Philip Yang
Honorary Chairman of the Hong Kong International Arbitration Center (HKIAC)
Former Chairman of the Asia Pacific Regional Arbitration Group (APRAG)
Article V of the New York Convention
Article V is the most important and core provision of the New York Convention:
"1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (This concerns that the composition of the arbitral tribunal must be carried out in accordance with the parties' agreement; otherwise, even if the arbitral tribunal is constituted, it would lack the parties' authorization.)
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country."
The Impact of US-UK Unilateral Sanctions on the Enforcement of Arbitral Awards
In the process of globalisation, the international community has made many efforts to ensure that the New York Convention remains harmoniously and uniformly applied at the enforcement stage, particularly in addressing the use of "public policy" (described as a "unruly horse") as a ground for refusing enforcement. The attitude of Chinese mainland courts towards "public policy" has also evolved from initial uncertainty to clarity, demonstrating a pro-arbitration stance. For example: the Supreme People's Court's Reply on Siemens International Trading (Shanghai) Co., Ltd.'s Application for Recognition and Enforcement of a Foreign Arbitral Award, [2015] Min Si Ta Zi No. 5.
Today, the overwhelming majority of countries in the era of globalisation regard supporting and enforcing international arbitral awards as an important public policy. Only in extreme circumstances, where the enforcement of a particular arbitral award would fundamentally contradict the enforcing state's public policy, would enforcement be refused.
Important public policies underlie sanctions regimes. When enforcing an award, the enforcing court must weigh these public policies against its own domestic considerations. Accordingly, it is foreseeable that a London arbitral award in favour of a sanctioned Chinese company would be treated differently when enforced in the US versus in China under the New York Convention.
Where the "Sanctioned Party" is the Losing Party
United Media Holdings, NV v Forbes Media LLC, No. 1:16-cv-05926-PKC, 2017 WL 3475069 (S.D.N.Y. Aug. 9, 2017)
The prevailing party, Forbes, sought enforcement in the US. The losing party argued that: (1) Forbes only "reported" the matter to OFAC mid-way through the proceedings, and a substantial portion of the arbitration was conducted without a licence, thereby violating the US sanctions regime; and (2) because it could not obtain OFAC's licence in time and was not granted a stay of proceedings, the losing party had to change counsel multiple times and, at the hearing, could not find a US lawyer it could "freely choose" to represent it.
The US court's attitude towards enforcing against a sanctioned losing party: "Article V(2)(b) must be construed very narrowly to encompass only those circumstances where enforcement would violate our most basic notions of morality and justice. …. Again, the Court notes that OFAC specifically licensed the arbitration proceedings as well as Forbes' and the Arbitrator's participation in them. It is difficult to see how enforcement of the Award would violate public policy where the issuance and enforcement of the Award were explicitly sanctioned by OFAC, and where the Award itself appears to further the goal of the sanctions laws by terminating the rights of a blocked person in an American-owned trademark. …"
Does this suggest that if, for example, Forbes had been the losing party in that case, enforcement might have been refused on public policy grounds because it would have contradicted the goal of the US sanctions regime?
Where the "Sanctioned Party" is the Losing Party (2)
PESA v UralTransMash Case
The Polish company PESA disregarded a Russian anti-suit injunction and proceeded with the SCC arbitration (SCC Case No. V2018/114), obtaining a favourable award.
When seeking enforcement in Russia, the Russian court refused enforcement. In its decision, the Russian Supreme Court (Case No. А60-36897/2020) stated that there was reasonable doubt as to whether the Russian company had received a fair hearing.
Where the "Sanctioned Party" is the Prevailing Party
There are very few cases in this category, which shows that under US-UK sanctions, it is highly unlikely that a "sanctioned party" would win in international arbitration and then "dare" to seek enforcement in the US or the UK under the New York Convention. However, it can be reasonably inferred that if a prevailing sanctioned party—for instance, a Chinese company listed on the US SDN List—applied to a US court for recognition and enforcement, there would be practical difficulties in enforcement.
Of course, the UK would also recognise and enforce arbitral awards under the New York Convention, but it might require payment into court rather than into an OFAC-designated account: see the precedent O v C [2024] EWHC 2838 (Comm).
Where the "Sanctioned Party" is the Prevailing Party (2)
Nevertheless, recognition and enforcement may still be obtained in countries or regions with different public policies. For example, if a foreign losing party has assets in Hong Kong, a sanctioned Chinese company would have no difficulty enforcing a favourable arbitral award (whether from London, Singapore, or CIETAC) in Hong Kong. In the precedent A Company v The Bank [2026] HKCFI 3169, the facts involved three bank guarantees issued by a Canadian bank in 2021 for a Russian metallurgical plant project in favour of a Russian nickel company. After the Russia-Ukraine conflict broke out in 2022, the project was terminated early, and the Russian nickel company demanded payment under the guarantees from the Canadian bank, which refused on the ground that payment would violate Canadian sanctions. The parties commenced LCIA arbitration, and in 2025 the arbitral tribunal rendered an award ordering the Canadian bank to pay EUR 30 million plus interest to the Russian nickel company, on the core ground that the Canadian bank had failed to prove that the Russian nickel company fell within the scope of Canadian sanctions. The Russian nickel company then sought enforcement of the award in Hong Kong. The Canadian bank's main ground for resisting enforcement was that enforcing the award would force the bank to violate its home state's sanctions laws, and that the bank and its employees would face criminal liability, thereby violating Hong Kong's public policy. This was not accepted by the Hong Kong court. Madam Justice Mimmie Chan pointed out that the Canadian bank had not demonstrated any real risk of criminal prosecution of the bank or its employees. Even if it had, Canada's sanctions regime did not apply in Hong Kong and would not affect Hong Kong's public policy of supporting arbitration and the enforcement of arbitral awards.
Where the "Sanctioned Party" is the Prevailing Party (3)
It is regrettable that traditional popular enforcement venues such as New York or London, due to the public policy obstacles posed by sanctions regimes, may hinder or affect the enforcement of awards. New York and London, as international financial centres, concentrate a large portion of the world's assets and have a wealth of sophisticated and professional legal mechanisms to assist with practical enforcement, making them generally reliable and certain enforcement venues for prevailing parties. However, in the context of geopolitical conflict, the world situation is subject to rapid change at any time, and parties seeking enforcement may find themselves unable to predict what they will face and will need to adopt better strategies.
