Soleimany v Soleimany
| Jurisdiction | England & Wales |
| Judge | Morritt,Waller L JJ,Sir Christopher Staughton |
| Judgment Date | 19 February 1998 |
| Date | 19 February 1998 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal (Civil Division).
Morritt and Waller L JJ and Sir Christopher Staughton.
Bitu Bhalla and Jonathan Miller (instructed by Nabarro Nathanson) for the defendant.
Daniel Serota QC and Colin Manning (instructed by Paisner & Co) for the plaintiff.
The following cases were referred to in the judgment of the court:
Binder v AlachouzosELR[1972] 2 QB 151
Birtley & District Co-operative Society Ltd v Wendy Nook & District Industrial Co-operative Society LtdELR[1960] 2 QB 1
Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co LtdELR[1993] QB 701
Holman v JohnsonENRENR(1775) 1 Cowp 341; 98 ER 1120
Israel Discount Bank of New York v HadjipaterasWLR[1984] 1 WLR 137
Laing (James) Son & Co Ltd v Eastcheap Dried Fruit CoUNK[1962] 1 Ll Rep 285
Lee (Joe) Ltd v Lord DalmenyELR[1927] 1 Ch 300
London Export Corporation v Jubilee Coffee Roasting Co LtdWLR[1958] 1 WLR 271
Macartney, ReELR[1921] 1 Ch 522
Prodexport State Company for Foreign Trade v E D & F Man LtdELR[1973] QB 389
Royal Boskalis Westminster v Mountain[1997] CLC 816
Soinco SACI v Novokuznetsk Aluminium Plant[1998] CLC 730
SR v HH (unreported, 8 December 1994, Buxton J)
Taylor (David) & Son Ltd v Barnett Trading CoWLR[1953] 1 WLR 562
Tinsley v MilliganELR[1994] 1 AC 340
Vervaeke v SmithELR[1983] 1 AC 145
Westacre Investments Inc v Jugoimport-SDPR Holding Co Ltd[1998] CLC 409
Arbitration Enforcement of Beth Din award Parties involved in illegal export of carpets from Iran referred dispute to Beth Din Beth Din applying Jewish law recognised illegality but considered that it was not material Whether English court would enforce Beth Din award Whether enforcement contrary to public policy because underlying contract illegal.
This was an appeal from a judge's decision dismissing an appeal from the master's grant of leave to enforce an arbitration award.
The parties were father and son who were involved in exporting carpets from Iran. Disputes arose between them which they agreed to refer to the Beth Din. Before the Beth Din there was no dispute that the carpets concerned were smuggled out of Iran in breach of Iranian revenue and export controls. The Beth Din recognised the illegality involved but that was not material under Jewish law. The Beth Din made an award in favour of the son on the basis that the parties were entitled to a share of the profits of the enterprise reflecting their respective contributions and that the issue at stake was merely the percentage each party should have. The son applied to register the award as a judgment and obtained leave from the master to enter judgment and enforce the award. The father resisted enforcement of the award on the ground that the underlying enterprise was illegal and that it would be contrary to English public policy to enforce the award. The judge held that the award should be enforced. The court was not enforcing the underlying agreement but the arbitration agreement entered into after the dispute arose. The Beth Din had considered the illegality argument but it was not material under Jewish law as applied by the Beth Din. The father appealed.
Held, allowing the appeal:
1. If the award were a judgment of a foreign court the English court would not enforce it. If a foreign court recognised by its judgment that a contract had been entered into with the object of committing an illegal act in a state which England recognised as a foreign and friendly state, and enforced the rights of the parties under it, that was the very type of judgment which the English court would not recognise on the grounds of public policy. (Royal Boskalis NV v Mountain[1997] CLC 816applied.)
2. The original arbitration agreement was a valid arbitration agreement and was not invalid as an attempt to refer an immoral or illegal dispute to arbitration. (Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co LtdELR[1993] QB 701applied.)
3. Where public policy was involved, the interposition of an arbitration award did not isolate a party's claim from any underlying illegality. The court could inquire into underlying illegality even if the arbitrator had considered it. When considering illegality of the underlying contract the court was not confined to illegality under English law. In this case the Beth Din had not decided that there was no illegality but that there was. Accordingly the award which purported to enforce an illegal contract was not enforceable in England. (SR v HH (unreported, 8 December 1994, Buxton J) overruled; Westacre Investments Inc v Jugoimport-SDPR Holding Co Ltd[1998] CLC 409andSoinco SACI v Novokuznetsk Aluminium Plant[1998] CLC 730considered.)
