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Finality v anti-bribery: Public policy and the enforcement of arbitral awards in England

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United Kingdom

In Alexander Brothers Limited v Alstom following detailed analysis of the applicable legal principles and relevant authorities, the English High Court dismissed an application to resist enforcement of an arbitral award on the basis that it was contrary to public policy due to alleged bribery in the performance of the underlying contract.
  Background

Alexander Brothers Limited (ABL) and Alstom (Alexander Brothers Limited v Alstom,[1]) entered into various consultancy agreements, pursuant to which ABL was to assist Alstom in obtaining government railway contracts in China.

Alstom failed to pay the full amount due to ABL under the agreements. In accordance with the arbitration clause in the agreements (which were governed by Swiss law), ABL commenced ICC arbitration seated in Switzerland to recover sums owing under the agreements. In its award, the tribunal found for ABL and ordered Alstom to pay.

Alstom did not comply with the award and brought an unsuccessful application to have the award set aside in Switzerland (as the seat of the arbitration).

In late 2016, ABL obtained an order for enforcement of the award in France. However, Alstom challenged the decision and, in May 2019, the Paris Court of Appeal refused permission to enforce on public policy grounds, finding that there were "serious, precise and consistent indicia that the sums Alstom paid to ABL financed and remunerated the bribery of public officials". That judgment is currently under appeal to the French Court of Cassation.

In October 2019, ABL was granted permission by the English High Court to enforce the award in England. Alstom applied to have the English enforcement order set aside, principally on the basis that enforcement would be contrary to public policy under s 103(3) Arbitration Act 1996.

As it had in the French courts, Alstom argued that there were strong indications that ABL had – without Alstom's knowledge – engaged in bribery in its performance of the underlying consultancy agreements and that the award ordering it to make payment under such agreements accordingly should not be enforced as a matter of public policy.

The judgment

The Court, via Cockerill, J., dismissed Alstom's application.

A key issue was whether Alstom was precluded from raising the bribery allegations at this stage of the proceedings, either on the basis that:

a)           Those allegations already had been determined by the arbitral tribunal; or
b)            On the basis that they were not before the tribunal for determination but could and should have been.

As to the first point, having considered the authorities applicable to challenges under s 103(3), and specifically to cases involving bribery, in some detail, the Court held that "where the arbitration tribunal has jurisdiction to determine the relevant issue of illegality and has determined that there was no illegality on the facts, there is very nearly no scope for this Court to re-open the issue of illegality" and that the Court will not do so other than "in exceptional circumstances".

Accordingly, it was first necessary to determine whether the arbitral tribunal had determined the bribery issue "on the facts".

The Court held that it had not. Despite the issue of whether Alstom was under an obligation to pay ABL's invoices "if there is evidence of or arguments for corruption" being set out in the terms of reference for the arbitration, the Court found that although "bribery in a broad sense was in issue […] the issue was not clearly the same" and that the tribunal did not give detailed consideration to the evidence relating to bribery.

In making this finding, the Judge distinguished the Court of Appeal's judgment in Westacre Investments Inc. v Jugoimport-SPDR Holding Co. Ltd. and Ors (which involved similar facts but in which the majority of the Court concluded that the same issue had been "made, entertained and rejected" by the arbitral tribunal and accordingly could not be revisited at the enforcement stage).

Here, the Court found that, unlike in Westacre, Alstom had not made a positive allegation of bribery on the part of ABL in the arbitration; rather, it had focused its arguments on whether ABL had complied with certain ethics and compliance obligations under the consultancy agreements. On that basis, this was not a case where the issue had already been determined by the arbitral tribunal.

However, the Court concluded that on the second point, Alstom was nonetheless barred from raising the issue at the enforcement stage because it "could and should" have made its positive case of bribery in the contractually agreed forum (i.e. the arbitration) but chose not to do so. Alstom was not relying on any new evidence that had emerged after the arbitration concluded and had offered no adequate reason for its failure to make the allegation in those proceedings.

While the Court acknowledged that it could in theory be relevant that a point was not run in the original proceedings because there was "genuinely no point" in doing so (e.g. due to a particularly high burden of proof under the relevant governing law), it found that Alstom had not put forward sufficient evidence of the standard of proof for bribery under Swiss law or the extent of its divergence from the English law test to establish that this was such a case.

The Court also did not accept that there were any overriding special circumstances based on the nature of the alleged wrongdoing (i.e. bribery in the performance of the underlying contract, as opposed to, e.g., a contract with bribery as its object) that would allow the Court to consider the allegation when it had deliberately not been made in the arbitration.

Further, although the facts were not primarily in issue, the Judge commented that the evidence of bribery relied on was not particularly strong and was based entirely on "suspicions and inferences".

The Court also dismissed Alstom's arguments based on EU law on public policy, issue estoppel (based on the findings of the Paris Court of Appeal) and alleged breach of the duty of full and frank disclosure by ABL when making its without notice application to enforce the award.

Comment

Although ultimately the case was decided on its facts, this judgment provides a useful summary of the English law approach to the tension between, on the one hand, the public interest in enforcing arbitral awards and ensuring the finality of proceedings and, on the other, the public interest in preventing the enforcement of illegal contracts and fighting corruption in international commerce.

It is interesting to note that the Judge accepted Alstom's argument that, in the 20 years or so since some of the leading cases in this area (including Westacre) were decided, public attitudes to bribery and corruption have changed significantly such that the Court "might now in some cases draw the line in a slightly different place".

Although the Court was not satisfied that this was such a case, this comment underscores the possibility that – on different facts - changing public attitudes could require reconsideration of how the principles relevant to balancing those two important public interests are applied.

This article was authored by Emily Wyse Jackson, a senior associate in Fieldfisher's dispute resolution team in London. For more information on our arbitration expertise, please visit the relevant pages on the Fieldfisher website.
 
[1]                 Alexander Brothers Limited (Hong Kong S.A.R) v (1) Alstom Transport SA (2) Alstom Network UK Limited [2020] EWHC 1584 (Comm).

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