bogdan Bobei, op.cit., p High Court of Cassation and Justice, Decision no. 1834/ Ion Deleanu, Valentin Mitea, Sergiu Deleanu, Noul Cod de procedura civila, Vol. II Art , Universul Juridic (2013), p Octavian Căpățână, op.cit., p CAB, Sec. V Civ., Dec. 663/ Radu Bogdan Bobei, op.cit., p. 416; Octavian Căpățână, op.cit., p Radu Bogdan Bobei, op.cit., p Octavian Căpățână, op.cit., p

8 fundamental principles of European Law are capable to resist the recognition and enforcement of arbitral awards rendered in violation thereof. 28. A notable particularity seen in the Romanian approach to public policy eception is that certain rules that qualify as public order of private international law admittedly overlap with other grounds for refusal of recognition and enforcement. Courts may accept to eamine a violation of the right to be heard outside the scope of Article V(1) b) of 1958 New York Convention and, likewise, a deficient constitution of the arbitral tribunal outside the scope of Article V(1) d), both under Article V(2) b), whenever such violations disregard what is found to be the public order of the Romanian private international law 37. Likewise, no precise line can be drawn between questions of arbitrability and public policy grounds. The courts are inclined to eamine whether a given dispute resolved by arbitration was capable of settlement by means of arbitration on a common ground between arbitrability and public policy rules 38, especially when, as in the vast majority of cases, the rationale behind the bar to arbitration stands in a public policy rule. Altogether, there is no real concern or trend of separation between the grounds for refusal of recognition and enforcement of arbitral awards, whereas the public policy eception under Article V(2)b) appears to be an almost universal means of intervention at the disposal of the state court for mitigating the enforcement of a foreign arbitral award whenever it defies the Romanian international public policy. 29. A catalogue of cases involving a public policy plea as ground for refusal of recognition and enforcement of foreign awards is appended in Anne 1 hereto. C. Public policy defined in the contet of setting aside proceedings 30. Under Romanian law, the violation of public policy is also a ground for setting aside domestic arbitral awards. Unlike in the contet of dealing with foreign arbitral awards, where, as detailed in the previous section, courts apply the public order of private international law, in setting aside proceedings, traditionally the second, domestic and broader notion of public policy comes into place. The eplanation resides primarily in the less liberal provision of Article 608(1) h) NCPC (former Article 364 i) of the 1864 Code of civil procedure), which allows a challenge of the award whenever it violates the public order, good morals or the mandatory legal provisions. Hence, the legislative background itself appears to admit a wider range of public policy arguments for setting aside a domestic award (or a wider scope of public policy as ground for setting aside), than contemplated in the contet of recognition and enforcement of foreign arbitral awards. 31. The High Court of Cassation and Justice defined as follows the concept of public policy in the contet of setting aside proceedings: For the purpose of Article 364 i) of the Code of civil procedure, the public policy must be understood as a limitation to party autonomy and freedom of 37 See for instance High Court of Cassation and Justice, Decision no. 1834/2007; nevertheless, in Bucharest Court of Appeals, Decision no. 663/A/2014, the court eplicitly separated the grounds and refused to eamine under Article V(2) b) of the 1958 New York Convention a violation that failed to qualify under Article V(1) b). 38 Suceava Court of Appeals, Decision no. 532/

9 contract, as it includes mandatory rules of law that the parties cannot derogate from in view of the general interest protected by such rules. 39 The public order designates the rules regarding the political, social and economic order, representing interests of a general character, governed by mandatory rules of law Despite the wider scope the notion of public policy is given in the contet of setting aside proceedings, the standard of review conducted by the Romanian courts remains minimalist and keeps the number of successful challenges low. When eamining a public policy argument, courts take a restrictive approach and generally refuse to reopen the case and review the merits of the case or accept any arguments that lead to a révision au fond. Instead, the focus is on whether a specific rule that qualifies under Article 608(1)h) NCPC is violated. Often courts find that, instead of alleging a violation of a public policy or mandatory rule of law, the applicant complaints about how the arbitral tribunal applied the law to incorrect findings of fact 41, or about how the arbitral