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International Arbitration and English Courts

Published online by Cambridge University Press:  17 January 2008

TD Grant
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Extract

The Court of Appeal, Civil Division, Longmore LJ, on 24 January 2007 handed down a decision in Fiona Trust v Privalov which clarifies the relation between sections 9 and 72 of the Arbitration Act 1996; affirms, again, in strong terms the separability (or severability) of an arbitration clause from the contract in which it is included; and, apparently for the first time in English courts, establishes that allegations of bribery may be subject to the jurisdiction of an arbitrator. The decision therefore holds interest in relation to the enforcement in the United Kingdom of agreements to arbitrate and, more generally, supports the position that arbitration has a role to play in international efforts to combat corruption.

Type
Shorter Articles, Comments, and Notes
Information
International & Comparative Law Quarterly , Volume 56 , Issue 4 , October 2007 , pp. 871 - 884
Copyright
Copyright © British Institute of International and Comparative Law 2007

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References

1 At time of publication, the case was on appeal, by permission of the House of Lords granted 29 March 2007: [2007] Bus L R 686, 704. The Court of Appeal had restrained arbitration, pending a House of Lords decision whether to grant appeal. The Court of Appeal, on 24 April 2007, held that arbitration may continue on the conditions (i) that findings reached in arbitration be without prejudice to any question currently before the courts; (ii) that respondents be allowed to appoint their own arbitrator (a right on which they earlier had defaulted); and (iii) that, in the event that the House of Lords finds the arbitration clause infirm and the matter thus not arbitrable, appellants bear any additional costs resulting from arbitration: [2007] EWCA Civ 414, Longmore LJ, paras 1–2, 15. The Commercial Court in a related proceeding on 21 May 2007 acknowledged the appeal on the arbitration point, but said that it was not material to the matter before it (a request by Fiona Trust to freeze certain defendants' assets): [2007] EWHC 1217 (Comm) Steel J, paras 15–16.

2 Sovcomflot's claims and the business structure of Sovcomflot and of the Nikitin concerns are described in the High Court judgment of 20 October 2006: Fiona Trust v Yuri Privalov [2006] EWHC 2583Google Scholar (Comm), [2006] All ER (D) 254 (Oct), Morison J, paras 2–7, hereinafter ‘Privalov (Comm)’.

3 [2007] EWCA Civ 20, 2007] All ER (D) 169 (Jan), para 5, herinafter ‘Privalov (Ct App)’, quoting charterparty, para 41(a), (b).

4 ibid, quoting charterparty para 41(c).

5 <http://www.lmaa.org.uk/terms/lmaaterms2006.pdf>.

6 Privalov (Comm), paras 48–9.

7 Schwebel, SM, International Arbitration: Three Salient Problems (Grotius Publications, Cambridge, 1987) 4–5Google Scholar. See to similar effect P Weil, ‘Les Clauses de Stabilisation ou d'Intangibilité Insérées dans les Accords de Développement Economique’, in Rousseau, CE, Mélanges Offerts à Charles Rousseau (Pedone, Paris, 1974) 301Google Scholar, quoted by Schwebel, ibid 45.

8 Among arbitration rules, see eg ICC Rules, Art 6; UNCITRAL Model Law, Art 16(1); UNCITRAL Rules, Art 21(2).

9 (1986) 11 Ybk Commercial Arbitration 98, 102, quoted by Schwebel (n 7) 55. See also Goldfields, Lena, reported, The Times (London, 3 Sept 1930) 7Google Scholar, reprinted in (1950) 36 Cornell LQ 31; BP Exploration Company (Libya) Ltd v The Government of the Libyan Arab Republic (1973) 53 ILR 297.

10 Prima Paint v Flood & Conklin Mfg Co 388 US 395, 402 (1967, Fortas, J) (emphasis added).Google Scholar

11 eg, in Campaniello Imports Ltd v Saporiti Italia 117 F 3d 655 (2d Cir 1997); Shearson Lehman Brothers, Inc v Kilgore, 871 SW 2d 925 (Tex Ct App 1994); Teledyne, Inc v Kone Corp 892 F2d 14404, 1410 (9th Cir 1989); Republic of the Philippines v Westinghouse Electric Corp 714 F Supp 1362 (DNJ 1989).

12 See eg Judgment of 30 May 1994, (1995) 20 Ybk Commercial Arbitration 745 (Tokyo High Court)Google Scholar; Judgment of 13 February 1978, (1981) 6 Ybk Commercial Arbitration 228 (Corte di Appello di Napoli).

