Alexander Brothers Ltd (Hong Kong S.A.R) v Alstom Transport SA
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Cockerill |
| Judgment Date | 18 June 2020 |
| Neutral Citation | [2020] EWHC 1584 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2019-000630 |
| Date | 18 June 2020 |
[2020] EWHC 1584 (Comm)
IN THE HIGH COURT OF JUSTICE
OF ENGLAND AND WALES
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Royal Courts of Justice,
Rolls Building
Fetter Lane,
London, EC4A 1NL
Mrs Justice Cockerill DBE
Case No: CL-2019-000630
Christopher Harris Q.C. and Sarah Tulip (instructed by Charles Fussell & Co LLP) for the Claimant
Orlando Gledhill Q.C. (instructed by Enyo LLP) for the Defendants
Hearing dates: 13, 14 May 2020
Draft Judgment sent to parties: 11 June 2020
Approved Judgment
Introduction
This is the application of the Defendants (“Alstom”) to set aside the without notice Order of Teare J enforcing an arbitration award (“the Award”) in favour of the Claimant (“ABL”) on the basis that it was contrary to public policy; alternatively for a trial of the public policy issue.
The Award orders Alstom to make payments under certain consultancy agreements, by which ABL was to and did assist Alstom in obtaining government railway contracts in China.
Alstom relies on two grounds. First, although this was not the major issue in the submissions before me, it submits that there was a failure to make full and frank disclosure on the without notice application.
Secondly, and in reality its primary case, Alstom says that the public policy ground under section 103(3) Arbitration Act 1996 is engaged. In essence, it contends that the underlying consultancy agreements are tainted by illegality in ABL's performance. Alstom places considerable reliance on the fact that enforcement in France has already been refused by the Paris Cour d'Appel, which held in May 2019 that there were “ serious, precise and consistent indicia” that payments made to ABL by Alstom under the consultancy agreements had been used to bribe Chinese government officials and that the sums held to be due under the Award were “ intended to finance or remunerate acts of bribery”.
One central issue before me is the extent to which this argument is available to Alstom in the light of the fact that there is a crossover between the public policy argument and the documents in play and submissions made in the arbitration. ABL contends that the Tribunal had this argument before it and rejected it; and that on the authorities this means that I am bound to reject Alstom's argument.
There is also a dispute as to whether any issue estoppel arises out of the decision of the Cour D'Appel.
The Facts
Background and events to 2009
The First Defendant (“Alstom Transport”) is a company incorporated in France. The Second Defendant (“Alstom Network”) is a company registered in England. Both are wholly-owned subsidiaries of the Alstom group, which has its headquarters in France. The Alstom group, primarily through Alstom Transport, is engaged in the business of the supply of railway locomotives and stock, in many countries worldwide.
ABL is a family run company incorporated in Hong Kong and managed by Ms Guo Qi, a highly qualified former employee of the Alstom Group.
In 2003, Ms Guo Qi was approached by Alstom to assist in the group's negotiations with the Chinese Ministry of Railways. Following completion of “rigorous” and “lengthy” due diligence and approval procedures, ABL and Alstom signed five consultancy agreements, in relation to various railway projects in China. Pursuant to these agreements, ABL was engaged to provide services and assistance in respect of Alstom's tenders for these projects and, if the tenders were successful, to assist in the performance of the resulting projects.
The agreements contained provisions (which varied somewhat between the agreements) for ABL to report to Alstom what work it carried out. Each of the agreements was governed by Swiss law and contained an arbitration clause providing for the settlement of any dispute to be referred to ICC arbitration in Switzerland.
Alstom made full payment to ABL under two of the five consultancy agreements. However, only partial payment was made in respect of the remaining three (“the Agreements”), two of which dated from 2004 and the third of which was entered into in 2009. This left several of ABL's invoices raised under the Agreements unpaid – the total sum in issue being some €2,975,480 plus default interest.
The investigation of Alstom for corruption
Alstom says that the backdrop to this refusal was the criminal investigation and proceedings in the UK and the United States against the Alstom group. The SFO commenced investigations into the Alstom group's activities in 2009. Criminal charges were brought in England against two Alstom group entities in 2014 for offences related to corruption in Tunisia, India, Poland, Hungary and Lithuania. In 2019 Alstom Network was ordered by the English Court to pay £16.4 million in fines and costs in respect of a conspiracy to corrupt in relation to a contract in Tunisia. Some inquiries were made by the English authorities about Alstom's business in China, but no charges were brought in respect of these.
In 2010, the United States Department of Justice started an investigation into possible acts of corruption by consultants employed by 4 entities within the Alstom group. These entities subsequently pleaded guilty in 2014 to acts of corruption. The total fine levied was US$772 million. Again, the fines did not relate to activities in China.
Alstom explains that these criminal investigations caused the Alstom group to adopt a more rigorous approach to the application of its internal ethics and compliance policies. In 2012 and 2013, therefore, the Alstom group instructed its advisers to conduct audits in the United Kingdom to ensure that these policies were being correctly applied. The agreements with ABL were inquired into as part of this process.