tribunal misapplied various dispositive (default) rules 42. In such latter cases, courts refuse to conduct a re-eamination on the merits of the dispute and reject the application for setting aside on the basis that the arguments claimed by the applicant fail to qualify as grounds for setting aside the award. Only provided that a specific violation of a public policy or mandatory rule of law is alleged by the applicant and found by the court, the award is set aside and, then, the merits of the dispute may be eamined anew. 33. For instance, the High Court of Cassation and Justice overturned judgments rendered by lower courts, which set aside arbitral awards as a result of conducting a révision au fond without a prior finding of a public order or mandatory rule of law violation: [ ] prior to an eamination on the merits of the dispute, the court must verify whether the grounds capable to set aside the arbitral award eist. 43 [ ] the court found that [ ] the claimant had not proved a breach of public policy rules or good morals [ ] but nevertheless proceeded to analyse the merits of the case [ ] conducting thus an illegal eamination of the merits of the case It was also held that [ ] the scope of the ground for annulment of the arbitral award under Article] 364 i) does not include complaints regarding the findings of fact [ ] or the interpretation and application of dispositive legal provisions, but only those that regard violations of mandatory legal provisions independently of the established facts of the case High Court of Cassation and Justice, Sec. II Civ., Dec. 806/ High Court of Cassation and Justice, 9-Judge Panel, Dec. 227/ High Court of Cassation and Justice, Sec. II Civ., Dec. 1194/2013; HCCJ, Sec. Com., Dec. 3311/ High Court of Cassation and Justice, Sec. Com., Dec. 3622/2008; HCCJ, Sec. Com., Dec. 747/ High Court of Cassation and Justice, Sec. Com., Dec. 801/ High Court of Cassation and Justice, Sec. Com., Dec. 14/ High Court of Cassation and Justice, Sec. Com., Dec. 3622/2008; High Court of Cassation and Justice, Sec. Com., Dec. 747/

10 35. According to established commentaries, a distinction needs to be made between procedural public policy and substantive public policy 46. As regards the procedural public policy, a distinction needs to further be made between the public policy concept applied in court proceedings and the same concept applied for the purpose of arbitral proceedings, as the scope of the latter is narrower 47. Unlike in court proceedings, the majority of rules that govern the conduct of arbitral proceedings are dispositive under Romanian law. Therefore, it is said that the procedural public policy revolves mainly around some core procedural principles, such as the principle of parties equal treatment, right to be heard and the principle of adversarial proceedings 48. On the other hand, it is held that the substantive public policy is intangible and, therefore, it remains essentially the same, be it in court or in arbitral proceedings Pleas based on substantive public policy succeed rarely. Courts found that there was a violation of public policy when the award disregarded the statute of limitations under the former Decree no. 167/ In one rather isolated case the court seems to have considered that the essential requirements for a (validly our note) concluded agreement are among the mandatory rules of law capable to set aside an arbitral award 51. However, the eamples of cases in which courts denied to consider various arguments as grounds for setting aside are very instructive for a correct understanding of the truly limited scope of the substantive public policy. For instance, it was held that the principle of pacta sunt servanda (usually invoked on basis of Article 969 of the former 1864 Civil Code) 52 and the principles of contract interpretation 53 fail to qualify as mandatory rules of law for the purpose of setting aside an arbitral award. Arguments that relied on breach of rules of law regarding undue payment, contract risk, off-set requirements 54 have been dismissed, as the court held that such involve a review on the merits. Likewise, courts refused to consider rules of law governing the effects of obligations in general and rescission of contracts in particular 55 under the ground for setting aside in question. The same judgment was made in respect of the legal provisions on imputation of payments 56. The High Court of Cassation and Justice held that an 46 Radu Bogdan Bobei, op.cit., p Ion Băcanu, Controlul judecătoresc asupra hotărârii arbitrale, Lumina Le (2005), p Ion Băcanu, op.cit., p Ion Băcanu, op.cit., p High Court of Cassation and Justice, Sec. II Civ., Dec. 1297/2010; Bucharest Court of Appeals, Sec. Com., Dec. 1991/1999 (final SCJ, Sec.Com., Dec. 2267/2000) published in Ion Băcanu, op.cit, p. 102; Oradea Court of Appeals, Sec. Com. Cont. Adm., Dec. 1/C/2010 (under Decree no. 167/1958, the statute of limitations was a matter of public order. Under the New Civil Code, which repealed the Decree no. 167/1958 as of 1 October 2011, the statute of limitations quits being overall a matter of public order (rules regarding the application in time of the New Civil Code are available); nevertheless, a generalisation should be avoided, as one needs to consider that certain provisions concerning the statute of limitations may still be mandatory under the New Civil Code and therefore enforceable as ground for setting aside arbitral awards. 