Discontinuing enforcement proceedings in the context of fraud allegations: when can the notice of discontinuance be set aside?
07 September 2018
In Stati and others v Kazakhstan, having obtained a favourable award in a Swedish-seated arbitration against Kazakhstan (K), the claimants (S) sought to enforce in a number of jurisdictions, including England. S successfully applied for an order to enforce the award in England and K then sought to set the order aside, alleging that the award had been obtained by fraud. Knowles J, sitting at first instance, directed that the fraud issue should be tried as an issue in the enforcement proceedings.
- Did K’s fraud claim stand independent of the enforcement proceedings, so that the notice of discontinuance does not apply to the fraud claim?
- If not, what was the proper scope of the power under CPR 38.4 to set aside a notice of discontinuance?
- Was Knowles J right to hold that K had a legitimate interest in pursuing its fraud allegations in the English court, even though the award could not be enforced here, on account of undertakings offered by the claimants, and, if he was wrong, did that provide grounds for setting aside his order?
- Was there a public interest in determining at trial whether S had “committed a fraud on the English courts” in seeking permission to enforce an award that, K said, was obtained by fraud?
- The Court of Appeal had little difficulty in agreeing with Knowles J that the fraud claim was a defence to the enforcement action and not an independent claim. It also clarified that the discretion to set aside a notice of discontinuance was not confined to cases of abuse of process or collateral tactical advantage. The Court of Appeal also dismissed K’s argument that, by applying for and obtaining the order for enforcement supposedly tainted by fraud, S had committed a fraud on the English courts.