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Anne-Sophie Jullienne: “Not paying an international arbitration award would invariably damage Mauritius’ reputation”

11 juin 2017, 17:04

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Anne-Sophie Jullienne: “Not paying an international arbitration award would invariably damage Mauritius’ reputation”

The award to Betamax by the Singapore International Arbitration Centre raises many questions about international arbitration. Anne-Sophie Jullienne, barrister at Afralaw Chambers and international arbitrator, explains this judicial mechanism. 

You are apparently the right person to talk to on matters of international arbitration.  What’s your experience in the field?  

I have been practicing in the field of international arbitration for 15 years now, including 9 years in London working for international law firms. Since my return in Mauritius in 2010, I have worked on several international arbitrations seated in Mauritius, London and Paris, including under the aegis of the PCA, the ICC and MARC.  I also teach on the subject at the University of Mauritius and as part of the Panthéon-Assas/Medine LLM on International Business Law.  
 
Since the Betamax award has come out, everybody wants to know: what is international arbitration? 

International arbitration is a private judicial mechanism which parties agree to have recourse to in order to have their disputes resolved by an independent third party, an arbitrator.  Although the default mechanism to resolve disputes is through the courts, parties are free to agree to resolve them through alternative methods, one of which is arbitration.   If the parties wish to submit their dispute to arbitration, they need to include in their contract an arbitration agreement to this effect. 

Why would parties want to submit their disputes to arbitration?

Some of the reasons may include the confidentiality of the proceedings, a speedier (in some cases) and more flexible process, the freedom for the parties to agree on matters of procedure or the benefits of choosing your own judge; foreign arbitrators for instance are less likely to be subject to political pressure; parties may also wish their arbitrator to have specific qualifications or expertise, particularly if the subject matter of the dispute is technical. Parties also often choose international arbitration because it is easier to obtain the recognition of a foreign award than a foreign court judgment.

What is an Arbitral Award? What legal force does an award have? 

An arbitral award is a decision rendered by one or several arbitrators in an arbitration, which is binding on the parties and which decides finally one or more issues in the arbitration. It is akin to a court judgment, but for it to have force of judgment and be readily enforceable against a party’s assets, it needs to be first recognised through the courts of the place of enforcement through an exequatur procedure.  The exequatur procedure does not allow the court to review the merits of the case. It is aimed at verifying compliance with certain safeguards, such as compliance with public policy, jurisdiction of the arbitrator etc.  An award on the merits is an award which decides on the substantive points and claims made by the parties in the arbitration.  Deciding on the validity of a contract, a breach of contract or entitlement to damages are issues which go to the merits of the case. A decision on the challenge of an arbitrator or on its jurisdiction is procedural in nature and is incidental to what the parties are ultimately seeking in the arbitration; it is not a decision relating to the merits of the case. 

What is Singapore International Arbitration Centre (SIAC) and why choose it?

SIAC is one of the several reputable international arbitration institutions around the world. It does not render awards as such. It has a mere administrative role and is responsible for managing the arbitral process.   

What is the seat of the arbitration and why does it matter?

The seat of the arbitration is of crucial importance in an arbitration.  It is the place the parties agree to attach their arbitration to for legal and procedural purposes.  Unlike domestic courts which are by their location attached to the country where they are located, an international arbitration has a life of its own and is not attached to any country unless and until the seat is agreed by the parties.  The seat attracts the application of the law of the seat relating to international arbitration and will therefore determine certain fundamental procedural issues such as the rights of recourse against awards, the powers of the tribunal or of the courts etc.  What is also fundamental in the choice of the seat is that only the courts of the seat will have jurisdiction to decide an application to set aside the award and the grounds on which this can be successfully done will be found in the law of the seat relating to international arbitration.  It is important not to confuse the procedural law of the seat which applies to the arbitral process and the law which governs the substantive issues (merits) relating to the contract (validity of contract, breach, damages etc), which may be different to the law of the seat. Similarly, the choice of the seat and the choice of the arbitration institution are not in any way linked and one may therefore seat an arbitration in Mauritius for instance, but use SIAC which headquarters are in Singapore.

In what circumstances therefore, can a SIAC arbitration be appealed?

