both Sections 189 of the Civil Procedure Code and Section 27 (1) (a) of the Act must be interpreted based on the legal maxim Actus curiae neminem gravabit (An act of the court shall prejudice no man). This maxim was applied in Trico Maritime (Pvt) Limited v. Ceylinco Insurance Co. Ltd. [S.C. Appeal No. 101/2005, S.C.M. 26.05.2010] where the Commercial High Court failed to consolidate applications made to enforce an arbitral award and an application made to set aside the award. I hold that a correction can be made to an arbitral award pursuant to Section 27 (1) (a) of the Act where, upon a plain and objective reading of the award in the context of the pleadings and evidence led, it is clear that the Tribunal had made an error in computation, clerical or typographical error or omission or any error of a similar nature.
summary
Section 15 (2) of the Act has
Before: Hon. P. Padman Surasena, J., Hon. Janak De Silva, J., Hon. K. Priyantha Fernando, J.
Counsel: S. A. Parathalingam, PC with Suren de Silva and Nishkan Parathalingam for the Respondent-Petitioner-Appellant - Chanaka de Silva, PC with Uween Jayasinghe for the Claimant-Petitioner-Respondent.
Decided on: 14.06.2024 - Janak De Silva, J.- JUDGEMENT
These four appeals arise from the judgment dated 20th October 2017 of the High Court of the Western Province (Exercising Civil Jurisdiction) holden in Colombo (“Commercial High Court”). It was held that there are no grounds to refuse the enforcement of the amended Arbitral Award dated 18th February 2015 (“Amended Arbitral Award’). The Commercial High Court proceeded to enforce the Amended Arbitral Award.
At the outset, the learned President’s Counsel
appearing for both parties concurred that all cases fixed for argument, viz.
SC Appeal Nos. 200/2018, 200A/2018, 200B/2018 & 200C/2018 are cases
stemming from one judgment of the Commercial High Court and therefore, it would
suffice for this Court to pronounce one judgment in respect of all those cases
in a consolidated hearing.
Leave to Appeal was granted on the following
questions of law:
(1) Does the said judgment err in law in that the
learned High Court Judge has failed to duly appreciate and direct himself on
the law on which the Petitioner sought a setting aside of the purported Corrected
Award?
(2) Does the said Judgment err in law in that the
Learned High Court Judge has failed to provide any reasons as to how the
purported corrections in the purported Corrected Award [which has been
permitted to be enforced] are permitted or countenanced in terms of Section 27
of the Arbitration Act No. 11 of 1995?
(3) Does the said Judgment err in law in that the learned
High Court Judge has failed completely to consider and/or provide any reasons
with regard to the objection raised by the Appellant that the Arbitral Tribunal
has failed to make the purported corrections within the time period of 14 days
as mandated by Section 27 of the Arbitration Act?
Factual Matrix
Admittedly a Loan Agreement dated 31st
January 2012 (“Loan Agreement”) was entered into between the Claimant-Petitioner-Respondent
(“Claimant”) and Respondent-Petitioner-Appellant (“Appellant”) and
Respondent-Respondent-Respondent (“Respondent”) as the Borrower.
In terms of the Loan Agreement, a sum of US
Dollars Seven Hundred Thousand only (USD 700,000/-) (“Loan Capital Sum”) was
loaned by the Claimant to the Borrower.
In accordance with Islamic Financing
principles, the said Loan Capital Sum was not to attract any interest but
attract a profit or return to the Lender computed at the rate of Thirty-Five
percent (35%) of the Loan Capital Sum which is US Dollars 122,496/= (“Return”).
The Borrower was to repay the Loan Capital Sum
together with the Return to the Lender in full on or before 2nd
August 2012.
Admittedly the Loan Capital Sum was disbursed.
However, the Borrower failed to repay the Loan Capital Sum and the Return
before the due date.
