Flashbird Ltd v Compagnie de Sécurité Privée et Industrielle SARL (Mauritius)

An application to set aside an arbitral award for procedural non-compliance requires more than proof of a departure from the arbitration agreement. Where the alleged defect concerns the number of arbitrators, the applicant must show that applying the agreed procedure was likely to have produced a different tribunal. In the circumstances, material prejudice or a meaningful effect on the arbitral process was also required. A failure concerning the basic architecture of an arbitration may stand differently. Hybrid institutional arbitration clauses are possible, but clear language is needed because of the procedural uncertainty and costs they may create.

The appellant challenged an arbitral award made in a contractual dispute concerning consultancy services. It applied to the Supreme Court of Mauritius under section 39(2)(a)(iv) of the International Arbitration Act 2008, arguing that the arbitration clause required arbitration under ICC Rules rather than MARC rules and that the tribunal should have comprised three arbitrators.

The Supreme Court dismissed the application on 30 November 2018. It held that the appellant had not shown that application of the ICC Rules would have resulted in a different tribunal, or that substantial prejudice had been suffered. The appeal concerned the interpretation of the arbitration clause, the alleged procedural irregularity, the prejudice requirement, and new points raised for the first time on appeal.

The Board dismissed the appeal. It agreed with the Supreme Court on the two issues sufficient to dispose of the challenge and considered it unnecessary to decide whether the arbitration clause was hybrid.

1. New points on appeal. Applying Baker v The Queen [1975] AC 774, the Board held that grounds not raised below should not normally be advanced for the first time on appeal. The exceptional category is confined to points which do not depend on evidence or facts of which judicial notice could be taken and on which the Board would not be assisted by the local courts’ views. The appellant’s proposed grounds concerned factual matters and were therefore unavailable. The forgery allegation was in any event legally irrelevant and unsupported by the evidence.
2. Tribunal composition. The only material procedural complaint concerned the appointment of one arbitrator rather than three. Article 12 of the ICC Rules presupposed a sole arbitrator where the parties had not agreed the number, unless the administering court considered that the dispute warranted three. The appellant therefore had to show that applying the agreed procedure was likely to have produced a panel of three. If the clause were hybrid, the relevant question would be whether MARC, applying the ICC Rules, would probably have appointed three arbitrators, rather than what the ICC itself would have done. That distinction did not affect the result. The appellant had not established a likely difference in composition.
3. Material prejudice. The jurisprudence concerning article V(1)(d) of the New York Convention, including Eastern European Engineering Ltd v Vijay Construction (Proprietary) Ltd [2018] EWHC 2713 (Comm); [2019] 1 Lloyd’s Rep 1, supported requiring material prejudice or a meaningful effect on the arbitral process before setting aside an award for procedural non-compliance. A failure to follow an agreement on the basic architecture of an arbitration might not require proof of prejudice. In this case, however, the alleged defect concerned only the number of arbitrators, and no material prejudice had been shown.
4. Hybrid clauses. The Board observed obiter that there was force in construing the clause as referring to MARC rules. Hybrid clauses create significant jurisdictional and procedural complications, so clear words should be required before such an arrangement is established. The Board did not determine the issue.

The appeal was dismissed.

• Privy Council — On an appeal as of right, dismissed the appeal: [2021] UKPC 32.
• Supreme Court of Mauritius — Dismissed the appellant’s application to set aside the arbitral award in a judgment dated 30 November 2018.