Whether English court can decide issue of fraud in a challenge to enforcement in England
The defendant was ordered to pay damages following an arbitral award in Sweden in 2013. The claimant sought to enforce the award in the US, whilst the defendant applied to the Court of Appeal in Sweden to have the award set aside. In 2015, the defendant sought to set aside the permission which had been granted by the English courts to enforce the award here. The defendant then obtained further documents in the US proceedings and sought to amend its pleadings in all the ongoing proceedings to allege fraud by the claimant. The English proceedings were stayed pending the determination of the proceedings in the Swedish courts. The Swedish courts dismissed the application and the US court refused to allow fraud to be added as a ground. The issue in this case was whether the English court should allow the defendant to pursue to trial its allegation that the award was obtained by fraud.
Two conditions normally have to be satisfied in these circumstances:
(1) The evidence to establish the fraud was not available to the defendant at the time of the hearing before the arbitrators. Knowles J was satisfied that such evidence had not been available to the defendant, and nor could it have been discovered with reasonable diligence.
(2) There is a prima facie case of fraud.
Knowles J acknowledged that he should accord "the greatest respect" to the Swedish and US courts: "If anything, the importance of mutual respect between courts that have responsibilities in relation to commercial arbitration that is of international reach – whether responsibilities in relation to oversight or enforcement - is increasing all the time as commerce becomes more globalised and interconnected". However, he went on to find that neither the Swedish nor the US court had in fact decided whether there had been the fraud alleged, and so no question of estoppel arose: "Relevant public policy can and does differ from country to country. It is correct to say that the Swedish Court did not decide whether under English law public policy required the application to enforce the Award in this jurisdiction to be refused".
Furthermore, even if there had been an estoppel, "the English Court would still have to decide whether enforcement of the Award should be permitted because English public order must ultimately be a matter for the English Court". That principle had been accepted in Yukos Capital v OJSC Roseneft and the judge rejected an argument that the principle was confined to judgments, and did not include NY Convention arbitral awards.
COMMENT: The English courts' approach (as set out in this judgment) presents challenges for a party wishing to enforce an award in multiple jurisdictions where it faces a challenge based on public policy grounds. As only the English courts can decide the issue of whether there has been breach of English law public policy, the same issue may need to be tried in more than one court, and could result in different results in different jurisdictions.