13 Privalov (Ct App), para 25.

14 [1992] Lloyds Rep 81, 92Google Scholar, quoted at Privalov (Ct App), para 23.

15 Privalov (Ct App) paras 23–4, discussing Heyman v Darwins Ltd; and Credit Suisse First Boston (Europe) Ltd v Seagate Trading Co Ltd [1999] 1 Lloyd's Rep 784.Google Scholar

16 Emphasis added: Privalov (Ct App), para 25.

17 If it had wanted to do so, the Court could have referred, inter alia, to Art 14(4)(a) of the 1961 Harvard Research Draft on the International Responsibility of States for Injuries to Aliens, requiring a ‘reasonable relation’ between impugned conduct and detriment: Sohn, LB and Baxter, RR, ‘Responsibility of States for Injuries to the Economic Interests of Aliens’ (1961) 55 AJIL 548.CrossRefGoogle Scholar Compare to Art 31 of the ILC Draft Articles on Responsibility of States for Internationally Wrongful Acts (GA Res 56/83 of 12 December 2001, annex).

18 Privalov (Ct App), para 31.

19 Indeed, it already has. See Albon (t/a ) v Naza Motor Trading SDN BHD [2007] EWHC 665 (Ch), Lightman J, paras 13–15Google Scholar.

20 Privalov (Comm), para 26.

21 Privalov (Ct App), para 34.

22 ibid para 35.

23 [2005] EWHC 1412 (Ch),[2005] 2 Lloyd's Rep 755.

24 Privalov (Ct App), para 39.

25 ibid para 40.

26 See, eg, Mustill, MJ and Boyd, SC, The Law and Practice of Commercial Arbitration in England (2nd edn, Butterworths, London, 1989) 464–82Google Scholar; Mustill, MJ and Boyd, SC, Commercial Arbitration: 2001 Companion (Butterworths, London, 2000) 95–6, 216–18, 267–72Google Scholar; Reisman, WM, Craig, WL, Park, W, and Paulsson, J, International Commercial Arbitration (Foundation Press, Westbury, NY, 1997) 440–3, 1149–53Google Scholar; Born, GB, International Commercial Arbitration (2nd edn, Transnational, Ardsley, NY, 2001) 295, 395–8Google Scholar; Schreuer, CH, The ICSID Convention: A Commentary (CUP, Cambridge, 2001) 66–8, 85–90.Google Scholar

27 SGS Société Générale de Surveillance SA v Republic of the Philippines (ICSID Case No ARB/02/6) (El-Kosheri, President; Crawford and Crivellaro, Members) decision on jurisdiction and admissibility (29 Jan 2004) 8 ICSID Reports 515.

28 Privalov (Comm), para 25.

29 Prima Paint v Flood & Conklin Mfg Co 388 US 395 (1967, Fortas, J).Google Scholar

30 ibid 402.

31 See Martin, AT, ‘International Arbitration and Corruption: An evolving standard’ (May 2004) 1 Transnational Dispute Management, n 29.Google Scholar

32 (1996) 21 Ybk Commercial Arbitration 47Google Scholar.

33 ibid 51 (para 17 of award).

34 ibid 52, 48 (paras 23, 2 of award).

35 ibid (para 16 of award).

36 ibid 52 (para 21 of award).

37 ibid 52 (para 19 of award).

38 See, eg, A El Kosheri and P Leboulanger, ‘L'arbitrage face à la corruption et aux traffics d'influence’ (1984) 3 Revue de l'Arbitrage 3. The Swiss Federal Tribunal, on an appeal of the Preliminary Award on Issues of Jurisdiction and Contract Validity in ICC Case No 6401 of 1991 (Westinghouse International Projects Company v National Power Corporation), described the award in Case No 1110 as ‘dépassée’: Arrêts du Tribunal Fédéral Suisse 119 II, 380, 385, quoted in JG Wetter, ‘Issues of Corruption before International Tribunals: The Authentic Text and True Meaning of Judge Gunnar Lagergren's 1963 Award in ICC Case No 1110’ (1994) 10 Arbitration International 277, 280.

39 Wetter, ibid 280.

40 See Martin, AT, ‘International Arbitration and Corruption: An evolving standard’ (May 2004) 1 Transnational Dispute Management, n 30Google Scholar; and comment to Case No 3913, Derains, Y and Jarvin, S (eds), Collection of ICC Arbitral Awards, 1974–85 (Kluwer Law International/IOC, Paris) 498.Google Scholar

41 ibid 497.

