Cukurova Holding A.S v Sonera Holding B.V

Courts enforcing New York Convention awards must adopt a pro-enforcement approach and refuse enforcement only on limited statutory grounds. The enforcing court determines for itself whether the tribunal acted within the submission, while considering the tribunal’s reasoning. An arbitration clause covering disputes arising out of or in connection with an agreement may extend to a related agreement where both contracts form components of one transaction. Under section 36(2)(c) of the Arbitration Ordinance 1976, inability to present a case requires matters beyond the party’s control, ordinarily involving natural justice. Mere disagreement with the tribunal’s reasoning, evidence assessment or level of detail in its reasons is insufficient. Public policy is approached with extreme caution.

Sonera obtained a US$932 million damages award in ICC arbitration against Cukurova. The BVI High Court permitted enforcement and entered judgment for more than US$1 billion. Cukurova’s application to set aside that judgment was dismissed, and the Court of Appeal of the British Virgin Islands dismissed its appeal.

Before the Privy Council, Cukurova challenged the Tribunal’s jurisdiction under the arbitration clause in the Letter Agreement. It also argued that it had been unable to present its case and that enforcement would contravene public policy under sections 36(2)(c) and 36(3) of the Arbitration Ordinance 1976.

Appeal dismissed. Lord Clarke delivered the judgment of the Board.

1. The enforcing court must determine jurisdiction for itself, while having regard to the Tribunal’s reasoning. The grounds for refusing enforcement of a Convention award are narrow, and enforcement cannot be refused merely for an error of law or fact. The scope of an arbitration clause using the formula arising out of or in connection with depends on the circumstances and the proper construction of the relevant agreements. Here, the Letter Agreement and the prospective SPA were component parts of a single transaction, their arbitration clauses were materially similar, and requiring a fresh arbitration would make no commercial sense. The approach in Ferrotitanium 4A_452/2007 and The Boxing Case 4A_103/2011 did not govern these materially different arrangements. The Tribunal therefore had jurisdiction.
2. Under section 36(2)(c), the resisting party must show that it was unable to present its case for reasons beyond its control. This ordinarily concerns a denial of natural justice, including failure to inform a party of the case it had to meet. The enforcing court applies its own conception of natural justice. Section 36(3) may in principle apply to a natural-justice breach outside section 36(2)(c), but public policy is approached with extreme caution and, on these facts, refusal depended on establishing inability to present the case. Enforcement of Convention awards is generally pro-enforcement, so good reasons are required for refusal.
3. The duty to give reasons does not create a free-standing ground for refusing enforcement. An arbitral tribunal need not address every argument or state its reasons at length. The Tribunal gave reasons for its conclusions. Cukurova knew that Sonera relied on tacit agreement, agreed a procedure for identifying matters on which Mr Berkmen’s evidence was decisive, and failed to particularise those matters. The Tribunal was entitled to decide that oral evidence was unnecessary.
4. Cukurova adduced Mr Osborne’s expert evidence on quantum, and the Tribunal considered the evidence before preferring Professor Lind’s assessment. Any error in that evaluation was an alleged error of fact or law for which the enforcing court had no supervisory jurisdiction. No breach of natural justice or public policy was established.

The Board advised that the appeal be dismissed. Its provisional view was that Cukurova should pay Sonera’s costs, subject to written submissions on costs within 21 days.

• Privy Council: [2014] UKPC 15, 13 May 2014 — dismissed Cukurova’s appeal.
• Court of Appeal of the British Virgin Islands: 9 May 2013 — dismissed Cukurova’s appeal from the High Court.
• High Court of the British Virgin Islands: 19 September 2012 — dismissed Cukurova’s application to set aside the enforcement judgment entered after permission had been granted ex parte.