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The English courts are fast becoming the premier enforcement jurisdiction for arbitral awards, explains Graham Huntley

By Signature Litigation
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Signature Litigation
Signature Litigation

The recent decision in Cruz City v Unitech is an illuminating example of the increasing extent to which the English courts are willing to use the impressive tools of domestic civil enforcement to support arbitral awards.

The near universal acceptance of the principles of the New York Convention have long made it easy for a successful party to an arbitration to register the award in domestic courts, which in England and Wales leads to them being treated as judgment debts.

Cruz City involved the enforcement stage of a long-running arbitration where the respondent (Unitech) was on the wrong end of a US$300m award made by a tribunal seated in England. Two points of potentially wide application and relevance arose.

The central background issue that clearly troubled the court was the approach Unitech was taking to the award. As an Indian-based company with no legal presence or assets in England, and having failed to set aside the award, it was now making every effort to evade payment and was in no way shy in saying so. The judge remarked, “Unitech, for its part, has made clear by words and conduct that it will do whatever it can to avoid having to meet its liabilities”. Elsewhere, Unitech had said in one of its annual reports that it doubted the award could ever be enforced in its home jurisdiction of India.

Disclosure of assets

Faced with that gloomy prognosis, Cruz City, also with no legal presence in England, turned to the English court. First it sought an order for disclosure of Unitech’s assets. It relied on section 37 of the Senior Courts Act, which gives the court wide-ranging powers to order various forms of injunctive relief. That includes an order to disclose assets. However, Unitech and all of its assets were outside the jurisdiction. The House of Lords had already held in Masri that similar provisions under the Civil Procedure Rules (CPR) part 71 could not be applied extraterritorially, at least where corporates (or rather their officers) were concerned.

The courts have now found a route around that problem. In this case the judge recognised that while a disclosure order against corporate officers abroad could not be made, there was no reason why the corporation itself, Unitech, could not be subjected to a disclosure order; it was after all a party to the English proceedings.

Round two started a year later when Cruz came back to the English court, having found its disclosure orders frustrated. It needed an enforcement system to attach Unitech’s assets outside England, including the shareholdings in the Unitech corporate structure. All efforts Cruz had made in those locations – which included India, the Isle of Man and Cyprus – had been met with what the judge described as “tooth and nail” resistance.

The court again found a solution. In this instance it ordered the appointment of a receiver by way of equitable execution, again using the powers in section 37. It readily recognised that the power will not usually be exercised “unless there is some hindrance or difficulty in using the normal processes of execution”.

Those difficulties being obvious in this case, the appointment of a receiver would at least enable the appointee to demand information from any and all, wherever they may be in the world, with respect to the company’s assets.

Of course, the recipients of such demands overseas could for the most part (and usually will) ignore such requests. Noting Unitech’s avowed determination to avoid payment was more than likely to lead to such an outcome, the court made it clear that if any individuals hindered the receiver from executing their function (for example by requesting information from Unitech or to require Unitech to deal with its assets), then they could consider themselves at risk of being detained in less than comfortable accommodation should they ever land in England and Wales.

In reaching these decisions the court has done as much as it could to add to the attraction and value of the arbitral process in this jurisdiction.

There is an attractive message here for parties determining where to arbitrate with what they believe to be good cases. For parties with poor cases who lose, the message is not to be too candid about an avowed reluctance to pay. For everyone, the English courts are well on the way to becoming the premier enforcement jurisdiction for arbitral awards.

Graham Huntley is an executive committee member of the London Solicitors Litigation Association and partner in Signature Litigation

Read the original article here.

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