CHALLENGES TO AWARDS: - PowerPoint Presentation

Slide1

CHALLENGES TO AWARDS: PUBLIC POLICY & FRAUD

RODERICK CORDARA QC, SC

ESSEX COURT CHAMBERSSlide2

overviewInterpreting the scope of ‘public policy’ in context of arbitral challenges is a vexed question internationally

But in the context of arbitral fraud, tests of public policy very similar as between jurisdictions.

No practical difference between ‘public policy’ and ‘fraud’, ie generally the same test for both, in each jurisdiction

In relevant jurisdictions, the hurdle is high, because Judges do not want to retry issues agreed to go to arbitration except for

very good reason

.

They want to make it a

very hard remedy

to achieve.Slide3

International ApproachThe ‘public policy’ gateway to fraud-based challenges is universal

It is offensive to public policy to enforce an award obtained by bribery, collusion etc. – it is a ‘shock to the public conscience’

It can also be offensive to public policy to enforce an award procured by fraudulent means – lying (perjury), hiding facts and documents, etc.Slide4

Seat States (curial law) & Enforcement States (NYC)

Seat/supervisory Courts – public policy or local fraud test: same thing in practice

Enforcement Courts – New York Convention - public policy (fraud/bribery implicitly included)

All roads therefore ‘lead to Rome’

(But NB: ‘Rome’ is not in the same place for everyone - Enforcement State may differ from Seat States).Slide5

For Enforcement States:

New York Convention on the Enforcement of Arbitration Awards (1958)

Art V, sub 2,

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: … (b) The recognition or enforcement of the award would be

contrary to the public policy of that country

.’

Fraud not expressly mentioned, but implicit.Slide6

For Seat/Enforcement States:UNCITRAL MODEL LAW Art 34(2)(b)(ii) / 36(1)(b)(ii)

– award

may

be set aside / not enforced, if it is in conflict with the

public policy

of the State.

Commentary attached, says this includes violations of public policy which would include

‘serious departures from fundamental notions of procedural justice

’.

Fraud not expressly mentioned but implicit

Certain States mention it in domestic statutesSlide7

Discretionary not mandatoryBoth the New York Convention and UNCITRAL wordings use ‘may’, not ‘must’

Same with relevant domestic statutes

Courts have a large discretion as to whether to set aside, even if things have gone wrong:

Is it just a case of a bad loser?

Or did ‘cheating’ go on, which made a probable difference to the outcome and which the loser could not have exposed at the time?Slide8

Where judges differ…Enforcement States are not always ‘deferential’ to Seat States – e.g. even where Seat State annuls, Enforcement State may still recognise or enforce: New York Convention Art. V(2)(b) gives enforcing states a discretion to disregard the grounds, including public policy:

‘Recognition and enforcement

may

also be refused if…’

See eg Dowans v Tanesco

[2011] 2 Ll R 275Slide9

WORLD TOUR – (1) Nigeria

Nigeria is in the legislative mainstream

Arbitration & Conciliation Act

s.48 The court

may

set aside an arbitral award …(b) if the court finds …(ii) that the award is against

public policy

of Nigeria

s.52(2) The court …

may,

irrespective of the country in which the award is made, refuse to recognise or enforce any award-…. (b) if the court finds- ….. (ii) that the recognition or enforcement of the award is against

public policy

of Nigeria.

s. 54(1), Second Schedule – NYC imported.Slide10

(2) UNITED KINGDOM – ENGLAND & WALES

Arbitration Act 1996 s 68(1)

challenge to award for

‘

serious irregularity

affecting the tribunal the proceedings or the award’

Includes

‘the award being

obtained by fraud

or the award

or

the way in which it was procured being contrary to

public policy

’

s 68(2)(g)

NB:

‘

substantial injustice

to the applicant’

must also be shown:

s 68(2)

(a balancing test, i.e. injustice to both sides considered)

UK Arbitration Act

s 73(1)(d)

– reasonable diligence to be shown by applicant, on pain of loss of claimSlide11

UK (nyc PROVISIONS)Arbitration Act 1996 ss 100-103

(New York Convention)

s. 103(3) ‘

Recognition or enforcement of the award may also be refused … if it would be contrary to

public policy

to recognise or enforce the award.’

Award may sometimes be recognised but not enforced.Slide12

UK case lawVery narrow interpretation of the statutory gateways in line with posture of support for arbitration and against re-opening cases:

Lesotho v Impreglio

[2006] AC 221.

