Judge gavel on law books, wooden desk

Betamax vs STC saga: the Mauritius Supreme Court was in error reviewing the award

Introduction

On 31 May 2019, the Supreme Court of Mauritius issued a landmark decision in the case of the State Trading Corporation (STC) v. Betamax Ltd. The Judges ruled in the favour of STC and set aside an international arbitral award rendered under the Arbitration Rules of the Singapore International Arbitration Centre (which sentenced the STC to pay of over 115 million US Dollars to Betamax).

This is the first time an award had been successfully challenged under the Mauritian International Arbitration Act 2008. This case already gave rise to many debates[1] relevant to anyone interested in the evolution of trade and arbitration law in Mauritius.

The Betamax case challenged the extent to which a court can set aside or refuse to enforce an international arbitration award on the basis that it contradicts with the country’s public policy and was granted permission to appeal to the Judicial Committee of the Privy Council on 24 June 2019.

Three issues had to be solved:

  • (the main issue) was the Supreme Court entitled to review the arbitrator’s decision that the COA was not in breach of Mauritian public procurement laws;
  • if the Supreme Court was entitled, was the COA illegal; and
  • if the COA was illegal, was the Award in conflict with the public policy of Mauritius?

On 14 June 2021, the Judicial Committee of the Privy Council considered that 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” and consequently allowed the appeal set aside the Order of the Supreme Court and allowed the application of Betamax to enforce the award.

Considering the interests, legal costs, and the sharp depreciation of the Mauritian rupee since the day of the arbitration award, Mauritius will have to pay more than one extra billion rupees in addition to the Rs 4 697 138 359 (USD 115 267 199) of damages awarded to Betamax. at today’s exchange rate (in addition to the granted compensation), at a time when Mauritius is already facing a financial challenge after more than one year of closing of its borders.

  1. Background

The STC is a corporate body, set up under the State Trading Corporation Act 1982, which caters for the importation of essential commodities, including petroleum products. Betamax Ltd is a joint venture vehicle between a Mauritian family and a Singaporean company an entity belonging to a group of about 20 companies owned by the Bhunjun family who deals with property development and construction.

On 27 November 2009, both Parties entered into a Contract of Affreightment (CoA), concluded for a duration of 15 years. Under the CoA, Betamax was required to procure, own, operate and maintain a vessel called the Red Eagle and make available to STC its full freight capacity for the transportation of the whole Mauritian oil imports, from Mangalore, India, to Port Louis, Mauritius. As consideration for the services provided by Betamax, STC had to pay over USD 17.6 million, to be increased annually by a percentage which would gradually escalate through the 15-year term.

On 30 January 2015, a new Government in Mauritius which had come to power in December 2014, terminated the CoA by Cabinet decision, considering that there had been serious breaches of the legal procurement process (held in Public Procurement Act 2006, “the PPA” and the Public Procurement Regulations 2008 “the PPR”, which were both amended in 2009).

Betamax construed this as unlawful repudiation, by STC, of its contractual obligations, which was the origin of initiation of an arbitral proceeding by Betamax. One of the main issues was to determine whether or not the PPA and PPR as they were in force on 27 November 2009 applied to the COA: STC contended that they did (thus requiring approval by the Central Procurement Board which was not given); Betamax contended that they did not.

  1. Arbitral award

A sole arbitrator was appointed by the parties to settle their dispute and arbitration was held under the 2013 Rules of SIAC.

Firstly, he declared himself competent to settle the issue. He was not convinced by STC’s argument that the fact that he was called upon to settle an issue involving the application of public order rules was an impediment to his jurisdictional powers.

Secondly, regarding the merits, the Arbitrator accepted the argument of Betamax that the CoA was not governed by the PPA and PPR, as it benefited from an exemption under the Public Procurement (Amendment N°2) Regulations 2009 (The PP Regulations 2009), and was therefore neither illegal nor invalid.

He judged that there was no “impossibility of performance” of the CoA by STC and that its termination was thus neither irresistible nor unforeseeable as it was not compelled to follow the direction of the Mauritian Government.

On 5 June 2017, the Arbitrator therefore awarded Betamax substantial damages in the sum of USD 115,267,199 as well as legal costs and costs of the arbitration. Two days later, the counsels of Betamax obtained an ex parte provisional award from the Supreme Court of Mauritius for the recognition and enforcement of the award.