In or around February 2014, the Claimant
commenced arbitration proceedings in Colombo pursuant to Clause 4.5 of the Loan
Agreement. In the Statement of Claim, the Claimant sought an Award jointly
and/or severally against the Appellant and Respondent:
“A. In a sum of United States Dollars Eight
Hundred and Twenty-two Thousand and Four Hundred and Ninety-Six (USD
822,496/=);
B. Together with a return on the Capital
Sum of United States Dollars Seven Hundred Thousand (USD 700,000/=), calculated
at a rate of 35% (or at such other rate as may be determined by the Tribunal)
per annum, commencing from the 2nd August 2012 until the full and
final settlement of the award;
C. Cost of Arbitration; and
D. Such other and further reliefs as to
this tribunal shall seem meet.”
The following admissions were recorded on 4th
June 2014:
1. Execution of the Loan Agreement is admitted.
2. It is also admitted that the Borrower received
a sum of US $ 700,000 referred to in Clause 2.3 of the Agreement.
3. It is admitted that the Borrower caused a
cheque for the sum of British Pounds 500,000 to be given.
4. The Borrower did not refund the sum of US $
700,000 or any part thereof up to date.
5. The aforesaid cheque for British Pounds
500,000 was presented for payment but dishonoured.
In view of the admissions, the Arbitral Tribunal
(“Tribunal”) directed the Appellant and the Respondent to begin the case. After
obtaining time to lead evidence, they failed to do so.
The Tribunal delivered the award in favour of
the Claimant on 18th February 2015 (“Original Award”). The operative
part reads as:
“We award the Claimant a sum of USD 700,000/=
together with a further sum of money calculated at 10% per annum from
02.08.2012 till payment in full.”
The Claimant filed a motion dated 19th
February 2015 moving that the Tribunal correct the Original Award in terms of
Section 27 (1) (a) of the Arbitration Act No. 11 of 1995 (“Act”). A copy of the
motion was served on the Appellant and Respondent. In the motion it was claimed
that due to an inadvertent omission and/or clerical error and/or typographical
error, the principal amount payable has been stated in the Original Award as
USD 700,000/= whereas it should be USD 822,496/=. The Claimant prayed that the
Tribunal insert the sum of USD 822,496/= instead of USD 700,000/=.
The Appellant and the Respondent filed a
motion dated 23rd February 2015 objecting to the correction. The
Tribunal issued a corrected Award (“Amended Award”) dated 18th
February 2015. Eight corrections were made to the Original Award by replacing
the reference to “USD 700,000/=” with “USD 822,496/=”.
The challenge to the enforcement of the
Amended Award revolves around this change made to the Original Award.
The Appellant seeks to impugn the judgment of
the Commercial High Court on the following grounds:
A. The corrections purportedly made to the Original
Award are contrary to the Tribunal’s own reasoning as contained in their Original
Award;
B. The corrections made to the Original Award are
not “errors in computation, any clerical or typographical errors or
omissions or any errors of a similar nature” falling within Section 27 (1) (a)
of the Act;
C. The Tribunal has not meaningfully interpreted
the words “with notice” contained in Section 27 (1) (a) of the Act;
D. The purported corrections of the Tribunal have
not been made within 14 days from the receipt of the Claimant’s request for the
same, in terms of Section 27 (2) of the Act;
E. The Tribunal has purported to correct the Original
Award on the basis that it is “necessary” and NOT by reasons of the
Claimant’s application to correct having been “justified” as required by
Section 27 (2) of the Act;
F. The purported Amended Award is contrary to
public policy; and
G. The Tribunal did NOT correct the Original
Award “on the same day” as erroneously understood by the learned Commercial
High Court Judge.
The learned President’s Counsel for the
Appellant submitted that the Tribunal had in its Original Award considered
whether 35% per annum as a “profit” or “return” should be
awarded. Having so considered, the Tribunal went on to reject the said prayer,
and instead, awarded 10% per annum in lieu of the 35% per annum claimed
by the Claimant in his Statement of Claim.
Accordingly, it was contended that in making
the Original Award, the Tribunal has concluded, and decided, that the Claimant
was entitled to be repaid the Loan Capital Sum (USD 700,000/=), but not, the “profit”
or “return” of 35% that the Claimant claimed.
