Deutsche Schachtbau-und Tiefbohrgesellschaft m.b.H. v R'as al-Khaimah National Oil Company
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE WOOLF,LORD JUSTICE RUSSELL,LORD JUSTICE LLOYD,LORD JUSTICE NOURSE |
| Judgment Date | 29 October 1987 |
| Neutral Citation | [1987] EWCA Civ J1029-5 |
| Judgment citation (vLex) | [1987] EWCA Civ J0324-2 |
| Docket Number | 87/1057,87/0271 |
| Court | Court of Appeal (Civil Division) |
| Date | 29 October 1987 |
and
[1987] EWCA Civ J0324-2
The Master of the Rolls
(Sir John Donaldson)
Lord Justice Woolf
Lord Justice Russell
87/0271
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
MR A. C. LONGMORE, Q.C, and MR A. D. W. PARDOE, instructed by Messrs William A. Crump & Co., appeared for the Appellants (Rakoil).
MR S. C. BOYD, Q.C., and MR I. B. GLICK, instructed by Messrs Herbert Smith & Co., appeared for the Respondents (D.S.T.).
MR D. B. JOHNSON, Q.C., and MR A. M. D. HAVELOCK-ALLAN, instructed by Messrs Middleton Potts, appeared for the Interveners (Shell).
Disputes arose "between Deutsche Schachtbau-und Tiefbohrgesellschaft mbH ("D.S.T.") and R'as Al Khaimah National Oil Company ("Rakoil") under an oil exploration agreement dated 1st September 1976. The agreement contained an I.C.C. arbitration clause and, in March 1979 D.S.T. referred its claims to an arbitral tribunal sitting in Geneva. In April 1979 Rakoil instituted proceedings in the court of R'As Al Khaimah for the rescission of the agreement upon the ground that it had been obtained by misrepresentation and also for damages. Neither party took any part in the proceedings instituted by the other. D.S.T. succeeded in the arbitration, the award dated 4th July 1980 being for US $4,635,664. Rakoil succeeded in the litigation, judgment being given on 3rd December 1979 whereby the agreement, or perhaps more accurately an earlier underlying agreement, was rescinded and D.S.T. were held liable to Rakoil in the sum of US $1,424,891.23 and Dirhams 110,687,839.61.
At this stage honour, but little else, was satisfied, since neither party could find a way of enforcing these decisions. That situation might have continued indefinitely, but for the fact that in about June 1986 rumours reached D.S.T. that Shell International Petroleum Co. Ltd. ("Shell") had been buying oil from Rakoil and would, presumably, be paying for that oil. Shell was an English subsidiary of the Anglo-Dutch group and D.S.T. set about trying to satisfy the award out of Shell's payments to Rakoil.
On 2nd July 1986, on the ex parte application of D.S.T., Mr Justice Bingham, as he then was, made orders:
(i) pursuant to Order 73 rule 10 and section 3(1)(a) of the Arbitration Act, 1975, granting leave to D.S.T. to enforce the Geneva arbitration award in the same manner as a judgment for the sum awarded, together with interest thereon amounting to a further sum of US $3,778,366.49.
(ii) restraining Rakoil from "removing outside the jurisdiction, disposing of, charging or otherwise dealing with any monies owned by them or deposited by them within the jurisdiction, or any debts due or to become due to them within, or from any person within the jurisdiction [and in particular from directing, accepting or receiving payment of the debt or debts due or to become due to them from Shell International Petroleum Co. Ltd. or any other company or corporation resident in England and Wales] up to the amount of US $8,500,000".
The words in square brackets were added by a further order of Mr Justice Bingham made on 24th July 1986, again on the ex parte application of D.S.T.
On 8th August 1986 Mr Justice Bingham refused an application to discharge this injunction, noting that there was a pending application to set aside that part of his order dated 2nd July 1986, which had given D.S.T. leave to enforce the arbitration award as a judgment. That application to set aside was heard by Mr Justice Leggatt on 25th February 1987.
Meanwhile, on 22nd January 1987, Rakoil applied for and obtained the leave of Mr Justice Staughton to issue a writ for service on D.S.T. in Germany claiming to enforce the R'As Al Khaimah judgment. The intention was to found a counterclaim to that based upon the award. An application to set aside that leave and all subsequent proceedings came before Mr Justice Leggatt at the same time as the application to set aside the leave to enforce the award as a judgment.
