IPOC International Growth Fund Ltd Defendant/Appellant v LV Finance Group Ltd Claimant/Respondent

• Jurisdiction: British Virgin Islands
• Judge: Rawlins, J.A.,Hugh A. Rawlins,Brian Alleyne,Denys Barrow
• Judgment Date: 18 June 2007
• Judgment citation (vLex): [2007] ECSC J0618-8
• Court: Court of Appeal (British Virgin Islands)
• Docket Number: CIVIL APPEAL NO.30 OF 2006
• Date: 18 June 2007

[2007] ECSC J0618-8

IN THE COURT OF APPEAL

Before:

The Hon. Mr. Brian Alleyne, SC Chief Justice [Ag.]

The Hon. Mr. Denys Barrow, SC Justice of Appeal

The Hon. Mr. Hugh A. Rawlins Justice of Appeal

CIVIL APPEAL NO.30 OF 2006

In the Matter of Part VII and Part IX of the Arbitration Act, Cap. 6

and

In the Application for Leave to Enforce An Arbitration Award and for entry of Judgment

Between:

IPOC International Growth Fund Limited

Defendant/Appellant

and

LV Finance Group Limited

Claimant/Respondent

Appearances:

Mr. Peter McDonald Eggers for the Defendant/Appellant

Mr. Richard Millett, QC, with him Mr. Jeffrey Elkinson and Mr. Richard Evans for the Claimant/Respondent

Rawlins, J.A.

1 The defendant/appellant, IPOC, is an international Business Company incorporated in Bermuda. The claimant/respondent, LV Finance, is also an international Business Company. It is incorporated in the British Virgin Islands ("the BVI). Both companies are allegedly owned by Russian nationals. LV Finance was granted 2 Partial Convention Awards against IPOC in arbitration proceedings in Zurich, Switzerland. The arbitration proceedings were instituted by IPOC under an option agreement between the parties dated 10 ^th April 2001 ("the April Option Agreement"). The shares in OAO Megafon, a Pan-Russian mobile telecommunications company, are the subject of the agreement. In LV Finance Group Limited v IPOC International Growth Fund Limited, 1 LV Finance obtained an order that permitted the registration and enforcement of those Convention Awards in Bermuda.

2 LV Finance applied, ex parte, to the High Court in the BVI, for an order to register and enforce the Convention Awards pursuant to section 35 of the Arbitration Act 2 and rule 43.10 of CPR 2000. In a judgment dated 13 ^th October Joseph-Olivetti J granted the application. The order stated as follows:

• "(1) The awards made by the Arbitral Tribunal consisting of Dr. Daniel Wehrli, Chairman, Ian L. Meakin and Dr. Boris O. Kojevnikov at Zurich, Switzerland on the 19 ^th day of October 2004 ('the First Partial Award') and on the 16 ^th May 2006 ('the Second Partial Award) (collectively 'the Awards') together with their findings are hereby recognized by this court;

• (2) The Claimant has leave to enforce the following declaratory judgments in the Awards by entering the following declaratory judgment:

  • (i) The defendant has not validly exercised the April Option under the April Option Agreement (as defined in the Awards);

  • (ii) The April Option Agreement (as defined in the Awards) is an illegal transaction; its purpose and performance are illegal, and it is therefore unenforceable."

• (3) The costs of this application and of any judgment entered hereunder is summarily assessed at $3,500 to the Claimant.

3 IPOC applied for an order setting aside the ex parte order. The application was supported by the affidavit of J. Danvers Baillieu. It was scheduled for hearing on 26 ^th September 2006. On 22 ^nd September 2006, IPOC filed another affidavit deposed by Ricardo E. Ugarte, one of the principal advocates in the Zurich arbitration. On the same date, IPOC applied to adjourn the hearing of its own application to set aside the ex parte order pending the decision on its appeal against the second Convention Award to the Swiss Supreme Court. The judge dismissed that application and heard the application to set aside as scheduled on 26 ^th September 2006. At that hearing, on a preliminary point, the learned judge refused to admit or to rely on the Ugarte affidavit. After a full hearing, she also dismissed the application to set aside the ex parte enforcement order and issued the following order:

• (i) IPOC's application to set aside the order dated 25 ^th July 2006 is dismissed with prescribed costs to LV Finance in accordance with CPR Part 65.5(2)(iii).

• (ii) The said order of 25 ^th July 2006 is amended by deleting paragraph 1 thereof and making the consequential changes to the remaining paragraphs.

• (iii) By adding at the end of the existing paragraph 2(i) the words " by its purported option notices of July 29 2003 and August 12, 2003".