In order to appreciate this argument, let me
begin by examining the reliefs that the Claimant claimed in his Statement of
Claim. They are two-fold:
Firstly, in prayer (A), the Claimant sought a
sum of US Dollars Eight Hundred and Twenty-two Thousand and Four Hundred and
Ninety-Six (USD 822,496/=). This is the total of the Loan Capital Sum of
USD 700,000/=, as defined in Clause 2.3 of the Loan Agreement, plus the Return,
as defined in Clause 3.5 of the Loan Agreement, which amounts to USD 122,496/=.
It is important to note that in terms of
Clause 3.5 of the Loan Agreement, the total amount of USD 822,496/= was to be
paid by 2nd August 2012.
Secondly, in prayer (B), the Claimant sought a
return on the Loan Capital Sum of USD 700,000/=, calculated at a rate of 35%
(or at such other rate as may be determined by the Tribunal) per annum, commencing
from the 2nd August 2012 until the full and final settlement of the
award (emphasis added).
Thus, these two prayers dealt with two
distinct amounts.
The Loan Agreement is silent on the
entitlement of the Claimant to prayer (B). However, in view of the admission of
the execution of the Loan Agreement, there was no dispute between the parties
on the entitlement of the Claimant to prayer (A).
This is clear upon a consideration of the
Additional Issues Nos. 9(a), 9(b) and 10 filed by the Appellant on 22nd
July 2014 which reads as follows:
“9 (a) Do the
words ‘this Agreement shall terminate upon the repayment to the lender in full
of the Loan capital Sum together with Return contemplated herein, and thereupon
the Corporate Guarantee aforesaid too shall expire and become null and void’
establish that the “Borrower” under the Loan Agreement is only liable to
repay the Loan capital Sum of USD 700,000 together with the Return of USD
122,496?
[…]
10. Without
prejudice and in any event is the maximum amount payable by the “Borrower”
under the Agreement limited to USD 822,496 only?” (emphasis added)
In these circumstances, there is much merit in
the submission of the learned President’s Counsel for the Claimant that the
Tribunal did not have to take any decision thereon.
In fact, the Tribunal did not do so and began
the Original Award by correctly stating that “the Claimant is seeking an award
jointly and severally against the Appellant and Respondent in a sum of USD
822,496/=.”
The Tribunal then considered prayer (A) and
concluded that they have no difficulty in holding that the Appellant and
Respondent are obliged to pay a sum of USD 700,000/= on or before 2nd
August 2012.
That is where the Tribunal fell into grave
error by overlooking that the Claimant had, in prayer (A) sought a sum of USD
822,496/= and not USD 700,000/=. In fact, the Claimant does not anywhere in the
Statement of Claim seek a sum of USD 700,000/= only.
The Tribunal then proceeds to examine prayer
(B) of the Statement of Claim from page 5 of the Original Award. In fact, it
cannot be any clearer upon an examination of the following extract from the Original
Award:
“RETURN ON THE SUM OF US $ 700,000
The next question to be considered is whether
the Award should be confined to USD 700,000/= or whether the Claimant is
entitled to the claim in prayer (b) of the statement of claim.”
Yet, the Tribunal did so by repeating the
grave error made earlier by referring to USD 700,000/= instead of USD
822,496/=.
The rest of the Original Award is an
examination of whether the Claimant is entitled to the relief claimed in prayer
(B) to the Statement of Claim. The Tribunal did not reject the claim of the
Claimant to a sum of USD 122,496/= as Return
(with a capital) as defined in the Loan Agreement and claimed in prayer (A)
in the Statement of Claim. All references to several extracts from the Original
Award relied on by the Appellant deals with prayer (B) and not (A) in the
Statement of Claim.
It must be borne in mind that prayer (B) also
refers to a “return” (with a simple), but this is for the period
beginning from 2nd August 2012. The amount claimed as USD 122,496/=
as Return becomes due prior to that date.
For the foregoing reasons, I have no
hesitation in rejecting the contention of the Appellant that the Tribunal had,
in the Original Award, rejected the claim made by the Claimant for a sum of USD
122,496/= as Return pursuant to Clause 3.5 of the Loan Agreement.
