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By Daniel Harrison

Recent UK Supreme Court decision could have far-reaching consequences for appeals

In a split decision, the Supreme Court recently considered whether an order requiring an appellant to pay money (that the appellant does not have) into court to continue an appeal “stifles” the appeal and whether the order should be overturned. The Supreme Court stated that such an order may be justified when the appellant company has established (on the balance of probabilities) that no such funds would (not could) be made available to the company, whether by the appellant’s owner or by some other closely associated person, as would enable the appellant to satisfy the requested condition.

Goldtrail Travel Ltd (in liquidation) v Onur Air Tasimacilik: the Case and Judgment

The Turkish airline appellant Onur was granted permission to appeal to the Court of Appeal on the condition that Onur pay into court £3.64 million that the High Court judge had awarded the respondent Goldrail by way of damages. Onur subsequently applied to the Court of Appeal for an order that the condition for payment into court be discharged on the ground that Onur could not comply with the condition, and that the effect of dismissing Onur’s appeal by reference to the condition would be to stifle its appeal.

By JP Sweny, Matthew Brown and Rachel Croft

The English Supreme Court has delivered a ruling that provides helpful guidance on the enforceability of trusts in respect of assets located in foreign jurisdictions that do not recognise trusts. The ruling also highlights potential issues in holding foreign assets on trust, particularly when the trustee transfers assets.

When a security trustee holds assets on trust for a group of finance parties, the risk of unauthorised transfer of assets is limited. This is because a security trustee will be required to, and will usually want to, seek instructions from the beneficiaries before exercising any powers of disposal. However, the Akers case is particularly relevant to project financing transactions that involve an English law security trust created over assets located in other jurisdictions that may not recognise trusts.

In the Akers case, the trust property consisted of shares in certain Saudi Arabian corporations, held on trust under Cayman Islands law trust arrangements. It was accepted in the case that because the relevant corporations were incorporated in Saudi Arabia and the shares were registered in Saudi Arabia, the lex situs (the law of the jurisdiction in which the relevant property is located) was Saudi Arabian law. Saudi Arabian law does not recognise trusts or the division of legal ownership and beneficial interest.

By Philip Clifford and Robert Price

On 1 March 2017 the Supreme Court[1] overturned an order of the Court of Appeal and decided that Nigerian National Petroleum Corporation (NNPC) could not be required to provide monetary security as a condition for resisting enforcement of a Nigerian arbitral award made in favour of IPCO (Nigeria) Limited (IPCO). The Supreme Court confirmed that the English courts do not have M&A - Chess Boardjurisdiction under section 103(5) of the Arbitration Act 1996 (the Act) to compel a party to provide security as a condition for resisting enforcement of an award under the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), unless an adjournment of the English enforcement proceedings is sought pending resolution of an application to set-aside or suspend the award in the courts of the seat.

Background Facts

Following an arbitration in Nigeria, NNPC sought to resist enforcement of the award under section 103(2)(f) of the Act (asserting that the award had not yet become binding or had been set aside or suspended by the Nigerian courts) and section 103(3) (asserting that enforcement should be refused as it would be contrary to public policy). Alternatively, NNPC requested that the enforcement proceedings be adjourned under section 103(5) of the Act pending resolution of the issues before the Nigerian courts. The Commercial Court adjourned enforcement proceedings on the condition that NNPC provided security pending resolution of the Nigerian proceedings.

Some time later, although the proceedings in Nigeria were still ongoing, IPCO renewed its application to enforce the award in England. The Commercial Court dismissed IPCO’s application on the grounds that NNPC had a good prima facie case on fraud and that the Nigerian proceedings should be permitted to run their course.

By Michael Green and Paul Davies

The UK will need to revisit its strategy to improve air quality following a recent court judgment determining that the Government’s existing plans are insufficient.  With air pollution reportedly responsible for 9,500 premature deaths in London each year, according to a study commissioned by the Greater London Transport Authority and Transport for London, the implications of this judgment are likely to have significant impact on the country’s transport infrastructure.