STC appealed to the Supreme Court and made two court applications in Mauritius, one to set aside the provisional registration of the award and the second to set aside the final award.

  1. Supreme Court judgement contradicted by the Law Lords

STC applied to have the award set aside pursuant to Section 39 of the Mauritian International Arbitration Act 2008 (the IAA)[2], as amended by the International Arbitration (Miscellaneous Provisions) Act 2003. It raised three separate grounds for both the appeal against the provisional registration and the motion to set aside the final award:

  • 1) that the subject matter of the dispute [was] not capable of settlement by arbitration under Mauritius Law (Section 39(2)(b)(i) of the IAA);
  • 2) that the arbitration agreement was not valid under Mauritian Law (Section 39 (2)(a)(i) of the IAA);
  • 3) That the award [was] in conflict with the public policy of Mauritius (Section 39 (2)(b)(ii) of the IAA).

3.1. Peculiar calculation by the Supreme Court of the applicable deadline to set aside a provisional order enforcing an arbitral award

Before turning to the merits, the Supreme Court had to answer a preliminary issue raised by Betamax that the STC had exceeded the 14 days deadline stipulated under Rule 15(7)(a) of the Supreme Court (International Arbitration Claims) Rules 2013 to submit its application to set aside the provisional order.

The Full Bench decided to set aside this preliminary issue and that is probably the first interesting outcome of this decision: a peculiar clarification of the calculation of the time-period to file such applications under the Supreme Court Rules.

“[…] the provisional order was made and served on STC on 7 September 2017. On 19 September 2017, STC lodged its application to set aside the provisional order with the Court’s registry. On 20 September 2017, the Chief Justice issued a circular ordering that the case be mentioned before the Court on 22 September 2017, on which date the STC made its motion to set aside the provisional order with the Court’s registry.

 A literal reading of Rule 15(7) reasonably led Counsel for Betamax to point out that “the time limit for making the application would expire on 21 September 2017 and [that] the application to set aside the provisional order was accordingly time-barred when it was made beyond the 14-day time limit on 22 September”.

The Court found itself “unable to construe the word “apply” in Rule 15(7)(a) as importing a requirement that an application to set aside a provisional order would be considered valid and effective only when it is made on open Court. Hence, it ruled that “the effective date of such an application would be the date on which it is officially lodged with the Court’s registry”.

This seems perfectly reasonable, as the Court’s decision fosters efficiency and practicality over excessive exegesis. However, one could wish that the Court stopped there and did not go any further into its explanations. Indeed, animated by a pedagogical spirit, which can be found in the whole judgement, it goes beyond the need for clarification and starts a thorough justification of its ruling:

Independently of the above, however, we consider that even if it were to be construed that the application was made outside the time limit on 22 September 2017, the Respondent should still not be precluded from pursuing its application for the following reasons: […]”.

Three out of the four reasons the Court gives to explain its reasoning appear surprising.

Firstly, the Court points out that “the delay would be minimal as the time limit would have been exceeded by one day only”. What about two days? Or three? Would the Court apply this reasoning to any foreclosure timeframe provided by law?

Secondly, the Court holds that “there is no indication of any consequential prejudice to Betamax which arises as a result of the matter being called before Court 1 day later”. By demanding that the party invoking a timeout under Rule 15(7)(a) proves grievance, doesn’t the Court significantly extend the exigency that it had itself formulated[3]?

Finally, according to the High Judges, “There is nothing in the Rules which indicates that (i) compliance with the time limit of 14 days must be construed as being imperative or obligatory; and (ii) any failure to comply with the time limit is fatal”.

Reading this fourth point of justification, it is now very unclear why the 14-day time limit was prescribed in the first place. One could hardly think that it was meant as a purely indicative timeframe. Should it be construed as deprived of any coercivity, no timeframe, other than common prescription rules, would limit the possibility for unsuccessful parties to arbitration to contest the provisional order for enforcement of the award. Besides, the inadmissibility of applications being implied wherever conditions for admission are required, one could wonder why the High Judges looked in vain for an explicit sanction and concluded that “in the circumstances, the mandatory application of a 14-day time limit would not be warranted”.

