Dowans Holding SA & Anor v Tanzania Electric Supply Co Ltd

For the purposes of recognising and enforcing a New York Convention award, an award is “binding” once ordinary recourse has expired or been excluded. A pending application to set aside or suspend the award in the country of origin does not, by itself, prevent the award from being binding under section 103(2)(f) of the Arbitration Act 1996.

The effect of a pending challenge is ordinarily considered under section 103(5). The court applies a sliding scale, weighing the apparent strength of the challenge against the risk that delay will prejudice enforcement. An adjournment may therefore be granted on terms requiring suitable security.

An ICC tribunal awarded the claimants more than US$65 million arising from an electricity power off-take agreement. The claimants obtained an order permitting enforcement in England and Wales under section 101(2) of the Arbitration Act 1996.

The defendant applied to set aside that order under section 103(2)(f), alternatively to adjourn recognition or enforcement under section 103(5), because challenges to the award were pending in Tanzania. The claimants sought security if an adjournment were granted. The principal questions were whether the award was already binding, how the statutory discretion should be exercised, and whether an adjournment should be conditional on security.

1. Binding award. The ICC Award was binding within section 103(2)(f). The parties had agreed that it was final and binding, the ICC Rules required the parties to carry it out without delay, and ordinary recourse had been excluded. The New York Convention replaced the Geneva Convention requirement of “finality” and eliminated double exequatur. A pending challenge in the home jurisdiction did not make the award non-binding.

2. The question whether an award is binding is determined by the enforcing court. The possibility of extraordinary recourse, such as a limited challenge in the home jurisdiction, does not prevent an award from being binding once ordinary recourse is excluded. Section 103(2)(f) addresses separately an award which is not yet binding and an award which has actually been set aside or suspended.

3. The existence of a pending challenge is instead addressed under section 103(5), which permits an adjournment where the court considers it proper. The court must assess the prospects of the challenge by reference to the law applied by the supervisory court. The relevant approach is a sliding scale: a manifestly valid award should ordinarily be enforced or protected by substantial security, whereas a manifestly invalid award should ordinarily lead to an adjournment without security.

4. The defendant’s challenge was not fanciful and therefore had a real prospect of success, but substantial hurdles existed, including the Absalom exception and the error-of-law-on-the-face-of-the-award test. The case lay towards the lower end of the sliding scale. An adjournment was appropriate, but only on terms.

5. Security is directed to protecting the enforcing party against prejudice caused by delayed enforcement and is not a penalty or a means of improving the claimant’s position. The court could consider the risk of losing enforcement opportunities in European jurisdictions, even though no assets were shown to be located in England and Wales.

6. Recognition and enforcement were adjourned until 20 November 2011, conditional on the defendant providing security of US$5 million.

This was a first-instance decision on applications concerning recognition and enforcement of an ICC award. The judgment does not state a prior appellate stage.