RBRG Trading (UK) Ltd v Sinocore International Co Ltd

The public-policy exception to enforcement of a New York Convention award receives a restrictive interpretation. The court balances the strong policies favouring enforcement and arbitral finality against preventing abuse of its enforcement process.

The illegality principles governing substantive claims do not replace the distinct approach under section 103(3) of the Arbitration Act 1996. Ordinarily, the court will not reopen an arbitral tribunal’s findings on an illegality issue within its jurisdiction. English public policy is engaged only by considerations of international, rather than purely domestic, public policy.

A failed attempt at fraud, collateral to a lawful contract and neither causing the awarded loss nor producing any benefit, does not ordinarily justify refusing enforcement.

A CIETAC tribunal awarded the seller damages for the buyer’s breach of a contract for the sale of rolled steel coils. The tribunal found that the buyer’s non-conforming letter of credit was the fundamental cause of termination and loss. Although the seller had presented forged bills of lading to the issuing bank, neither the buyer nor the bank was deceived and no payment was made.

Phillips J dismissed the buyer’s application to set aside an order enforcing the award. The buyer appealed, contending principally that the award should not be enforced under section 103(3) of the Arbitration Act 1996 because the seller’s claim was connected with its fraud. It also relied on the seller’s continuing proceedings against the bank and challenged the sufficiency of an undertaking preventing double recovery.

The central questions were whether the illegality approach in Patel v Mirza applied to enforcement proceedings, whether the attempted fraud was sufficiently connected with the award, and whether the judge had erred in accepting the undertaking.

1. Appeal dismissed. Patel v Mirza [2016] UKSC 42 did not alter the distinct principles governing recognition and enforcement under section 103(3) of the Arbitration Act 1996. It determines whether conduct is illegal as a matter of English law, but it neither considered nor decided the proper approach to the public-policy defence against enforcement of an arbitral award. That context always includes a strong public policy favouring enforcement.
2. The public-policy exception must be approached restrictively. The court must balance arbitral finality against preventing abuse of its enforcement process. Relevant matters include the nature and strength of the alleged illegality, its connection with the claim, and the extent to which the tribunal addressed it. Where the governing law discloses no illegality, English public policy is engaged only by rules reflecting international public policy rather than purely domestic considerations.
3. Where a tribunal had jurisdiction over the illegality issue and determined the relevant facts, the enforcing court should ordinarily refuse an attempt to reopen those findings. The CIETAC tribunal had made findings of effective causation under Chinese law. It found that the buyer’s non-conforming letter of credit, rather than the forged bills of lading, was the primary or fundamental cause of the termination and loss.
4. The attempted fraud was insufficiently connected with the award. The sale contract and its required performance were lawful. Neither the buyer nor the bank was deceived, the forged bills did not circulate, and the seller obtained no benefit from them. The award succeeded despite the wrongful conduct, not because of it. The attempt was therefore collateral to the contractual claim. Public policy was not engaged or, alternatively, was clearly outweighed by finality.
5. The same result would have followed under Patel v Mirza because the wrongful conduct was not central to the contract or its performance.
6. The judge was entitled to accept an undertaking preventing double recovery without requiring discontinuance of the seller’s Chinese proceedings against the bank. That case-management decision fell within the generous ambit of his discretion. Hamblen LJ gave the judgment; Irwin and Lewison LJJ agreed.

1. Court of Appeal (Civil Division): The appeal was dismissed unanimously. The court upheld enforcement of the CIETAC award under section 103 of the Arbitration Act 1996.
2. Commercial Court: Phillips J dismissed the buyer’s application to set aside Burton J’s enforcement order and accepted the seller’s undertaking against double recovery. No neutral citation is stated in the judgment.
3. High Court: Burton J made the original enforcement order under section 101(2) of the Arbitration Act 1996.
4. Chinese court: The buyer’s application to set aside the CIETAC award on procedural grounds was dismissed. The judgment states that its available rights of challenge were thereby exhausted.