Law report: Enforcement of arbitration award

5 May 1999 Westacre Investments Inc v Jugoimport - SDPR Holding Co Ltd Court of Appeal (Lord Justice Waller, Lord Justice Mantell and Sir David Hirst) 12 May 1999

IN PROCEEDINGS to enforce a foreign arbitration award, it was not open to the defendants to go behind findings of fact made in the arbitration proceedings.

The Court of Appeal dismissed the defendants' appeal against a ruling on a preliminary issue in proceedings to enforce an arbitration award made against them in Geneva.

The plaintiffs and the defendants' predecessors entered into a written contract whereby the defendants appointed the plaintiff their consultant with respect to the sale of military equipment in Kuwait. The agreement was expressly governed by Swiss law and contained an arbitration agreement, which provided that all disputes should be settled in accordance with the Arbitration Rules of the International Chamber of Commerce with the arbitration's seat to be in Geneva.

In July 1989 the defendants repudiated the agreement and the plaintiff commenced arbitration proceedings. In the arbitration the defendants contended, inter alia, the plaintiff had bribed persons in Kuwait for the purpose of persuading them to exercise their influence in favour of entering into a contract with the defendants.

The majority of the tribunal, in making an award in the plaintiff's favour, found that the defendants had not established that there had been any bribery, nor that the plaintiff's activities had been illicit, nor that anything rendered the agreement unenforceable as violating "bonos mores".

The defendants' appeal against the award was dismissed by the Swiss Federal Court. The plaintiff was granted an ex parte order permitting it to enforce the award in the United Kingdom. The defendants served a summons to set that order aside, the summons being supported by an affidavit in which a different stance was taken from that before the arbitration tribunal, and in which matters were asserted which were contrary to findings by the arbitrators.

On the trial by consent of a preliminary issue as to whether the enforcement of the award would be contrary to English public policy, the judge held that there was no bar to enforcement, and the defendants appealed. The judge, in deciding the preliminary issue, had taken the view that both the primary facts and the inferences of fact drawn in the affidavit were to be assumed to be proved, and the following issue, inter alia, arose on the appeal: whether, on the basis of the judgment in Soleimany v Soleimany [1998] 3 WLR 811 it was open to the defendants in the enforcement proceedings to challenge the arbitrators' findings of fact on the bribery issue; and if so, and if successful in proving the assertions set out in the affidavit, the court should enforce the award.

V.V. Veeder QC and Charles Hollander (Forsters) for the plaintiff; Jonathan Gaisman QC and Stephen Kenny (Holman Fenwick & Willan) for the defendants.

Lord Justice Mantell said that there was some doubt as to whether the suggestion made obiter in Soleimany v Soleimany to the effect that some kind of preliminary inquiry short of a full-scale trial should be embarked on whenever "there is prima facie evidence from one side that the award is based on an illegal contract" was correct.

However, even accepting the guidelines offered in that case, any such preliminary inquiry in the circumstances of the present case would lead to the conclusion that the attempt to re-open the facts should be rebuffed, for the following reasons: (a) there was evidence before the tribunal that the agreement was a straightforward commercial contract; (b) the arbitrators specifically found that the underlying contract was not illegal; (c) there was nothing to suggest incompetence on the part of the arbitrators; and (d) there was no reason to suspect collusion or bad faith in the obtaining of the award.

Moreover, it was clear from the award itself that bribery was a central issue: the allegation had been made, entertained and rejected. Had it not been rejected, the claim would have failed, Swiss and English public policy being indistinguishable in that respect.

Kate O'Hanlon

Barrister