Privy Council permits enforcement of arbitral award under New York Convention despite alleged lack of due process
The Judicial Committee of the Privy Council has handed down its judgment in Gol Linhas Aereas SA v MatlinPatterson Global Opportunities Partners (Cayman) II LP and others [2022] UKPC 21. The judgment canvasses a number of novel points concerning the enforcement of arbitration awards in the Cayman Islands under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (commonly known as the New York Convention), but it will be of equal interest to practitioners in other common law jurisdictions that have implemented the Convention.
The Convention provides a set of international legal standards for the recognition and enforcement of arbitration awards, and it is widely recognised to be the foundation of effective international arbitration. Some 160 countries have implemented the Convention, including the Cayman Islands, British Virgin Islands, Bermuda, Cyprus and Luxembourg.
The Convention also provides the grounds on which a court may decline to recognise and enforce an arbitral award made overseas, however it is uncontroversial that a court should construe those grounds narrowly in light of the Convention’s objective of facilitating the domestic enforcement of foreign arbitral awards.
In Gol Linhas, the award debtor sought to impugn a Brazilian arbitration award on a number of the grounds provided for in the Convention, including that there had been a failure of due process. The debtor alleged that, in the arbitration, the creditor had made a claim under article 60 of the Brazilian Civil Code founded on the allegation that certain figures in a financial statement had been deliberately overstated. The tribunal was satisfied that the overstatement occurred, but went on to reject the article 60 claim and instead awarded damages under article 148. The debtor argued that, as the creditor had not advanced an article 148 claim and the tribunal had not raised it with the parties, it had been denied a fair opportunity to be heard on that claim.
In rejecting that argument, the Privy Council observed that the meaning of “unable to present his case” in the Convention should be interpreted by reference to the law of the jurisdiction in which recognition was sought (rather than international standards or the law of the arbitration), and that there was no need to demonstrate causality between the asserted breach of due process and the tribunal’s decision. The Privy Council went on to hold that, while it would have been preferable for the arbitral tribunal to invite the parties to comment on the potential application of article 148 before making its decision, it was not persuaded that this amounted to a sufficiently serious denial of procedural fairness given that (among other considerations) the underlying factual allegations had been proven.
The Privy Council ultimately rejected the award debtor’s other arguments, leaving the award creditor free to enforce its arbitration award in the Cayman Islands.
