SA Coppee Lavalin NV v Ken-Ren Chemicals and Fertilisers Ltd ((in Liquidation) in Kenya) ; Voest-Alpine AG v Same
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith of Kinkel,Lord Browne-Wilkinson,Lord Mustill,Lord Slynn of Hadley,Lord Woolf |
| Judgment Date | 05 May 1994 |
| Judgment citation (vLex) | [1994] UKHL J0505-1 |
| Date | 05 May 1994 |
| Court | House of Lords |
And
[1994] UKHL J0505-1
Lord Keith of Kinkel
Lord Browne-Wilkinson
Lord Mustill
Lord Slynn of Hadley
Lord Woolf
House of Lords
My Lords,
I have had the advantage of reading in draft the speech to be delivered by my noble and learned friend Lord Mustill and also that prepared by my noble and learned friend Lord Woolf. I agree entirely with the views expressed by Lord Mustill as to the general approach which should be adopted by the court in considering whether or not to exercise its jurisdiction under section 12(6)(a) of the Arbitration Act 1950 so as to order security for costs in an international arbitration conducted in England, in particular an arbitration under ICC rules. Like Lord Woolf, however, I differ from him on the critical question whether the present cases fall within the exceptional category where such an order would be just and appropriate. The circumstance that not only are the claimants insolvent and thus incapable of meeting any order for costs which might be made against them should the claims fail, but also that the arbitrations are being financed on their side by an outside party standing to gain substantially from success in them, appears to me to favour most strongly the making of the order. If it is not appropriate to do so in these cases I have the greatest difficulty, as does my noble and learned friend Lord Woolf, in envisaging any case involving ICC rules in which the order would indeed be appropriate.
I would therefore allow the appeal in both cases, and make a remit tot he judge to fix the amount of security.
My Lords,
For the reasons given by my noble and learned friend Lord Mustill I too would dismiss both appeals.
My Lords,
These appeals raise two issues. The first is controversial, but narrow: What principles should the English court apply when considering an application for security for costs made under section 12(6)(a) of the Arbitration Act 1950 by a party to an international arbitration conducted in England under the auspices of the Court of Arbitration of the International Chamber of Commerce? The second is of great general importance: In what spirit should a national court, and in particular an English court, approach the exercise of its statutory or other powers to order interim relief in the context of an international arbitration between foreign parties conducted in accordance with the procedural rules of an arbitral institution?
Although the disputes from which these appeals arise are complex, the relevant facts may be very shortly stated. For this purpose I will concentrate on one of the appeals. Copp�e-Lavalin S.A./N.V. is a Belgian company. By a contract dated 18 November 1975 it agreed with Ken-Ren Chemicals and Fertilisers Limited to engineer, supply, deliver and supervise the erection and start-up of a plant for the manufacture of a chemical plant in Kenya. Ken-Ren is a Kenyan company, of which the majority shareholder is the Government of Kenya. It is now insolvent. Article 24 of the contract provided as follows:
" 24 ARBITRATION
If at any time any question, dispute or difference shall arise between the Seller and the Purchaser, either party shall, as soon as reasonably practicable, give to the other notice in writing of the existence of such question, dispute or difference, specifying its nature and the point in issue, and the same shall be referred to the International Chamber of Commerce in Paris. The arbitrators shall be (3) three in number, shall be appointed in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce in Paris and shall meet in London. The award of the arbitrators shall be final and binding on the parties and there is no recourse to the local Courts. Belgian law shall be the substantive governing law."
Very serious disputes have arisen under the contract and heavy losses have been incurred. The parties have rightly agreed, in accordance with the observations of Browne-Wilkinson V-C in Porzelack K. G. v. Porzelack (U.K.) [1987] 1 W.L.R. 420, that it is not appropriate to enter into the merits of the underlying dispute on an application for security for costs, and the application has been conducted on the basis that arguable claims have been made and have been met with arguable defences.