Section 27 (1) (a) of the Act
The next two contentions of the Appellant are
based upon the interpretation of Section 27 (1) (a) of the Act which reads as
follows:
“27. (1) Within
fourteen days of receipt of the award, unless another period of time has been
agreed upon by the parties, whether at the request of the arbitral tribunal or
otherwise
(a)
a party, with notice to the other party, may request the arbitral tribunal
(i) to correct in
the award any errors in computation, any clerical or typographical errors or
omissions or any errors of a similar nature; or
(ii) to modify
the award where a part of the award is upon a matter not referred to
arbitration, provided such part can be separated from the other part and does
not affect the decision on the matter referred;”
The Appellant contended that the purported
corrections made by the Tribunal cannot fall within the meaning of an “error
in computation”, or “typographical errors” or “clerical error”
because by their own reasoning, the Tribunal had rejected the claim that the
Claimant is entitled to “return” or “profit” at 35% per annum. It was
submitted that the Tribunal does not have the power to carry out a fundamental
change to the Original Award.
This contention is misconceived in law. As
pointed out earlier, the Tribunal did not reject the claim made by the Claimant
for a Return as prayed for in prayer (A) in the Statement of Claim.
The issue we must decide is whether the
omission (here I use it in the neutral sense), made by the Tribunal is a matter
that can be corrected in terms of Section 27 (1) (a) of the Act.
Both the learned President’s Counsel sought to
rely on judicial precedent on Section 189 (1) of the Civil Procedure Code which
reads as follows:
“189. (1) The
court may at any time, either on its own motion or on that of any of the
parties, correct any clerical or arithmetical mistake in any judgment or order
or any error arising therein from any accidental slip or omission, or may make
any amendment which is necessary to bring a decree into conformity with the
judgment.”
On a plain reading of this provision, it is
clear that it has a narrower ambit than Section 27 (1) (a) of the Act. A
correction in any judgment or order can be made only where a mistake arises
from any accidental slip or omission or to bring a decree in conformity with
the judgment. Section 27 (1) (a) of the Act is not so constrained.
The Appellant relied on the decisions in Ramasamy
Pulle v. De Silva (12 NLR 298), Dionis Appu v.
Arlis et al (23 NLR 346) and Shavin Nona v. Wickramasinghe
and others [(2012) 2 Sri.L.R. 400]. They are not of any particular relevance in
determining the issue before us.
In Dharmadasa v. Meraya (50
NLR 197) and Thambipillai v. Muthucumaraswamy (57
NLR 97), it was held that Section 189 of the Civil Procedure
Code permitted a correction where the mistake was of the Judge.
In my view, both Sections 189 of the Civil
Procedure Code and Section 27 (1) (a) of the Act must be interpreted based on the legal maxim Actus curiae neminem gravabit (An
act of the court shall prejudice no man). This maxim was applied in Trico
Maritime (Pvt) Limited v. Ceylinco Insurance Co. Ltd. [S.C. Appeal
No. 101/2005, S.C.M. 26.05.2010] where the Commercial High Court failed
to consolidate applications made to enforce an arbitral award and an
application made to set aside the award.
I hold that a correction can be made to an
arbitral award pursuant to Section 27 (1) (a) of the Act where, upon a plain
and objective reading of the award in the context of the pleadings and evidence
led, it is clear that the Tribunal had made an error in computation, clerical
or typographical error or omission or any error of a similar nature.
In the present case, the error was entirely of
the Tribunal. The Claimant specifically prayed for the repayment of the Loan
Capital Sum and Return which amounted to US Dollars 822,496/=. The Arbitral
Tribunal clearly did not reject the claim for the repayment of the Return. They
analysed only the profit or return payable on the Loan Capital Sum from
02.08.2012. Yet, they made a grave error by awarding the Claimant only US
Dollars 700,000/= in the Original Award. Hence, the amendment made by the
Tribunal to the Original Award falls within the provisions of Section 27 (1) (a)
of the Act.
Notice
The Appellant contends that the Tribunal acted
contrary to Section 27 (1) (a) of the Act. It was submitted that the Tribunal
has not meaningfully interpreted the words “with notice” therein. It is
the contention of the Appellant that the Tribunal should have given both
parties an opportunity to be heard orally.
