The Supreme Court's recent judgment in Cat.SA v Priosma Limited(1) has underlined the jurisdiction's pro-enforcement stance. In particular, the court:
- refused an application by Bermuda-based Priosma Limited (the award debtor) to set aside an ex parte order granting Cat.SA (the award creditor) leave to enforce a foreign arbitral award rendered in an arbitration seated in Paris (the set aside application); and
- granted Priosma's application for a stay of enforcement in Bermuda pending the outcome of an appeal by Priosma against the award to France's highest appellate court (stay order) but, as a condition of the stay order, ordered Priosma to provide security for the full amount of damages and costs awarded to CAT by the three-member tribunal in Paris.
The judgment once again confirms Bermuda's status as a sophisticated, arbitration-friendly jurisdiction. It is a classic example of the Bermuda courts' robust approach when asked to enforce foreign arbitral awards against award debtors in Bermuda, even in circumstances where the award in question is being challenged by the award debtor in the courts of the seat, or legal place, of the arbitration.
Chief Justice Narinder Hargun's judgment expressly states that the decision is "consistent with the pro-enforcement policy" of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, which was given legal effect in Bermuda in 1979, as well as the Bermuda International Conciliation and Arbitration Act 1993, which incorporates the United Nations Commission on International Trade Law Model Law into Bermuda law.
On a more technical level, the judgment stands as good authority for the principle that, pursuant to the legal doctrine of issue estoppel, the Bermuda courts will prohibit award debtors from re-litigating arguments in support of non-enforcement of a foreign award if those arguments have already been made before, and rejected by, the supervisory courts of the arbitration. In addition, the judgment clarifies that even if award debtors succeed in persuading the Bermuda courts to stay enforcement pending a legal challenge in the courts of the foreign seat, there is nevertheless a real possibility that the award debtor may be required, depending on the circumstances, to provide security as a condition of any order granting a stay (potentially up to the award's full value).
CAT, a member of a French group of (re)insurance companies, commenced an arbitration against Priosma, a Bermudian reinsurance broker, in Paris pursuant to an arbitration agreement annexed to a brokerage agreement. CAT's claim concerned the non-payment of sums it alleged were due to it from Priosma under the brokerage arrangements between the parties.
The subsequent arbitral proceedings in Paris were fully contested by Priosma, which as part of its defence contested the tribunal's jurisdiction to decide CAT's claim on the grounds that there was no valid and binding arbitration agreement in place between CAT and Priosma (the jurisdictional objection).
The arbitral tribunal rejected the jurisdictional objection and proceeded to decide the merits of the substantive dispute in CAT's favour. Priosma was ordered to pay CAT €556,958 along with interest from the date of the award.
On 10 June 2016 Priosma appealed against the award to the Paris Court of Appeal, once again relying on the jurisdictional objection. The Paris Court of Appeal dismissed Priosma's appeal. On 24 September 2018 Priosma issued a further appeal to the Court of Cassation. This appeal was pending when the set aside application was heard by the Bermuda Supreme Court.
The grounds of the set aside application were identical to those relied on by Priosma before the Paris Court of Appeal. As the latter court had rejected those arguments, the doctrine of issue estoppel prevented the Bermuda court from entertaining those same arguments in its proceedings. In short, the chief justice concluded that he was bound by the Paris Court of Appeal's ruling.
The fact that Priosma had commenced court proceedings in France to challenge the award meant that Priosma had voluntarily submitted to the jurisdiction of the French courts, and therefore an essential condition under Bermuda law for issue estoppel to apply in the context of a foreign court's ruling was made out.
The Bermuda court's power to grant a discretionary stay of enforcement of a foreign award pending the outcome of a challenge to the award in the courts of the seat derives from Section 36(2) of the 1993 act. When deciding whether to exercise its discretion to stay enforcement, the Bermuda Court will apply the sliding scale test set out in the foundational and long-running English IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation case.(2)
As such, the Bermuda court will consider several relevant factors when deciding to grant a stay of enforcement, including:
- whether the challenge in the courts of the seat is genuine and not simply by way of a delaying tactic;
- whether the challenge has a realistic prospect of success;
- the extent of any delay which would be occasioned by a grant of a stay; and
- any resulting prejudice to the award creditor.
In deciding whether to order the award debtor to provide security as a condition of granting a stay of enforcement, the Bermuda court will consider:
- the strength of the argument that the award is invalid (as perceived on a brief consideration of the award debtor's arguments in the foreign proceedings); and
- whether enforcement will be rendered more difficult for the award creditor if enforcement is delayed.(3)
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