BVI Court grapples with principles of foreign law in enforcing multiparty arbitral award
The BVI Commercial Court recently demonstrated its willingness to enforce foreign arbitral awards in the case of PT Ventures SGPS SA v Vidatel Limited. The decision confirms that there are limited circumstances in which the court may refuse to enforce an award issued in a New York Convention state.
PT Ventures, Vidatel and two other entities each held 25 per cent of the shares in Unitel. A dispute arose when PT Ventures alleged that Vidatel and the two other entities acted in breach of a shareholders’ agreement by blocking the appointment of PT Ventures’ nominated director to Unitel’s board and preventing the payment of dividends to PT Ventures.
PT Ventures commenced arbitration proceedings with the ICC in France. However, under the terms of the shareholders’ agreement each shareholder in Unitel was entitled to appoint their own arbitrator, with the tribunal then being able to appoint a president. PT Ventures objected to the arbitrators being appointed as stipulated by the agreement on the basis that their arbitrator would be outnumbered 3-1. PT Ventures argued this would violate the Dutco principle; a mandatory principle of French law which requires equality of the parties in the appointment of an arbitrator. The Vidatel companies argued that the arbitrators should be appointed in accordance with the agreement. In the event, the ICC appointed each member of the five-member tribunal itself.
When the award came to be enforced in the BVI, Vidatel resisted enforcement on the basis that: (i) the tribunal was not properly constituted in accordance with the arbitration agreement; and (ii) two of the appointed arbitrators were not independent and impartial. Both grounds, if made out, would have brought the case within section 86 of the Arbitration Act, which sets out the exhaustive grounds for refusing to recognise/enforce an award.
In determining whether the ICC had been correct to appoint all members of the arbitral tribunal, the BVI Court had to consider whether the Dutco principle would have been contravened had the tribunal been appointed in accordance with the shareholders’ agreement. After considering the evidence on foreign law, the Court held that the three co-respondents should be considered as one party for the purposes of the Dutco principle and that the principle would have been violated had the co-respondents each appointed their own arbitrator. Thus, the ICC was right to have appointed all five members of the tribunal.
On the second issue, the Court found that none of the factors raised was sufficient to impugn the independence and impartiality of the challenged arbitrators.
None of the grounds for refusing enforcement having been made out, the Court allowed the award to be recognised and enforced in the BVI.
The case is a reminder of the very narrow grounds on which the BVI courts may refuse to recognise and enforce foreign arbitral awards, especially those made in New York Convention states. It also demonstrates the willingness of the Commercial Court to grapple with allegations of impartiality as part of the enforcement application in the BVI, rather than to refer such issues back to the courts of the country in which the arbitration took place.