(Delivered by Waller LJ)
Sion Soleimany and his son Abner Soleimany are Iranian Jews by origin. Until 1980 Sion owned a successful business in Teheran which sold and exported valuable Persian and other oriental carpets. In 1980 Sion came to England, and as a result of upheavals in Iran has remained here ever since. Abner was a student in England, but, following his father's arrival here, returned to Iran at Sion's request to help free a consignment of carpets that had been seized by the Iranian customs authorities. In his attempts to free those carpets Abner claims to have suffered severely at the hands of the Iranian authorities. But while in Iran he concluded that there were substantial profits to be made from the export and sale of Persian carpets, but the export from Iran would (as he has always accepted) have involved contravention of Iranian revenue laws and export controls. Between 1980 and 1983 Abner arranged the export of carpets from Iran and the carpets were sold by Sion in England or elsewhere outside Iran. Unfortunately disputes arose between Abner and his father. Those disputes covered many areas, but the main area related to whether Abner had received what he claimed was due to him from the proceeds of sale of the carpets that Abner alleged he had arranged to export from Iran.
Attempts were made to settle those disputes by mediation, but ultimately, on 12 December 1990, Abner and Sion resolved to arbitrate their disputes before the Beth Din, and signed an agreement in the following form:
We, the undersigned [Abner] and [Sion]hereby agree to refer to arbitration the claim or cause which the said [Abner] alleges that he has against the said [Sion] for decision by Beth Din (Court of Chief Rabbi) according to the rules of procedure established for or customarily employed in references to arbitration before the said Beth Din.
And we the undersigned, hereby do further agree each for himself to accept and perform the award of the said Beth Din touching the said claim or cause.
It appears from a leaflet described as Din Torah; Information for litigants and legal advisers. (Beth Din Leaflet No. 4) that the system of law to be applied by the Beth Din is Jewish law, albeit sometimes other systems of law may also be relevantby way of the doctrine of incorporation, but the decision as to which law to apply is that of the Dayanim.
Abner's statement of case before the Beth Din asserted in summary that Abner had arranged the purchase of the carpets in Iran, and that Sion had undertaken to act on behalf of Abner in selling the same in the west. It was asserted that Abner and Sion were not partners, and that although no specific arrangements had been made, Sion should be allowed a reasonable remuneration calculated by reference to the net profits (para. 4). Abner asserted that by virtue of entrusting Sion with the responsibility to resell, Sion had assumed a duty to account and to pay Abner the net proceeds of sale. He alleged that Sion had failed to discharge the contractual obligations which he assumed.
In Sion's response he made certain allegations unrelated to Abner's claim, but in relation to Abner's claim he asserted that:
(1) Sion had supplied the funds for the purchase of carpets in Iran;
(2) other carpets had been purchased by Abner contrary to Sion's instructions and at an overvalue so that a loss was made on resale; and
(3) others had been purchased by Abner utilising the proceeds of sale of Sion's business in Iran.
Thus it is alleged in para. 12:
The transactions carried out by Abnerwere disastrous, inflicting substantial losses on Sion. Abner never paid anything for the price of carpets. All the funds were paid by Sion or advanced upon the undertaking of Sion. Sion had to borrow at prohibitive rates to repay the cost of these transactions and had to accept substantial losses in connection with the operation conducted by Abner.
There was no reliance by Sion at this stage on any illegal activity in Iran as having any bearing on the obligations of either party.
In Abner's reply there was a reference to the fact that the carpets belonging to Sion which had been seized by the authorities were seized because they were being smuggled out of Iran and to the fact that it was intended, in order to free those carpets, that Abner would bribe the Revolutionary Guards. There was no reference to other forms of illegal activity in Iran.
However, in his statement before the Beth Din Abner described how he had found a way of making money by agreeing with diplomats that they would take carpets outside Iran for me, using their diplomatic immunity. Before the Beth Din there was no dispute that, as Abner now states in his affidavit, the carpets with which Abner's claim was concerned were smuggled out of Iran in breach of Iranian revenue controls and export controls.
By the award made by the Beth Din on 23 March 1993, it is recited that Abner purchased quantities of carpets and exported them, illegally, out of Iran (emphasis added). There is further recognition of the illegal activities in Iran in other parts of the award. For example, in relation to quantum it is recognised that, By the very nature of the illicit enterprise, few records were kept. In assessing profits the award disallows the full...
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