AWARD ENFORCEMENT ORDERS: TO SET ASIDE OR NOT TO SET ASIDE? – THAT IS THE QUESTION

In a judgment handed down by the English High Court last month (A v B [2020] EWHC 952 (Comm)), the court delivered a stern warning to claimants considering the enforcement of an arbitration award which fails to establish a clear “right to payment”. The judgment also serves as a timely reminder that an application for leave to enforce an arbitration award should be made on solid legal grounds, and with full disclosure of all relevant points if made on an ex parte basis.

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DISPUTE RESOLUTION CHOICES FOR BANKS AND FINANCIAL INSTITUTIONS IN A POST-BREXIT WORLD: OPTING FOR ARBITRATION?

Partner Andrew Cannon and Senior Associate Hannah Ambrose have authored an article for Butterworths Journal of International Banking and Financial Law, discussing the suitability of arbitration as a dispute resolution mechanism for banks and other financial institutions post-Brexit.

The article explores the current uncertainty surrounding the enforcement of English court judgments post-Brexit, whilst comparing and contrasting arbitration as a means of resolving disputes with traditional litigation from the perspective of the banking and finance industry. The article goes on to highlight important considerations that industry players ought to take into account if they are considering arbitration as an alternative means of resolving their disputes.

The full article can be accessed by clicking this link.

This article first appeared in the October issue of Butterworths Journal of International Banking and Financial Law and is reproduced with the agreement of the publishers.

If you have any questions or would like discuss any aspect of this post, please contact Andrew Cannon, Partner, or Hannah Ambrose, Senior Associate, or your usual Herbert Smith Freehills contact.

Andrew Cannon
Andrew Cannon
Partner
+44 20 7466 2852
Hannah Ambrose
Hannah Ambrose
Senior Associate
+44 20 7466 7585

 

Swiss Federal Tribunal refuses to set aside the Deutsche Telekom v India Award

We previously reported here that a Geneva-seated UNCITRAL tribunal (the “Tribunal“) constituted under the India-Germany Bilateral Investment Treaty dated 10 July 1995 (the “India-Germany BIT”) found India in breach of its treaty obligations in relation to its cancellation of a spectrum allocation contract[1] (the “Contract“) in an interim award dated 13 December 2017 (the “Award“).

The Contract was entered into in 2005 between Devas Multimedia Private Limited (“Devas“), an Indian company and Antrix Corporation Limited (“Antrix“), an Indian state-owned satellite company, wherein Devas agreed to pay a fee in return for the lease of the S-band electromagnetic spectrum provided by two orbiting Indian satellites. In the arbitration before the Tribunal, the Claimant, Deutsche Telekom AG (“DT“) (which indirectly held a 20% stake in Devas via a Singaporean subsidiary) alleged a breach of the fair and equitable treatment standard under the India-Germany BIT.

In the Award, the Tribunal dealt with issues of jurisdiction and liability (leaving aside issues of quantum for a later award), and held that it possessed jurisdiction to hear the dispute and that India had indeed violated the standard of fair and equitable treatment under the India-Germany BIT.

India sought to challenge the Award in the Swiss Federal Tribunal (“Federal Tribunal“), being the court of supervision of the arbitration. In a decision last month, the First Civil Law Court of the Federal Tribunal rejected India’s application for the annulment of the Award by a 3:2 majority in a judgment dated 11 December 2018 (available here (in French)).

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English Court of Appeal refuses Micula Appeal against stay of ICSID Award but orders Romania to provide £150m Security

In Micula & Ors v Romania [2018] EWCA Civ 1801 the English Court of Appeal (the “Court”) dismissed an appeal against the High Court’s stay of enforcement of a 2013 ICSID award in favour of Swedish investors Ioan and Viorel Micula (the “Appellants” or “claimants“) against Romania (the “Award“), but allowed an appeal against the High Court’s refusal to order Romania to provide security.

