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Albudery Shariha

Corruption does not immune consideration and invalidates arbitration awards – British High Court ruling.

| Albudery Shariha

A British High Court ruling asserts corruption does not immune cases and may invalidate arbitral provisions. This ruling emphasised that corruption is a serious and fundamental issue, and arbitration agreements should not be used to prevent courts from dealing with such cases.
At a September 2023 hearing, the UK Supreme Court decided to hear the corruption case concerning Mozambique, known as the country’s “tuna bond case”, rather than refer it to arbitration in Switzerland. This case is worth $2 billion.

The Republic of Mozambique has requested $2 billion in compensation from Privinvest, alleging that the company paid bribes to facilitate Mozambique’s entry into financial guarantees for contracts to develop the tuna fishing industry and the exploitation of marine gas resources. Mozambique has confirmed that it has not received the commitments agreed in these contracts. To explore the claims of bribery and fraud made by Mozambique, examining the validity of those contracts was not necessary. Thus, defending the truth of the contracts will not affect the defendants’ liability for Mozambique’s claims.

The defendants, a group of Privinvest’s subsidiaries, denounced the English court’s decision to consider the case, noting the existence of arbitration agreements by the contracts signed between the parties. However, the UK Supreme Court ruled that any claim by Mozambique did not fit the scope of arbitration agreements under section 9 of the English Arbitration Act 1996.

This provision emphasises that the parties cannot use arbitration agreements to prevent courts from dealing with claims of bribery and fraud, even if such claims are related to essential supply contracts that include arbitration clauses. This is because bribes and fraud are serious allegations regarding the core contractual relationship between the parties.

Therefore, the court decided that it was not appropriate to refer the award of damages only to arbitration, as this would be decided on the issue of primary liability in this case.

According to Article 9 of the Arbitration Act 1996, the parties can ask the court to declare that it does not have jurisdiction in the case of an arbitration agreement. The court can be held in favour of the lawsuit in favour of arbitration even if the dispute can only be referred to arbitration after other dispute settlement procedures have been exhausted.

This provision is essential because it highlights the scope of application of Section 9 of the English Arbitration Act 1996, represented by Article III of the New York Convention. This provision reinforces the principle of the inability of the parties to use arbitration agreements to prevent courts from dealing with matters such as bribery and fraud, which are severe and substantive allegations of contractual relations between the parties. It also aligns with the Convention against Corruption, which Libya acceded to in 2005, showing an international commitment to fighting corruption and achieving justice.