51 High Court of Cassation and Justice, Sec. II Civ., Dec. 1297/ See High Court of Cassation and Justice, Sec. II. Civ., Dec. 3645/2007; High Court of Cassation and Justice, Sec. Com., Dec. 3197/2009; High Court of Cassation and Justice, Sec. Com., Dec. 3311/2010; High Court of Cassation and Justice, Sec. II Civ., Dec. 2106/2012 published in Marin Voicu, Arbitrajul Comercial. Jurisprudență adnotată și comentată , p. 461; High Court of Cassation and Justice, Sec. II Civ., Dec. 3961/2012; High Court of Cassation and Justice, Sec. II Civ., Dec. 2079/ High Court of Cassation and Justice, Sec. II. Civ., Dec. 2612/2008; High Court of Cassation and Justice, Sec. II. Civ., Dec. 3645/ High Court of Cassation and Justice, Sec. Com., Dec. 747/ High Court of Cassation and Justice, Sec. II Civ., Dec. 561/ High Court of Cassation and Justice, Sec. II. Civ., Dec. 1472/

11 arbitral award that allegedly had incorrectly applied the contractual liability instead of tort liability was not subject to setting aside on this ground 57. Similarly, the argument that a contract had been qualified by the arbitral tribunal as joint venture agreement in breach of ta law provisions was dismissed 58. The complaints regarding the amount of arbitration costs are outside the scope of the action for setting aside 59. As a general remark, some of the aforementioned eclusions should not be (and are not) generally regarded as being of an absolute nature, as it goes without saying that, in particular cases, a breach of a specific mandatory rule may amount, in a broader-construed contet, to a violation, for instance, of the pacta sunt servanda principle. Therefore, often the question is rather one of standard of review, than scope of the public order notion, and what courts generally aim is preventing a disguised review on the merits where no grounds for setting aside actually eist. 37. As regards the procedural public policy, it was held that there was a violation of the principle of parties equal treatment, adversarial proceedings and right to be heard in a case where the arbitral tribunal rendered the award relying on evidence to which not all parties had equal access 60. The failure to include reasons in the arbitral award was also considered a violation of procedural public policy 61 in the contet of setting aside proceedings. The High Court of Cassation and Justice held that enforcement of the time limit provided in the Code of Civil Procedure for making amendments to the initial statement of claim filed by the claimant is mandatory and therefore ordered the setting aside of an arbitral award that accepted a new claim after the epiry of the said time limit 62. Courts eamined res judicata as public policy ground Looking at the case law, one can see that certain rules that qualify as domestic public policy capture other grounds for setting aside arbitral award. A similar overlap was noticed in the contet of recognition and enforcement of foreign arbitral awards. Again, here, courts often take the public policy ground as an all-embracing provision that allows setting aside an award where it fails to meet the required standard of compliance, this time with public policy, mandatory rules and good morals. The High Court held that the scope of the ground for setting aside in question includes the violation of the fundamental principles of the arbitral trial [ ] and the non-compliance with the rules of eclusive jurisdiction with a mandatory character 64. As such, often questions of (in)arbitrability are eamined on basis of public policy considerations, particularly those concerning the disputes over administrative contracts 65, which have been subject to constant debate over the last years, due to legislative changes and inconsistent case law. Although there is no universally accepted approach, some judgments consider the disputes over administrative contracts coming within the eclusive jurisdiction of the state courts in view of public policy legal provisions High Court of Cassation and Justice, Sec. II Civ., Dec. 2327/ High Court of Cassation and Justice, Sec. II Civ., Dec. 1781/ Supreme Court of Justice, Sec. Com., Dec. 4351/1998 (quoted in Ion Băcanu, op.cit., p. 103) 60 High Court of Cassation and Justice, Sec. II Civ., Dec. 899/2012; Supreme Court of Justice, Sec. Com., Dec. 2941/ High Court of Cassation and Justice, Sec. II Civ., Dec. 4180/ High Court of Cassation and Justice, Sec. II Civ., Dec. 1845/ Supreme Court of Justice, Sec. Com., Dec. 6086/2001 published in Ion Băcanu, op.cit., p High Court of Cassation and Justice, Sec. II Civ., Dec. 2076/ High Court of Cassation and Justice, Dec. 2991/2012, High Court of Cassation and Justice, Sec. Com. 973/ High Court of Cassation and Justice, Dec. 2991/