42 ICC Case No 3916 of 1982, Derains and Jarvin (n 40) 507.

43 For comment see S Jarvin, ibid 511.

44 ICSID Case No ARB/98/8, 8 ICSID Rep 220.

45 In the event, the tribunal rejected the allegation. For other examples of tribunals considering allegations of corruption, see ICC Case No 8891 (unreported) (1998), noted in Rossel and Prager, ‘Illicit Commissions and International Arbitration: The Question of Proof’ (1999) 15 Arbitration International 329; ‘ICC Case No 8891 (1998)’ (2000) 4 Journal du Droit International 1076; ICC case No 5943 (the Northrop case) of 1990, summarized in Martin (n 40) at n 34. See also ICC case No 2930, (1984) 9 Ybk Commercial Arbitration 105.

46 eg Fillite (Runcorn) v Aqua-Lift (1989) 26 Const L R 66.Google Scholar

47 Especially to Harbour Assurance Co (UK) v Kansa General International Insurance [1993] QB 701.Google Scholar

48 Privalov (Ct App), para 17. This language already has been favourably cited: Mabey and Johnson Ltd v Jonathan Laszlo Danos [2007] EWHC 1094Google Scholar (Ch), Henderson J, para 13; Film Finance Inc v The Royal Bank of Scotland [2007] EWHC 195 (Comm) Smith J, [2007] 1 Lloyd's Rep 382, 389–90, para 47.

49 Privalov (Ct App), paras 17–18.

50 ibid para 29. The Court of Appeal also said: ‘[I]f the arbitration tribunal decides that the charters were indeed procured by bribery they will be able to decide what consequence that conclusion has on any claims which the charterers might otherwise legitimately have’: ibid para 44.

51 Convention on Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), adopted 10 June 1958, entered into force 7 June 1959, 330 UNTS 3, 41.

52 See, eg ICC Case No 4145 (1987) 12 Ybk Commercial Arbitration 97, 102, paras 28–9.Google Scholar And an allegation of bribery weakly made is extremely unlikely to succeed: Tanesco v IPTL, Tariff and Other Remaining Issues (9 Feb 2001) (Rokinson, President; Brower and Rogers, members) 8 ICSID Rep 272, 282–3, paras 52–7. Cf Société Générale de Surveillance SA v Pakistan (3 07 2002) 8 ICSID rep 352Google Scholar (S Ct Pakistan), Sheikh, , Farooq, and Dogar, JJ, 359–60, paras 14–17.Google Scholar

53 Adopted by GA Res 58/4, 31 Oct 2003; entered into force 14 Dec 2005: UNTS reg no 42146, UKTS No 14 (2006). The Convention has 84 parties and 56 further signatories as yet not parties. The United Kingdom ratified the Convention on 9 February 2006, with entry into force on 11 March 2006: Cmd Paper 6854.

54 eg United Nations Convention against Transnational Organized Crime, adopted by GA Res 55/25 of 15 November 2000, entered into force 29 September 2003, 131 parties, 16 further signatories, ratified by the United Kingdom on 9 February 2006.

55 eg African Union Convention on Preventing and Combating Corruption, adopted, Maputo, 11 July 2003, entered into force 5 August 2006, 16 parties, 24 further signatories having not as yet ratified; Council of Europe Criminal Law Convention on Corruption, adopted 27 January 1999, entered into force, 1 July 2002, 35 parties, including the United Kingdom, 13 further signatories having not as yet ratified, ETS No 173, 2216 UNTS 228; Inter-American Convention against Corruption (Organization of American States), entered into force, 6 March 1997, 33 parties, one further signatory having not as yet ratified.

56 Council of Europe Civil Law Convention on Corruption, adopted 4 November 1999, entered into force 1 November 2003, 27 parties, 14 further signatories having not as yet ratified, ETS No 174, 2246 UNTS 6.

57 2246 UNTS 6, 7.

58 2246 UNTS 6, 8.

59 The United Kingdom signed the Convention on 8 June 2000: <http://conventions.coe.int/Treaty/Commun/ChercheSig.asp?NT=174&CM=8&DF=6/28/2007&CL=ENG>.

60 A number of disputes involving investments in the former USSR have been arbitrated under the rules of the Stockholm Chamber of Commerce, the activity of which is reviewed by Runeland, Per, ‘Sweden Thrives as Neutral Arbitration Ground’ [18 10 2004]Google Scholar National L J. It was suggested as early as 1989 that an increase in commerce between the West and a liberalizing Soviet Union would result in an increase in related claims: Reisman, WM, ‘For A Permanent USSoviet Claims Commission’ (1989) 83 AJIL 51.CrossRefGoogle Scholar