The Court’s judgment is interesting because although it reaches the same conclusion as the High Court in respect of staying enforcement of the Award, it does so for different reasons. In particular, the Court found (by majority) that:

  1. The High Court was correct to find that an ICSID award is res judicata under English law from the time of the award.
  2. Although the English Arbitration (International Investment Disputes) Act 1966 (the “1966 Act“), which implements the ICSID Convention into English law, requires that ICSID awards be treated in the same way as judgments of the High Court, this does not mean that EU law applies in the same way as it would apply to domestic judgments simply because the UK is a member state at the date of registration of the award.
  3. The principle of res judicata cannot be used to circumvent or significantly obstruct state aid rules (per the CJEU case of Klausner).
  4. Only operative terms (and not, for example, recitals) of EU Commission decisions are legally binding.

The Court’s decision is the latest in the long-running Micula saga, which began as a dispute arising out of Romania’s abolition of certain tax incentives in 2005 in order to comply with EU rules on state aid. Please see here for our blog post on the ICSID award.

The Award has been the target of decisions of the European Commission. In its final decision of 30 March 2015 (the “Final Decision“), the Commission found that payment of the Award by Romania would constitute new state aid incompatible with EU law, and was therefore prohibited. Please see here for our blog post on the Final Decision. The claimants have applied to the General Court of the European Union (the “GCEU“) to annul the Final Decision. The GCEU heard the application in March 2018 and a judgment is awaited.

In 2017, the High Court refused Romania’s application to set aside registration of the Award, but granted a stay of enforcement pending the decision of the GCEU on the annulment application. The Commission intervened in those proceedings. The High Court refused the claimants’ application for security in the meantime on the basis that it would itself risk breaching the Final Decision. The Appellants appealed against both the stay of enforcement and refusal to make the stay conditional upon payment of security. Please see here for our blog post on the High Court’s judgment, which was the subject of the present appeal.

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English Court rejects Ukraine’s attempt to set aside enforcement order on grounds of state immunity

The English Court (the “Court“) has dismissed an application by Ukraine to set aside a court order permitting Russian investor, PAO Tatneft, to enforce an arbitral award against Ukraine.  Ukraine argued that it was immune from the Court’s jurisdiction by virtue of the State Immunity Act 1978. The Court found that Ukraine had not waived its right to rely on state immunity arguments, despite not having raising them in the arbitration. However, it found that Ukraine had agreed to submit the disputes in question to arbitration under the Russia-Ukraine Bilateral Investment Treaty (the “BIT“) and was therefore not immune from proceedings in connection with the arbitration by virtue of s9(1) of the State Immunity Act 1978 (“SIA“).

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English Court rejects claim that notice of arbitration given in a foreign language is not proper notice

In a dispute between an English company and a Russian company, the English High Court (the Court) refused to set aside an order enforcing a Russian arbitration award on the grounds that the English company had not been given notice of the arbitration or the appointment of arbitrators. The English company claimed that a series of letters in Russian, informing it of the arbitration proceedings, did not constitute proper notice as they were not provided with an English translation. However, as the headings of the letters were in English and contained the English word “arbitration”, and related to a contract in which the company had agreed to Russian language arbitration, the Court held that the English company ought to have known that the documents related to arbitration, and that the letters therefore constituted a valid notice.  The Court’s comments suggest that there are a number of practical steps that a party can take when beginning an arbitration against a counter-party which does business in a language different from that of the notice.  These are discussed further below.

Oao v Magneco Metrel UK Ltd [2017] EWHC 2208 (Comm)

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Paris court rejects application for review and withdrawal of arbitral enforcement order, despite allegations of fraud

The Paris Court of First Instance has rejected an application for the review and withdrawal of an enforcement order of an arbitral award, despite allegations of fraud and collusion between the arbitrator and the claimant. It also refused to the state’s request to stay enforcement proceedings until the issuance of a decision in proceedings appealing the arbitral award before the Common Court of Justice and Arbitration.

