Protection of Direct Foreign Investment: Public Policy Exception Impact on Foreign Direct Investments: 'Court (Non) Enforcement of Arbitration Decisions Based on Public Policy Exception'

18 Pages Posted: 18 Jul 2014 Last revised: 9 Sep 2014

See all articles by Gianmaria Ajani

Gianmaria Ajani

University of Turin

Derya Tarman

Koç University Law School

Wanderley Fernandes

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP

Francisco de Elizalde

IE University

Daniel Levy

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP

Domenico Francavilla

University of Torino

James B. Speta

Northwestern University - Pritzker School of Law

Marco de Benito Llopis-Llombart

IE Law School

Maria Lúcia de Pádua Lima

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP

Paulo Clarindo Goldschmidt

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP

Date Written: June 2014

Abstract

This paper is not a target by itself. It is part of a project to research and analyze certain aspects of foreign investments in different jurisdictions.

In certain countries, some industries, such as car manufacturing, are granted specific treatment, benefits or incentives resulting from a kind of international competition for new investments. A movement that, sometimes, results in more benefits to the industry than to the country or the community where they are located, and which has been properly described as a “race to the bottom”. When this phenomenon occurs within the boarder of a given country, some regulation may be effective. However, in the international context the questions gain much more complexity.

These are basically incentives to attract new investments and they are ordinarily granted to specific market agents. However, incentives may be a “Siren´s song”, attracting new entrepreneurs without giving them real protection for their ventures. In this sense, predictability and a stable legal framework may be an effective incentive for direct investments.

New problems emerge from international transactions involving technology companies as well. For instance, Amazon, a global player has started operations in different jurisdictions bringing several legal challenges regarding transactions taking place outside (virtual environment) the country were the services are rendered or goods delivered. In other words, how to deal with operations conducted by a company with local presence, including distribution and logistics systems, but closed outside the country?

In such context, it is essential that judicial decisions and arbitral awards be recognize as valid and enforced in different jurisdictions. In most of international deals, the parties elect specific rules for their businesses, such as CISG, UNIDROIT, Principles of European Contract Law, the law of one of the contracting parties or a “neutral law” from another country. At the same time, arbitration has been the most frequent method of dispute resolution in the international arena. Therefore, it is an important part of international transactions to enforce decisions taken in one jurisdiction in another country were the practical result is actually effective.

However, in most of the countries, a foreign award must be acknowledged by local courts in order to obtain the “exequatur” of such decision. Usually, the courts would evaluate only formal aspects to ensure that a local resident had the chance to present a proper defense according to a “due process of law” in the foreign jurisdiction (“loci arbitrii”). The merits of the cause should not be disputed again in the place of enforcement, except in very restrict matters. Public policy is certainly the most relevant one.

Suggested Citation

Ajani, Gianmaria and Tarman, Derya and Fernandes, Wanderley and de Elizalde, Francisco and Levy, Daniel and Francavilla, Domenico and Speta, James B. and de Benito Llopis-Llombart, Marco and Lima, Maria Lúcia de Pádua and Goldschmidt, Paulo Clarindo, Protection of Direct Foreign Investment: Public Policy Exception Impact on Foreign Direct Investments: 'Court (Non) Enforcement of Arbitration Decisions Based on Public Policy Exception' (June 2014). Law Schools Global League (LSGL) Research Paper No. 1. Available at SSRN: https://ssrn.com/abstract=2461481 or http://dx.doi.org/10.2139/ssrn.2461481

Gianmaria Ajani (Contact Author)

University of Turin ( email )

Via Po 53
Torino, Turin - Piedmont 10100
Italy

Derya Tarman

Koç University Law School ( email )

Rumelifeneri Yolu
34450 Sariyer
Istanbul, 34450
Turkey

Wanderley Fernandes

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

Francisco De Elizalde

IE University ( email )

Castellón de la Plana 8
Madrid, 28006
Spain

Daniel Levy

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

Domenico Francavilla

University of Torino ( email )

Via S. Ottavio, 20
Torino, Turin - Piedmont 10124
Italy

James B. Speta

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States

Marco De Benito Llopis-Llombart

IE Law School ( email )

Campus de Santa Cruz la Real
Segovia, 40003
Spain

Maria Lúcia de Pádua Lima

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

Paulo Clarindo Goldschmidt

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

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