A November 2011 decision of the Alberta Court of Appeal is the
latest chapter in a longstanding case involving efforts by
Pertamina, the Indonesian national oil & gas company, to
prevent the enforcement of a Swiss arbitral award in favour of KBC,
a Cayman Islands company. In December 2000, the tribunal awarded
KBC US$261 million in damages relating to a geothermal electricity
project cancelled by the government of Indonesia during the Asian
The unusual aspect of this decision is that Pertamina sought to
undermine the award by re-opening KBC's Alberta enforcement
proceedings against it. KBC had already fully satisfied the award
through the seizure of bank assets in New York and terminated the
Alberta proceedings. The only live issue on appeal was whether the
procedures used by KBC for ending the Alberta proceedings were
deficient. Because nothing the Alberta court could do would restore
money or property to Pertamina in Alberta, the enforcement
proceedings were academic by the time the appeal was heard.
Pertamina was attempting to gain a favourable ruling in Alberta
which it could use to set aside an anti-suit injunction granted by
the U.S. Federal Court for the Southern District of New York. This
injunction prevented Pertamina from seeking from the Cayman courts
a worldwide freezing order (known as a "Mareva
Injunction") to prevent other creditors from dealing with
KBC's assets, which were by this time subject to liquidation
The U.S. court granted the injunction because it viewed
Pertamina's efforts as likely an attempt to tie up KBC assets
and obstruct and delay the liquidation proceedings. Ultimately
Pertamina was seeking to unwind KBC's enforcement proceedings
entirely, and recover their seized assets, starting with a
challenge to the award in Alberta.
Under the New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, an international treaty given
legislative force in all Canadian jurisdictions, courts may only
decline to recognize or enforce a foreign arbitral award on limited
procedural and jurisdictional grounds, or if the award is shown to
be "contrary to the public policy of the country where
enforcement is sought." Pertamina argued that the award was
contrary to Alberta public policy because it was obtained by fraud,
in that KBC had allegedly failed to disclose to the arbitral
tribunal that it had political risk insurance, and that it had
withheld from the tribunal documents which cast doubt on the
viability of the project.
The Court of Appeal called the appeal "the endless
repetition of failed litigation" which tended to "destroy
all conflicts of laws rules on jurisdiction and recognition."
Similar arguments of fraud had been raised and rejected by U.S.
Federal Courts in Texas and New York, and in Hong Kong, and the
Alberta Court declined to revisit them. Pertamina also sought to
introduce new evidence in Alberta. The court concluded that
Pertamina's proper recourse was either to convince the U.S.
Federal Court in New York to reconsider the anti-suit injunction or
to review the award in the Swiss courts, where the tribunal was
constituted and where it could have appealed.
The Court of Appeal dismissed these efforts by Pertamina,
calling the "appeal and its underlying motion . . . an attempt
to have the tail wag an elderly elephant." It stated the
appeal was "vexatious" and "like those . . . usually
only encountered among recreational litigants." The court
dismissed the appeal and awarded additional costs to KBC as a
penalty for Pertamina unsuccessfully claiming fraud.
This decision illustrates that there are limited circumstances
in which a disappointed litigant is able to overturn a foreign
arbitral award at the enforcement stage. The New York Convention
promotes the twin goals of international arbitration, the efficient
settlement of disputes and the avoidance of protracted litigation,
by requiring a litigant to bring itself within the narrowly defined
exceptions if it wants to challenge a foreign arbitral award.
The Alberta Court of Appeal showed a strong willingness to
uphold foreign awards and respect the rulings of foreign courts,
even though it might have decided the case differently. The Alberta
court rejected the efforts of Pertamina to relitigate the earlier
proceedings and treated the award as presumptively enforceable. The
decision augers well for those considering including an arbitration
clause into a commercial agreement, commencing an arbitration, or
enforcing an arbitral award.
It's not often that our little blog intersects with such titanic struggles as the U.S. presidential race – and by using the term "titanic" I certainly don't mean to suggest that anything disastrous is in the future.
J.J. v. C.C., is an interesting case in which the court held that an automotive garage owes a duty to minor children to secure the vehicles on the premises by locking the cars and safely storing the car keys...
In Irwin v. Alberta Veterinary Medical Association, 2015 ABCA 396, the Alberta Court of Appeal found that the "ABVMA" failed to afford procedural fairness to a veterinarian undergoing an incapacity assessment.
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