In support of this proposition, our attention
was drawn to O’Reilly and others v. Mackman and others [(1983)
2 AC 237 at 276] where Lord Diplock held:
“But the requirement that a person who is
charged with having done something which, if proved to the satisfaction of a
statutory tribunal, has consequences that will, or may, affect him adversely,
should be given a fair opportunity of hearing what is alleged against him and
of presenting his own case, is so fundamental to any civilised legal system
that it is to be presumed that Parliament intended that a failure to observe it
should render null and void any decision reached in breach of this
requirement.”
The decision in Nestle Lanka PLC v.
Commissioner of Labour et al [C.A. Writ 574/2004, C.A.M. 11.05.2007]
was also relied upon by the Appellant.
The Claimant countered that Section 15 (2) of
the Act did not impose any mandatory obligation on the Tribunal to hold oral
hearings in respect of every application made to it. Section 15 (2) of the Act
reads as follows:
“15. (2) An
arbitral tribunal shall afford all the parties an opportunity, of
presenting their respective cases in writing or orally and to examine all
documents and other material furnished to it by the other parties or any other
person. The arbitral tribunal may, at the request of a party, have an
oral hearing before determining any question before it.” (emphasis added)
This section uses both shall which is
followed by may. The use of the word shall with respect to one
matter and use of the word may with respect to another matter in the
same section of the Act, in my view, generally leads to the inference that the
word shall imposes an obligation, whereas the word may confer a
discretionary power.
Section 15 (2) of the Act has two parts. The
first part deals with the substantive matter before an arbitral tribunal. There
an arbitral tribunal shall give all parties an opportunity of presenting
their respective cases in writing or orally. The choice is with the relevant
party. They may choose to present their cases in writing or orally or in
combination as party autonomy is paramount. No doubt an arbitral tribunal is
entitled to make relevant inferences where a party does so without offering the
witness or document to any cross-examination.
The second part deals with incidental matters
arising in the course of the arbitral proceedings. There an arbitral tribunal may
at the request of a party have an oral hearing before determining any
question arising in the incidental matter. In the absence of such a request
from a party, an arbitral tribunal may determine the issue without an oral
hearing but after providing parties with an opportunity to submit in writing its
position on the application.
In this matter, the Appellant did not request
the Tribunal to hold an oral hearing into the application made to amend the Original
Award. On the contrary, the Appellant and Respondent were content to submit their
objections to the application by motion dated 23rd February 2015.
Moreover, Section 17 of the Act reads as
follows:
“17. Subject to
the provisions of this Act, the parties shall be free to agree on the procedure
to be followed by the arbitral tribunal in conducting the proceeding…”
Clause 4.5 of the Loan Agreement provides
that:
“[T]he procedure adopted at the arbitration
shall be determined by the arbitrators.”
In the foregoing circumstances, I am of the
view that the Tribunal did not err by failing to conduct an oral hearing on the
application to correct the Original Award in the absence of an application to
do so by any party.
Time Limit
The Appellant submitted that the Tribunal had
failed to act in conformity with Section 27 (2) of the Act as the purported
corrections have not been made within 14-days from the receipt of the request
to make corrections.
Section 27 (2) of the Act reads as follows:
“27. (2) If the
arbitral tribunal considers the request to be justified, it shall make the
correction, modification or give the interpretation within fourteen days of the
receipt of the request, or such longer period as the parties may agree, to, at
the request of the arbitral tribunal. The interpretation shall form part of the
award.”
The time line according to the Appellant is as
follows:
1. The Claimant made his application to the
Tribunal on 19th February 2015.
2. The Appellant and the Respondent tendered
their objections on 23rd February 2015.
3. The Amended Award was communicated to the parties
by letter dated 13th March 2015.
Thus, it was submitted that the Tribunal did
not make the corrections to the Original Award prior to the lapse of 14-days
from the date of the Claimant’s application to correct the Original Award.
