Public Policy And The Enforcement Of Arbitral Awards

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:

The evidence to establish the fraud was not available to the Defendant at the time of the hearing before the arbitrators. 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...