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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Minister Of Finance (Incorporated) & Anor v International Petroleum Investment Company & Anor [2019] EWHC 1151 (Comm) (08 May 2019) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2019/1151.html Cite as: [2019] Bus LR 1827, [2019] EWHC 1151 (Comm), [2019] WLR(D) 291 |
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THE BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
COMMERCIAL COURT (QBD)
IN THE MATTER OF THE ARBITRATION ACT 1996
IN THE MATTER OF THE ARBITRATION ACT 1996 MINISTER OF FINANCE (INCORPORATED)
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
(1) MINISTER OF FINANCE (INCORPORATED) (2) 1MALAYSIA DEVELOPMENT BERHAD |
Claimants |
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- and |
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(1) INTERNATIONAL PETROLEUM INVESTMENT COMPANY (2) AABAR INVESTMENTS PJS |
Defendants |
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Ewan McQuater QC, Farhaz Khan and Nathaniel Bird (instructed by Clifford Chance LLP) for the Defendants
Hearing dates: 11-12 March 2019
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Crown Copyright ©
Mr Justice Robin Knowles:
Introduction
Other applications
The Consent Award
"The Parties entered into [the Binding Term Sheet] in connection with the settlement, release and discharge of all outstanding rights, obligations and liabilities as between the 1MDB Group and the IPIC Group (each as defined ), in exchange for the creation of new rights, obligations and liabilities between them and [MOF] undertook to procure the satisfaction by 1MDB of all its obligations, to perform those obligations itself and to indemnify and make certain payments to the IPIC Group ".
a. The Binding Term Sheet was stated to be valid and binding upon IPIC and Aabar and MOF and 1MDB until terminated by the Settlement Deeds.
b. MOF and 1MDB were to pay to IPIC by 31 December 2017 approximately US$1.2 billion (and interest) in instalments.
c. In relation to Deeds of Guarantee executed in May 2012 and October 2012 by IPIC ("the Guarantees") in respect of certain bonds ("the Bonds") it was stated that US$102,725,000 had been paid by IPIC, and that MOF and 1MDB were obligated to indemnify IPIC in respect of all sums which might be paid thereafter by IPIC or any member of IPIC's Group or for which they might become liable under or in relation to the Guarantees up to the full sum potentially falling due under the Guarantees of approximately US$4.7 billion.
d. The First Arbitration was terminated.
The Second Arbitrations
"Any dispute arising from or in connection with this Deed (including a dispute relating to the existence, validity or termination of this Deed or any non-contractual obligation arising out of or in connection with this Deed or the consequences of its nullity ) shall be finally resolved by arbitration under the LCIA Rules which are deemed to be incorporated by reference into this Clause. The seat of arbitration shall be London, England and the language of the arbitration shall be English. The governing law of this arbitration clause shall be the substantive law of England."
The central issue on these applications
Party autonomy and the supervisory jurisdiction of the Court
"17. But perhaps the most important consideration is the practical reality of arbitration as a method of resolving commercial disputes. People engaged in commerce choose arbitration in order to be outside the procedures of any national court. They frequently prefer the privacy, informality and absence of any prolongation of the dispute by appeal which arbitration offers. Nor is it only a matter of procedure. The choice of arbitration may affect the substantive rights of the parties, giving the arbitrators the right to act as amiables compositeurs, apply broad equitable considerations, even a lex mercatoria which does not wholly reflect any national system of law. The principle of autonomy of the parties should allow them these choices.
"18. Of course arbitration cannot be self-sustaining. It needs the support of the courts; . Different national systems give support in different ways and an important aspect of the autonomy of the parties is the right to choose the governing law and seat of the arbitration according to what they consider will best serve their interests."
19. the jurisdiction to restrain foreign court proceedings is generally regarded as an important and valuable weapon in the hands of a court exercising supervisory jurisdiction over the arbitration. It promotes legal certainty and reduces the possibility of conflict between the arbitration award and the judgment of a national court.
20. Whether the parties should submit themselves to such a jurisdiction by choosing this country as the seat of their arbitration is, in my opinion, entirely a matter for them. "
"1 General principles.
The provisions of this Part are founded on the following principles, and shall be construed accordingly
(a) the object of arbitration 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."
" an agreement as to the seat of an arbitration 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."
Challenges under section 67 and 68 of the 1996 Act
"67. Challenging the award: substantive jurisdiction.
(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court -
(a) challenging any award of the arbitral 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) The arbitral 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 the arbitral 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.
68. Challenging the award: serious irregularity.
(1) A party to arbitral 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.
(2) 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).
