By

Austin Robinson

In July 2023, the English Commercial Court alarmed the arbitration community by using UK consumer law as public policy grounds to deny the enforcement of an arbitral award.¹ The case of Payward v. Chechetkin serves as an example of how and why a court should be able to reconcile the binding effect of arbitration with its own jurisdictional public policy.²

In opening a cryptoasset exchange account, Mr. Chechetkin formed an arbitration agreement with Payward.³ After a dispute arose between the two, Mr. Chechetkin filed suit, alleging violations of UK consumer laws. Payward removed the case to be settled by an arbitrator.⁴ In accordance with the arbitration agreement, the arbitrator applied JAMS Consumer Minimum Standards and the law of California to find that Chechetkin assumed the risk of loss and, therefore, could not recover.⁵ Payward sought enforcement of this award in England, but Chechetkin challenged on the basis of Sec. 103(3) of the English Arbitration Act of 1996, that enforcement may be refused if it would be contrary to public policy.⁶

The English Commercial Court denied enforcement of the award by finding that the UK’s Consumer Rights Act (“CRA”) constituted UK public policy.⁷ The Court’s argument rests on prior case law that concluded consumer protection, with respect to the fairness of contractual terms, has “equal standing to national rules which rank, within the domestic legal system, as rules of public policy.”⁸ Resultingly, the Court determined that the CRA, as a part of their domestic public policy favoring consumer protection, authorized denying enforcement of the arbitral award.⁹

The Court in Payward interpreted the public policy exception to encompass consumer protection law, effectively ‘overriding’ the arbitral award.¹⁰ This poses concerns beyond the mere applicability of UK consumer protection law because it challenges the obligation of contracting states to recognize arbitral awards as binding.¹¹ The treatment of awards varies across jurisdictions. Several other countries favor a transnational approach rather than a domestic approach to public policy in order to more easily enforce awards.¹² Contrast this case with Tampico Beverages, in which the Supreme Court of Colombia addressed the enforceability of an ICC award on public policy grounds.¹³ The Court found that even though the award may violate Colombia’s domestic public policy, they should look to international authorities to determine if there was a violation that justified denying the award.¹⁴ The United States similarly adopted a narrow construction of the public policy exception by favoring international public policy rather than the United States’ national policy.¹⁵

These alternate approaches reveal that England has interpreted the public policy exception broadly to protect certain areas of their domestic law. Ultimately, the underlying rationale of the public policy exemption justifies English court’s denial of enforcement. The public policy exception enables enforcing jurisdictions to preserve their jurisdictional policies as they deem necessary. The New York Convention made this clear by stating that the “public policy” should be that of the country that is enforcing the award.¹⁶ Although the binding nature of an arbitral award must be respected, courts must “enforce them in accordance with the rules of procedure of the territory where the award is relied upon.”¹⁷ Public policy was not defined in The New York Convention declined to impose any one transnational public policy so that each contracting state could define it as narrowly or as broadly as they desired.

Payward signifies the importance of the public policy exception, its transnational consequences, and domestic advantages. While cases like Payward may diminish the universal enforcement value of an arbitral award they do not unilaterally destroy that value. This sacrifice is necessary to maintain transnational relationships and prevent arbitration from discriminating against domestic law.