• (iv) LV Finance to draw up a formal order reflecting this conclusion.

4 The order was entered and filed on 24 ^th October 2006 and states as follows:

• (1) 9 and 31 of the affidavit of J Danvers Baillieu sworn on 11 August 2006 are struck out pursuant to CPR rule 30.3(3).

• (2) IPOC's Application to set aside the order dated 25 ^th July 2006 ("the July Order") is dismissed with prescribed costs to LV Finance in accordance with CPR Part 65.5(2)(iii).

• (3) The July Order is amended so that:

  • (a) Paragraph (1) thereof is deleted, and consequential numbering amendments are made to the remaining paragraphs of the July Order; and

  • (b) The following words are added at the end of the existing paragraph 2(i) thereof: " by its purported option notices of July 29 2003 and August 12, 2003".

  • (c) The operative orders of the amended July Order will therefore read as follows:

    • (1) The Claimant has leave to enforce the following declaratory judgments in the Awards by entering the following declaratory judgment:

      • (i) The defendant has not validly exercised the April Option under the April Option Agreement (as defined in the Awards);

      • (ii) The April Option Agreement (as defined in the Awards) is an illegal transaction; its purpose and performance are illegal, and it is therefore unenforceable."

    • (2) The costs of this application and of any judgment entered hereunder is summarily assessed at $3,500 to the Claimant.

• (4) IPOC shall pay LVFG's costs of IPOC's said Notice of Application.

The appeal

5 IPOC appealed on 5 grounds. The first ground states, in effect, that the learned judge erred when she dismissed the application to admit or to rely on the Ugarte affidavit. The second ground states that the judge erred by refusing to hold that the partial awards were unenforceable. IPOC's main contention on this ground is that the judge should have found the Awards unenforceable because they are declaratory in nature and because they are Convention awards, which are not amenable to the enforcement of compliance procedures. The third ground of appeal states that the judge erred when she refused to set aside her ex parte order because the Awards are unenforceable on account of public policy. IPOC's main contention on this ground is that the judge should have found the Awards unenforceable on the ground that they were tainted by illegality since the Arbitration Tribunal stated that there was illegal conduct by both parties. The fourth ground of the appeal states that the judge erred by not holding that the Awards should not be enforced because they were affected by act of state which renders the Agreements non-arbitrable.

6 The fifth ground of appeal is stated in the alternative. It states that if this court does not allow the appeal on any of the other grounds, it should find that the judge erred when she refused to grant IPOC's application to adjourn the hearing. However, as the parties agree, this ground was rendered redundant because the Swiss Supreme Court dismissed IPOC's appeal which challenged the Second Partial Arbitration Award. The parties informed this court of the decision of the Swiss court in February 2007. That court subsequently handed down the written decision on 19 ^th February 2007. The parties also informed this court that the decision of the Swiss Supreme Court makes it necessary for them to make submissions on whether that decision also affects other issues that were canvassed in this appeal. They therefore prayed for an opportunity to make submissions on this during the June sitting of this court in the BVI.

7 The decision of the Swiss Supreme Court confirms the Second Convention Award. Had that court set aside the award, the appeal would have fallen away altogether because there would be no Award that could be the subject of enforcement proceedings. When submissions were heard on 7 ^th June 2007, learned counsel for the parties informed this court that they were in agreement that the decision of the Swiss Supreme Court does not affect the appeals on the grounds of enforceability and public policy. Learned counsel for IPOC insisted that that decision does not affect the appeal as it relates to natural justice/the Ugarte affidavit and arbitrability/act of state because this court must determine all of the grounds in accordance with the law of this forum. On the other hand, learned counsel for LV Finance contended that the Swiss decision means that the appeal has fallen away on these 2 grounds.

8 I think that I should first consider these 2 latter grounds of appeal. In so doing, if it is determined that the decision of the curial court affects the appeal on any of these grounds I shall not go on to consider whether the learned judge fell into error on the particular ground. Having considered those grounds, I shall then determine the appeal on the grounds of non-justiciability because of public policy and enforceability. First, however, in order to put this appeal into proper legal context, I shall set out the basis for the enforcement of Convention Awards in this Territory.

The legal basis for enforcement of Convention Awards

9 The primary basis for the enforcement of Convention Awards in this Territory is the Arbitration Act. It provides for domestic arbitration and the enforcement of the orders issued on such arbitration. The Act also provides for the enforcement of Convention Awards with which the present case is concerned. The Act defines a Convention award as an award that is made in pursuance of an arbitration agreement in the Territory or a State, other than the Territory or the United Kingdom, which is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on International Commercial...