It is the Appellant who asserts that the
Tribunal failed to make the correction within the specified time. The 14-day
time period begins to run from the date of the receipt of the request. It
must be established that the Tribunal failed to make the correction within
14-days of the receipt of the request to make the correction. The legal burden
of establishing that fact is on the Appellant. In Somasundaram v.
Kumara and Others [S.C. Appeal 179/2018, S.C.M. 04.04.2024],
my brother Surasena J. held that as it is the Liquidator who had made the
initial application under Section 367 read with Section 370(1) of the Companies
Act in that case, in terms of Section 101 of the Evidence ordinance, the legal burden
is on the Liquidator to establish the fact he asserts.
It is true that the application to correct the
Original Award is dated 19th February 2015. However, there is no
material before Court to show the date on which the Tribunal received that
request. This is an administered arbitration. Hence, we cannot proceed on the
basis that the date of receipt by the arbitration center should also be the
date of receipt by the Tribunal.
According to paragraph 66 of the petition of
the Appellant filed in S.C. Appeal 200/2018, the Attorney-at-Law for the
Appellant received a letter dated 13.3.2015 on 17.3.2015 from the Arbitration
Centre enclosing the Amended Award.
Nevertheless, there is no evidence as to the
date on which the Amended Award was in fact made by the Tribunal nor the date
on which the request for correction was received by the Tribunal.
As the learned President’s Counsel for the
Claimant pointed out, the burden was on the Appellant to submit this evidence.
For the foregoing reasons, I am of the view
that the Appellant has failed to establish the fact that the Tribunal failed to
make the corrections within 14 days from the receipt of the request to make
corrections.
In any event, even if the Tribunal has failed
to make the corrections within the stipulated time, it should not invalidate
the Amended Award. As pointed out above, the correction of the Original Award
was necessitated due to the lapse on the part of the Tribunal. Hence, the fact
that it was done outside the permitted time should not be held to the
determinant of the Claimant. Again the legal maxim Actus curiae neminem
gravabit (An act of the court shall prejudice no man) applies. Such a lapse
on the part of the Tribunal should not prevent the Claimant obtaining the full
amount he is entitled in law.
Furthermore, such alleged delay has not
prejudiced the substantial rights of the Appellant or occasioned a failure of
justice. This is the constitutional benchmark for any intervention by the Court
of Appeal in the exercise of its jurisdiction in terms of Article 138 of the Constitution. I am of the view that Court is entitled to
adopt that threshold in exercising its appellate jurisdiction in relation to
the present matter.
Reasons for Correction
The Appellant submitted that the Tribunal has
made the correction as it was deemed necessary. It was submitted that
Section 27 (2) of the Act permits any correction only where the request is justified.
The Appellant cited the decisions in Ranjith
Flavian Wijeratne v. Asoka Sarath Amarasinghe and Others [S.C.
Appeal 40/2013, S.C.M. 12.11.2015] and Benedict and
Others v. Monetary Board of the Central Bank of Sri Lanka and Others [(2003)
3 Sri.L.R. 68]. Both these decisions emphasise the need to give reasons
and that if reasons are not given, the court can draw an inference that there
is no rational reason for its decision.
In the present case, the Tribunal has given
its reasons for making the correction. It is true that the Tribunal does not
use the word justified in its order. Nevertheless, it is well-settled
that an exercise of a power will be referable to a jurisdiction which confers
validity upon it and not to a jurisdiction under which it will be nugatory.
This principle has been applied even to cases where a Statute which confers no
power has been quoted as authority for a particular act, and there was in force
another Statute which conferred that power [L. C. H. Peiris v. The
Commissioner of Inland Revenue (65 NLR 457)].
It is clear upon a plain reading of the Original
Award that the Tribunal had made an omission in setting out the sum payable in
terms of prayer (A) in the Statement of Claim. Thus, the correction made by the
Tribunal is justified in terms of Section 27 (2) of the Act.
Public Policy
The learned President’s Counsel for the
Appellant contended that the Amended Award is in violation of:
i.
Section 27 (1) (a)
(i) of the Act as the purported corrections were not “errors in computation,
any clerical or typographical errors or omissions or any errors of a similar
nature”;
ii.
