THE AUTHOR:
Aleksandre Kakhadze, In-House Counsel at TBC Capital
In The Devil and the Good Lord, Jean-Paul Sartre’s Archbishop notes, ‘A victory described in detail is indistinguishable from a defeat.’ This quote is particularly fitting when examining the public policy exception – one of the two grounds that a court may consider ex officio to refuse enforcement of an arbitral award under the New York Convention.
In this context, a recent ruling from the Supreme Court of Georgia warrants close scrutiny. On its face, the decision represents a resounding win for Georgia’s pro-arbitration stance. In contrast, the Court’s argumentation in reaching that conclusion invites the very detailed description the Archbishop warned of, compelling a closer look at what kind of victory it truly is.
Factual Background
The Georgian Parties and Ras Al-Khaimah related Parties (“RAK Parties”), as the Arbitral Tribunal referred to them, having initiated multiple proceedings in Georgia, the UAE, and England, sought to consolidate all related civil cases under a single forum. To this end, they executed an Arbitration Agreement on 6 June 2017 (“Arbitration Agreement”), under the Stockholm Chamber of Commerce (“SCC”) Rules. The foundation of these legal proceedings is a series of transactions dating back to 2006. The arbitration itself commenced in 2018, with the parties stipulating in their agreement that all disputes should be resolved once and for all by a single, final award. The complex arbitral proceedings in Mikadze and others v. RAKIA and others ultimately involved 24 parties and 26 claims, culminating in an arbitral Award rendered on 31 January 2022. The Arbitral Tribunal constituted under SCC Rules (‘SCC Tribunal’) later expressed its belief that, with its award, ‘the dispute between the parties has finally been resolved,’ a belief that would soon be tested during a protracted enforcement battle before the Georgian courts.
Under Articles 44-45 of the Georgian Law on Arbitration (‘Arbitration Law’) – which is modeled in the spirit of UNCITRAL (United Nations Commission On International Trade Law) Model Law on International Commercial Arbitration (2006) – the recognition and enforcement of foreign arbitral awards, as well as challenges to them, fall within the exclusive competence of the Supreme Court of Georgia (‘Supreme Court’). Despite the arbitration lasting over four years, the subsequent court proceedings for enforcement were far from swift. The Supreme Court issued several rulings in the process, from partially granting an injunction request before enforcement (21 June 2022) to denying a motion to halt enforcement proceedings (8 February 2024).
For the purposes of this article, the central focus will be the Supreme Court’s ruling on the recognition and enforcement of the foreign arbitral award, dated 20 November 2023 (№ა-2367-შ-70-2022) (‘RAKIA Case’), and the public policy challenge raised by the Georgian Parties.
The Acquittal in the Criminal Case and the Public Policy Argument
One of the main debtors, Mr. G.M., was found criminally liable by Tbilisi City Court on 31 December 2013, on three counts of misappropriation or embezzlement under Article 182 of the Criminal Code of Georgia. Mr. G.M. was also found liable for embezzlement by a court in Ras Al-Khaimah on 26 April 2017.
The Arbitration Agreement itself contained a specific clause, namely:
‘A criminal court decision in the UAE, Georgia, or any other jurisdiction, shall not be of a binding nature for the panel of arbitrators, and the RAK parties shall not rely on criminal verdicts rendered in the UAE, Georgia, or any other jurisdiction as evidence proving any fact in the arbitral proceedings.’
Given that a key member of the Georgian Parties was found criminally liable in two jurisdictions, one can infer that this clause was included to anticipate potential conflicts. Ironically, this wording, likely intended as a shield, would later prove critical to defeating their arguments.
On 24 February 2021, the SCC Proceedings were closed in accordance with the Article 40 of the SCC Rules. However, a significant development occurred six months before the final award was rendered: the Tbilisi Appellate Court overturned the 2013 conviction, acquitting Mr. G.M.
Taking advantage of the above-mentioned developments, the Georgian Parties argued before the Supreme Court that this acquittal was based on the same factual circumstances examined by the SCC Tribunal. Therefore, they contended, enforcing an arbitral award that contradicted a final judgment of a Georgian court would violate Georgia’s public policy.
The Supreme Court rejected this argument, basing its decision on three key grounds (§32):
- The Contractual Agreement (§32.1): The Court emphasized Article 14 of the Arbitration Agreement, which explicitly stated that criminal court decisions would not bind the arbitral tribunal or serve as prejudicial evidence. Consequently, the Court noted ‘a guilty verdict could not have become the basis for the arbitral award, and the circumstances established by the verdict could not have had a prejudicial effect during the arbitral hearing.’
- Failure to Present a Key Witness (§32.2): The Court pointed out that the Appellate Court’s acquittal, among other circumstances, relied on the testimony of a witness, Khater Massaad. However, this witness was never presented to the SCC Tribunal by the Georgian Parties, despite the Tribunal’s suggestion. In an adversarial process, the Supreme Court reasoned, the burden was on the Georgian Parties to produce their witnesses.