3.2. The scope of the review

  • The Supreme Court challenged the merits of the award

Counsel for the applicant invoked before the Supreme Court, the IAA in conjunction with articles 2060 and 2061 of the Civil Code, which state that for all matters of public order arbitration clauses are not valid and that such clauses are null, except if provided otherwise by law. The invocation of these old provisions was not necessarily relevant[4], as they do not apply to international arbitration anymore due to the principle of Disconnection of international arbitration from domestic arbitration and regime[5].

According to Counsel for STC, the arbitration agreement was not valid under Mauritian Law because the CoA was in itself unlawful having been entered into in breach of the PPA. Therefore, the arbitration clause itself could not be valid as it necessarily did not comply with the requirements set up in the relevant procurement regulations.

Counsel for Betamax contested the STC’s argument by explaining that the Court, upon receiving an application to set aside an award, is only allowed to exercise a prima facie review of the award in terms of its compliance with international public policy and is not allowed to judge the case in law a second time.

  • …. But was overturned by the Privy Council

For the Law Lords, the Supreme Court missed the first step of the reasoning, as it should have first analysed whether or not it could challenge the award and not look at the merits to ascertain if they comply with public policy:

“The Supreme Court did not approach the application under section 39(2)(b)(ii) of the International Arbitration Act by first considering whether it was permissible to make such a challenge. It first determined the issue of interpretation and held that, by entering into the COA, the parties acted in breach of the PP Act and the COA was illegal in consequence. Then it considered whether the breach of the PP Act was such that it would be contrary to public policy to enforce the Award.”

The Law Lords further stated that:

« as the Arbitrator had determined that the COA was exempted and there was no illegality, it was not open to the Supreme Court to determine the question whether the Award conflicted with the public policy of Mauritius under section 39(2)(b)(ii) of the International Arbitration; that issue could not arise before the Supreme Court as it had finally been determined in the arbitration that there was no illegality under the legislative provisions of the PP Act and PP Regulations. »

The Privy Council judgement provides for a precise and detailed analysis of the ambit of section 39(2)(b)(ii) of the International Arbitration Act. The Law Lords considered that STC’s reasoning will be tantamount to opening up Pandora’s box and contrary to the final and binding effect of an award, since it would strikingly widen the scope of section 39(2)(b)(ii) based on alleged illegality:

As the alleged illegality of a contract not infrequently arises in relation to the interpretation of regulations or other legislative provisions said to be applicable to the contract, the ambit of the court’s intervention would be increased significantly by this route to a review of an award under section 39(2)(b)(ii) of the International Arbitration Act.

This would be inconsistent with the purpose of the International Arbitration Act and the Model Law.”

The Law Lords even contemplated the potentiality of exceptional circumstances before considering that those would be very unlikely[6]. They conclude their judgement on the first by considering:

that the Supreme Court was in error in reviewing the decision of the Arbitrator that the COA was exempt from the provisions of the PP Act and PP Regulations. That decision was final and binding on the parties and therefore no issue arose under section 39(2)(b)(ii) of the International Arbitration Act as to whether the Award was in conflict with the public policy of Mauritius.”

3.3. The legality of the CoA: unravelling the spaghetti bowl

 Following the Privy Council’s answer on the first issue, the issue of the legality of the CoA does not even arise. The Law Lords nevertheless expressed their reasoning for the sake of clarity and overturned the Supreme Court once again by judging that the arbitrator rightfully considered that the COA was exempted from the PPA and PPR and was therefore not illegal.

  • The Parties’ conflict of interpretations

Betamax’s argument, which had convinced the arbitrator, was that, at time of conclusion, the CoA actually fell in the category of contracts exempted from the PPA obligations through the PP Regulations 2009. Indeed, Section 2 of the PPA defines the expression “public body” as not including “exempt organisations”. To these latter, the Act does not apply, allowing them to pass contracts freely, without prior scrutiny and assent of the Central Procurement Board. Regulation 3 of the PP Regulations 2009 defined “exempt organisations” as follows: “a public body which is excluded from the application of the Act in relation to contracts referred to in the First Schedule”.

The First Schedule of the PPA designated specifically the STC, in respect of contracts relating to “goods purchased for resale, including services incidental to the purchase or distribution of such goods”.