(3) 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);
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it;
(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;
(f) uncertainty or ambiguity as to the effect of the award;
(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;
(h) failure to comply with the requirements as to the form of the award; or
(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.
(4) 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.
(5) The leave of the court is required for any appeal from a decision of the court under this section."
"The courts, when called upon to exercise the supervisory role assigned to them under the [1996 Act], are acting as a branch of the state, and not as a mere extension of the consensual arbitral process. Nevertheless, they are acting in the public interest to facilitate the fairness and well-being of a consensual method of dispute resolution ."
The validity of the arbitration agreements
The jurisdiction of the arbitrators in the Second Arbitration and the supervisory jurisdiction of the court in respect of the First Arbitration
MOF and 1MDB do however contend that if matters falling within the court's supervisory jurisdiction are caught by the arbitration agreements, then those agreements have no effect to that extent. This, it is argued, is because of section 4 of the 1996 Act, the section that (as we have seen) makes clear that sections 67 and 68 are mandatory provisions.
Therefore as things stand both the court (by reason of its supervisory jurisdiction over the First Arbitration) and the arbitration tribunal in the Second Arbitrations have jurisdiction and a jurisdiction for which the answer to the underlying question (i.e. whether, as MOF and 1MDB contend, the Settlement Deeds are void and not binding upon them) is material.
"There might in some cases, such as the present, be an overlap between the powers of the arbitral tribunal to determine issues of breach between the parties concerning their contractual relationship and the court's supervisory jurisdiction when it is invoked in support of an arbitration agreement. whilst the parties have agreed that disputes between them should be referred to arbitration they have also agreed, by reason of the seat of the arbitration being England, that the English court is the forum which can exercise a supervisory jurisdiction in support of the arbitration ."
" an area of overlapping or concurrent jurisdiction so that matters can fall within the compass both of an arbitration agreement and of a (typically implicit) agreement to supervisory jurisdiction."
" by contracting for arbitration in England under English law, the parties have impliedly agreed that the usual ancillary proceedings may be brought before the English court to assist and protect the arbitration. These include claims for an anti-suit injunction, which are therefore not a breach of even broadly worded arbitration clauses. This implied agreement operates as an exception to the general scope of the arbitration clause, and permits the court and the arbitrations to exercise a concurrent jurisdiction."
A stay under section 9 of the 1996 Act of the section 67 and 68 challenges
"(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.
(1) An application may be made notwithstanding that the matter is to be referred to arbitration only after the exhaustion of other dispute resolution procedures.
(2) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.
(3) On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.
(4) If the court refuses to stay the legal proceedings, any provision that an award is a condition precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to those proceedings."
" [The] expression ["to be referred" to arbitration within the meaning of section 9 of the 1996 Act] connotes that the parties agreed that the matters must be referred to arbitration."
That requirement will not be satisfied if there is concurrent jurisdiction, i.e. the parties also agreed to the supervisory jurisdiction of the court. Thus (at [45]):
" by making the arbitration agreements [the parties] also agreed to the supervisory jurisdiction of the English court. So long as [a party's] application seeks relief in accordance with that part of the agreements, [that party] cannot be said to be acting in breach of the arbitration agreements."
"Were it otherwise that part of the court's supervisory jurisdiction referred to by Lord Hoffmann [in The Front Comor] would usually be subject to a stay pursuant to section 9 of the Act."
"If there is no area of overlap, I would consider it necessary in order to give a proper and workable effect to section 9 to define more specifically the "matter" to which it refers. Thus, in this case the "matter" that [one party] contends is to be referred to the arbitrators in the [second arbitrations] is whether in view of the [first arbitration] and the award they should reject the claims on the grounds of the re-arbitration complaints. Correspondingly the "matter" that is the subject of the legal proceedings, [the other party's] application, is whether in view of the re-arbitration complaints the court should exercise its supervisory jurisdiction in view of the [first arbitration] and the award. "
A case management stay of the section 67 and 68 challenges; inherent jurisdiction
"In circumstances in which an international commercial dispute involves arbitration as well as court proceedings, it makes good commercial sense for the court to have regard, where appropriate, to the orderly resolution of the dispute as a whole, if necessary by granting a temporary stay in favour of arbitration. A coherent system of commercial dispute resolution has to take into account the fact that various different tribunals may be involved, each of which should aim to minimise the risk of inconsistent decisions and avoid unnecessary duplication and expense."
An injunction in respect of the Second Arbitrations; section 37(1) Senior Courts Act 1981
" 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 the arbitration, or that its continuation will be vexatious, oppressive or unconscionable However this may not be sufficient "
Conclusions