Mere falsity of the evidence led is not enough:

Double K Oil v Neste Oil

[2010] 1 Ll R 141

The impugned conduct must be dishonest/ fraudulent/ unconscionable/ reprehensible, not merely negligent:

Protech v Al-Kharafi

[2005] 1 LlR 779 and

Gater v Nak

[2008] 2 LlR 479Slide13

UK case lawConduct includes suppression of documents:

Elektrim v Vivendi

[2007] 1 Ll R 693 

The dishonest conduct must be conduct of the winning party, or its ‘privy’, not merely a third party:

ibid

.

Evidence of fraud/perjury must be newly discoverable – i.e. not reasonably available at hearing:

Thyssen Canada v Mariana

[2005] 1 Ll R 640;

Nestro Maritiem v Sea Anchor

[2012] 2 Ll R 144Slide14

UK case lawThe withheld evidence must be such that it would probably have altered the outcome of the hearing

Chantiers v Gaztransport

[2011] EWHC 3383 – and in the case of perjury it has to have been so strong as to be decisive:

DDT Trucks v DDT Holdings

[2007] 2 Ll R 213 Slide15

(2)-(3) Uk-US case lawUK approach to New York Convention is closely aligned to US approach

See

IPCO (Nigeria) Limited v NNPC

[2014] 1 Ll R 625, [113]-[115], following

Continental Transfer v Fed. Govt Nigeria

697 F Supp 2d 46 (2010), i.e. US also has high hurdles for successfully preventing recognition or enforcement on public policy grounds.Slide16

IPCO v nnpcIn summary, the first instance decision was that forged evidence produced in a Nigerian arbitration could constitute a ground for refusing to enforce the award in England, with the English Court adjourning any further proceedings until the relevant challenge to the validity of the award could be made in Nigeria.

(Court of Appeal decision awaited)Slide17

(4) SINGAPOREApplies a single ‘conflict with public policy of this State/Singapore’ test: s 31(4)(b) & First Schedule of the International Arbitration Act Art 34(2)(b).Slide18

SINGAPORECase law: very narrow approach:

fraud/perjury, by party or privy to party, must be causative of decision, and there must be no lack of reasonable diligence by innocent party.

PT Asuransi Jasa Indonesia (Persero) v Dexia Bank SA

[2007] 1 SLR(R) 597 (at [59])

(seat State)

AJU v AJT

[2011] 4 SLR 739 at [37] (enforcement State: IAA case)Slide19

SINGAPORECorruption of tribunal shocks the conscience and is clearly injurious to the public good or is wholly offensive to the ordinary reasonable and fully informed member of the public– but corruption must be strictly proved:

Dongwoo Mann+Hummel Co Ltd v Mann+Hummel GmbH

[2008] 3 SLR(R) 871, obiter (at [139]);

Beijing Sinozonto Mining Investment Co Ltd v Goldenray Consortium (Singapore) Pte Ltd

[2014] 1 SLR 814Slide20

AUSTRALIAUses ‘public policy’ , ‘fraud’ and ‘corruption’:

International Arbitration Act 1979 s 8

Recognition of foreign awards

(7) …. the court

may

refuse to enforce the award if it finds that... (b)  to enforce the award would be contrary to

public policy

.

(7A) To avoid doubt and without limiting paragraph (7)(b), the enforcement of a foreign award would be contrary to public policy if: (a)  the making of the award was induced or affected by

fraud or corruption

; …Slide21

(5) AUSTRALIA

Case law:

See:

ESCO Corporation v Bradken Resources Pty Ltd

[2011] FCA 905 (pro-arbitration stance)

TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia

[2013] HCA 5

Uganda Telecom Limited v Hi-Tech Telecom Pty Ltd

[2011] FCA 131– public policy attack on Ugandan award, rejected by Aus. Ct. Alignment with US cases.Slide22

conclusionBy whatever route, different judges in different jurisdictions converge on the conclusion that

where there is corruption on the part of the Tribunal, the decision must be set aside – the ‘arbitral well’ is poisoned

but

where the misdeeds are those of a party, help will only be offered where the applicant has striven hard, in the face of dishonesty that actually or probably deprives it of the prize sought in the case. Nothing less will do: even if the poison chalice was secretly offered, it must be proved to have been drunk by the Tribunal and to have been fatal to its decision.Slide23

GOOD LUCK& Thank you