Only weeks after the decision of the US Court of Appeals for the Second Circuit decided that it lacked jurisdiction to enforce in New York the award of the arbitral Tribunal in the ICC arbitration between the Cukorova Holding A.S and Sonera Holding B.V, the Judicial Committee of the Privy Council delivered its latest Judgment on 13 May 2014 in the long saga1 in relation to the same award, dismissing all of Cukurova's grounds of appeal and leaving the way open to Sonera to enforce its' arbitral award in BVI. Sonera was awarded some US$932 million in damages under the Award (the Final Award).

In doing so the Privy Council, affirmed the decision of the Eastern Caribbean Supreme Court of Appeal (Court of Appeal)2, which had agreed with the first instance decision of Hon. Justice Bannister QC, and upheld the Award, which had found Cukorova liable to Sonera for defaulting on a 2005 agreement to sell Sonera its 53% stake in Turkcell.

Cukurova challenged enforcement on three principal grounds: (1) that the Tribunal lacked jurisdiction to grant the relief in the Final Award; (2) that it had been unable to present its case before the Tribunal3; and (3) enforcement of the Final Award would be contrary to the public policy of the BVI4. In other words, the identical challenge to that which had failed in the Court of Appeal.

The Final Award is a "Convention Award" within the definition given in the BVI Arbitration Ordinance (an "award made in pursuance of an arbitration agreement in the Territory of a State other than [BVI] or the United Kingdom which is a party to the New York Convention").

Noting that the grounds upon which the court can refuse to enforce a Convention Award are to be narrowly construed, and in particular that it cannot refuse on the ground of error of law or fact, the Board saw no reason to interfere with the conclusions reached by the Judge and the Court of Appeal (which centered on the expert evidence of Swiss law given at the trial) "On the contrary, their conclusions seem to the Board to make very good sense".

Issues (2) and (3) were dealt with together under the "public policy" umbrella. The Board summarised Cukurova's objections thus: "First, the Tribunal decided the key issue in the dispute ... on a basis that had never been put to Cukurova and that Cukurova never had the opportunity to address. Secondly, the Tribunal ignored (and failed to give reasons for rejecting) Cukurova's evidence and submissions on a key point in relation to the quantification of Sonera's loss. This resulted in a massive increase in the damages awarded against Cukurova".

s. 32(2)(c) (in the same terms as 103(2)(c) of the Arbitration Act in England) is brought into play where a party has been prevented from presenting his case by matters outside of his control, for example, if he is never informed of the case he is called upon to meet5. In addition, BVI public policy mirrors English public policy, it being contrary to both to enforce an award where the proceedings violate principles of natural justice.

Through a detailed analysis of what had actually taken place before the Tribunal, which appeared to an extent to have been a series of procedural blunders [or misunderstandings] on Cukurova's part, the Board found exactly as the Court of Appeal and the Judge at first instance had, that Cukurova had in fact had every opportunity to present its case and did know the nature of the case against it so that its appeal on that ground must fail.

The Board also agreed with the Court of Appeal's analysis of the second limb (that the Tribunal had ignored (and failed to give reasons for rejecting) Cukurova's evidence on a key point): the Tribunal had given sufficient consideration to the evidence put forward and its preferring of one expert over the other was not a complaint that could succeed under s. 36(2)(c) and nor could it succeed on the public policy ground because in essence: "the Tribunal gave reasons for its decision. Whether those reasons were convincing or not is not a matter for the enforcing court".

Throughout its Judgement, the Board echoed the pro-enforcement sentiments expressed in the Court of Appeal in BVI, which are now reflected in Law in BVI through the new BVI Arbitration Act (Arbitration Act), which was gazetted (a pre-requisite to its entry into force) in January 2014. The expressed intention of the BVI Legislature is to bring the legislative regime in relation to the arbitrations up to date and to transform the BVI, already one of the Words largest domiciles for the incorporation of companies, into a leading arbitration centre. To that end, the Act:

  • Recognises and incorporates the UNCITRAL Model Law and in doing so (amongst other things) streamlines the procedures for the recognition and enforcement of foreign awards in BVI
  • Declares the intention to establish, and sets in place procedures for the establishment of a BVI International Arbitration Centre; and
  • Confirms that talks are in progress to extend the New York Convention to BVI.

Footnotes

1 Cukurova A.S. v Sonera Holding B.V [2014] UK PC 15

2 BVIHCV AP 2012/0029

3 s. 36(2)(c) of the BVI Arbitration Ordinance (Arbitration Ordinance)

4 S. 36(3) of the Arbitration Ordinance

5 Minmetals Germany GmbH v Ferco Steel Ltd [1999] CLC 647 and Kanoria v Guiness [2006] EWCA Civ 222 applied.

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