12 39. Finally, as regards the notion of public policy in the contet of setting aside proceedings, it is worth noting the doctrinal view that a distinction should be made between domestic and international arbitration in what concerns the scope of public policy as ground for setting aside arbitral awards, to the effect that the role of public policy is reduced in international arbitration 67. Unfortunately, considering the case law, the courts have apparently not embraced the aforementioned view, conducting a similar eamination in setting aside proceedings brought against both, domestic and international arbitral awards. Only rare judgments consider the application of a narrower scope of public policy review in cases concerning the setting aside of international arbitral awards 68. The case law needs to be, however, assessed in the contet of an already fairly restrictive approach of the courts in terms of applying a very low standard of review in setting aside proceedings, irrespective of whether the award is rendered in domestic or international arbitration. 67 Octavian Căpățână, Litigiul arbitral de comerț eterior, Academiei (1986), p for instance, High Court of Cassation and Justice, Sec. II Civ., Dec. 490/2012, which however tackles the issue in a rather declaratory than applied approach. 12

13 ANNEX 1: CATALOGUE OF CASES INVOLVING A PUBLIC POLICY PLEA AS GROUND FOR REFUSAL OF RECOGNITION AND ENFORCEMENT OF FOREIGN AWARDS Identification of the decision High Court of Cassation and Justice, Decision no. 2318/ final judgment (case file no. 8182/111/2009*) Summary of the public policy argument Substantive Procedural Enforcement denied In brief: The party resisting recognition and enforcement of the award claimed that the award violated the disposition principle and the principle of equal treatment. Details: The award declared the lawful termination of a sale-purchase agreement between the parties, determined the price provided in a subsequent sale-purchase agreement, ordered the respondent party to pay the price under the subsequent salepurchase agreement and penalties for nonperformance. It was claimed that, by granting the above mentioned relief, the arbitral tribunal disposed above the scope of the parties submission to arbitration, in breach of the procedural principle of disposition. Secondly, as regards the alleged unequal treatment of the parties, it was claimed that the arbitral tribunal found both parties liable in the reasoning of the award, but ordered only the respondent party to pay penalties. Enforcement accepted High Court of Cassation and Justice, Decision no. 3181/ final judgment (case file no /3/2008) Judgment: The court of first instance and the appellate court held that the arguments pleaded by the party seeking to resist recognition were issues of domestic procedural law and have nothing to do with the public policy of international private law. The High Court of Cassation and Justice upheld the judgments made by the lower courts and added that, at all events, as it transpired from how the proceedings had been administered, the arbitral tribunal complied with the principles of equal treatment, right to be heard and adversarial trial. In brief: The party resisting recognition and enforcement of the award claimed that the award breached the principle of equal treatment and of due process, alleged that the arbitral tribunal was not independent and impartial and, finally, alleged a breach of principle of legality. Details: It was claimed that the principles of equality and due process had been breached, in broad lines, on the basis that the arbitral tribunal allegedly ignored the evidence submitted by the respondent party and erred in the interpretation of the facts and the 13

14 agreement. Further, it was claimed that the arbitrator failed to meet the standard of independence and impartiality due to a conflict of interest. As regards the principle of legality, the party resisting recognition claimed mainly substantive breaches, such as the violation of the principle of interpretation of agreements according to the parties common will, breach of rules regarding the separate legal personality of the companies, omission to eamine other legal provisions invoked by the party. High Court of Cassation and Justice, Decision no. 1834/ final judgment (case file 38617/2/2005) Judgment: The court of first instance rejected altogether the above mentioned arguments and held that all of them depart from the scope of the fundamental rights and guarantees granted in the Romanian Constitution and Article 6(1) ECHR, and do