English Commercial Court

Tactical stay of execution rejected

Publication October 2015


Introduction

An English court refused to stay execution of an order giving permission to enforce a New York Convention award, the stated purpose of which was tactical. The judge stressed that the court retains discretion in these circumstances to stay, although discretion will rarely be exercised.

Can the court stay an order to enforce an award?

Under the Arbitration Act 1996 (the Act)1, English courts should grant permission to enforce a New York Convention (NYC) arbitration award ‘in the same manner as a judgment or an order’ of an English court – and the award creditor can elect to turn the award into an English judgment.

There are limited ways for a debtor under an NYC award to resist or delay such enforcement. These are set out at section 103 of the Act, which enacts Article V of the New York Convention grounds.

H&C S Holdings v Rbrg Trading (UK) Limited

This recent case before the English Commercial Court involved a dispute between the claimant, a Singaporean company, and the defendant, an English company. It tested whether – if no NYC grounds have been argued (or, if argued, made out) and the award creditor has elected to turn the NYC award into an English judgment – there remains any residual discretion under which the English court can none the less stay enforcement and, if so, what the threshold would be.

The most common grounds for petitioning the court to stay enforcement of an award under Part 83 of the English Civil Procedure Rules (which govern English litigation proceedings) are:

  • The existence of claims to set aside or suspend the award before a foreign court in the seat of the arbitration.
  • The award debtor advances counterclaims or cross-claims in excess of the award debt, and there is doubt that the award creditor can repay the amounts counter or cross-claimed.

In both cases, the court has power to grant a stay of execution of an award. The overall test is whether there are any ‘special circumstances which render it inexpedient to enforce the judgment or order’.

In H&C2, the English court denied the stay application on the particular facts. Following the Far Eastern3 decision (see below), it clarified that residual jurisdiction to do so did exist, but confirmed that it would only stay execution of an NYC award in very limited circumstances.

H&C: the facts of the case

The original dispute arose from a contract for the sale of Brazilian iron ore in 2009. It was referred to and decided by a sole arbitrator in Singapore, who issued an award in favour of the claimant for US$1.9 million (with interest). The claimant obtained an order giving it permission to enforce the award.

Subsequently, the defendant commenced another arbitration in Singapore, relating to an earlier iron ore agreement (also dated 2009), claiming US$1.5 million as an allegedly ‘admitted debt’ and damages of around US$0.9 million.

The defendant then applied for a stay of execution of the award pending determination of its new case in arbitration on the grounds that the stay would ensure that the claimant was ‘motivated to cooperate in the pursuit of the second arbitration and not to delay its outcome’. There was no suggestion on the part of the defendant that there were any concerns as to the enforcement of any award it might obtain in the new arbitration against the claimant. The defendant also offered to pay the full amount of the award and costs into court as a condition of the stay.

Mr Justice Phillips dismissed the defendant’s application.

  • He rejected the defendant’s contention that the close link between the two iron ore sale contracts – which could have given rise to an equitable set-off in relation to claims arising from them if they had been decided together – was sufficient to amount to a ‘special circumstance’ under CPR Part 83 Rule 7.4.
  • The judge noted that the defendant made its claim ‘belatedly’ and had failed to foreshadow it in any way during the preceding five years.
  • He also found that, although the second iron ore contract was briefly referred to in the transcripts of the arbitration hearing, there was no suggestion of any claim arising out of the second contract.
  • He rejected the defendant’s argument that it was ‘understood’ that the US$1.5 million was admitted by the claimant, as no evidence of this belief was put before him.
  • He rejected the defendant’s submission that it should be entitled to a stay of execution ‘for no more than the tactical purposes of giving the claimant an incentive not to delay the defendant’s new arbitration’, as this would not render the enforcement of the award ‘inexpedient’ to satisfy the requirements of CPR Part 83 Rule 7.
“… English courts will rarely … regard it as appropriate to make an order to stay enforcement in respect of a New York Convention award …”

However, he went on to quote Potter J in the Far Eastern case (decided under the 1975 Arbitration Act), who said that ‘having elected to convert an award into an English judgment, the plaintiff ought in principle to be subject to the same procedural rules and conditions as generally apply to the enforcement of such judgments’ and that ‘once judgment has been entered in terms of the award, it shall [not] for the purposes of enforcement be treated in any different manner from any other judgment or order’ and, consequently, be subject to the English court’s power to stay execution of the judgment under the Civil Procedure Rules. Accordingly, he took the view that the court did retain discretion to stay enforcement of an award in appropriate circumstances, but held that it would be inappropriate to exercise that jurisdiction on these particular facts.

What will come from this?

Phillips J confirmed in the H&C case that the test for grant of a stay of enforcement of any English judgment is one of ‘expediency’, and where no circumstances exist which would render the enforcement inexpedient, an application for stay would not succeed. He stressed, citing Far Eastern, that the English courts will rarely, if ever, regard it as appropriate to make an order to stay enforcement of a New York Convention award when the grounds for stay or refusal have not been made out. Residual discretion to do so does exist.

The H&C case raises interesting issues about the interaction between the NYC and the English Civil Procedure Rules in the context of enforcement of NYC arbitration awards. There may be tactical advantages in seeking to enforce an English judgment rather than the NYC award, but, based on H&C, the award creditor should bear in mind that it will be required to comply with the conditions for the enforcement of foreign judgments in England, including residual discretion of the court to stay enforcement. A decision of the higher English courts on the issue is still awaited.

Deborah Ruff is a partner and Julia Belcher an associate in the London office of Norton Rose Fulbright.


Footnotes

1

Section 101 – fulfilling New York Convention obligations.

2

H&C S Holdings Pte Limited v Rbrg Trading (UK) Limited [2015] EWHC 1665 (Comm).

3

Far Eastern Shipping Co v AKP Sovcomflot [1995] 1 Lloyd’s Rep 520.

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