Bowled Out!

Federal Court overturns the Sri Lanka Cricket Case - a commentary by Tan Lai Yee

 

 

 

INTRODUCTION

 

The Federal Court recently had occasion to consider the treatment of foreign arbitral awards under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards Act 1985 (“CREFA”) in Lombard Commodities v Alami Vegetable Oil Products Sdn Bhd [2010] 2 MLJ 23.

 

This recently reported decision of the Federal Court has effectively overturned the decision of the Court of Appeal in Sri Lanka Cricket v World Sport Nimbus Pte Ltd [2006] 2 CLJ 316 (covered in Issue No. 2/2006 of LEGAL INSIGHTS) to the effect that the non-gazetting of a state as a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“New York Convention”) is not fatal to an application for the enforcement of an arbitral award pursuant to CREFA.

 

 

 

BACKGROUND

Briefly, Lombard Commodities Ltd (“Appellant”) obtained an arbitral award dated 10 July 2002 against Alami Vegetable Oil Products Sdn Bhd (“Respondent”) pursuant to an arbitration whose seat was in London. The Appellant applied to the High Court of Malaya to enforce the award against the Respondent in Malaysia.

 

The above case essentially turns on the interpretation to be given to section 2(2) of CREFA which states that “the Yang di-Pertuan Agong may, by order in the Gazette, declare that any State specified in the order is a party to the New York Convention, and that order shall, while in force, be conclusive evidence that that State is a party to the said Convention”.

 

 

 

ISSUE

 

The only issue to be decided by the Federal Court was whether the failure to issue a Gazette notification pursuant to section 2(2) of the CREFA declaring the United Kingdom to be a party to the New York Convention renders a convention award made in the United Kingdom unenforceable in Malaysia, notwithstanding the fact that all the conditions ordinarily required for the enforcement of the said award under the CREFA have been satisfied?

 

 

 

DECISIONS OF THE HIGH COURT AND THE COURT OF APPEAL

 

The High Court allowed the enforcement of the arbitral award pursuant to section 27 of the Arbitration Act 1952 and CREFA.

 

The Court of Appeal reversed the decision of the High Court and held that the requirement of a gazette notification is a statutory requirement mandated by section 2(2) of CREFA. The Court of Appeal stated that it was bound by the earlier Court of Appeal decision by Gopal Sri Ram JCA in Sri Lanka Cricket.

 

The grounds given by Gopal Sri Ram JCA in holding that the gazette notification was mandatory in nature in Sri Lanka Cricket were cited by the Court of Appeal in Lombard as follows:

 

(a) the requirement of gazetting a country as a part of the New York Convention must have been intended to be mandatory in effect as the right to enforce a convention award pursuant to section 3(1) of CREFA is a benefit only applicable through the Act;

(b) section 2(2) of CREFA essentially hinges on the requirement of the gazette notification such that no other proof of that fact would be necessary once that has been complied with;

(c) the purpose of CREFA is to give effect to the New York Convention subject to certain reservations, such reservation being the issuance of the gazette notification.

 

 

 

THE FEDERAL COURT’S DECISION


 

The Majority Judgment

 

The Federal Court, by a 2:1 majority, overturned the Court of Appeal’s decision, holding that the gazette notification is not a mandatory requirement before a foreign award made in a state of a contracting party to the New York Convention can be regarded as a convention award.

 

In the opinion of Arifin Zakaria CJ, the Court of Appeal's decision in Sri Lanka Cricket which has the effect of imposing an additional condition before a convention award could be enforced in this country would be contrary to the stated objective and purpose of CREFA and would undermine the regime for the enforcement of a convention award.

 

 

The reasons for the majority decision of the Federal Court can be summarized as follows:

 

(a) the gazette notification is not a substantive requirement under CREFA but rather a provision which is “evidential in effect” as opposed to being a “substantive provision” of the Act as section 2(2) of CREFA is situated in the interpretation provision of the Act;

(b) the aims and objectives of section 3(1) of the CREFA, read together with the relevant provision of the New York Convention, namely Article III, and section 27 of the Arbitration Act 1952, was to give effect to convention awards to be enforceable in Malaysia to be treated as a domestic award;

(c) the requirement for gazetting cannot be meant by the Legislature as imposing a mandatory requirement as that would be contrary to Article III of the New York Convention which prohibits convention awards from being subjected to more onerous conditions on the recognition or enforcement of such awards than those imposed on the recognition and enforcement of other domestic arbitral awards.

 

 

The majority of the Federal Court opined that in order to determine whether a state is a contracting state to the New York Convention, evidence can be led to show that the particular state is a contracting state under the Convention. The majority of the Court further opined that for this purpose, the United Nations Treaty Collection may be consulted for authoritative status information on the UNCITRAL Convention deposited with the Secretary General of the United Nations.

 

 

 

The Dissenting Judgment

 

Gopal Sri Ram FCJ, in dissenting with the decision of the majority, essentially reiterated the position propounded in Sri Lanka Cricket. His Lordship was particularly concerned with the question as to “who is a party to the New York Convention”. In His Lordship's opinion, the answer is found in section 2(2) of CREFA. Once a state has been gazetted and for so long as the order remains in force, it is conclusive that the particular state is a party to the New York Convention. It follows, His Lordship added, that if there is no order gazetted, there can be no question of there being any conclusive evidence as to its contents.

 

 

 

AN ANALYSIS

The importance of the Federal Court's decision in Lombard is that it overturns Sri Lanka Cricket and makes clear the position as regards those applications for enforcements made pursuant to CREFA which are still pending before the Courts.

 

Section 38(4) of the new Arbitration Act 2005 defines a "foreign State" as a State which is a party to the New York Convention. The omission of any reference in this sub-section to gazette notification eliminates the problem that arose in Sri Lanka Cricket. Accordingly, the absence of a gazette notification will not be an impediment to applications made under Sections 38 and 39 of the Arbitration Act 2005 to enforce awards from contracting parties to the New York Convention.

 

CONCLUSION

The decision by the Federal Court in the above case demonstrates that the Courts will now only be concerned with the status of a party as a contracting party to the New York Convention. Notably, this decision is authority that the absence of a gazette notification has no impact on a state being regarded as a contracting state to the New York Convention provided that at the time the award is published, the existing status of the particular state is that of a contracting state under the New York Convention.

 

 

TAN LAI YEE ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it )

 

 
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