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Arbitration award upheld by the English court in the face of allegations of bribery

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McEvoy Stacey
Stacey McEvoy

Senior Associate

London

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15 July 2014

In Honeywell International Middle East Ltd v Meydan Group LLP [2014] EWHC 1344 (TCC), 30 April 2014, allegations of bribery during a tender process for electrical works were not sufficient to resist the enforcement in England of a Dubai arbitration award relating to non-payment under an electrical works contract. Even if the bribery allegations had a prospect of success (which they did not), Ramsay J held that it would not be contrary to English public policy to enforce an arbitration award based on an arbitration agreement that had been procured by a bribe.

Meydan Group LLC (Meydan) is a Dubai company which owns a racecourse. On behalf of Meydan, TAK, an engineering consultant, invited tenders for electrical works. Honeywell International Middle East Ltd (Honeywell) was the successful tenderer, and a contract between it and Meydan was signed which included a clause providing for any disputes to be settled by arbitration under the rules of the Dubai International Arbitration Centre (DIAC). Meydan failed to meet its payment obligations, leading Honeywell to commence arbitration proceedings and terminate the contract.

Although it was served with all documents, Meydan did not take any active part in that arbitration (contending that the initial Request incorrectly named the respondent entity as "Meydan LLC") and did not attend the hearing.

An award was made by the arbitral tribunal in favour of Honeywell for approximately GBP 12.6 million.

Honeywell sought to enforce the award in England. Meydan resisted enforcement on eight separate grounds under s103 of the Arbitration Act 1996, which sets out the grounds (based on Article V of the 1958 New York Convention on the Recognition and Enforcement of Arbitral Awards) on which the English court can refuse to recognise or enforce a New York Convention Award. The most interesting ground for challenge related to allegations that the original contract was tainted by bribery, in that Meydan alleged that Honeywell had bribed TAK in order to obtain the work.

Section 103 challenge can be heard summarily

A key question before the court was the approach that the court should take regarding applications resisting enforcement of a New York Convention award under s103, and whether the court was able to decide whether the necessary grounds were satisfied without needing to hold a full hearing. Ramsay J recognised the "important public policy" reasons for enforcement of arbitral awards, and noted that the courts would only refuse to enforce an award under s103 in a "clear case", such that the court should also be "cautious" about requiring full disclosure and cross-examination of evidence in an application for enforcement of an award. Applying the usual test for summary judgment, as set out in Easy Air Ltd (T/A Openair) v Opal Telecom Ltd [2009] EWHC 339 (Ch), Ramsay J dismissed the application as having no real prospect of succeeding in establishing any of the "limited" grounds set out in s103.

Bribery allegations have no real prospect of success

Meydan's principal submission was that the award was not valid under UAE law because it resulted from a contract procured by Honeywell's bribery, such that enforcement should be refused under s103(2)(b) because the arbitration agreement was not valid. It alleged that certain fees (which were neither normal nor usual) that had been paid by Honeywell to TAK during the tender process were, in fact, bribes under English law.

In order to establish bribery (by way of the secret commission) under English law, it would need to be shown that the payment was not disclosed to Meydan as the principal. Ramsay J held that, as a senior member of Meydan's staff was made aware of both the relevant payment and the suspicious circumstances of the payment, there was no real prospect of Meydan establishing that the payment was in fact a "secret" payment. Even if that conclusion had not been reached, as the relevant evidence had been available at the time of the arbitration, and not put forward by Meydan, it could not have been relied upon by Meydan in seeking to set aside enforcement of the award. Additionally, due to the principle of separability as set out in the DIAC Rules, Meydan would also have to have shown that, as a matter of UAE law, the arbitration agreement contained within the relevant contract was itself procured by bribery (which was not alleged).

As such, Ramsay J concluded that this argument had no real prospect of succeeding at trial.

Meydan similarly contended that the award had been made in respect of matters not capable of settlement by arbitration, such that enforcement should be refused under s102(3), as issues of forgery, perjury and bribery may not be arbitrated. However, Ramsey J found that there were no prospects of success on these grounds as Meydan had not put any such issues before the arbitral tribunal (although it could have at the time, and had access to the available evidence), and, in any event, that evidence was not so strong that it would have reasonably been decisive at the hearing.

Obiter: even if bribery was proved – no effect on enforcement of award

The judge observed that, even if Meydan's case on bribery did have prospects of success, contracts procured by bribes were not unenforceable in England, but rather were voidable at the innocent party's election, with counter-restitution. Highlighting that public policy should only be invoked in "clear cases", and given the position of English law on point, Ramsay J held that Meydan had no prospects of successfully contending that enforcement of an award should be refused under s103(3) on the basis that it would be contrary to public policy to enforce an award where a contract (containing an arbitration agreement) had been procured by a bribe.

Meydan raised a number of additional grounds on which it submitted the award should not be enforced, none of which found favour with the judge.

COMMENT

A party that fails to raise relevant allegations at the time of the arbitration, including as to matters of bribery or other public policy issues, or that fails to participate in an arbitration, may forego certain procedural protections. The fact that the respondent entity was incorrectly named in the original request for arbitration was not a sufficient reason not to respond to or participate in the arbitration, and the responsibility for the disadvantages that followed from Meydan's non-responsiveness (including its inability to nominate an arbitrator and the addition of additional claims) was placed squarely with Meydan, rather than being viewed as a matter requiring intervention at the enforcement stage.

Though obiter, the judge's comment in this case provide some support for the view that an award arising out of a contract (containing an arbitration agreement) procured by bribery may be enforceable in England without any basis to object to enforcement on public policy grounds. As such, it will be necessary for parties to raise their allegations of bribery at the arbitration hearing and seek the appropriate remedy at that point, rather than waiting until enforcement proceedings are on foot. However, the judgment may be of concern to parties if the substantive law to be applied pursuant to their arbitration agreement does not provide the same level of protection as under the laws of England (pursuant to which contracts proven to be procured by bribery are voidable).

Finally, the fact that this decision was handed down at a summary judgment stage, and, in particular, noting Ramsay J's comments that the court "will generally be able to come to a decision on whether the grounds [under s103] are made out without the necessity for holding a full hearing", emphasises that parties should be able to enforce arbitration awards in England without the need for expensive and drawn-out enforcement proceedings.