English Court Refuses To Enforce Unchallenged Award

In what the Court considered a “serious and unusual case”, the English High Court in David Sterling v Miriam Rand and Morris Rand [2019] EWHC 2560 (Ch), refused to enforce an unchallenged award made by the Beth Din in London on the basis that to do so would not be in the interests of justice and possibly contrary to public policy.

The Court dealt with the following questions.

Did the Beth Din have the power to order the transfer of Property? The Court held [52]:

“I have come to the conclusion that the Claimant was correct to argue that by agreeing to the application of Jewish law to the procedure of the arbitration the Beth Din has power to order the transfer of the Property because Jewish law gives the Beth Din power to make such an order.”

If the Beth Din lacked such a power, did the Court have the power to order the transfer? Given the Court’s decision that the Beth Din did have power to make the order, it was not necessary for the Court to decide this question. However, the Court stated [60]:

“It was not necessary for me to decide this question and the authorities put forward were not decisive. The court’s discretion on enforcement is unfettered and it will have wide power to give effect to an award. However, it can only enforce the award: the power to order something different is limited. In this case I would have been willing to find that the court had jurisdiction under section 66 to make an order transferring the Property even if the Beth Din lacked powers to make such an order. More generally this would be a somewhat unusual situation since (on the presumed basis) the award would be open to challenge on grounds of the tribunal’s lack of power and the absence of power may give rise to other good reasons for refusing enforcement as a matter of discretion.”

Should the Court exercise its discretion under section 66 of the Act to enforce the Award? The Court considered that an order enforcing the Award would not be in the interests of justice, it could be contrary to public policy, and it could damage the integrity and reputation of the Beth Din system. The Court stated [65-66]:

“Any arbitration award that has not been challenged is final and is treated as binding. It should ordinarily be enforceable, and s.66 should be a straightforward remedy for achieving that. The provisions of the 1996 Act are firmly in favour of giving effect to arbitration awards and enabling them to be enforced. The starting point is the statutory policy in favour of giving effect to an unchallenged award.”

“However, the Court has a wide discretion in deciding whether to enforce and domestic awards are not subject to the mandatory rules of the New York Convention. Section 66 is never a rubber-stamping exercise. While monetary awards will not automatically raise an investigation as to whether they are properly to be enforced, the enforcement of an award in the form of a declaration or a mandatory injunction is more likely to generate specific consideration. These are always regarded as discretionary remedies whenever granted, and the court’s order in similar terms will only be granted if appropriate…”

At [68 & 70], the Court stated:

“The court remains entitled to decline to enforce an Award on public policy grounds, and also where third parties’ rights would be prejudiced or where there are issues as to the arbitrability of the dispute.”

“In exercising discretion as to enforcement of an order requiring a party to transfer real property relevant considerations will include the practicality and usefulness of enforcing the order (see West Tankers). The order of a court, unlike that of an arbitral tribunal, may be binding on third parties, and will ordinarily be public so the court may take into account different considerations to those that influenced the tribunal, especially where ownership of real property is in issue. I took these matters into account and also the new evidence of the parties’ financial arrangements subsequent to the Award, workability, arbitrability, issues of public policy, the interests of third parties, as well as the overall interest in giving effect to a final arbitration award.”

The Court concluded [83-84]:

“It is a serious and unusual case where an unchallenged award is not enforced by the court. I have taken account of the arguments in favour of enforcement. I am acutely conscious that the parties agreed on arbitration to resolve their dispute in 2014 and the Beth Din gave a prompt decision after hearing both sides. However, I am not satisfied that it would be in the interests of justice to make an order that the Property be transferred into the name of Mr Stern or the Claimant. The new evidence put forward to justify this order is directly inconsistent with the case that was put before the Beth Din regarding the contracting party to the Heskem and the person to whom ownership of the Property was to be transferred. The new evidence regarding housing benefit also suggests that relevant information was not made available to the Beth Din showing that performance of the Heskem may have involved the wrongful claim and receipt of housing benefit from Hackney BC (both before and after the hearing before the Beth Din). In these circumstances an order for specific performance would not be in the interests of justice, it could be contrary to public policy and it could damage the integrity (and reputation) of the Beth Din system.”

See the review of this case by Herbert Smith Freehills, who comment:

This rare example of the English Courts not enforcing an unchallenged arbitral award demonstrates that section 66 of the Act is never a rubber-stamping exercise. The Court has discretion under this provision and will consider the interests of justice before enforcing an award, particularly where the arbitral award is a specific performance order relating to land.

This case also demonstrates that the qualification contained in section 48 of the Act, allowing the parties to determine the powers of the tribunal by agreement, can be engaged where the parties choose a different procedural law to English law without requiring a specific agreement on particular tribunal powers. Since section 48 is a non-mandatory provision of the Act, it can be disapplied, or superceded, if the parties’ agreement grants different or greater powers such as through the choice of a procedural law which grants powers to the tribunal, as Jewish law did in this case.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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