BY Natasha Behary Paray , Maxime Sauzier , Shrivan Dabee AND Thierry Koenig
Ground breaking Mauritian decision made on domestic court intervention in international arbitration awards
On 14 June 2021, the Judicial Committee of the Privy Council (“JCPC”) handed down an important decision in the case of Betamax Ltd v State Trading Corporation on the issue of “illegality” being raised to set aside and resist enforcement of an arbitral award, upon an appeal from the Supreme Court of Mauritius.
The case concerned an arbitration that was administered by the Singapore International Arbitration Centre (“SIAC”). Here, the sole arbitrator had considered the legality of a contract between Betamax and the State Trading Corporation (“STC”) which was purported to have been concluded in breach of Mauritian public procurement laws. The arbitrator held that the contract was not entered into in breach of such laws, and awarded damages to Betamax to the sum of USD115.3-million, with interests and costs.
The Mauritius Supreme Court refused to enforce and set aside the award as it considered the contract to be in breach of Mauritian public procurement laws and that such illegality was flagrant.
Lord Thomas, delivering the judgment on behalf of the JCPC, held that since the arbitrator had considered the issue of illegality and had determined that there was none, the Supreme Court had no power to review this award and that the issue of illegality should not be reopened by the court upon an application for setting aside/resisting recognition and enforcement of the award.
The JCPC identified the following three issues as arising from the appeal:
- the scope of the powers of the Supreme Court when considering an application for setting aside an arbitral award on grounds of public policy. On the particular facts of the case, the question was whether the Supreme Court had the power to reopen the issue of the alleged breach of Mauritian public procurement laws;
- if the answer to the above issue was resolved in the affirmative, the second issue was whether the contract between Betamax and STC was in fact illegal having regard to Mauritian public procurement laws;
- if the answer to the question of the legality of the contract was in the affirmative, the last question would be whether the award giving effect to such contract was in conflict with the public policy of Mauritius.
On the first issue, after reviewing the provisions of the Mauritian International Arbitration Act, the JCPC:
- remarked that the grounds for setting aside an arbitral award are essentially the same as those applicable for refusing the recognition and enforcement of an arbitral award under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention);
- acknowledged that the court, when faced with an application for setting aside, may interpret the nature and scope of public policy differently from a court of the state where recognition and enforcement is being resisted;
- affirmed that, notwithstanding any difference in the nature and scope of public policy between different courts, there was no reason for any difference in the extent of a court’s right of intervention when considering an award in the light of public policy;
- took note that the Supreme Court had only cursorily considered the question of its right of intervention and that, after making a determination on whether or not the award contravened Mauritian public procurement laws;
- identified that the approach of the Supreme Court was based on an obiter dicta of Lord Waller LJ in the English case of Soleimany v Soleimany which was not subsequently adopted by the English Court of Appeal or the courts in Singapore;
- held that:
- in the absence of fraud, breach of natural justice or any other vitiating factor, an arbitral tribunal’s decision is final, whether the issue was one of fact or of law;
- if an arbitral tribunal has the jurisdiction to determine the issue of illegality and it proceeds to do so, the issue of illegality should not be reopened by the court upon an application for setting aside/resisting recognition and enforcement of the award;
- if an arbitral award determines that a contract is illegal but makes an award enforcing the contract, a state court could be entitled to set aside the award on grounds of public policy;
- accordingly, since the arbitrator in the present case was duly empowered to consider the issue of illegality under the contract between Betamax and STC and had duly considered the issue and determined that there was no illegality, the Supreme Court had no power to review this decision.
Notwithstanding its finding that the Supreme Court was not entitled to reopen the question of the illegality of the contract which had finally been determined by the arbitrator, the JCPC nevertheless considered whether the decision of the Supreme Court on the illegality of the contract was warranted. They held that the Supreme Court had wrongly interpreted the provisions of the Public Procurement Regulations 2009 and that the contract between STC and Betamax was not concluded in contravention of the said Regulations.
The decision of the Supreme Court was thus set aside and Betamax was granted leave to proceed with its enforcement of its award for the sum of USD115.3-million with interests and costs.
This decision clarifies not only the approach to be adopted by the courts of Mauritius on applications for setting aside arbitral awards falling under the scope of the International Arbitration Act, but also prescribes the test to be applied to determine when a court can intervene when faced with an application to resist the enforcement of an arbitral award, whether under the International Arbitration Act or the New York Convention. In addition, it stands as a compelling indicator of the likely approach which will be favoured by the Supreme Court of England and Wales in relation to the issue of the right of a court to intervene at the stage of enforcement of an arbitral award for the purposes of English law since this question had, so far, only been considered at the level of the Court of Appeal.
Thierry Koenig SA
Head of ENSafrica | Mauritius
+230 5729 9990
P. Maxime Sauzier SC
ENSafrica | Mauritius | Director | Senior Counsel
+230 5729 6847
ENSafrica | Mauritius | Barrister | Executive
+230 5492 7834
Natasha Behary Paray
ENSafrica | Mauritius | Barrister | Associate
+230 5748 0789