By Dan Smith and Anna Hyde

The UK Supreme Court has rejected a formal “reliance” test to determine whether a defendant to a civil claim can rely on the claimant’s wrongdoing to defeat the claim, replacing it with a more fact-sensitive “range of factors” approach, which may expand cases in which the defence operates.

“No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act”, Lord Mansfield’s dicta in Holman v Johnson (1775)[i], encapsulate the English common law defence of illegality to civil claims.  The defence is based on the public policy that a person should not be able to benefit from their own wrongdoing and that the courts should not enforce claims that harm the integrity of the legal system.  It is a potentially far-reaching defence which can apply in any civil claim, and the recent case of Patel v Mirza[ii] indicates that all litigants should now consider it whenever allegations or evidence indicate wrongdoing.

However, whilst the rationale is clear, authorities have been less so. As Gloster LJ put it in the Court of Appeal, “it is almost impossible to ascertain or articulate principled rules from the authorities”[iii], either for the recovery of money or other assets paid or transferred under illegal contracts, or for the range of cases to which the defence might apply (e.g. to claims for contractual damages or performance, to claims in tort, or to restitutionary claims for unjust enrichment).

By Daniel Harrison

A recent Supreme Court decision raises issues over the extent of court intervention in the arbitration process and reminds us of the importance of carefully selecting institutional rules so as to avoid (if necessary) the ability of parties to appeal against arbitral awards on points of law.

This decision also reinforces the finality of arbitral awards and makes it clear that it is difficult successfully to appeal an arbitral award. In many cases institutional rules of arbitration (such as the LCIA and ICC Rules) do not permit appeals on points of law and this highlights the importance of selecting institutional rules. Had the parties adopted the LCIA or ICC Rules, NYK would not have been able to make this section 69 appeal at all, saving time and money.

By Jonathan Hew

The Supreme Court has clarified that, for a term to be implied into an agreement, it must be either necessary for business efficacy or so obvious that it goes without saying. This is a significant judgment for commercial practitioners and for those drafting or dealing with contracts generally.

Under English law, a court can imply terms into a contract to supplement its express provisions. However, the Privy Council’s decision in Attorney General of Belize and others v Belize Telecom Ltd and another [2009] UKPC 10 had led to uncertainty about the appropriate test for the implication of terms. The test has since been clarified by the Supreme Court in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Limited and another [2015] UKSC 72.

By Daniel Harrison

The English High Court has again demonstrated its willingness to exercise supervisory jurisdiction in support of arbitration proceedings by granting an anti-suit injunction and a freezing order against a party which started foreign court proceedings despite an arbitration agreement.  This judgment emphasises the English courts’ desire to uphold and protect arbitration agreements when a party tries to evade arbitration.

By Simon Bushell and Robert Price

Case: JSC BTA Bank v Ablyazov [2015] UKSC 64

Introduction

A freezing order is an interim injunction that prevents a party to litigation from dealing with their assets until judgment (and on occasion, after judgment). Its purpose is to prevent a losing party from dissipating their assets and frustrating enforcement.

However, the standard form freezing order does not make specific provision to prevent respondents from borrowing money. Freezing orders generally entitle a respondent to access certain funds for ordinary living purposes and to pay their legal fees. Consequently,  a potential loophole existed where respondents could borrow money and default on the loans after paying the proceeds to third parties. If the lender then obtained a judgment against the respondent, this would create a competing claim and frustrate the purpose of the freezing order by reducing the assets available to the original claimant. Alternatively, a respondent might have entered into a loan with an affiliated lender, which would then act to protect its claim in concert with the respondent in priority to the genuine claimant. This could also have the effect of frustrating the freezing order.

By Jonathan Hew

The Supreme Court is the highest court in the UK and the final resting place for civil and criminal appeals. Lord Neuberger, the President of the UK Supreme Court, has set out his views on the role and function of the court that may prove useful guidance if you are considering an appeal.

On 4 December 2015, Lord Neuberger made a speech at the Centre for Commercial Law Studies Conference 2015 entitled “UK Supreme Court decisions on private and commercial law: The role of public policy and public interest”.