The case demonstrates the deference given to international arbitral awards by French courts in enforcement proceedings and the limited ability of the courts to review the underlying award. It also reiterates that, as a matter of principle, the only recourse available against an order granting enforcement of a foreign award is an appeal on the grounds permitted under Article 1525 of the French Code of Civil Procedure (CPC). Courts will be restrictive in their interpretation of the CPC and any application for the review or withdrawal of an enforcement order of an international arbitral award is likely to fail. A party will have no means of challenging the enforcement order, absent an appeal under Article 1525 of the CPC, even in cases where allegations of fraud and collusion have been made. (La République du Niger v Africard Co Ltd, Tribunal de grande instance de Paris, summary judgment (ordonnance de référé)).

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Enforcement and dispute resolution under the Withdrawal Agreement and any future relationship agreement: no role for the CJEU….or is there?

On its face, the thrust of the UK Government’s Future Partnership Paper on Enforcement and Dispute Resolution (the Paper), published on 23 August, is to rule out the jurisdiction of the Court of Justice of the European Union (CJEU) to determine the enforcement of rights and obligations by individuals and businesses derived under the Withdrawal Agreement (and any future relationship agreement) and disputes between the EU and the UK.  Since the Paper was published, the Prime Minister has again reiterated the Government’s position that “the UK will be able to make its own laws – Parliament will make our laws – it is British judges that will interpret those laws, and it will be the British Supreme Court that will be the ultimate arbiter of those laws.”

However, as discussed below, whilst perhaps consistent with the stage of negotiations, the Paper is drafted to leave considerable room for manoeuvre, and it leaves many questions unanswered regarding enforcement of rights and obligations under the Withdrawal Agreement and any future relationship agreements and dispute resolution between the UK and the EU after Brexit.

The Paper follows the publication on 22 August of the UK Government’s Future Partnership Paper on Providing a Cross-border Civil Judicial Cooperation Framework, considered in our blog post here, which presented the UK’s position on the extent to which current EU rules on choice of law, jurisdiction and enforcement of judgments should continue to apply as between the UK and the EU Member States post-Brexit.   Continue reading

English Court Stays Enforcement of Micula ICSID Award Against Romania

In Micula & Ors v Romania & Anor [2017] EWHC 31 (Comm) the English High Court stayed enforcement of a 2013 ICSID award in favour of Swedish investors Ioan and Viorel Micula against Romania (the "Award"), but refused to set aside registration. Subsequently, in Micula & Ors v Romania & Anor [2017] EWHC 1430 (Comm) the English High Court gave permission to appeal the stay of enforcement but refused to make the stay conditional on the provision of security by Romania.

The English Court’s decisions in this case consider interesting aspects of the interplay between potentially conflicting obligations of national, international and EU law. In particular, the Court found that:

  1. as a matter of English law read with Article 54 of the ICSID Convention, an ICSID Convention award achieves finality, and becomes res judicata, at the time of the award; and
  2. the English Arbitration (International Investment Disputes) Act 1966 (the "1966 Act"), which implements the ICSID Convention into English law, only requires that ICSID awards be treated in the same way as judgments of the English High Court. Therefore, as a judgment of the High Court is subject to EU rules as to state aid, the Court is restrained from taking a decision which conflicts with the European Commission's decisions on state aid.

The Court's decision represents the latest development in the long-running dispute between the parties arising out of Romania’s abolition of certain tax incentives in 2005 in order to comply with EU rules on state aid. Please see here for our blog post on the ICSID award.

The Award has been subject to decisions of the European Commission. In its final decision of 30 March 2015 (the "Final Decision"), the Commission found that payment of the Award by Romania would constitute new state aid incompatible with EU law, and was therefore prohibited. Please see here for our blog post on the Final Decision. The claimants in the case invited the Court to assume that the Final Decision was valid.

Given the Court's decision, the parties will now await the outcome of (i) the claimants' application to the General Court of the European Union ("GCEU") to annul the Commission’s Final Decision, which is expected to be heard before the end of the year; and (ii) the claimants' appeal, if brought, against the English High Court's stay of enforcement of the Award.

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