What just happened?

The Commercial Court upholds order that enforces an arbitration award against public policy challenge under s.103(3) Arbitration Act 1996 in Alexander Brothers Ltd v Alstom Transport SA.[1]

What does it mean?

The case involved Alstom, a multinational company that manufactures tube carriages for the London Underground that was being pursued in the English Commercial Courts by a Hong Kong firm called Alexander Brothers Limited over suspected corrupt payments worth £2m.[2] In a lengthy and learned Judgment rejecting the public policy challenge, Cockerill J considered the leading authority in this area, the majority decision of the Court of Appeal in Westacre Investments Inc. v Jugoimport-SPDR Holding.[3] She described that aspect of Westacre as not “entirely satisfactory” and giving rise to “no clear statement of principle in this area.”[4] Thus, rejecting the public policy challenge that was made in the case. Information on this case was only disclosed to the public once the case was heard in Court. At LawMiracle, we assess whether the scope of confidentiality in an arbitration proceeding is absolute in English Arbitration law

How does it affect the legal industry?

This case indicates the strong affection of UK courts seeking to protect confidentiality in arbitration. For our non-law readers, arbitration is a form of alternative dispute resolution that allows parties to avoid the expensive and time-consuming process of litigation in courts. This is because of the private setting of arbitration, which allows parties to remain confident in discussing trade secrets or business practices that are generally protected by the principle of confidentiality. In this context, trade secrets could potentially be an innovative software that is currently being developed by the company prior to being registered as a patent. Interestingly, other countries such as Australia require parties to expressly agree to confidentiality prior to commencing arbitration.[5] In contrast, English arbitration has consistently used an implied principle of confidentiality to protect parties’ interests. In layman terms, it means that there are automatic obligations for parties in arbitration to remain confidential.

Beyond the legal argumentation, practical implications in private arbitration may question the scope of confidentiality in UK arbitral proceedings. At LawMiracle, we believe that confidentiality could be leaked, where a person provides financial support to one of the parties involved in arbitration dispute by paying off expenditure such as the party’s legal representation.[6] The text in Russell on Arbitration, rightly notes that “where a third-party funds one party, the confidential information made present during the arbitration proceeding may potentially leak.”[7] This is because, the funder’s decision to invest is subject to the information such as; ‘the witness evidence of the opposing party,’ that this individual will receive from the dispute. It is after receiving this information, the funder will be in a position where they will have to review the progress that is taking place in the arbitration, in order to decide whether they should continue providing financial support to this party.[8] Thus, the party that is getting funded will breach the duty of confidentiality if this existence of the funder is not disclosed to the tribunal.[9] However, this factor is entirely subjective to the knowledge of the opposing party and the consciousness of the party that is receiving funds from this third party as to where this existence is not acknowledged during the arbitral proceedings, the scope of confidentiality; implied; expressed or made under a statutory basis[10] will not be effective in practice.[11]

Written by Amir Yasin

Assessing firms:

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References:

[1] Orlando Gledhill QC, ‘Commercial Court upholds order enforcing arbitration award against public policy challenge under s.103(3) Arbitration Act 1996’ (One Essex Court). Alexander Brothers Ltd v Alstom Transport SA and Anr [2020] EWHC 1584 (Comm)

[2] David Pegg and Rob Evans, ‘Alstom embroiled in £2m corruption row with Hong Kong firm’ (The Guardian, 13th May 2020)