not qualify as breaches of the right to a fair trial, equal and impartial treatment. The appellate court upheld the first instance judgment and added that, as regards the impartiality of the arbitrator, the party failed to challenge the arbitrator during the arbitral proceedings, according to the rules of arbitration. As regards the other breaches alleged by the party, the appellate court found that such sought a review of the merits of the case and were thus inadmissible. The High Court of Cassation and Justice upheld the judgments of the lower courts and added that, since the arbitral tribunal applied the Romanian law (on the merits of the dispute), there can be no eamination at stake as regards the compatibility of the award with the Romanian law, whereas this is precisely what the international public policy test implies. In brief: The party resisting the recognition of the award claimed a violation of due process rights and breach of principle of equal treatment. Details: On the basis of international public policy grounds, it was claimed that the recognition of the final award in question, rendered on quantum, had to be refused, since the applicant had not primarily applied for recognition of the interim award on liability. Further, it was claimed that the principle of equal treatment was breached in view of the following circumstances of the case: (i) the constitution of the arbitral tribunal with a sole arbitrator had followed the request of the claimant party, whereas the request of the respondent party that the dispute be resolved by three arbitrators had been ignored; (ii) the sole arbitrator favoured manifestly the claimant party in the course of taking of evidence; (iii) the sole arbitrator was not impartial in considering that respondent s liability was implicit by bifurcating the proceedings; (iv) the arbitral tribunal favoured the claimant party manifestly by allowing the 14

15 taking of such evidence that it previously denied; (v) the sole arbitrator favoured the claimant by accepting the oral eamination of a witness, although no written witness statement had been submitted to the file; (vi) the arbitrator discriminated the parties in what regards the assessment of evidence, by applying differentiated criteria; (vii) lack of impartiality in the eamination of respondent s challenge against the arbitrator; (viii) the sole arbitrator s interpretation of the agreement was inconsistent and in contradiction with the parties will. Judgment: The High Court of Cassation and Justice overruled the judgments of the lower courts and denied the recognition and enforcement of the award. The High Court of Cassation and Justice accepted two of the arguments pleaded by the party resisting enforcement and dismissed the remaining arguments. Specifically, the High Court held that (i) it would be against the international public policy to recognise a final award on quantum without a recognition of the interim award on liability rendered previously in the same case, since the recognition of a partial award is an intrinsic condition failing which the final award may not be recognised; (ii) the constitution of the arbitral tribunal with a sole arbitrator had been contrary to the principles of equal treatment and due process as regards the requirement of impartiality, as the respondent party could have reasonable doubts as to the impartiality of the arbitrator nominated by the opposite party. The High Court also reasoned that a violation of Article 6 ECHR amounts to a violation of Article 21(3) of the Romanian Constitution, namely in what regards the right to a fair trial, whilst the latter is included in the scope of international public policy. Bucharest Court of Appeals, Decision no. 182/ , upheld by the High Court of Cassation and Justice by the Decision no. 293/ final judgment (case file no. 353/2/2014) In brief: The party resisting recognition and enforcement of the award claimed violation of the right to a fair and impartial trial as per Article 6 of ECHR, lack of standing in the arbitral proceedings, violation of the pacta sunt servanda principle, violation of the principle of interpretation of the contracts according to the true will of the parties, violation of privity of contract, violation of the principle of unjust enrichment. Details: As regards the alleged violation of the right to a fair and impartial trial, the party resisting the recognition claimed that the arbitral tribunal had ignored and distorted its defence and accepted claimant s pleas although the latter were unsupported by evidence and had not ensured the adversarial nature of the proceedings. As regards the 15

