Betamax applied to the Judicial Committee of the Privy Council (the Privy Council) against the decision of the Supreme Court of Mauritius. The Supreme Court had allowed the appeal of the then appellant, State Trading Corporation (STC) and the arbitral award made by the arbitral tribunal to the then respondent, Betamax was dismissed as summarised in Appleby's Mauritius Newsletter August 2019, here.
The decision of the Board of the Privy Council dated 14 June 2021 in this Appeal is most certainly welcomed within the International Arbitration community. The Board has ruled in favour of Betamax, setting aside the order of the Supreme Court and allowing Betamax to enforce the arbitral award of USD 115.3 million plus interest and costs.
The case has important ramifications regarding the scope of a court in deciding whether to set aside or refuse to enforce an international arbitration award on the basis that it conflicts with public policy.
Issues before the Privy Council
The Board had to consider the following three issues:
- Was the Supreme Court entitled to review the Arbitrator's decision set out in the Award that the COA was not subject to the provisions of the PP Act and PP Regulations and the making of it, without the approval of the Central Procurement Board, was not illegal?
- If the Supreme Court was entitled to review that decision of the Arbitrator, was the COA illegal as having been entered into in breach of the PP Act and PP Regulations on their proper interpretation?
- If the COA was illegal, was the Award giving effect to the COA in conflict with the public policy of Mauritius?
The Reasoning of the Board
On the first issue about whether the Supreme Court of Mauritius was entitled to review the Arbitrator's decision as set out above, Section 39 of the International Arbitration Act 2008 of Mauritius (the IAA) IAA on exclusive recourse against an arbitral award is based article 34 of the UNCITRAL's Model Arbitration Law 1985 (as amended in 2006) (the Model Law) is relevant inasmuch as it allows the Supreme Court of Mauritius to set aside an award in limited circumstances, including cases where such award is in conflict with the public policy.
The Privy Council stated that it was for the Supreme Court to determine the nature and extent of the public policy and where an arbitral tribunal decides that an agreement is illegal but, nevertheless, makes an award which enforces the agreement, the Supreme Court is entitled to set aside such award under section 39(2)(b)(ii) of the IAA if the award conflicts with the public policy.
The arbitrator in this case had considered the PP Act and the PP Regulations (the Public Procurement Laws) and decided that they did not render the COA illegal. However, STC argued that if the arbitral tribunal had made an error of law as to the legality of an agreement in circumstances which involved the public policy of Mauritius, the Supreme Court was entitled to correct it by considering afresh whether the Public Procurement Laws applied to the COA.
While rejecting the argument of STC, the Privy Council held that:
- The argument of the STC, if accepted, would have involved a significant expansion of section 39(2)(b)(ii) of the IAA which was inconsistent with the purpose of the IAA and the Model Law. The Model Law is based on the principle that where a matter has been submitted to an arbitral tribunal and is within its jurisdiction, the arbitral tribunal's decision is final whether the issue is one of law or fact;
- Under section 39(2)(b)(ii) of the IAA, the Supreme Court should decide whether, on the findings of law and fact made in the award, there is a conflict between the award and public policy. Whereas, in this case, the question of interpretation of the Public Procurement Laws and the legality of the COA was no issue of public policy;
- It was within the jurisdiction of the arbitrator to determine issues of law and facts which included the issue of the interpretation of the Public Procurement Laws and whether they had the effect of making the COA illegal;
- there is no opt in to permit an appeal on questions of law and the Supreme Court had no power to review that decision except under the limited circumstances of section 39(2)(b)(ii) of the IAA;
- The Supreme Court) cannot, under the guise of public policy, reopen issues relating to the meaning and effect of the contract or whether it complies with a regulatory or legislative scheme."
The Board held that the decision of the arbitrator was binding and final on all the parties. This is an important pronouncement since it clarifies what ought to have always been clear: the finality of arbitral awards and its binding effect on all the parties who have submitted themselves to the Arbitration process and agreed to be bound by it.
On the second issue, the Board was called upon to adjudicate on a question of interpretation of the Public Procurement Act and its subsequent Regulations. Although the Board found that in the light of its conclusions on the first issue, the second and third issues did not arise, the Board nevertheless explained why, on the proper interpretation of the various amendments to the exemptions set out in the Public Procurement Laws, it agrees with the arbitrator's findings rather than the Supreme Court.
The Privy Council ruled that there were no grounds to overturn an arbitral award by which STC was ordered to pay $US 115.3M with interests and costs to Betamax. The Privy Council has reiterated and confirmed the principles of the IAA on the finality of the decision of an arbitral tribunal in cases of international arbitration and the limited circumstances where such an award/decision may be reviewed by the Supreme Court under section 39 of the IAA.
At a time where certainty is key, it is a welcomed reminder of a legitimate expectation of a minimal intervention of Courts at the stage of enforcement of an arbitral award and no doubt this decision comes as a relief to those resorting to arbitration in the hope of avoiding strenuous time in Court and to bind them to the decision of a commonly agreed alternative dispute resolution medium.
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