According to Betamax, the CoA fell into that category. Indeed, in its view, the fact that “it was primarily a contract for the provision of freight services and that it also involved the acquisition, construction, financing, management and operation of [a] vessel did not mean that it was not a contract for services incidental to the purchase or distribution of goods purchased for resale”.

According to STC however, the exemption would apply only to a contract which essential subject matter was the purchase of goods intended for resale. STC never bought any goods for resale from Betamax. The primary aim of the CoA was to organize the acquisition, construction, financing, management and operation of a tanker in order to transport petroleum products. Counsel for STC also pleaded for a restrictive lecture of the exemptions, for the PPA is an important piece of legislation aimed at the protection of public interest. Finally, STC invoked Regulation 2A of the PP Regulations 2009, which aims at insuring that the exemptions do not, in any way, apply to some specific expensive major contracts, regarded as particularly decisive for public interests.

In the end, the main question that the Judges had to answer was the determination of what set of Regulations applied:

Is it the PP Regulations 2009, by virtue of which the CoA may be exempt from the PPA and the procurement process prescribed under the PPA? Or, have the PP Regulations 2009 themselves been ousted by their Regulation 2A as a result of which it is the PPA which would be applicable to the CoA?

  • The Supreme Court ruling: the PPA applied to the CoA

It is obvious that the debate between the litigants brought into light the difficult interpretation of a somewhat scattered set of regulations which may seem contradictory, or, at least, easily misleading.  Accordingly, the High Judges took great care in drafting a thorough judgement which unravels this “spaghetti bowl”[7] in a notably pedagogical way.

Firstly, the Court, after reviewing all the legislative changes which impacted the PPA, concludes that, when the CoA was awarded, “STC was bound as a public body to act in conformity with the PPA in respect of” contracts relative to goods, civil engineering works and capital goods, consultancy services and other services which amounted to over Rs 100 million.

Secondly, after reviewing the legislative changes which impacted the Public Procurement Regulations 2008 (which holds the exemptions), it recalled that, the specific Regulation 2A, held in the PP Regulations 2009, retained the application of the PPA, hence against the benefit of the exemptions, with respect to certain types of contracts. The sole purpose of Regulation 2A is to precise the scope of the exemptions and to exclude certain types of their benefit. Regulation 2A indeed states that:

noting in these regulations shall be construed as excluding the application of the Act to a public body referred to in the First Schedule to these regulations and the Schedule to the act in respect of a procurement contract to which the public body intends to be a party and which is specified in column 2 of the Schedule to the Act”.

The column two of the Schedule so designated by Regulation 2A holds precisely the contracts, awarded by the STC in relation to “Goods, Civil Engineering Works & Capital Goods, Consultancy Services [and] other services” which amount to over Rs 10 million. To these contracts, thus, the PPA and its procurement procedure fully applied at the time of conclusion of the CoA.

The Court dived into the regulatory definitions of “goods” and “other services”. According to these definitions, “goods” encompasses “objects of every kind and description, including commodities, raw material, manufactured products and equipment […] as well as services incidental to the supply of the goods such as [non-exhaustively according to the judges] freight and insurance”. This extremely broad regulatory definition led the Judges to conclude that “the subject matter of the CoA which is essentially in respect of freight as a service incidental to the supply of petroleum products therefore falls directly and squarely within the definition of goods under the PPA”. And further “that should have been enough to bring the CoA within the ambit of the PPA and consequently subject the CoA to the legal requirements prescribed under the PPA for the award of such a contract”.

The Court then went on explaining how the CoA, in any case, also falls into the regulatory definition of “other services”, mentioned in column 2.

The technique the Court had recourse to could be described as wide-net fishing: it relies on the broad regulatory definitions of the categories of contracts governed by the PPA to establish whether the contract, at least for one of its elements, brings it within the ambit of the PPA.

In other words, the definition of “goods” and “other services”, which are both listed under column 2 of the schedule to the PP, would serve to capture a contract for “goods” as well as for any services, other than consultancy services, whether they are incidental to the supply of the goods or not. The only condition being that the value of the contract must exceed 100 million rupees in respect of either “goods” or “other services” respectively.