On 14 November 1990 Ken-Ren lodged with the Court of Arbitration of the International Chamber of Commerce (hereafter "the I.C.C.") a request for arbitration. This was followed by an Answer from Copp�e. In due course arbitrators were appointed, being nationals respectively of the United States, Brussels and England. The parties and the arbitrators signed Terms of Reference dated 29 January 1992. Subsequently, in accordance with Article 9 of the Rules of Conciliation and Arbitration of the I.C.C. (hereafter "the I.C.C. Rules") the I.C.C. invited each party to pay one-half of the amount fixed by the Court of Arbitration as the deposit to cover the I.C.C.'s costs and the fees of the arbitrators. Copp�e refused to pay, giving as one of its reasons the insolvency of Ken-Ren. The latter then paid the other half of the deposit and pursuant to Article 9.4 of the Rules the Terms of Reference thereupon became operative on 30 June 1992. One week later Copp�e issued a summons in the High Court seeking an order for security, giving as grounds that Ken-Ren is ordinarily resident out of the jurisdiction: it is a nominal claimant in the arbitration in so far as it is claiming on behalf of the Government of Kenya: and it will be unable to pay Copp�e's costs if ordered to do so (by analogy with section 726 of the Companies Act 1985 and also Ord. 23. r. 1 of the Rules of the Supreme Court). On 8 October 1992 Potter J. refused the application. Copp�e appealed to the Court of Appeal with the leave of the Full Court. The argument of the appeal was dominated by the previous decision of the Court of Appeal in Bank Mellat v. Helliniki Techniki [1984] Q.B. 291, in which the court had dismissed an application for security for costs made in respect of an ICC arbitration. Kerr L.J. (with whom Waller L.J. briefly agreed) and Robert Goff L.J. giving different reasons for reaching the same conclusion. Since the Bank Mellat case was binding on the Court of Appeal in the present case close attention was naturally given to the differences and similarities between the two judgments and to identifying the ratio decidendi of the decision. As your Lordships' House is not bound by Bank Mellat it is unnecessary to enter into details and it is sufficient to say that in the result the Court of Appeal followed the reasoning of Kerr. L.J. and upheld the judge's refusal to order security for costs. Lloyd L.J added that his provisional view, not based on full argument, was that he would have allowed the appeal had been free to do so. The court granted leave to appeal to this House on the ground that this was a point of major importance in arbitration law.
The jurisdiction of the High Court to order security for costs in an arbitration is created by section 12(6) of the Arbitration Act 1950 as amended:
"The High Court shall have, for the purpose of and in relation to a reference, the same power of making orders in respect of-
( a) security for costs;
( b) �.;
( c) the giving of evidence by affidavit;
( d) examination on oath of any witness before an officer of the High Court or any other person, and the issue of a commission or request for the examination of a witness out of the jurisdiction;
( e) the preservation, interim custody or sale of any goods which are the subject matter of the reference;
( f) securing the amount in dispute in the reference;
( g) the detention, preservation or inspection of any property or thing which is the subject of the reference or as to which any question may arise therein, and authorising for any of the purposes aforesaid any persons to enter upon or into any land or building in the possession of any party to the reference, or authorising any samples to be taken or any observation to be made or experiment to be tried which may be necessary or expedient for the purpose of obtaining full information or evidence; and
( h) interim injunctions or the appointment of a receiver: as it has for the purpose of and in relation to an action or matter in the High Court:
Provided that nothing in this subsection shall be taken to prejudice any power which may be vested in an arbitrator or umpire of making orders with respect to any of the matters aforesaid."
The addition of paragraph ( a) (amongst others) to the much shorter list of powers already created by the Arbitration Act 1889 followed recommendations in the Report of the MacKinnon Committee on the Law of Arbitration (1927). There is nothing in the published papers relating to the antecedents of this power to indicate the principles according to which Parliament intended it to be exercised.
The power of the High Court to which section 12(6)(a) is assimilated is contained in R.S.C. Ord. 23. r. 1. which (omitting immaterial provisions) reads as follows:
"1(1) Where, on the application of a defendant to an action or other proceeding in the High Court, it appears to the Court-
( a) that the plaintiff is ordinarily resident out of the jurisdiction, or
( b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or
( c)...
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