Westacre Investments Inc v. Jugoimport-SDRP Holding Company, Beogradska Banka DD and others.
(England and Wales) Supreme Court of Judicature (Court of Appeal), Waller, Mantell LJJ. and Sir David Hirst, 12th May 1999.
International arbitration award - suggestion that contract was illegal rejected by tribunal - whether enforcement could be resisted on grounds of public policy - whether alleged perjury by witnesses a ground to resist enforcement - whether court could open up the tribunal's findings of fact relating to illegality.
Facts:
The predecessors in title to Jugoimport-SDRP Holding Company and Beogradska Banka DD, the Federal Directorate of Supply and Procurement of the Socialist Federal Republic of Yugoslavia (the Directorate) and Udruzena Beogradska Banka (the Bank), concluded an agreement that provided for Westacre Investments Inc (Westacre) to be appointed by the Directorate with respect to the sale of military equipment in Kuwait. In return for its services, Westacre was to receive a substantial percentage of the value of the contracts entered into by the Directorate with, principally the Kuwaiti Ministry of Defence. The Bank guaranteed payment of all fees due to Westacre. The agreement was stated to be governed by Swiss Law and provided for ICC arbitration.
Disputes arose and were referred to arbitration. The tribunal awarded substantial sums to Westacre. During its submissions at the hearing, the Directorate contended that the agreement was void because it violated
"ordre public international" or "bonos mores", the suggestion being that Westacre had given bribes to persons in Kuwait to help secure a contract with the Directorate. It was not suggested that the Directorate had entered into the agreement with the view that this would happen or that Westacre was, in fact, a vehicle for receiving bribes. The tribunal dismissed these arguments on the grounds that the Directorate had advanced insufficient evidence to substantiate them.
The Directorate and the Bank challenged the award in the Swiss courts contending, for the first time, that Westacre was a vehicle for claiming bribes from the Directorate. Its application for an annulment was dismissed.
Westacre obtained from the High Court an ex parte order for the enforcement of the award in England. The successors in title to the Directorate and the Bank sought, unsuccessfully, to set that order aside. They appealed on three grounds.
First that, even without going beyond the facts that appeared in it, the award was unenforceable on grounds of public policy,
Lemenda Trading Co Ltd v. African Middle East Petroleum Co Ltd [1988] 1 QB 448 (the Lemenda point).
Secondly, on the grounds that Westacre, through its witnesses, gave perjured evidence at the arbitration.
Thirdly, on the grounds that the facts found by the tribunal could be reopened by the court so as to inquire into the issue of illegality.
Held:
The appeal would be dismissed (Weller LJ dissenting on the third point only).
On the Lemenda point. Lemenda Trading Co Ltd v. African Middle East Petroleum Co Ltd decided that there were some rules of public policy that, if infringed, would lead to non-enforcement by the English court whatever the proper law of the parties' agreement and wherever the place of performance, but others that were based on considerations that were purely domestic. Contracts for the purchase of influence were not in the former category.
Thus a contract for the purchase of personal influence, if to be performed in England, would not be enforced as contrary to English domestic public policy. But where such a contract was to be performed abroad, it was only if performance was also contrary to the domestic public policy of that country, that the English court would not enforce it. Furthermore, if all that could be said for a contract was that performance in a foreign country would be contrary to the domestic public policy of that state, enforcement would only be refused if performance was also contrary to domestic public policy in England.
Since the tribunal did not make findings as to whether or not the agreement would be illegal under Kuwait law, the appeal on this ground failed.
On the second ground. The grounds on which an international arbitral award could be challenged in the English court on the basis that perjured evidence had been given were narrower than those that could be relied on to challenge a foreign judgement at common law. The conditions that should normally be fulfilled were (a) that the evidence to establish the fraud was not available to the party alleging the fraud at the time of the hearing before the tribunal, and (b) where perjury was the fraud alleged, i.e. where the very issue before the tribunal was whether the witness or witnesses were lying, the evidence must be so strong that it would reasonably be expected to be decisive at a hearing and, if unanswered, must have this result. Since no good reason had been shown why the allegations of perjury were not made in sufficient time to enable the award to be challenged in the Swiss court, they could be relied on now.
On the third ground (Waller LJ dissenting). The crucial issue was whether the tribunal's findings of fact on the bribery issue could be challenged in enforcement proceedings. The suggestion, in
Soleimany v. Soleimany [1998] 3 WLR 811, that such an enquiry could, in certain circumstances be possible, was a difficult concept and there were concerns over its application in practice. Nevertheless, even accepting its guidelines, a preliminary enquiry showed that, in this case, the facts found by the tribunal should not be re-opened.
First, there was evidence before the tribunal that this was a straightforward, commercial contract. Secondly the tribunal specifically found that the underlying contract was not illegal. Thirdly, there was nothing to suggest incompetence on the part of the tribunal. Finally there was no reason to suggest collusion or bad faith in the obtaining of the award. The seriousness of the alleged illegality, to which Waller LJ gave weight, was not a factor to consider at the preliminary enquiry stage.
For the Appellants: Mr J Gainsman QC and Mr S Kenny (instructed by Messrs Holman Fenwick &
Willan).
For the respondent: Mr V Veeder QC and Mr C Hollander QC (instructed by Messrs
Forsters).
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