Mr Justice Leggatt refused to set aside the leave granted to D.S.T. to enforce the award and set aside the leave to serve the writ issued by Rakoil against D.S.T. However he imposed a stay on execution of the award until after the hearing of an appeal to this court against the refusal of Mr Justice Bingham to discharge the injunction. That appeal was due to "be heard on 9th March 1987.
The reality was, and is, that D.S.T. has to uphold the validity of the orders both of Mr Justice Bingham and Mr Justice Leggatt if they are to enjoy any fruits of this litigation. If the leave to enforce the award is set aside, cadit quaestio. If the injunction is set aside, any assets of Rakoil in this country will disappear overseas in the twinkling of a telex.
Accordingly arrangements were made for the appeal from the judgment of Mr Justice Leggatt to be heard at the same time as that from the judgment of Mr Justice Bingham.
Meanwhile Shell were subjected to substantial commercial pressure to pay Rakoil in New York and, on their application, were given leave to intervene in the appeal against the grant and continuance of the injunction, which was inhibiting them from so doing. Thus the scene was set for an appeal which has raised issues of some general importance and which has been argued with great skill by all concerned.
The logical starting point for a consideration of those issues must be the order giving leave to enforce the award and the refusal to set it aside.
The Geneva award is a "Convention Award" within the meaning of the Arbitration Act, 1975, being an award made in pursuance of an arbitration agreement in the territory of a State, other than the United Kingdom, namely Switzerland, which is a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It follows that it is enforceable in England either by action or under section 26 of the Arbitration Act 1950 and that such enforcement is mandatory, save in the exceptional cases listed in section 5 of the 1975 Act.
Section 5 provides, so far as is material, that:
" Refusal of enforcement.
"5.-(1) Enforcement of a Convention award shall not be refused except in the cases mentioned in this section.
"(2) Enforcement of a Convention award may be refused if the person against whom it is invoked proves—
"(a)…
"(b) that the arbitration agreement was not valid under the law to which the parties subjected it or, failing any indication thereon, under the law of the country where the award was made; or
"(c)…
"(d) (subject to subsection (4) of this section) that the award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration or contains decisions on matters beyond the scope of the submission to arbitration; or
"(e)…
"(f)…
"(3) Enforcement of a Convention award may also be refused if the award is in respect of a matter which is not capable of settlement by arbitration, or if it would be contrary to public policy to enforce the award.
"(4) A Convention award which contains decisions on matters not submitted to arbitration may be enforced to the extent that it contains decisions on matters submitted to arbitration which can be separated from those on matters not so submitted."
Section 26 of the 1950 Act provides that:
"An award on an arbitration agreement may, by leave of the High Court or a judge thereof, be enforced in the same manner as a judgment or order to the same effect, and where leave is so given, judgment may be entered in terms of the award."
The machinery for applying for leave to enforce such an award is regulated by Order 73 rule 10. Suffice it to say that the application may be made ex parte, although the court can direct that a summons be issued, and that "the debtor" may apply to set the order aside within a specified time, in this case 23 days, of the order giving leave being served upon him and that "the award shall not be enforced until after the expiration of that period or, if the debtor applies within that period to set aside the order, until after the application is finally disposed of", (rule 10(6)).
D.S.T. complied with all the formalities and, subject to the result of this appeal, is, and has since 2nd July 1986 been, entitled "to enforce the award in the same manner as a judgment or order to the same effect" and to enter judgment in the terms of the award, which D.S.T. has in fact done, but subject always to a continuing inability to proceed to immediate enforcement initially because of the terms of Order 73 rule 10(6) and latterly because of the stay granted by Mr Justice Leggatt.
Mr Andrew Longmore, Q.C., for Rakoil, takes a number of points which can be consolidated under five heads:
(a) Is the arbitration agreement subject to the law of R'As Al Khaimah and void under that law?
(b) Can Rakoil rely upon the decision of the court of R'As Al Khaimah without regard to English rules on the recognition of foreign judgments?
(c) Did the award exceed the scope of the submission and, if so, can enforcement be refused in whole or in part (subsections (2)(d) and (4) of section 5 of the Arbitration Act, 1975)?
(d) Would it be contrary to public policy to enforce the award?
(e) Are the answers to these questions so clear that there ought to be summary judgment, as contrasted with leaving D.S.T. to sue on the award?
It is common ground that this falls to be ascertained by...
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