Having concluded that the PPA applied to the CoA, the Court judged, without difficulties, that “it can hardly be disputed that the CoA failed to comply with the requirements of the PPA”, as it was a major contract, which fell into the category of contracts excluded from exemptions, to which the CoA fully applied, but which nonetheless was not awarded pursuant to the mandatory procurement process nor by the Central Procurement Board. Under the PPA, both the public body and the private company willing to contract are strictly forbidden to do so outside of the PPA framework. Therefore, “The CoA was to all intents and purposes a contract which had been illegally awarded in breach of the PPA”.

  • The contrary conclusion of the Privy Council

After widely exposing and detailing the same legal corpus, the Law Lords considered that the High Judges could not possibly be right, as their reasoning would give effect to contradictory provisions annihilating their effects within the same legal corpus:

The Supreme Court’s view, as explained above, was that as column 2 of Part 5 of the Schedule to the PP Act (as amended) set out in respect of STC contracts for goods and other services, Regulation 2A operated to exclude the COA from exemption. As the Supreme Court accepted, this interpretation of Regulation 2A largely rendered the exemptions provided for in the other amendments meaningless or, as the Supreme Court pithily expressed it in the passage quoted at para 75 above, “annihilated” their effect.

This cannot be the correct interpretation as, on this basis, the PP Regulations 2009 would have contained provisions that were incompatible with each other. Moreover, STC’s more nuanced argument that the provisions are not incompatible with each other makes little sense for two reasons.”

Regarding the issue of whether or not the COA was a contract for “Goods purchased for resale, including services incidental to the purchase or distribution of such goods” as set out in the Schedule to the PP Regulations 2009, the Law Lords considered that:

“What is required is that the service was incidental to the goods purchased for resale; it is not required that the service is incidental to the specific contract under which goods were purchased for resale. As STC was purchasing petroleum for resale and as the COA was a contract for the supply of freight incidental to that purchase for resale, it was within the exemption provided for in the Schedule to the PP Regulations 2009.”

Once again, the Law Lords confirmed the conclusion reached by the arbitrator in the award regarding the legality of the CoA.

3.4. Which Public policy would be considered?

Considering their answers to the first two issues, the Law Lords declined any comments on the issue of public policy, considering that:

Considerations in relation to the scope and extent of public policy in relation to an illegal contract are best considered in circumstances where the illegality is established and its seriousness can be judged in that context.”

We will nonetheless expose below the argumentation raised by the parties in Supreme Court.

The STC argued that the PPA was an integrant part of Mauritian Public Order and that the enforcement of the award, which granted Betamax reparation for the breach of a contract concluded in violation of these Regulations, would therefore violate public order.

According to Betamax, even if the PPA applies and if “it is breached, it is the international public policy of Mauritius and not its domestic public policy which should be considered and it has not been established that there is any such breach”; “In so far as there are competing public policy considerations, the public policy of promoting Mauritius as a jurisdiction of choice in the field of International Arbitration should prevail.

Now, what does such a breach of the public procurement regulations imply for international arbitration?

The third ground for the STC’s applications was that the arbitral award needed to be set aside because enforcing it would conflict with Mauritius public policy. The success of the application therefore depended largely on the admission, by the Court, that the PPA formed an integrant part of the public policy of Mauritius.

Relying on foreign case-law, Betamax raised the interesting argument that “the prevalent trend in international arbitration has developed a very restrictive approach to public policy control”. It therefore pleaded that, should the Court consider that the PPA applied and had been breached, the enforcement of the arbitral award would still not violate Mauritius public order as the PPA was merely protecting economic interests, and could not be considered as part of international public order.

Henceforth, at the centre of the case was the fundamental question of which public policy should the Court consider: should it be the – narrower – international conception of public policy; or should it be the – wider – national conception of Mauritian public policy?

  • International public policy or Mauritian public policy?

To answer this question, the High Judges bore the burden to review extensively the state of case-law in other important jurisdictions for international arbitration: France; the USA; Switzerland; Germany; Canada; India; and Hungary. The reason why they underwent such a comparative review, apart from the fact that Counsels were pleading for completely different understandings of public policy, is simply that the Betamax v. STC case is indeed and international arbitration case. The judgement once rendered would thus have fitted into a larger context of international arbitration jurisprudence, where it is common practice for jurisdictions to refer to other national case laws to foster legal certainty in the spirit of comity of nations[8].

