In Anatolie Stati and others v Kazakhstan [2017] EWHC 1348 (Comm), the English High Court held that the Defendant’s application, to set aside permission granted to the Claimants to enforce an arbitral award, should proceed to trial as there was sufficient evidence the tribunal had been deliberately misled by the Claimants.

Background

The High Court’s 6 June 2017 judgment related to a December 2013 (New York Convention) arbitral award arising out of Energy Charter Treaty arbitral proceedings seated in Sweden. Pursuant to the award, the Defendant was ordered to pay damages in excess of US$500 million. The Defendant subsequently applied to the English High Court to set aside permission granted to the Claimants to enforce the award, on the basis that enforcement of the award would contravene English public policy due to the Claimants’ fraud. In particular, it was alleged that the value of a bid (for a liquefied petroleum gas plant), on which the tribunal based its assessment of damages, was the result of the Claimants’ dishonest misrepresentation.

Elsewhere, the US Court (on 11 May 2016) refused a motion by the Defendant to add the alleged fraud to its grounds for opposing enforcement (the Claimants having commenced enforcement proceedings in the US on 30 September 2014). The Defendant also applied to the Swedish Court of Appeal to set aside the award, and that application was dismissed on 9 December 2016.

Decision

Sections 103(1) and (3) of the Arbitration Act 1996 provide that “[r]ecognition or enforcement of a New York Convention award shall not be refused except where…it would be contrary to public policy to recognise or enforce the award.”

The two conditions to be fulfilled in order for the English Court to permit the Defendant to pursue a trial of the issues, in light of the allegation that the New York Convention award was obtained by fraud, were:

  1. The evidence to establish the fraud was not available to the Defendant at the time of the hearing before the arbitrators.
  2. There was a prima facie case of fraud sufficient to overcome the extreme caution of the Court when invited to set aside an award on the ground of public policy.

As to the first condition, the English Court held that the Defendant did not have access to the evidence relied on in respect of the alleged fraud, nor could it have discovered the evidence with reasonable due diligence, prior to the tribunal’s award.

As to the second condition, the Court found that there was the necessary strength of prima facie case that the tribunal would not have based its assessment of damages on the bid if the value of the bid was the result of the Claimants’ dishonest misrepresentation.

In distinguishing its conclusions from those of the US and Swedish Courts, the English Court found that those courts, in reaching their respective decisions, had not had to address the same issues (therefore no issue estoppel had arisen). The Court also highlighted that, even if the relevant issues had been decided by the US/Swedish Courts, the English Court would still have to decide separately if enforcement of the award accorded with English public policy. In the circumstances, pursuant to English public policy, the English Court could intervene where the tribunal had been deliberately misled by the Claimants.

The English Court concluded that the Defendant’s application should proceed to trial.

Comment

Parties should be live to the potential for divergent decisions on enforcement of an arbitral award where courts in multiple jurisdictions are concerned, not only as a result of the potential for disparity between the issues forming the basis of courts’ decisions, but also where the scope and limits of a jurisdiction’s public policy require courts to reach differing conclusions.