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ICLG > African Law & Business - News and Analysis > Betamax: Supreme Court annuls arbitrators’ decision

Betamax: Supreme Court annuls arbitrators’

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Andrew Mizner | 20 Decembe

Published by: Duncan Bagshaw at 05/06/2019

Duncan Bagshaw of Howard Kennedy looks at a dispute over a contract which the Mauritius Supreme Court found
“shakes the very foundations of the public financial structure and administration of Mauritius”.
Eversheds Sutherland target
The Mauritius Supreme Court has handed down a judgment annulling the arbitral award issued in the dispute between
By restructuring its Africa group
the Mauritian State Trading Company (STC) and Betamax Limited. Sutherland hopes to forge greate
and create closer links with its o
Mauritius has for several years sought to position itself as a centre of excellent for international arbitration, by adopting Paris and the Middle East.

modern, supportive laws, offering sophisticated international arbitral institutions and providing for a specialist judiciary Andrew Mizner | 07 October, 2

to handle relevant matters before the courts.

BACKGROUND

Betamax is a Mauritian company which is part of the Bhunjun group, owned by the Bhunjun family, under the leadership
of patriarch Soodursan Bhunjun.

The purpose of Betamax was to provide petroleum shipping services to Mauritius as part of the government’s strategy
to ensure adequate provision of refined petroleum products on the island.
African Promise for arbitrati
In November 2009 Mauritius was under a government led by Prime Minister Navin Ramgoolam. Betamax entered into a
Ensuring that African arbitrators
contract with STC to provide the exclusive use of the vessel, Red Eagle for the importation of petroleum products from represented on international arb
in Africa-related arbitrations has
India, in return for payment of the cost of 100% of the hire capacity of the vessel (whether or not it was fully loaded)
priority as the ‘African Promise’ i
and giving Betamax a right of first refusal to transport any petroleum products imported by STC in excess of Red
Follow us on LinkedIn Angela Bilbow | 04 October, 2
Eagle’s capacity.
The contract attracted strong criticism from political opponents ofPractice
the government, on the grounds
areas Jurisdictions Compare &of the rates
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charged for transport, the favourable deal terms and the fact that the deal was done with the Bhunjun family's
company, who were perceived to be close to Dr Ramgoolam.
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In December 2014, the government was defeated and replaced by a new government, led by Sir Anerood Jugnauth,
long-time political opponent of the Ramgoolams.
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Less than two months later, the government resolved to terminate the contract, on the grounds that mandatory public
procurement rules had not been complied with. This decision attracted mixed responses. Many commentators took the IBASeoul: Africa looks to the

view that the government was overturning a decision which was unfavourable to Mauritius and motivated by The International Bar Associatio
inappropriate personal relationships. Others felt that the government would damage Mauritius’ reputation by focused look at Africa’s commer
also associated challenges. Part
terminating a commercial contract. round up from Seoul.

Ben Rigby | 26 September, 20

Perhaps predictably, the termination of the contract by the STC was responded to with an arbitration claim by Betamax,
brought before the Singapore International Arbitration Centre (SIAC), albeit seated in Mauritius. Various arguments
were advanced before well-known arbitrator, Michael Pryles, including most significantly that the contract was granted
to STC in breach of mandatory public procurement rules.

The arbitrator rejected all of the arguments advanced by the STC and gave an award in favour of Betamax of around
MUR 4.7 billion (approximately USD 132 million). Betamax promptly applied to enforce the award in Mauritius. In
Mauritius, some commentators took the view that the government ought to pay the award voluntarily, or risk further
damaging the reputation of Mauritius. Nevertheless, the STC resolved to continue to contest the matter.
Reed Smith adds experience
The arbitration being seated in Mauritius, STC was entitled to resist enforcement in Mauritius and to apply to set aside arbitration lawyer
the award under the Mauritian International Arbitration Act 2008. The provisions of the Act on enforcement and setting
A Paris-based lawyer with exper
aside of awards are similar to those in the UNCITRAL Model Arbitration Law. arbitrations across Europe and F
has joined Reed Smith as a partn

THE CHALLENGE Naomi Jeffreys | 24 Septemb

The setting-aside proceedings in Mauritius were strongly contested, featuring leading Mauritian and English counsel on
both sides. James Guthrie QC (3 Hare Court, London), Alain Choo-Choy QC (One Essex Court, London) and Ravin
Chetty SC (5 St James Court, Mauritius) led the team for STC, whilst Stuart Isaacs QC (King & Spalding, London) and
Rishi Pursem SC (Benoit Chambers, Mauritius) led the team for Betamax.

