Sanctions as International Public Policy in Arbitration: Reconciling Enforcement Under Article V(2)(b) of the New York Convention Through a Structured Proportionality Framework

Manal Shify, Solicitor; Notary Public

Abstract

International commercial arbitration ultimately depends on national courts at the enforcement stage, where the pro-enforcement bias of the New York Convention must be reconciled with the forum's mandatory public policy. Although Article V(2)(b) permits refusal of recognition or enforcement on public policy grounds, it is intended to operate as a narrow and exceptional safeguard. The rapid expansion of sanctions regimes, particularly in the European Union and the United Kingdom, has placed increasing pressure on this framework, as award debtors argue that sanctions compliance precludes enforcement. This development risks transforming sanctions into a de facto veto, undermining predictability in arbitral enforcement.

This article argues that sanctions-based objections should not automatically justify refusal of enforcement. Contemporary sanctions regimes are not structured as absolute prohibitions, but as systems of controlled compliance, often implemented through licensing and authorisation mechanisms. Against this background, the article develops a structured proportionality framework for the application of Article V(2)(b), grounded in the Convention's pro-enforcement orientation, the UNCITRAL Secretariat Guide, the ICCA Judges' Guide, and relevant judicial practice. The proposed approach enables courts to assess sanctions-related objections in a calibrated manner, distinguishing between genuine legal prohibitions and situations capable of regulatory accommodation.

By structuring judicial discretion, the framework preserves enforcement as the default while accommodating legitimate sanctions concerns through conditional and compliance-based mechanisms. In doing so, it seeks to reconcile the integrity of the Convention with the evolving demands of sanctions law.

Sanctions as International Public Policy in Arbitration: Reconciling Enforcement Under Article V(2)(b) of the New York Convention Through a Structured Proportionality Framework is part of TDM 2 (2026) - Sanctions and International Arbitration: Impact on Substantive and Procedural Issues (Volume 3) and is available here www.transnational-dispute-management.com/article.asp?key=3165 (sign in to download).