At the start of its review, the Supreme Court agreed that “the laws of many
States, reflecting the policy of the New York Convention
[9], have limited provisions for challenging an arbitral award and have what is generally referred to as “a pro-enforcement bias””.

Indeed, nowadays, many countries tend to prioritize international public policy[10]. But, in contrast, Mauritius, in its enactment of the UNCITRAL Model Law[11], via the IAA, made a deliberate choice not to refer to international public policy, and instead expressly chose its own national public policy[12]. “It is clear therefore that the public policy is the public policy of the enforcing State”.

The Court buttresses its point quoting its Cruz City[13] prior decision:

very importantly, by virtue of the public policy exception provided in the law governing arbitration and enforcement of the award it is obvious that this Court has the power to exercise ultimate control over the arbitral process where it is considered to be against the public policy of this country”.

This may seem startling, as Counsel for Betamax had already sought reliance on the wording of this precise case, and in particular the finding that “it is public policy in the international context that will matter and not the public policy that would normally apply when challenging a domestic award”. In other words, the Court here invoked Cruz City, a bold case in favour of public policy construed in an international context, as support for its argument that it is national public policy, strictly understood, which applies.

Did the Court just turn around its case-law regarding the appropriate interpretation of public policy? Did it really abandon its differentiated approach of public policy according to a national or international context? In other words, did it overturn Cruz City?

The most likely answer is that it did not. It would have been quite paradoxical for the Court to carefully review the relatively homogeneous state of the law in seven different countries before completely disregarding it. At the contrary, STC v. Betamax, tries to reconcile the choice of the legislator for Mauritian public policy with the narrower international understanding of this notion. It does so by having recourse to the concept of “Fundamental legal order”.

  • The protection of the “Fundamental legal order” of Mauritius

In line with the foreign case law reviewed, the Court observes that:

the narrower category of international public policy as opposed to purely domestic policy is confined to the violation of fundamental concepts of the legal order in the State concerned. Public policy as a ground for setting aside an international arbitration award has been generally limited to cases of clear violations of mandatory legal rules which are fundamental to the legal order of the State”.

The Court then clearly and quite decisively affirmed the criterion to be met for a conflict with Mauritius public policy to be sanctioned under the IAA:

the threshold is quite high; it should be the breach of fundamental legal principle, a breach which disregards the essential and broadly recognised values which form par of the basis of the national legal order, and a departure from which will be incompatible with the State’s legal and economic system”.

Following STC v. Betamax, the enforcement of the award, in order for the award to be set aside, should reach and infringe the very core of a “fundamental legal principle” which enshrines decisive and shared values.

Effectively, with STC v. Betamax, the PPA was fully recognized as “reflect[ing] the public policy of Mauritius in prescribing and ensuring high standards of integrity, free and open competition, and protection from fraudulent and corrupt practices in the award of major public contracts with a view to securing the efficient use of the public funds of Mauritius”.

Furthermore, “the mandatory provisions of the PPA, which impose the application of the PPA and the procurement process prescribed by the PPA in respect of the CoA, constitute fundamental pillars of good governance in Mauritius and are thus undoubtedly part of the public policy of Mauritius within the meaning of Section 39 (2) (ii) of the IAA”. Finally, “It is beyond dispute, the Court concludes, that such a public procurement legislation constitutes one of the vital pillars of good governance and forms an integral part of the fundamental legal order of Mauritius”.

Again, one can see the continuity between Cruz City and STC v. Betamax precisely in the use of the words “broadly recognised” – “broadly” being a reference to the international context –, and “within the meaning of Section 39 (2) (ii) of the IAA”, meaning which was explained in Cruz City.

  1. Conclusion

This case is the first by which an international arbitration award was (temporarily) set aside under the IAA by a national Court (before being overturned).

The Supreme Court judgment was particularly protective of Mauritius public interests regarding major contracts granted in an alleged unlawful way to private companies. It showed again great interest in foreign case-law and quotes two relevant decisions: the AJU v. AJT case of the Singapore Court of Appeal and Soleimany v Soleimany of the English Court of Appeal. In the latter, the English court of Appeal had decided in unequivocal terms that:

the court is […] concerned to preserve the integrity of its process, and to see that it is not abused. The parties cannot override that concern by private agreement. They cannot by procuring an arbitration conceal that they, or rather one of them, is seeking to enforce an illegal contract”.

