Republic of Mozambique v Credit Suisse International & Ors

Under section 9 of the Arbitration Act 1996, the court must stay proceedings so far as they concern any matter which the parties agreed to arbitrate. A matter includes a substantial issue arising from the claim or a reasonably foreseeable defence. The inquiry is practical and concerned with substance, not pleading form. The scope of a Swiss-law arbitration clause is construed objectively and contextually. The in favorem arbitri principle does not override language and context, and multiple arbitration clauses may affect whether the connection is sufficient. An allegation that contracts are instruments of fraud or shams is directly connected with their validity. Even if not pursued as a claim, the contracts’ validity, genuineness and commerciality may be matters raised in defence. Where those issues are integral to the causes of action, the proceedings fall within the arbitration agreements.

The Republic brought claims against the Privinvest companies and others alleging bribery, conspiracy, dishonest assistance, knowing receipt, deceit and proprietary relief arising from three transactions involving supply contracts, financing and sovereign guarantees. The supply contracts were governed by Swiss law and contained arbitration agreements. The Republic was not a signatory, but the preliminary issue was decided on the assumption that it was bound by the arbitration clauses.

Waksman J dismissed the Privinvest companies’ application for a stay under section 9 of the Arbitration Act 1996, holding that the pleaded claims were outside the arbitration agreements. On appeal, the issues were whether the clauses had been construed too narrowly and whether the pleaded claims, including allegations that the supply contracts were instruments of fraud or shams, fell within their scope.

Appeal allowed. Lady Justice Carr delivered the judgment, with Lord Justice Singh and Lord Justice Henderson agreeing.

1. Section 9 of the Arbitration Act 1996 requires a two-stage inquiry. The court must first identify the matters in respect of which the proceedings are brought, including substantial issues and reasonably foreseeable defences. It must then decide whether those matters fall within the arbitration agreement properly construed in context. The inquiry concerns substance rather than pleading form, and a stay may be granted pro tanto. The mandatory nature of the stay is not displaced by practical futility, fragmentation or case-management difficulties. The approach in Sodzawiczny v Ruhan [2018] 2 Lloyd’s Rep 280 and Tomolugen v Silica [2015] SGCA 57 was applied.
2. The Judge’s findings on Swiss law were not open to challenge. The scope of an arbitration clause was to be construed objectively, in context and by reference to what reasonable parties acting in good faith would intend. In favorem arbitri was only a supplemental principle. Multiple arbitration agreements and the back-to-back sub-contracts were relevant contextual matters. Fiona Trust & Holding Corp and others v Privalov and others [2007] UKHL 40 did not prevent a context-sensitive construction.
3. The Judge erred in holding that the instrument of fraud or sham allegation was outside scope. That allegation directly challenged the validity of the supply contracts and was therefore sufficiently connected to arbitration clauses covering disputes arising in connection with, or in relation to, those contracts. The fact that no separate relief was claimed on the allegation was immaterial.
4. The Republic could not remove that issue and treat the remaining proceedings as unrelated to the supply contracts. The Privinvest companies would inevitably, and at least reasonably foreseeably, rely on the validity, genuineness and commerciality of those contracts in defending allegations of dishonesty. Those were substantial matters directly connected with the arbitration agreements.
5. The same analysis applied to the claims for bribery, dishonest assistance, conspiracy, knowing receipt and proprietary relief. The transactions formed an interdependent alleged fraudulent scheme involving the supply contracts, financing and guarantees. The conspiracy claim as a whole was sufficiently connected, notwithstanding that the guarantees were pleaded as a key aim and that one alleged unlawful means concerned entry into the guarantees. Whether the Republic was in fact party to the arbitration agreements, and whether the subcontractors could invoke them, remained to be determined if necessary.

1. Court of Appeal (Civil Division): allowed the appeal and held that the Republic’s claims against the Privinvest companies fell within the arbitration agreements, subject to unresolved questions concerning party status and invocation.
2. High Court, Commercial Court: Waksman J dismissed the Privinvest companies’ application for a stay under section 9 of the Arbitration Act 1996 in a judgment dated 30 July 2020.