Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd

A Convention award will ordinarily be enforced where the arbitrators considered and rejected an allegation that the underlying contract involved bribery. Without fresh evidence, the enforcing court should not reopen the arbitrators’ factual findings merely because commercial corruption is alleged.

A preliminary inquiry may consider whether the arbitrators addressed illegality, whether contrary evidence existed, whether they were competent, and whether collusion or bad faith affected the award. The seriousness of the alleged illegality belongs to the subsequent balance between finality and public policy, if that stage is reached. An allegation that an award was procured by perjury normally requires previously unavailable evidence sufficiently strong to be decisive if unanswered.

Westacre agreed to provide consultancy services relating to sales of Yugoslav military equipment in Kuwait. The agreement was governed by Swiss law and provided for ICC arbitration in Geneva. After the agreement was repudiated, a majority of the tribunal awarded Westacre substantial sums. The tribunal considered and rejected an allegation of bribery, and the Swiss Federal Court dismissed a challenge to the award.

Colman J permitted enforcement in England and rejected the defendants’ public-policy defence: [1998] 3 WLR 770. The defendants appealed, alleging that the agreement purchased personal influence, that Westacre’s witnesses had given perjured evidence, and that further evidence established a contract to pay bribes. The central issue was whether the arbitrators’ factual findings could be reopened during enforcement proceedings.

1. Appeal dismissed by a majority. Mantell LJ, with whom Sir David Hirst agreed, held that the appellants could not reopen the arbitrators’ findings on bribery. Bribery had been a central issue in the arbitration. The tribunal had expressly rejected it, and the Swiss Federal Court had dismissed the challenge to the award. No fresh evidence satisfying the applicable standard was produced.

2. The preliminary inquiry described in Soleimany v Soleimany did not justify a full trial. There was evidence before the tribunal that the agreement was an ordinary commercial contract. The arbitrators expressly found no illegality, nothing suggested that they were incompetent, and there was no reason to suspect collusion or bad faith in obtaining the award. Mantell LJ held that the gravity of the alleged corruption was not relevant when deciding whether to embark upon a full inquiry. It would become relevant only when balancing finality against illegality at the later enforcement stage.

3. The court unanimously rejected the argument based on Lemenda Trading Co Ltd v African Middle East Petroleum Co Ltd [1988] 1 QB 448. A contract purchasing personal influence abroad does not infringe a universally applicable rule of English public policy merely because English domestic policy would disapprove it. Where the award and underlying contract offended neither the proper law nor the curial law, the English court could enforce the award notwithstanding a different domestic policy at the place of performance.

4. The proposed amendment alleging perjured evidence was also properly refused. A foreign arbitral award is the decision of the tribunal selected by the parties and should be treated more like a domestic award than a foreign judgment. Ordinarily, a perjury challenge requires evidence unavailable at the arbitration and so strong that, if unanswered, it would reasonably be expected to determine the result. The failure to invoke the available Swiss review procedure within time was an additional factor against reopening the dispute.

5. Waller LJ dissented on the central issue. He considered commercial corruption a matter of the highest international public policy and would have permitted the appellants to prove their allegations because the case now advanced had not been properly examined by the tribunal. The majority nevertheless upheld Colman J’s order. The appeal was dismissed with costs, and leave to appeal to the House of Lords was refused.

1. Court of Appeal: By a majority, dismissed the appeal from Colman J’s enforcement decision and refused leave to appeal to the House of Lords.

2. High Court, Commercial Court: Colman J held that the pleaded case disclosed no defence to enforcement, refused permission to amend the defence to allege perjury, and upheld enforcement of the award: [1998] 3 WLR 770.

3. Swiss Federal Court: Dismissed the challenge to the arbitral award. It was bound by the tribunal’s factual findings and held that the award did not contravene Swiss public policy.

4. ICC arbitral tribunal: By a majority, rejected the allegation of bribery and awarded Westacre damages under the consultancy agreement.