- April 4, 2014
- Posted by: Josiah Hincks Solicitors
- Category: Business Law Updates
In discouraging an excessively formalistic approach to the enforcement of foreign arbitral awards in the UK, the Court of Appeal has rejected a highly technical bid by two businessmen to shelter from liabilities totalling more than $26 million.
Arbitrators in Los Angeles had found the businessmen personally liable in respect of breaches of an investment contract which they had purported to enter into on behalf of a company which did not in fact exist. The beneficiary of the award, a US company, had sought to enforce it against the businessmen’s UK assets.
The company successfully applied to the High Court under Sections 100-103 of the Arbitration Act 1996 to have the award recognised in the UK. However, that order was later set aside by a judge on the basis that the proceedings were ‘irregular’ in that the company had failed to produce the originals or certified copies of two arbitration agreements on which the award was based.
The judge nevertheless made a fresh order, giving the company leave to enforce the award as a judgment, after rejecting the businessmen’s substantive objections. The businessmen and the company appealed and cross-appealed, respectively, against those parts of the judge’s decision that were not in their favour.
In upholding the company’s cross-appeal, the Court noted that ‘excessive formalism’ had no place in modern litigation. Copies of the relevant arbitration agreements had been attached to the claim form, which was verified by a statement of truth. On that basis, it was clear that ‘they were what they purported to be’ and that they could be treated as true and certified copies of the originals.
Noting that the businessmen had signed the underlying contract on behalf of a non-existent company, the Court rejected their plea that enforcement of the award should be delayed pending the outcome of parallel proceedings in America. Their other objections to enforcement were also rejected.