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06 June 2013
The Trinidad-based Caribbean Court of Justice is expected to deliver a landmark ruling on arbitration law in the next few months.The Caribbean Court of Justice is the final appellate court for Barbados, Belize and Guyana, with other Commonwealth Caribbean states in the process of joining, thereby finally cutting ties with the UK Privy Council.
In 2009 the Supreme Court of Belize, the first instance court, granted judgment in favour two Belizean entities, ordering that they be permitted to enforce an arbitral award issued by the London Court of International Arbitration against the Belize government. The government appealed and the Belize Court of Appeal ruled that Part 4 of the local Arbitration Act was unconstitutional, null and void, and therefore set aside the order granting enforcement. As a result, the companies appealed to the Caribbean Court of Justice.
The arbitration arose from a 2005 settlement deed in which the parties settled an ongoing arbitration and also agreed on certain tax treatment for the two companies. The terms of the settlement were implemented for two years, but following a change in political administration, the government repudiated the agreement. As a result, the companies invoked the arbitration provision in the agreement and proceeded to arbitration in London. The tribunal had to consider the legality of the settlement deed and whether the government had breached the deed and measure of damages.
The tribunal concluded that:
In the event, it awarded approximately US$20 million in damages and costs. The government took no part in the arbitration proceedings, but resisted enforcement by the companies.
The Supreme Court ordered that the award could be enforced, having rejected the government's arguments that the issue referred to arbitration was not arbitrable and that enforcement should be refused as being contrary to Belize public policy.
The Court of Appeal heard full argument and concluded by majority that the award could not be enforced because Part 4 of the act, which gives effect to New York Convention awards in Belize, was unconstitutional. Therefore, the court did not rule on the merits.
The Arbitration Act was amended in 1980 to give effect to the New York Convention, but at this time Belize was a British colony and the United Kingdom had signed, but not yet ratified or extended the application of the convention to Belize. In the circumstances, the Court of Appeal held that the act was unconstitutional as interfering with external relations which a colonial legislature had no power to engage. The fact that the United Kingdom would ratify the convention shortly thereafter and extend its application to Belize before it became an independent nation was ineffective, according to the Court of Appeal.
The Caribbean Court of Justice has heard full argument on all issues raised and will decide on the legality of the 1980 amendment to the Arbitration Act. The evidence before it reveals that it was the intention of the UK government to ensure that the legislation was in place locally before it ratified the convention in order to ensure that there would be no breach of its international obligations. Further, the United Kingdom extended the applicability of the convention to Belize in 1981, just before independence.
In resisting enforcement, the government has relied on Section 30(3) of the act and has contended that the issue referred to arbitration was whether the contractual warranty which conferred a particular type of tax treatment on the companies was breached by the government in 2008. The government contends that the arbitrators were actually enforcing Belizean tax laws and therefore the issue was not arbitrable. Of course, arbitrators have routinely held that they have competence to determine whether the issue submitted is arbitrable, and concluded as such in this instance. It was concluded that they were not enforcing the tax laws, but deciding on the validity and breach of a contractual warranty. They therefore proceeded to consider the evidence and applicable law.
The Caribbean Court of Justice will decide whether enforcement of the award is contrary to Belize public policy. The government contends that the then minister of finance lacked capacity to conclude the settlement deed, and that the tax treatment could be legally conferred by legislative action only and not by way of the settlement deed. The court will have to pass on whether a party which has not participated in an arbitration is allowed to raise arguments before the enforcement court which it should have canvassed before the arbitrators. Also, the Caribbean Court of Justice will have to decide the nature and extent of evidence of illegality that must be produced before an enforcement court will re-open the arbitrators' conclusions of fact and law. In deciding these issues, the court will consider and opine on the leading cases dealing with the public policy defence to the enforcement of arbitral awards, including Westacre Investments Inc v Jugoimport SDPR Holding Co Ltd and Soleimany v Soleimany from the United Kingdom, A v R from Hong Kong and Parsons & Whittemore Overseas Co Inc v Societe Generale de L'Industrie Du Papier (RAKTA) from the United States.
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