The principles of
natural justice, as the Appellants has not been heard, nor have reasons been
given as to why the Arbitral considered the corrections “necessary”; and,
iii.
The time
stipulated in Section 27 (2) of the Act, within which the Tribunal was mandated
to act.
Accordingly, it was submitted that it would be
contrary to the public policy of this country to enforce the Amended Award.
The public policy principle has received
international legal recognition in arbitration matters. Article V.2 of the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New
York Convention) and Article 36 of the UNCITRAL Model Law enshrines this
principle. It is an acknowledgement of the right of the State and its judicial
arm to exercise decisive control over the arbitral process.
This recognition was in spite of the concerns
raised by some delegates at the negotiations of the New York Convention. The
concern was that it was affording an unsuccessful defendant or a State a second
bite at frustrating enforcement. Nevertheless, some delegates viewed it as a
necessary “safety-valve”.
The Act, inter alia, seeks to
give effect to the New York Convention. Section 32 (1) (b) (ii) of the Act
states that an arbitral award made in an arbitration held in Sri Lanka may be
set aside by the High Court, on application made therefor, within sixty days of
the receipt of the award where the High Court finds that the arbitral award is
in conflict with the public policy of Sri Lanka. The Act does not define what
is meant by public policy.
The public policy argument is not the most
attractive of legal defenses. It is vague and capable of liberal
interpretation.
In Richardson v. Mellish
[(1824-34) All ER 258 at 256] Burrough J. described it as:
“…a very unruly horse, and when once you get
astride it you never know where it will carry you. It may lead you from sound
law. It is never argued at all, but when other points fail.”
Lord Davey in Janson v. Driefontein
Consolidated Mines, Ltd. [(1902) AC 484 at 500] was
more critical in stating that:
“…public
policy is always an unsafe and treacherous ground for legal decision.”
Sir John Donaldson MR in Deutsche
Schachtbau-und Tiefbohrgesellschaft mbh. v. Ras Al Khaimah National Oil Co. and
Shell International Petroleum Co. Ltd. [(1987) 2 Lloyd’s Rep. 246 at
254] sought to elucidate the content of public policy as
follows:
“Considerations of public policy can never be
exhaustively defined, but they should be approached with extreme caution. … It
has to be shown that there is some element of illegality or that the
enforcement of the award would be clearly injurious to the public good or,
possibly, that enforcement would be wholly offensive to the ordinary reasonable
and fully informed member of the public on whose behalf the powers of the State
are exercised.”
Nevertheless, as Lord Denning MR pointed out
in Enderby Town Football Club Ltd. v. Football Association Ltd.
[(1971) Ch. 591 at 606]:
“With
a good man in the saddle, the unruly horse can be kept in control”.
This Court has sought to achieve such
restraint when confronted with a public policy argument against the enforcement
of an arbitral award.
In Light weight Body Armour Ltd. v.
Sri Lanka Army [(2007) 1 Sri.L.R. 411 at 419-420] Tilakawardane
J. held:
“It is also important that a Court considering
a challenge on the basis of public policy bear in mind the possibility of the
misuse of this doctrine by a defendant in order to avoid the consequences of
the arbitral award. Certainly the uncertainty and inconsistencies concerning
the interpretation and application of public policy could encourage the losing
party to rely on the doctrine of public policy to resist, or at the very least
delay enforcement of the arbitral award. Therefore the Court must also bear in
mind the very legitimate concern that it may afford an unsuccessful defendant
and/or the state a second 'bite' at frustrating enforcement.”
In Kiran Atapattu v. Janashakthi
General Insurance Co. Limited [S.C. Appeal 30-31/2005, S.C.M.
22.02.2013] Marsoof J. held:
“It is therefore obvious that while the
dynamism of the concept of public policy cannot be denied, it is important to
exercise extreme caution in applying the concept.”