The Supreme Court had concluded quite eloquently that: “Public policy will not allow it”. This firm refusal to welcome any arbitral award, rendered on the basis of an illegal underlying contract was commendable, although reminded in a crystal-clear way by the Judicial Committee of the Privy Council: “the guise of public policy, [cannot] reopen issues relating to the meaning and effect of the contract or whether it complies with a regulatory or legislative scheme”.

It is well established in general international arbitration law that the judges of exequatur should confine their judgement to a prima facie analysis of the arbitration award. The proper extent of their analysis should be the following: does, at first sight, the recognition and/or enforcement of the award conflict with public policy? The scope of the control should never reach the merits of the case and in no way should the judge substitute him/herself for the arbitrator(s), which the Privy Council reminded clearly.

The pedagogical purpose adopted by the Privy Council in answering the issue of the legality of the CoA brings a useful clarification on the applicable regulatory framework for the procurement of major contracts, but some uncertainties remain on the non-addressed issues, being over the procedural timeframe for applying to set aside provisional orders of enforcement in Mauritius or the scope of adequate judicial scrutiny on national public policy enforcement.

The Law Lords’ judgement will undoubtedly be warmly welcomed by the international arbitration community.

PLCJ Team – 18th June 2021

[1] It was especially discussed during the Mauritius Arbitration Week of 10-14 June 2019 to which PLCJ actively participated.

[2]This act is based on the UNCITRAL Model Law as amended in 2006 […], and was the outcome of three years of efforts on the part of the Government of Mauritius, assisted in particular by the Secretariats of UNCITRAL and of the Permanent Court of Arbitration at The Hague. S. A. H. MOOLAN, A Brief Introduction to the Mauritian International Arbitration Act 2008.

[3] The Supreme Court (International Arbitration Claims) Rules 2013 were “made by the Chief Justice, after consultation with the Rules Committee and the Judges, under Section 198 of the Courts Act”.

[4] Counsel for Betamax rightly pointed out that, by virtue of Section 2C. of the IAA, the application of international arbitration provisions was completely disconnected from that of domestic arbitration regime.

[5] Principle precisely established in Section 2C.(1) and Section 2C.(2)(a) of the IAA.

[6] “There may be some exceptional cases, where the court under the Model Law provision may be entitled to review the decision on legality, but it is not easy to think of such a case arising in practice. In the light of experience, it would not be helpful to seek in this appeal to go further by delineating possible circumstances or making observations about them. There would be a risk that such observations could be deployed in the cases which are in practice likely to arise in misguided attempts to expand the ambit of intervention under section 39(2)(b)(ii) of the International Arbitration Act / article 34 of the Model Law.”

[7] Expression commonly used, especially in international commercial law, to describe the entanglement of potentially contradictory normative provisions.

[8]Principle, in the name of which courts would fine-tune the reach of their national substantial law and jurisdictional rules, refrain from questioning the lawfulness of another sovereign state’s acts, and restrict themselves from issuing such judgments and orders when to do so would amount to an unjustifiable interference”. T. SCHULTZ & N. RIDI, Comity and International Courts and Tribunals, Cornel International Law Journal, Vol. 50, P.578.

[9] The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly refered to as the 1958 New York Convention is a United Nations Convention, broadly contracted, which aims at the facilitation of enforcement of foreign arbitral awards.

[10] For instance, French international arbitration law is often described as manifesting a strong favor arbitrandum: Article 1514 of the French Civil Procedure Code, along with Article 1520 (5) state that an international arbitration award can be set aside in France “if the recognition or enforcement of the award is contrary to international public policy”.

[11] The United Nation Commission on International Trade Law Model Law on International Commercial Arbitration, adopted on 21 June 1985, and amended in 2006, is, as its name suggest, a model of legislative norms that States can adopt by incorporating them in their domestic law, with more or less flexibility. This is what Mauritius did, with the IAA in 2008.

[12]  The Mauritian International Arbitration Act 2008, Section 39. (2) “An arbitral award may be set aside by the Supreme Court where- (b) the Court finds that (ii) the award is in conflict with the public policy of Mauritius;

[13] Supreme Court of Mauritius, Cruz City 1 Mauritius Holdings v Unitech Ltd & Anor [2014 SCJ 100]

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