[3] Westacre Investments Inc. v Jugoimport-SPDR Holding Co. Ltd. and Ors [2000] 1 QB 288 - The dispute arose from a ‘consultancy’ agreement for the procurement of contracts for the sale of military equipment in Kuwait. Westacre commenced arbitration, claiming payment of its ‘consulting fee’. Jugoimport defended the claim on the grounds that, in violation of Kuwaiti law and public policy, the contract involved Westacre bribing various Kuwaitis for entering sales contracts with Jugoimport. The agreement between Westacre and Jugoimport was governed by Swiss law, and provided for arbitration in Switzerland. The arbitral tribunal found that there was no evidence of corruption and that lobbying by private enterprises to obtain public contacts was not illegal under Swiss law. The award was first challenged in the Swiss Federal Court, which rejected the challenge on the basis that allegations of corruption had already been dealt with and rejected by the arbitral tribunal. The award was later challenged in English courts, where Jugoimport filed new evidence in support of its allegation of corruption. English courts rejected the challenge to enforcement because the arbitral tribunal itself had considered the allegations of bribery and found that they had not been substantiated; Moreover, ‘lobbying’ (seek to influence a legislator on an issue) was not an illegal activity under the governing law chosen by the parties. The court was faced with international arbitration awards that had been upheld by the Swiss Federal Tribunal, and therefore had to balance the public policy of sustaining international arbitration awards. - https://simplestudying.com/westacre-investments-inc-v-jugoimport-spdr-holding-co-ltd/#:~:text=Westacre%20Investments%20Inc%20v%20Jugoimport%2DSPDR%20Holding%20Co.,of%20military%20equipment%20in%20Kuwait.&text=The%20agreement%20between%20Westacre%20and,provided%20for%20arbitration%20in%20Switzerland.

[4] Orlando Gledhill QC, ‘Commercial Court upholds order enforcing arbitration award against public policy challenge under s.103(3) Arbitration Act 1996’ (One Essex Court) and Geert Van Calster, ‘Alexander bros v Alstom. A reminder of the relevance of EU law for New York Convention refusal of recognition of arbitral awards on ordre public grounds.’ (GAVC LAW, 18th June 2020)

[5] ‘Quick guides: Dispute Resolution Clauses: an overview’ (Ashurst, 12th February 2020)

[6] Read Chapter 1 – Introduction, Section 7. - Third Party Funding of Arbitration Proceedings, Para 1-042 in in David St John Sutton, Judith Gill, Matthew Gearing, Russell on Arbitration (24th edn, Sweet & Maxwell 2015) < https://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&context=402&crumb-action=replace&docguid=IFAEAD0F099C811E5957CE7DC5EC494E5> Date Accessed 22/05/2019. The possibility of this potentially happening can be seen in Arkin v Borchard Lines Ltd (Costs Order) [2005] EWCA Civ 655; [2005] 1 W.L.R. 3055 and Excalibur Ventures LLC v Texas Keystone Inc [2014] EWHC 3436 (Comm); [2014] 6 Costs L.O. 975.

[7] Read Chapter 1 – Introduction, Section 7. - Third Party Funding of Arbitration Proceedings, Para 1-047 in in David St John Sutton, Judith Gill, Matthew Gearing, Russell on Arbitration (24th edn, Sweet & Maxwell 2015) < https://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&context=402&crumb-action=replace&docguid=IFAEAD0F099C811E5957CE7DC5EC494E5> Date Accessed 22/05/2019.

[8] Read Chapter 1 – Introduction, Section 7. - Third Party Funding of Arbitration Proceedings, Para 1-047 in in David St John Sutton, Judith Gill, Matthew Gearing, Russell on Arbitration (24th edn, Sweet & Maxwell 2015) < https://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&context=402&crumb-action=replace&docguid=IFAEAD0F099C811E5957CE7DC5EC494E5> Date Accessed 22/05/2019.

[9] Read Chapter 1 – Introduction, Section 7. - Third Party Funding of Arbitration Proceedings, Para 1-047 in in David St John Sutton, Judith Gill, Matthew Gearing, Russell on Arbitration (24th edn, Sweet & Maxwell 2015) < https://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&context=402&crumb-action=replace&docguid=IFAEAD0F099C811E5957CE7DC5EC494E5> Date Accessed 22/05/2019.

[10] See s.18(2)(a)(i) of Hong Kong Arbitration Ordinance 2011 (Cap.609) and article 30(1) of the LCIA Arbitration Rule 2014

[11] Read Chapter 1 – Introduction, Section 7. - Third Party Funding of Arbitration Proceedings, Para 1-045 and Para 1-047 in in David St John Sutton, Judith Gill, Matthew Gearing, Russell on Arbitration (24th edn, Sweet & Maxwell 2015) < https://login.westlaw.co.uk/maf/wluk/app/document?src=doc&linktype=ref&context=402&crumb-action=replace&docguid=IFAEAD0F099C811E5957CE7DC5EC494E5> Date Accessed 22/05/2019.

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