Enforcing Arbitral Awards Against State Entities: Public Policy and International Comity
Understanding Gater Assets Ltd v Naftogaz of Ukraine [2008] EWHC 237 (Comm)
In Gater Assets Ltd v Naftogaz of Ukraine [2008] EWHC 237 (Comm), the English Commercial Court examined the boundaries of public policy and international comity in enforcing a foreign arbitral award against a state-owned enterprise. The decision illustrates the English courts’ strong pro-enforcement stance under the New York Convention (1958), even when the losing party is a major state company.
📂 Case Details
Case Title: Gater Assets Ltd v Naftogaz of Ukraine
Citation: [2008] EWHC 237 (Comm)
Court: High Court of Justice, Queen’s Bench Division (Commercial Court)
Judge: Mr Justice Tomlinson
Date: 15 February 2008
Legal Area: International Arbitration – Enforcement – Public Policy – State-Owned Entities
Parties:
Claimant: Gater Assets Ltd (assignee of Monégasque de Réassurances SAM)
Defendant: Naftogaz of Ukraine
⚖️ Background of the Dispute
The dispute originated from an arbitration before the International Commercial Arbitration Court (ICAC) in Moscow, concerning gas deliveries and alleged unauthorised withdrawals by Ukraine’s Naftogaz, then a key participant in the Russian–Ukrainian gas transit system.
In 2000, the ICAC tribunal rendered an award against Naftogaz, which was later assigned to Gater Assets Ltd, a company registered in the British Virgin Islands. Gater sought to enforce the award in England under section 101 of the Arbitration Act 1996, which incorporates the New York Convention into English law.
Naftogaz opposed enforcement, claiming that recognition would be contrary to public policy because the award had been procured by fraud and that it should not bind a state-owned entity subject to sovereign influence.
🔍 The Legal Questions
The Commercial Court had to address several complex issues:
Could alleged irregularities in a foreign arbitration justify refusing enforcement under Article V(2)(b) of the New York Convention and section 103(3) of the Arbitration Act 1996?
Should English courts revisit the merits of an arbitral award already upheld by the courts at the seat (Russia)?
Did the public policy exception extend to cases involving state-controlled companies?
The Court’s Ruling
Justice Tomlinson rejected Naftogaz’s challenge and upheld enforcement of the award. The Court ruled that:
Public policy exceptions must be narrowly applied, reserved only for violations of the most fundamental principles of justice.
Allegations of fraud or misconduct had already been considered by the Russian courts, and there was no basis for the English court to reopen them.
The fact that Naftogaz was state-owned did not grant it immunity or alter its contractual obligations.
The Court concluded that enforcing the Moscow award was consistent with English notions of justice and with the New York Convention’s objective of promoting certainty in international arbitration.
Significance of the Decision
This case underscores the English judiciary’s pro-enforcement philosophy in arbitration and its limited tolerance for public policy defences. It demonstrates that:
English courts will not second-guess arbitral decisions unless a clear and serious injustice is shown.
State-owned enterprises are treated as commercial actors, not as sovereign entities, when they engage in business transactions.
The decision reinforces international comity, respecting the authority of the courts at the seat of arbitration.
What Businesses and Investors Should Know
For international investors and corporations:
England remains one of the most reliable jurisdictions for enforcing foreign arbitral awards, even against powerful state entities.
The public policy defence is interpreted restrictively, ensuring predictability and finality.
Businesses contracting with state-owned companies should include English governing law and enforcement clauses, knowing they will be respected by English courts.