I have not been taken to those audits but understand the position to be as follows:
1) The report into the First Audit identified “ several accounting errors and internal control weaknesses”, including that the “ level of documentation is not deemed appropriate;” it also stated that “ no unusual significant transactions were identified and the main cash transactions were reconciled”;
2) The report from the Second Audit was not disclosed by Alstom in the arbitration or in these proceedings. Nor, in either proceedings, did it present evidence from any of those who were involved in the audit. It is to be inferred (as the Tribunal did) that the audit report from the Second Audit contained nothing which would assist Alstom's case that there was bribery.
–2016: The Arbitration and the Award
Nonetheless, Alstom took the view that the proofs of services required under the Agreements were insufficient and therefore suspended all payments to ABL. That suspension gave rise to the arbitration.
Alstom and ABL were therefore parties to a Swiss law-governed and Geneva-seated ICC arbitration commenced by ABL. ABL claimed punitive and compensatory damages in the total amount of €5,475,480. The arbitration was commenced in December 2013. The Tribunal was chaired by Dr Christian W Konrad (with co-arbitrators Dr Willi Diestschi, an experienced Swiss lawyer and Dr Daniel Schimmel, the head of international arbitration and litigation at Foley Hoag New York).
There has been considerable issue before me as to the nature of the defences in the arbitration and I have been taken through the proceedings in as much detail as time has permitted. Both parties said that the nature of the claims in the arbitration was clear – though they then disagreed fundamentally as to the overall nature of the claims, Alstom contending that the claims were fundamentally contractual, and ABL arguing that bribery and corruption was front and centre of the defence. I agree with neither of them.
The position as to the claims in the arbitration was less than clear. Given the importance of this point some detailed explanation is necessary.
The arbitration commenced in December 2013. There was no issue as to jurisdiction. Alstom submitted its Answer to the Request for Arbitration in March 2014. The main feature of this Answer was to request a stay of proceedings pending completion of the criminal investigations. I have not been provided with this document, but it is clear from the Award that it did place concerns about bribery and corruption at the heart of its response.
The essence of its initial case, as recorded by the Tribunal, was that “ [Alstom] could not effect payment … until such payment was officially cleared in particular by the SFO”. It was also said that “ it cannot be excluded that the SFO will subsequently bring corruption and conspiracy charges for project [sic] in China.”
By April 2014 the Tribunal had circulated the draft Procedural Order and draft Terms of Reference. The Terms of Reference defined the issues which the Tribunal understood to be before it. As recorded in the Award they were these:
“i. Can the fact that Respondents are subject to an investigation by the UK Serious Fraud Office influence their payment obligations towards Claimant and, if so, in which way? Is it necessary that payments under the Consultancy Agreements are officially cleared by the Serious Fraud Office? Is Claimant's alleged failure to provide a satisfactory level of information to Respondents in connection with the criminal investigation, and its alleged refusal of a complementary audit, of relevance to Respondents' payment obligations and, if so, in which way?
ii. Is Respondents' internal compliance policy in...
To continue reading
Request your trial
-
The Federal Republic of Nigeria v Process & Industrial Developments Ltd
...of refusing to endorse illegal conduct: Alexander Brothers Limited (Hong Kong SAR) v Alstom Transport SA Alstom Network UK Limited [2020] EWHC 1584 (Comm), 273 With that as background I find persuasive Mr Howard's submission that the fairness factor does have an impact in challenges where ......
-
PAO Tatneft v Ukraine
...preclude an application that a New York award should not be enforced: see Alexander Brothers Ltd v Alstom Transport SA and anor, [2020] EWHC 1584 (Comm). Mr Edey did not argue 63 Secondly, Tatneft introduced its issue estoppel argument in the course of the hearing before me (which overran ......
-
Anthony Douglas King v Barry Stiefel
...been advanced at the hearing); ii) The evidence was not previously available or reasonably obtainable. (see Alexander Bros v Alstom [2020] EWHC 1584 (Comm) [2021] 1 Lloyd's Rep. 79 at 282 Thus in the latter case I concluded that allegations of illegality even if endorsed by a foreign cour......
-
Payward, Inc. v Maxim Chechetkin
...was said to mean that the award was not contrary to public policy. 94 In Alexander Bros Ltd (Hong Kong SAR) v Alstom Transport SA [2020] EWHC 1584 (Comm), Cockerill J dealt with a case of alleged illegality (bribery). She reviewed a considerable number of cases, holding that, if the arbitr......
-
Court Refuses To Enforce Foreign Arbitration Award Against Cryptocurrency Exchange User
...on its own jurisdiction. The court distinguished the approach set out in Alexander Bros Ltd (Hong Kong SAR) v Alstom Transport SA [2020] EWHC 1584 (Comm) which prevents enforcing courts from reopening arbitrators' It did so on the basis that the tribunal in Alexander Bros had the jurisdicti......