Taken From: http://www.ntegrity.co.uk/

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The English Commercial Court Does Not Give Opinions in a Vacuum

The opinions of the Commercial Court in London carry persuasive force around the world. However, its role is not to resolve factual issues in a vacuum but to provide practical relief to those who have been wronged. The Court of Appeal resoundingly made that point in the context of a $500 million arbitration dispute.

Two individuals and two companies (the investors) had been awarded damages in that sum against a foreign state by an arbitration panel. The state was found to have subjected the investors to a string of arbitrary measures, including tax assessments and criminal proceedings, which ultimately led to the unjustified seizure of their investments in the energy infrastructure of the relevant country.

The investors obtained an order in London that enabled them to enforce the award against the state’s UK assets, but later sought to discontinue those proceedings. The state, however, argued that the award had been obtained by fraud and a judge acceded to its application to set aside the notice of discontinuance. That ruling meant that the proceedings would continue and that the fraud allegations would be tested at an eight-day trial.

In upholding the investors’ appeal against the judge’s decision, the Court noted that the the subject matter of the dispute had no connection to England. The parties were all foreign, the arbitration was held in Sweden, under the supervision of the Swedish courts, and the applicable law was not English law. The state’s sole purpose in continuing the proceedings in England was to set aside the enforcement order and to obtain a finding of fact that the award was infected by fraud.

The Court observed that the jurisdiction of the English courts can only be invoked in order to obtain relief, in the form of orders or appropriate declarations. It is not their function to hear cases which can have no relevant result. The investors’ purpose in launching the proceedings was to enforce the award and, on discontinuance, that purpose had ceased.

The finding of fraud sought by the state might have persuasive value in enforcement proceedings being pursued by the investors in other countries, but could not result in an English judge granting any relevant relief. The state thus had no legitimate interest in the continuation of the proceedings in London. The proceedings would therefore be discontinued on terms that the enforcement order be set aside.

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