Enforcement order of an award set aside by the English High Court on the basis of Sections 103(2)(c) and (f) of the 1996 Arbitration Act

In a judgment dated 19 February 2015, the High Court of England and Wales set aside an order to enforce an award under the New York Convention on the basis of Sections 103(2)(c) and (f) of the 1996 Arbitration Act and thus declined enforcement of this award.

On 4 November 2000, Malicorp Ltd. (“Malicorp”), a company registered in England and Wales, and the Government of Egypt entered into a concession contract for the design, construction and operation of a new airport, for a duration of 41 years.

A dispute arose out of the concession contract, leading the Republic of Egypt to annul the contract. As a result, Malicorp initiated arbitration proceedings against not only the Government of Egypt, but also the Egyptian Holding Company for Aviation and the Egyptian Airports Company (“the Defendants”) under the aegis of the Cairo Regional Center for International Commercial Arbitration.

In essence, Malicorp claimed compensation for breach of contract resulting from the Defendants’ failures and the subsequent annulment of the concession contract; in turn, the Defendants argued that not only the arbitral tribunal did not have jurisdiction but Malicorp had committed fraud and its claims should be rejected.

An award was rendered in Cairo on 7 March 2006:

  • Finding that the arbitral tribunal had jurisdiction over the Government of Egypt, but not over the Egyptian Holding Company for Aviation and the Egyptian Airports Company because only the Government of Egypt was a party to the concession contract;
  • Ordering the Government of Egypt to pay to Malicorp a sum of USD 10 million for loss of profits and USD 4,773,497 for costs and expenses, plus interests on the basis of Article 142 of the Egyptian Civil Code, pursuant to which “when a contract is void or annulled, the parties are reinstated in their position prior to the contract. If such reinstatement is impossible, damages equivalent to the loss may be awarded”;
  • Ordering the annulment of the concession contract due to a mistake made regarding Malicorp’s capital at the time of conclusion of the concession contract in accordance with Articles 120 and 121 of the Egyptian Civil Code.

If Malicorp first obtained enforcement of the award in France, the enforcement order has been further annulled at the Defendants’ request on 19 June 2008 by decision of the Paris Court of Appeal -which was subsequently upheld by the French Cour de Cassation on 23 June 2010-, for breach of due process under former Article 1502-4 [now Article 1520-4] of the French Code of Civil Procedure.

The annulment was based on the fact that none of the parties had raised Articles 120, 121 and 142 of the Egyptian Civil Code, which were the basis for the annulment of the concession contract and Malicorp’s grant of damages. No “mention” whatsoever had been made to these provisions during the proceedings. Therefore, the arbitral tribunal had raised ex officio these grounds which had not been debated by the parties.

Then, on 29 February 2012, Malicorp requested and obtained a new enforcement order in England under Section 101(2) of the 1996 Arbitration Act.

On 5 December 2012, the Cairo Court of Appeal set aside the arbitral award at the Defendants’ request, decision which is currently pending before the Egyptian Court of Cassation.

Thereafter, the Defendants applied to have the English enforcement order set aside before the High Court under Section 103(2) of the 1996 Arbitration Act.

On 19 February 2015, the High Court decided to set the enforcement order aside on the following grounds:

  • The award was set aside by a competent authority of the country where the award was rendered under Section 103(2)(f) of the 1996 Arbitration Act, which provides that enforcement of a New York Convention award (i.e. an award rendered abroad) may be refused if “the award […] has been set aside or suspended by a competent authority of the country, or under the law of which, it was made”. The High Court thus adopted the “preferred approach” consisting of two assumptions pursuant to which (i) the word “may” of Section 103(2) confers the High Court discretion whether to enforce an arbitral award even though it has been set aside by a decision of a competent authority, and (ii) the High Court should not exercise the power to enforce an award if the annulment decision of the foreign authority is conformed with general English private international law principles, i.e. “basic principles of honesty, natural justice and domestic concepts of public policy”.  In the case at hand, the High Court ruled that the Cairo Court of Appeal’s decision did not offend such principles so that its decision should be given effect.
  • The arbitral tribunal granted damages on a basis that was neither pleaded nor argued: under Section 103(2)(c) of the 1996 Arbitration Act, enforcement of an arbitral award may be denied if a party has been “unable to present his case”. Since the parties did not have the opportunity to present their case on grounds on which the arbitral tribunal decided, the High Court considered that it constituted a “serious breach of natural justice” so that the enforcement order was to be set aside.

This decision is interesting because it is a clear confirmation of the English case law and doctrine’s position regarding Section 103(2) of the 1996 Arbitration Act: the High Court has a discretionary power whether to apply this Section but a discretionary power that must be exercised in accordance with recognized general English law principles.

Moreover, this decision is consistent with the English general approach consisting of recognizing and giving effect to foreign jurisdictions’ decisions setting aside an arbitral award. However, it should be noted that if the last decision of complying with the annulment of a foreign award was based on the ground of estoppel (as commented here), this time, it has been on the basis of Section 103(2)(f).

This underlines the isolation of the French position on the recognition of foreign decisions setting aside an arbitral award. Indeed, French courts have long refused to have their scope for enforcement of an arbitral award limited by a foreign court’s decision to set aside such an award. This approach was illustrated by the leading decision Putrabali, rendered by the Cour de Cassation on 29 June 2007 where the court underlined the fact that, unlike English law, “French rules on international arbitration does not list the setting aside of an award in the country of origin as a ground for refusing the recognition and enforcement of an award”.

The High Court’s decision may be found here.

The Paris Court of Appeal’s decision may be found here.

The French Cour de Cassation’s decision may be found here.

Advertisements
%d bloggers like this: