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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Minister of Finance (Incorporated) v 1Malaysia Development Berhad & Ors [2019] EWCA Civ 2080 (26 November 2019) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2019/2080.html Cite as: [2020] Bus LR 45, [2020] 2 All ER (Comm) 269, [2019] EWCA Civ 2080, [2019] WLR(D) 664, [2019] 2 CLC 923, [2020] 1 Lloyd's Rep 93 |
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ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESCOMMERCIAL
COURT (QBD)
The Honourable Mr Justice Knowles CBE
The Rolls Building London, EC4A 1NL |
||
B e f o r e :
LORD JUSTICE NEWEY
and
LORD JUSTICE MALES
____________________
MINISTER OF FINANCE (INCORPORATED) | ||
1MALAYSIA DEVELOPMENT BERHAD | Claimants/Appellants | |
and | ||
INTERNATIONAL PETROLEUM INVESTMENT COMPANY | ||
AABAR INVESTMENTS PJS | Defendants/Respondents |
____________________
Mr Mark Howard QC, Mr Craig Morrison and Mr Nathaniel Bird (instructed by Clifford Chance LLP) for the Respondents
Hearing date: 29th October 2019
____________________
Crown Copyright ©
Sir Geoffrey Vos, Chancellor of the High Court (delivering the judgment of the court):
Introduction
Essential factual background
"12. I understand that this Consent Award should be set aside because:
a. The Consent Award was procured by fraud or the way it was procured was contrary to public policy. The Award formed part of an attempt by Mr Najib to cover up his and his fellow conspirators' fraud (including former senior officers of IPIC and Aabar PJS), contrary to the interests of MOFI, 1MDB and the Malaysian people, in whose interests he was constitutionally bound to act. Moreover, IPIC and Aabar PJS knew that he was acting in this way and were complicit in his fraud: their agents colluded with him in the original fraud, and then both IPIC and Aabar PJS colluded with him again in seeking to cover the fraud up by means of the Award and other agreements. I consider that this was a continuation of the fraud and that the way in which the Award was procured was clearly contrary to public policy. In addition, the settlement agreements upon which the Consent Award is based are void and would, if they were not void, be unenforceable on grounds of illegality.
b. In any event, the Tribunal only had jurisdiction to grant a Consent Award if it was jointly requested to do so by all of the parties to thearbitration.
Mr Najib was acting in a way that was profoundly contrary to MOFI and 1MDB's best interests and therefore was not acting with MOFI or 1MDB's authority. As a result, MOFI and 1MDB did not, in fact, request the Consent Award and IPIC/Aabar PJS was aware of this".
The judge's judgment
The issues for determination
i) Whether the judge exercised his case management power to stay the court applications on the correct legal basis?ii) If not, ought this court to exercise a case management power to stay the court applications?
iii) Whether the judge exercised his discretion to refuse an injunction under section 37(1) on the correct legal basis?
iv) If not, ought this court to exercise its discretion to grant an injunction to restrain the second
arbitrations
under section 37(1)?
Relevant statutory background
"The provisions of this Part are founded on the following principles, and shall be construed accordingly—
(a) the object ofarbitration
is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this Part".
"(1) The mandatory provisions of this Part are listed in Schedule 1 and have effect notwithstanding any agreement to the contrary.
(2) The other provisions of this Part (the "non-mandatory provisions") allow the parties to make their own arrangements by agreement but provide rules which apply in the absence of such agreement".
"(1) A party toarbitral
proceedings may (upon notice to the other parties and to the tribunal) apply to the court—
a) challenging any award of thearbitral
tribunal as to its substantive jurisdiction; or
b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) Thearbitral
tribunal may continue the
arbitral
proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction.
(3) On an application under this section challenging an award of thearbitral
tribunal as to its substantive jurisdiction, the court may by order—
a) confirm the award,
b) vary the award, or
c) set aside the award in whole or in part.
(4) The leave of the court is required for any appeal from a decision of the court under this section".
(1) A party toarbitral
proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—
a) failure by the tribunal to comply with section 33 (general duty of tribunal);
b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67); …
g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy; …
(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may—
a) remit the award to the tribunal, in whole or in part, for reconsideration,
b) set the award aside in whole or in part, or
c) declare the award to be of no effect, in whole or in part.
The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.
(4) The leave of the court is required for any appeal from a decision of the court under this section".
"(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted—
(a) any availablearbitral
process of appeal or review, and
(b) any available recourse under section 57 (correction of award or additional award)".
Authorities and relevant principles
"27. As a matter of construction of the policy and thearbitration
provision within it, with its express reference to English law and the 1996
Arbitration
Act, I consider that the parties have incorporated the framework of that Act and agreed that it should apply to any
arbitration
between them with all its mandatory provisions and with its nonmandatory provisions, save to the extent that there is agreement to the contrary. The agreement to the seat and the curial law necessarily imports that, with the result that challenges to any award are governed by the relevant sections of the Act, as amended by the parties' agreement where the Act itself allows it. …
29. The significance of the "seat ofarbitration"
has been considered in a number of recent authorities. The effect of them is that the agreement as to the seat of an
arbitration
is akin to agreement to an exclusive jurisdiction clause. Not only is there agreement to the
arbitration
itself but also to the courts of the seat having supervisory jurisdiction over that
arbitration.
By agreeing to the seat, the parties agree that any challenge to an interim or final award is to be made only in the courts of the place designated as the seat of the
arbitration".
"17. It follows from this that a choice of seat for thearbitration
must be a choice of forum for remedies seeking to attack the award. As the judge said in paragraph 27 of his judgment, as a matter of construction of the insurance contract with its reference to the English statutory law of
arbitration,
the parties incorporated the framework of the 1996 Act. He added that their agreement on the seat and the "curial law" necessarily meant that any challenges to any award had to be only those permitted by that Act. In so holding he was following the decisions of Colman J in A v B [2007] 1 Lloyds Rep 237 and A v B (No. 2) [2007] 1 Lloyds Rep 358 in the first of which that learned judge said (para. 111):—
'… an agreement as to the seat of anarbitration
is analogous to an exclusive jurisdiction clause. Any claim for a remedy going to the existence or scope of the
arbitrator's
jurisdiction or as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of the
arbitration.'
That is, in my view, a correct statement of the law".
"The consideration that parties have elected toarbitrate
confidentially and privately cannot dictate the position in respect of
arbitration
claims brought to court under rule 62.10.[8] Rule 62.10 therefore only represents a starting point. Such proceedings are no longer consensual. The possibility of pursuing them exists in the public interest. The courts, when called upon to exercise the supervisory role assigned to them under the
Arbitration
Act 1996, are acting as a branch of the state, not as a mere extension of the consensual
arbitration
process. Nevertheless, they are acting in the public interest to facilitate the fairness and well-being of a consensual method of dispute resolution, and both the Rule Committee and the courts can still take into account the parties' expectations regarding privacy and confidentiality when agreeing to
arbitrate."
"31. A party who makes an application under section 72(1) of theArbitration
Act 1996 is asking the court to determine whether the tribunal in question has jurisdiction to hear and determine the matters submitted to it. That is a question of law which ultimately admits of only one answer, however difficult it may be to ascertain it, and it is the court's responsibility to decide the question on the basis of the evidence the parties have chosen to put before it, unless there is some justification for not doing so. There is a good reason for that. Although
arbitrators
have jurisdiction to decide their own jurisdiction, they do not have the final word on the subject, because it is open to the parties to challenge their award under section 67 of the Act on the grounds that they lacked substantive jurisdiction. In simple terms, a party is not bound by the award of a tribunal on a matter that he did not agree to refer to it. It may be that in a few cases there may be practical reasons for allowing the tribunal to reach a decision on its own jurisdiction before the court finally rules on the matter, but such cases are likely to be rare. In the present case a decision by the tribunal might have had some persuasive authority, but could not finally determine the matter before the court. …
33. … I agree with the views expressed by Lightman J in Albon v Naza Motor Trading Sdn Bhd [2007] EWHC 665 (Ch) that it will only be in exceptional cases that a court faced with proceedings which require it to determine the jurisdiction ofarbitrators
will be justified in exercising its inherent power to stay those proceedings to enable the
arbitrators
themselves to decide the question".
First issue: Did the judge exercise his case management power to stay the court applications on the correct legal basis?
"… an appellate judge should only interfere where the decision is not merely different from that which the appellate judge would have made, but is a decision which the appellate judge considers cannot be justified. In the words of Lawrence Collins LJ in Walbrook Trustee (Jersey) Ltd v Fattal [2008] EWCA Civ 427 at [33]:
'an appellate court should not interfere with case management decisions by a judge who has applied the correct principles and who has taken into account matters which should be taken into account and left out of account matters which are irrelevant, unless the court is satisfied that the decision is so plainly wrong that it must be regarded as outside the generous ambit of the discretion entrusted to the judge'.
In other words, before they can interfere, appellate judges must not merely disagree with the decision; they must consider that it is unjustifiable".
Second issue: If not, ought this court to exercise a case management power to stay the court applications?
Third issue: Did the judge exercise his discretion to refuse an injunction under section 37(1) on the correct legal basis?
"In order to establish exceptional circumstances, it will usually be necessary, as a minimum, to establish that the applicant's legal or equitable rights have been infringed or threatened by a continuation of thearbitration,
or that its continuation will be vexatious, oppressive or unconscionable, these being the principles which govern the grant of injunctions to restrain proceedings in a foreign court: see the Elektrim case [2007] 2 Lloyd's Rep 8 at [56]. However this may not be sufficient as the Elektrim decision illustrates: see [74] and [75]".[16]
Fourth issue: If not, ought this court to exercise its discretion to grant an injunction to restrain the second arbitrations
under section 37(1)?
Conclusions
Note 1 See paragraph 83 of the judgment. [Back] Note 2 Which lists sections 67 and 68 amongst the mandatory provisions of the 1996 Act. [Back] Note 3 See the response to the request for Note 4 The Departmental Advisory Committee on Note 5 Paragraph 28 of the DAC Report suggests that these provisions “cannot be overridden by the parties”.
[Back] Note 6 See, for example, Midnight Marine Ltd v. Thomas Miller Speciality Underwriting Agency Ltd [2018] EWHC 3431 (Comm), [2019] 1 Lloyd’s Rep 399 at [37] to [39].
[Back] Note 7 See also Lord Hope at [34] to [35].
[Back] Note 8 Note 9 At paragraph 85 of the judge’s judgment.
[Back] Note 10 See section 66 of the 1996 Act, which provides that “an award made by the tribunal pursuant to an Note 11 See Article V of the NY Convention which sets out those limited grounds.
[Back] Note 12 See Lord Steyn’s speech in Lesotho Highlands Development Authority v. Impreligo SpA [2005] UKHL 43, [2006] 1 AC 221 at [28], where he said that, amongst other things, “a high threshold must be satisfied” and “it must be established that the irregularity caused or will cause substantial injustice to the applicant”, the latter requirement being “designed to eliminate technical and unmeritorious challenges”. See also The Magdalena Oldendorff [2007] EWCA Civ 998, [2008] 1 Lloyd’s Rep. 7 at [35]. [Back] Note 13 Lord Bingham inReichhold: “It will very soon become clear that stays are only granted in cases of this kind in rare and compelling circumstances”. [Back] Note 14 Moore-Bick LJ said at [31]: “Although Note 15 The ability of the Note 16 See also Rix LJ in Star Reefers Pool v. JFC Group [2012] EWCA Civ 14, [2012] 2 All ER (Comm) 225 at [2] and [26].
[Back] Note 17 See paragraph 107 of the judgment, where the judge said that: “the use of the case management stay will appropriately manage the risk of parallel proceedings and costs and possible ‘rush to judgment’”.
[Back] Note 18 See, for example, paragraphs 3.16-3.18 of the defendants’ amended requests for Note 19 See the Privy Council judgment of Lord Sumption in Stichting Shell Pensioenfunds v. Krys [2014] UKPC 41, [2015] AC 616 at [18]-[25] on anti-suit injunctions generally. [Back]arbitration
dated 16th January 2019, and paragraph 6 of Mr Richard Little’s witness statement dated 30th October 2018. [Back]
Arbitration
(DAC) Report on the
Arbitration
Bill 1996.
[Back]
Arbitration
claims are defined in CPR Part 62.2(1) as meaning, amongst other things, any application to the court under the 1996 Act and “a claim to declare that an award by an
arbitral
tribunal is not binding on a party”.
[Back]
arbitration
agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect”.
[Back]
arbitrators
have jurisdiction to decide their own jurisdiction, they do not have the final word on the subject, because it is open to the parties to challenge their award under section 67 … on the grounds that they lacked substantive jurisdiction”.
[Back]
arbitral
tribunal to rule on the question of whether it has jurisdiction before intervention by national courts.
[Back]
arbitration where they contend that the issue and/or service of the court applications constituted an event of default under clauses 1.1 and/or 5.4 of the settlement deed. Clause 23.2 of the settlement deed provided that “[t]he Parties hereby waive any right to refer any question of law and any right of appeal on the law and/or merits to any court”, and clause 5.4 provided that the parties waive any and all rights to challenge the consent award on grounds of jurisdiction or for any other reason.
[Back]