Mauritius: The Supreme Court Of Mauritius Re-Affirms Its Pro-Arbitration Approach

Last Updated: 9 September 2015
Article by Malcolm Moller and Sharmilla Bhima

The Supreme Court of Mauritius (Supreme Court) recently re-affirmed its pro-arbitration approach when it granted an application by UBS AG (UBS) to stay proceedings pending the determination of a dispute by an adjudicating court under section 5 of the International Arbitration Act 2008 (IAA) in Mauritius Commercial Bank Ltd v UBS AG Singapore Branch and anor 2015 SCJ 307 (MCB Case).

Background to the MCB Case

The MCB Case concerned a claim for damages that The Mauritius Commercial Bank Ltd (MCB) lodged before the Supreme Court against UBS AG, Singapore Branch (UBS Singapore) and UBS for breach of contract. The basis of the claim was a side letter dated 31 July 2012 that the MCB had entered into with UBS Singapore (Side Letter).

As a result of its obligations under the Side Letter, the MCB extended an amount of USD$20 million to UBS Singapore. In so doing, it became one of the lenders for a secured loan that was extended to a Mauritian borrower under a Facility Agreement dated 16 August 2012 (Facility Agreement). The amount of the loan under the Facility Agreement was USD$100 million (Loan). Furthermore, over and above the Mauritian borrower, the MCB, UBS Singapore and UBS were parties to the Facility Agreement.

Sometime after its entry into the Side Letter, it came to the knowledge of the MCB that UBS Singapore had reduced its commitment in the Loan to the amount of USD$15 million without informing the MCB. The MCB took the view that its commitment to the Loan should also be reduced to USD$15 million in order to be "equal to" the commitment of UBS Singapore under the terms of the Side Letter. UBS Singapore refused to accede to MCB's request hence the claim for damages before the Supreme Court.

The Proceedings Before the Supreme Court

In the MCB Case, UBS refused to submit to the jurisdiction of the Supreme Court. It argued that the Supreme Court lacked jurisdiction to entertain the dispute between the parties because of an arbitration clause under the Facility Agreement.

UBS argued that under the arbitration clause, all disputes arising between the parties to the Facility Agreement 'out of or in connection with the Facility Agreement' should be resolved by arbitration. This therefore meant that the present dispute could only be resolved by arbitration as it was a dispute that arose between the parties to the Facility Agreement and the Side Letter had a connection to the Facility Agreement.

UBS therefore requested an order to be granted under section 5 of the IAA by which the Supreme Court should forthwith transfer the present claim for damages to another bench of the Supreme Court constituted in the terms prescribed by section 5 of the IAA.

Supreme Court Decision

In granting the order under section 5 of the IAA, the Supreme Court set aside the arguments of the MCB that the Side Letter bound only the MCB and UBS Singapore and was meant to remain confidential between the MCB and UBS Singapore. Furthermore, since the Side Letter pre-dated the Facility Agreement it was independent of the latter. Accordingly, the arbitration clause could not be said to apply to the Side Letter as the parties to the Side Letter could not be said to have contemplated that disputes arising thereunder should be resolved by arbitration.

The Supreme Court held that the position taken by the parties made it clear that the issue to be determined turned on the application of the arbitral clause to the dispute between the parties. Accordingly, applying the terms of section 5 of the IAA, the Supreme Court in the present case was bound to refer forthwith the dispute to another bench of the Supreme Court provided the condition under section 5 of the IAA was satisfied.

Section 5 of the IAA casts an obligation on a party which requests a transfer to do so 'not later than when submitting his first statement on the substance of the dispute'. In this regard the Supreme Court was satisfied that UBS had met this criterion as it had refused to submit to the jurisdiction of the Supreme Court from the start of the proceedings.

Having determined that UBS had satisfied the substantive criterion under section of the IAA, the Supreme Court applied its mind to the procedural aspect of transfers under section 5 of the IAA.

The Supreme Court considered Rule 13(1) & (2) of the Supreme Court (International Arbitration Claims) Rules 2013 (Rules) by which a party requesting a transfer should do so by way of affidavit and supporting documents and, following which the Supreme Court was bound to stay the on-going proceedings.

In the MCB Case, the Supreme Court was satisfied that UBS had submitted its request for referral by way of an affidavit. It therefore followed that it was bound to stay the proceedings in the MCB Case.

Commercial Impact of the Supreme Court Decision

The decision of the Supreme Court in MCB Case reflects the strong commitment of the Supreme Court to support international arbitration and apply the spirit of the IAA. In so doing, the Supreme Court brings a significant contribution to furthering the ambition of the Mauritian Government to position Mauritius as the preferred forum for international arbitration within the Africa-Asian region, in respect of which the launch of the LCIA-MIAC Arbitration Centre as a joint project of the Mauritian Government and the London Court of International Arbitration in 2011 was the hallmark of this ambitious project.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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