To determine this, we need to look at the SIAC arbitration rules which apply to any SIAC arbitration and the procedural law of the seat. When read together, the SIAC arbitration rules and the Singapore act or the Mauritius act (which acts are substantially the same on rights of recourse against awards) prevent parties to appeal an award on the merits.  However, both the Singapore act and the Mauritius act provide for a number of exhaustive grounds on which a party may rely to apply to ‘set aside’ an award, but these do not include errors of fact or law relating to the merits of the case. Both acts provide for the same grounds for setting aside, namely matters affecting the validity of the arbitration agreement, irregularities in the appointment of the arbitrator or the composition of the tribunal, lack of jurisdiction of the arbitrator, if the dispute cannot by law be submitted to arbitration, if the making of the award was affected or induced by fraud or corruption, if the award is contrary to public policy or if there has been a breach of natural justice during the proceedings which substantially prejudice the parties. As you can see, none of these grounds allow the Court to re-judge the merits.  If a party is successful on any of the grounds for setting aside however, the consequence would be that it would invalidate the award and the finding on the merits would no longer stand. Therefore, in principle it is possible that the decision of the arbitrator on the merits would fall away, but it would not be as a result of a challenge on the merits. 

Can the State of Mauritius make an application to the Mauritius courts to appeal the merits of the case or to set aside the award? 

I can only speak in general terms and not specifically on the Betamax case. As I have explained earlier, whether in Singapore or in Mauritius, one cannot appeal on the merits, but can apply to set aside the award which is a different and more limited type of review of the award. If the seat of an arbitration is Singapore, the losing party cannot apply to set aside the award before the Mauritius courts, it needs to do so in Singapore. If the seat is Mauritius, the losing party can apply to the Mauritius courts to set aside on the limited grounds mentioned earlier (which does not mean that the application will necessarily be successful). Also, please bear in mind that everything that I am saying in this interview is subject to whatever the parties may have agreed to in their arbitration agreement or in the proceedings. If the parties have agreed in their arbitration agreement that they can appeal an award on the merits, this agreement would be valid. 

Would the application to the court of the seat be the end of the matter?

If the seat is Mauritius, the decision of the Supreme Court on setting aside may be appealed to the Privy Council. If the seat of the arbitration is Singapore, if I am not mistaken, I think it is the High Court of Singapore which has jurisdiction to set aside an award and its decision can then be appealed to the Singapore Court of Appeal. In either situation, we could still be here in several years’ time talking about the likely final outcome of the case.  

Is Mauritius obliged to pay the damages pending the decision of the court of the seat?

Under both the Singapore and the Mauritius acts, until all recourses on setting aside have been exhausted, there is no obligation on the State to pay the award. However, both acts provide that the court of the seat seized of the setting aside application may order the losing party to provide security for the payment of the award, for instance in the form of a payment into court.  Security is usually requested if the losing party is likely to dissipate its assets in order to avoid payment of the award or is otherwise likely to be unable to pay the debt by the time the appeal is decided.  In my view, it is unlikely that a Mauritius court would order security against the State of Mauritius, but a Singapore Court might … 

Is there anything which the State can do in order not to pay the Rs.4.6 billion? 

It would not be right for me to comment on this. 

What are the consequences for Mauritius if it decides not to pay?

Enforcement of awards against assets in a foreign country requires that the court of that country first recognise the award through recognition proceedings (also called ‘exequatur’).  If the State ultimately loses in its challenge of the award, the winning party will be entitled to apply to enforce the award against the assets of the State of Mauritius in all countries where Mauritius has assets. Mauritius will be entitled to challenge these applications before the courts of the countries where enforcement is sought, but the grounds on which enforcement may be refused are similar to those for setting aside.  There is therefore no scope at the enforcement stage to get a court to review the decision on the merits.  Not paying an international arbitration award would invariably damage Mauritius’ reputation as an investor-friendly country and ultimately its economy.  A country which is heavily dependent on foreign investment and on support from foreign lenders and international organisations would be sending the wrong signal by refusing to comply with an international arbitration award. That probably answers your question. 

If the award is set aside is it still possible to use the award to enforce it against the assets of the State of Mauritius in Mauritius or elsewhere? 

To cut a not so straightforward story short… the setting aside of an award by the court of the seat does not necessarily prevent recognition and enforcement in other countries, but I am of the view that the courts of many countries are likely to refuse to recognise an award which has been set aside at the seat, in particular the Mauritius Courts for reasons which I will not mention here.  

What is your view of an arbitration agreement appointing one foreign arbitrator in a case such as the Betamax case?

Again, speaking in general terms, a client’s multi-million contract might not be worth the paper it is written on, if its legal advisor has not provided for a dispute resolution clause which will allow its client to defend its case properly, fairly and at a cost that it can afford. In high profile, high value or potentially highly politicised contracts, parties would almost invariably have recourse to a 3-arbitrator tribunal as this gives the opportunity for each party to appoint one of the 3 arbitrators and to ensure that the arbitral tribunal as a whole has a combination of knowledge and experience, which would be difficult to find in one arbitrator alone. To illustrate, it may be important to a party to have a panel of arbitrators who would together have expertise in Mauritian and/or French contract law, shipping disputes, procurement disputes or simply, the politics of the country.   A 3 arbitrator-panel is a costly option, but in certain types of disputes cost savings should not come at all costs.