In a judgment delivered on 31 May 2019, a bench of three Designated Judges of the Supreme Court constituted under section 42 of the Mauritian International Arbitration Act, 2008 (the “IAA”), set aside an arbitral award delivered under the Arbitration Rules of the Singapore International Arbitration Centre.
The dispute submitted to arbitration concerned the termination of a 2009 contract for a fixed duration of 15 years for the freight of petroleum products from India to Mauritius. The contract was entered into between the State Trading Corporation (“STC”) and Betamax Limited, who had contracted to undertake the freight. In awarding the contract, the provisions of the Public Procurement Act (“PPA”) were not followed as it was believed that the contract fell outside the purview of the PPA by operation of the Regulations adopted under the PPA.
In 2015, the STC, upon a decision of the Government of Mauritius, terminated the contract in view that it had been awarded in breach of the PPA. Betamax initiated arbitration proceedings for breach of contract and was awarded damages in the sum of USD115 267 199 by the arbitral tribunal.
Betamax applied for recognition and enforcement of the arbitral award in Mauritius and was granted a provisional order to that effect. STC challenged the award on two fronts: application for the setting aside of the provisional order and a further application for the setting aside of the award.
The grounds relied on by STC were as follows:
- the contract was awarded in breach of the PPA and was therefore illegal;
- the award was in breach of the public policy of Mauritius;
- the subject matter of the dispute is not capable of settlement by arbitration under Mauritian law.
Even though the parties submitted arguments in respect of all these grounds, the decision of the Supreme Court is limited to the public policy argument, based on a breach of the PPA.
In this regard, the Supreme Court decided as follows:
- the Regulations adopted under the PPA did not operate to exempt the STC from complying with the PPA for contracts of the type concluded with Betamax, that is, contracts for freight;
- since the contract (which was a major contract for purposes of the PPA) was concluded in breach of the provisions of the PPA, it was illegally awarded;
- having regard to the magnitude of the contract, its enforcement, “in flagrant and concrete breach of public procurement legislation enacted to secure the protection of good governance of public funds, would violate the fundamental legal order of Mauritius. Such a violation breaks through the ceiling of the high threshold which may be imposed by any restrictive notion of public policy”.
In reaching the above decision, the Supreme Court considered the approach of a number of jurisdictions, including jurisdictions that have not adopted the UNCITRAL Model Law, such as England, France and Switzerland. It would appear from the judgment that the test applicable for the purposes of Mauritian law is that, in order for a breach of a legal provision to amount to a breach of public policy warranting setting aside of the award, the breach must be “flagrant, actual and concrete”, as is the case under French law (case of SNF SAS v Cytec Industries BV (Holland), Cour de Cassation, Ch. Civ., 1ere, 4 juin 2008). The threshold to meet this standard is, however, considered very high. In this particular case, the Supreme Court held that the breach was fundamental enough to meet the required threshold.
This is the first time that the Supreme Court of Mauritius is granting an application for the setting aside of an award under section 39 of the IAA on grounds of public policy of Mauritius. At this stage, It is not known whether Betamax will appeal against the setting aside decision before the Judicial Committee of the Privy Council.
Betamax had initiated proceedings before Indian courts for enforcement and execution of the award in India. Their approach following the setting aside judgment will be interesting to follow.