- Failure to Introduce the Acquittal to the Tribunal (§32.3): The Supreme Court noted that the acquittal was issued on 28 July 2021, whereas the arbitral award was rendered on 31 January 2022, resulting in a six-month gap. The RAK Parties submitted a legal opinion from a Swedish lawyer confirming that under the SCC Rules governing the arbitration, ‘Swedish law allows parties the possibility of presenting new evidence after the arbitral proceedings are closed.’ The opinion cited SCC Rule 40, which permits the tribunal to reopen proceedings in exceptional cases. The Court concluded that ‘under the SCC rules and Swedish law, the Georgian parties had the right to submit the Appellate Court’s decision to the arbitration along with a request to reopen the case,’ but failed to do so.
Interestingly, the Court introduced its third point (§32.3) by stating, ‘Moreover, even if we consider the verdict rendered in the criminal case in Georgia as relevant evidence in the arbitration hearing,’ suggesting that the grounds for its decision might be alternative rather than cumulative.
Ultimately, the Supreme Court denied the motion to refuse recognition and enforcement. It should be noted that a separate public policy challenge, based on allegations of illegal spying on the parties and arbitrators, was also swiftly dismissed as no relevant evidence confirming the criminal act has been presented in the case.
The question remains: by focusing on procedural and contractual failures, did the Supreme Court deliberately avoid the core issue of whether contradictory findings between a domestic court and an arbitral tribunal inherently violate public policy?
International Practices regarding Parallel Proceedings
Much like RAKIA Case, conflicting decisions from parallel court and arbitral proceedings are a long-standing challenge in international commercial arbitration. In Croatia v. MOL, Judgment 4A_69/2022, para 5.1, the Swiss Supreme Court, interpreting its Private International Law Act, held that ‘[a]n arbitral tribunal is not bound by a criminal judgment rendered in the context of the same complex of facts, which is why it may arrive at a solution different from that adopted by the criminal authority.’
Similarly, the Supreme Court of India (Criminal Appeal No. 1704/2025, p. 5) reinforced the finality of an arbitral award, stating that ‘[b]y way of a criminal proceeding, the arbitral award passed cannot be interdicted or set aside.’
The RAKIA Case, however, presents a slightly distinct set of facts. The parties had contractually agreed that criminal court decisions would not have res judicata effect on the tribunal. Furthermore, the acquittal occurred before the arbitral award was rendered. As the RAK Parties successfully argued, the Georgian Parties appeared to be using the public policy defense to cure their own procedural inaction before the arbitral tribunal.
Concluding Remarks
By adopting a three-pronged factual analysis, the Supreme Court skillfully avoided setting a broad precedent on the relationship between domestic court judgments and foreign arbitral awards. This display of judicial pragmatism delivered a resolutely pro-arbitration outcome, reinforcing internationally recognized principles of party autonomy, procedural waiver, and the prohibition of revision au fond.
However, this victory may prove to be a pyrrhic one. By focusing on the peripheral issues of contract and procedure, the Court sidestepped the central and more challenging doctrinal question: does an arbitral award with findings that contradict a Georgian court judgment violate Georgian public policy?
Answering ‘no’ would have rendered the subsequent analysis of the parties’ conduct irrelevant. The Court’s approach implies that the answer is ‘yes,’ or at least ‘maybe,’ but that the public policy defense was waived or forfeited in this specific case. This raises further questions. Did the contractual waiver in Arbitration Agreement alone suffice? Or was it the failure to present the witness? Or the inaction in submitting the new judgment to the Tribunal? The Court’s language suggests these grounds might have been alternative rather than cumulative, meaning not all three of them had been necessary to defeat the public policy claim. This sets an exceptionally high threshold for parties seeking to invoke the public policy exception in Georgia.
This case, from arbitration to enforcement, serves as a valuable lesson on several fronts: the double-edged nature of arbitration clauses, the critical importance of diligence before a tribunal, and the formidable difficulty of successfully raising a public policy defense before the Supreme Court of Georgia. The Court has planted a flag for its pro-arbitration stance, but in light of the Archbishop’s warning, a closer look at the details prompts a crucial question that only time can answer: is this a victory that will endure, or one that will unravel?
*Please note that all translations of excerpts from Georgian legal texts and case law are provided for informational purposes only. They are not official translations and should not be used as a basis for legal analysis or interpretation.
ABOUT THE AUTHOR
Aleksandre Kakhadze is an In-House Counsel at TBC Capital, a Georgian investment bank, where he specializes in debt capital markets and cross-border transactions. His background includes serving as a Specialist in the International Legal Cooperation Division of the MIA of Georgia and providing legal support in commercial arbitration to an international law firm. Aleksandre is a summa cum laude LL.B. graduate in Public International Law from Ivane Javakhishvili Tbilisi State University and a U.S. State Department Exchange Alumnus.
*The views and opinions expressed by authors are theirs and do not necessarily reflect those of their organizations, employers, or Daily Jus, Jus Mundi, or Jus Connect.