16 alleged violation of the principles of pacta sunt servanda and of contracts interpretation in accordance with the true will of the parties, the resisting party claimed that the arbitral tribunal had ignored the limits of its consent to the conclusion of the agreement. As regards the breach of principles of contract privity and of unjust enrichment, the party claimed that a substitute sale had been effected by a third party and that the claimant had in fact suffered no loss. Judgment: The Bucharest Court of Appeals upheld the first instance judgment and dismissed all the arguments raised by the party resisting recognition and enforcement of the award. The court held that, although the party claimed violation of fundamental procedural and substantive principles, its pleas proved that what was in fact sought was a review on the merits of the case and that such review falls outside the scope of the recognition and enforcement proceedings. The second appeal filed by the party resisting enforcement was annulled by the High Court of Cassation and Justice. Bucharest Court of Appeals, Decision no. 501/A/ (judgment not final, second appeal pending before the High Court of Cassation and Justice) (case file no /3/2011) In brief: The party resisting recognition and enforcement of the award claimed violation of international public policy against the recognition and enforcement of an award that is not enforceable according to the law of the seat. Details: The party resisting recognition and enforcement of the award relied on the provisions of Article 174 of Private International Law no. 105/1992, which required the foreign award (judgment) to be enforceable under the law of the court that rendered it. The resisting party claimed that the above mentioned provision was part of Romanian international public policy. Further it claimed that the award in question was not enforceable under Article 1477 of the French Code of civil procedure, according to which an arbitral award can only be enforced if it is granted eequatur by the court on the territory of which it was rendered. The resisting party submitted that the award in question was not granted eequatur in France, where the award was rendered, and therefore was not enforceable as per Article 174 of the Private International Law no. 105/1992. Judgment: The court of first instance allowed the application for recognition and enforcement of the foreign award. The Bucharest Court of Appeals dismissed the appeal filed by the party resisting the recognition and upheld the first instance judgment. On the one hand, the court held that 16

17 Article 174 of Private International Law no. 105/1995 was superseded by the provisions of Article 3 of the New York Convention, which do not specifically require that the award be enforceable according to the law of the place where it was rendered, but only refer to the requirement that the award should be binding. On the other hand, the court held that the requirements for recognition and enforcement of arbitral awards (set out in the Private International Law no. 105/1992) were not within the scope of the Romanian international public policy. In order to decide so, the court found that, according to Article as 10 of the Private International Law no. 105/1992, the same law had a subsidiary application in relation to the New York Convention. Bucharest Court of Appeals, Decision no. 822/ final judgment (case file no /3/2013) In brief: The party resisting recognition and enforcement of the award claimed violation of public policy in relation to an alleged breach by the arbitral tribunal of the provisions of Romanian insolvency legislation regarding the stay of any actions against the debtor at the date of the opening of the insolvency proceedings, claiming further, on the same basis, that the award was rendered in breach of the eclusive jurisdiction of the Romanian courts and in violation of the principle of creditors equal treatment. Details: The party resisting recognition and enforcement of the award relied mainly on the provisions of Article 36 of the former Insolvency Law no. 85/2006 according to which any actions for debt recovery against the insolvency debtors were stayed at the date of the opening of the insolvency proceedings. The party claimed that, in the given case, by not ordering the stay of the arbitral proceedings at the date on which the respondent party entered insolvency proceedings, the arbitral tribunal failed to observe the above mentioned provisions and rendered the award in disregard of the eclusive jurisdiction of the Romanian courts. Further the resisting party claimed that the award was rendered in breach of other provisions of the Romanian insolvency law and, altogether, in breach of the principle of creditor s equal treatment, leading to discrimination among the creditors and harming the rights of those creditors who filed collectively their claims within the insolvency proceedings. Judgment: The court of first instance accepted the application for recognition and enforcement of the foreign award after rejecting the above mentioned arguments raised by the resisting party under the public policy eception. In order to decide so, the 17