A helpful insight into the content of public
policy in the 1985 UNCITRAL Model Law is found in the Commission Report (UN
Doc. A/40/17, para. 297) which states:
“It was understood that the term ‘public
policy’, which was used in the 1985 New York Convention and many other
treaties, covered fundamental principles of law and justice in substantive as
well as procedural respects. Thus, instances such as corruption, bribery and
fraud and similar serious cases would constitute a ground for setting aside. It
was noted, in that connection, that the wording ‘the award is in conflict with
the public policy of the State’ was not to be interpreted as excluding
instances or events relating to the manner in which it was arrived at.”
Nevertheless, it can be stated that public
policy does not furnish an opportunity to the losing party to oppose
recognition and enforcement to reargue the merits of the case or to allege that
the case was wrongly decided [UNCITRL Secretariat Guide on the Convention on
the Recognition and Enforcement of Foreign Arbitral Awards (New York, (1958),
2016 Edition, 248].
The Appellant is seeking to resist the
enforcement of the Amended Award on public policy grounds based on alleged
procedural irregularities. Every procedural violation does not give rise to a
violation of public policy. It must be of a fundamental nature. As Fouchard
Gailard Goldman on International Commercial Arbitration points out [E. Gaillard,
J. Savage, eds., (1996), 996], it is consistent with the letter and spirit of
the New York convention that, as a matter of principle, mandatory rules of the
enforcement forum should be considered as part of its public policy when they
reflect that forum’s fundamental concepts of morality and justice, from which
no derogation can be allowed. Our procedural laws are founded upon the rules of
natural justice. It is a fundamental principle of our law. Hence, enforcement
of an arbitral award may be refused on grounds of public policy in the event
that there has been a breach of the rules of natural justice or due process.
This is in addition to the ground enshrined in
Article V.1 (b) of the New York Convention, which is similar to sections 32 (1)
(a) (ii) and 34 (1) (a) (ii) of the Act, which provides that enforcement may be
refused if the party against whom the award is invoked was not given proper
notice of the formation/identity of the tribunal or of the arbitration
proceedings, or was otherwise unable to present his case [See van den Berg, The New
York Convention of 1958, (Kluwer, 1981), pp. 296-311].
Nevertheless, the allegations of the Appellant
are unsustainable in law as more fully explained earlier. The correction made
by the Tribunal falls within the ambit of Section 27 (1) (a) (i) of the Act. The
Appellant had due notice of the application to correct the award. The Appellant
placed its objections before the Tribunal in writing. No application was made
for an oral hearing by the Appellant. The correction made by the Tribunal is
justified in terms of Section 27 (2) of the Act. The Appellant has failed to
prove that the Tribunal failed to make the correction within 14-days of the
receipt of the request. In any event, the time stipulated in Section 27 (2) of
the Act is directory and not mandatory.
For the foregoing reasons, I hold that the
enforcement of the Amended Award is not contrary to the public policy of Sri
Lanka.
Commercial High Court Judgment is Flawed
The Appellant submitted that there are many
flaws in the judgment of the Commercial High Court. In particular, it was contended
that the learned Judge of the Commercial High Court erred in holding that the
Tribunal had made the corrections and delivered the Amended Award on the same
day.
This is obviously erroneous. The Amended Award
was issued later. Nevertheless, there is nothing wrong in dating the Amended
Award on the same day as the Original Award. The Tribunal did not issue a fresh
award. It only made corrections to the Original Award. Any correction made
pursuant to Section 27 (1) of the Act forms part of the original award. It is a
recognised international practice as reflected in Article 38 of the UNCITRAL
Arbitration Rules and Article 33.1 of the Singapore International Arbitration
Centre (SIAC) Rules.
The complaint on the failure on the part of
the learned Commercial High Court Judge to properly evaluate the issues before
it is not without merit. Nevertheless, the order made to enforce the Amended
Award is correct in law.
For all the foregoing reasons, all three
questions of law are answered in the negative.
Accordingly, the appeal is dismissed.
As for costs, I am mindful that there were
four appeals on the same facts. The Appellant shall pay the Claimant a sum of
Rs. 50,000/= as costs for each appeal.
Appeal dismissed.
Judge
of the Supreme Court
P.
Padman Surasena, J.
I
agree.
Judge
of the Supreme Court
K.
Priyantha Fernando, J.
I
agree.
Judge of the Supreme Court
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