Soleimany v Soleimany

The English court will not enforce an arbitral award which on its face enforces a contract entered into with the common intention of committing an illegal act in a foreign, friendly state.

An enforcement judge may go behind an award when there is prima facie evidence that the award rests on illegality. The judge should make a limited preliminary inquiry and refuse enforcement if enforcement would be contrary to English public policy.

The Court of Appeal considered whether an award of a Beth Din (Jewish religious arbitral tribunal) should be enforced in England where the award recognised that the parties had jointly run an enterprise to smuggle carpets out of Iran. The award gave a money sum to one party. The defendant sought to resist enforcement on grounds of illegality and public policy after registration under Arbitration Act 1950 s.26.

The central question was whether an English court may refuse to enforce an arbitral award which enforces rights founded on a contract or enterprise whose object was to commit offences under the law of a foreign friendly state.

1. Disposition: The appeal was allowed. The registration and order enforcing the Beth Din award were set aside and Master Gowers' order reversed. Leave to appeal to the House of Lords was refused.
2. Primary legal rule: An English court will not enforce an award that, on its face, enforces a contract made with the common intention of committing an illegal act in a foreign and friendly state. Such enforcement would be contrary to English public policy.
3. Enforcement of awards and public policy: Enforcement of an award invokes the executive power of the State and is governed by the lex fori. An award is enforceable only subject to English law and public policy. This applies irrespective of the proper law of the underlying contract or the law governing the arbitration.
4. Going behind an award: Where there is prima facie evidence from one side that an award is based on an illegal contract, the enforcement judge should make a limited inquiry. The judge should ask whether there is evidence to the contrary, whether the arbitrator expressly found no illegality, whether there are signs of incompetence, collusion or bad faith. The inquiry should be preliminary and not a full trial.
5. Arbitration clause separability and limits: Although an arbitration clause may be separable and arbitrators may have jurisdiction to decide illegality, that jurisdiction does not guarantee enforceability in England where enforcement would offend public policy. In some cases the arbitration agreement itself may be void if connected to an illegal enterprise.
6. Application to facts: The Beth Din award explicitly recorded that the enterprise was illegal and that the parties had acted jointly with intention to smuggle carpets from Iran. On that basis the award could not be enforced in England.
7. Practical guidance: Enforcement judges should balance the public interest in finality of arbitration against the public interest in refusing to enforce illegality. If preliminary inquiry shows the award enforces an indisputably illegal enterprise, enforcement must be refused.
8. Orders: Appeal allowed with costs; registration and judgment on the award set aside; order of Master Gowers reversed; leave to appeal to the House of Lords refused.

• Court of Appeal (Civil Division): Allowed the appeal and set aside enforcement of the Beth Din award ([1998] EWCA Civ 285).
• High Court, Queen's Bench Division: Master Gowers granted registration under Arbitration Act 1950 s.26 (order later set aside by this Court).