The issues of particular interest were whether the arbitrator had jurisdiction, if the contract was unlawful due to failure
to comply with the public procurement legislation, whether the arbitrator reached the wrong conclusion on whether the
contract had been granted in breach of the public procurement legislation, and if so whether that meant that the arbitral
Kenyan lawyer takes interna
award could be set aside on the grounds that it breached public policy. practice to Morrison & Foers

Challenges to awards based upon a breach of public policy are rare and few of them succeed. Betamax relied upon Morrison & Foerster is seeking to
Asian arbitration practice to othe
authorities relating to the interpretation of the concept of public policy in the context of international arbitration. Whilst the hire of a London-based inter
the Act (like the UNCITRAL Model Law) permits the court to set aside an international arbitral award on the grounds partner with an established Afric

that it contravenes the public policy of Mauritius, there is a strong argument that that is limited to the international Andrew Mizner | 19 Septembe

public policy of Mauritius. The Mauritian Supreme Court previously took this view in Cruz City 1 Mauritius Holdings v
Unitech Ltd, holding that “it is public policy in the international context that will matter”.

The Supreme Court in Betamax drew a distinction between “international public policy” and "the public policy of
Mauritius”, noting that the former expression is not used in the Act. However, having briefly reviewed the approaches of
courts in no less than seven other jurisdictions, and applying the approach in Cruz City, the Supreme Court did
recognise that “the notion of public policy is more restricted when applied against enforcement of international
arbitration awards” and “the narrower category of international public policy as opposed to purely domestic policy is
confined to the violation of fundamental concepts of the legal order in the state concerned”. French oil company takes A
stake
Having decided to approach the matter in this way, the Supreme Court was firmly of the view that the public
The purchase of a USD 80 millio
procurement rules were part of Mauritian public policy, and breach of them could be of sufficient fundamental
operations in Angola has expand
importance even
Follow usto
on justify
LinkedInthe annulment of an international arbitration award. & Prom in the country.

Andrew Mizner | 19 August, 2

On a detailed review of the public procurement law, the Mauritian Practice
Supreme Court
areas was satisfied
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been granted to Betamax in breach of the mandatory procurement rules, and that such a breach would make the
enforcement of the award contrary to public policy.
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This decision may cause some concern amongst international arbitration lawyers with an interest in Mauritius. Whilst
the Supreme Court carried out a very careful review of the law on public policy, there are likely to be those who consider
that theALB
decision elevated
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status of an alleged
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deciding that such a breach could justify setting aside an international arbitration law.

Betamax’s argument was that, far from being a matter of public policy, the attack on the award amounted to an appeal Shah renews LCIA Africa po

because the STC had argued before the arbitrator that the contract had been granted in breach of public procurement Stephenson Harwood’s head of A
appointed as head of the London
law, and the arbitrator had decided that there had been no breach. Therefore, it was argued, the attempt to overturn the
Arbitration’s African Users’ Coun
award was no more than an appeal on the merits (or on the grounds of an error of law), which is not available in arbitration body’s users and thei

Mauritius except where the parties have expressly agreed to it, and certainly not where the SIAC rules apply, which Andrew Mizner | 12 June, 201

exclude any right of appeal.

In rejecting this argument, the Supreme Court relied upon authorities which indicate that a breach of competition law
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may be sufficiently to justify setting aside on public policy grounds. For example, the European Court of Justice’s
decision in Eco Swiss China Time Ltd v Benetton International NV. The Court also relied upon Merkin and Flannery’s
book on the English Arbitration Act 1996 which suggests that whilst a breach of competition law may justify setting ADR oil and gas
aside an award on public policy grounds, there remains doubt as to whether any such breach is sufficient. The French
Arbitration Shipping d
courts have made it clear that only serious breaches will be sufficient and the court will not conduct a full review of the
decision, but only a minimal review to identify serious cases. Contracts Mauritius S

It is also not entirely clear whether the reliance by the court on the analogy of competition law amounted to sound India
reasoning. Competition law appears to have been quite widely recognised as a mandatory area of law which can fall
within public policy. Public procurement rules, however, have not previously been found to amount to such a
fundamental mandatory area of law that they can be considered part of public policy in the international context.
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The contrary view to that taken by the Mauritian Supreme Court would distinguish public procurement laws from the
sort of fundamental principles to which international public policy is limited. If it could have been established that the
contract had been granted through clear corruption, then that would be a different matter. However, public procurement Howard Kennedy bolsters
rules generally are complex provisions, highly specific to the national concerns of the state in question. If they apply to 19/03/2019

the contract in question, an arbitrator is generally able to consider whether there has been a breach. One wonders
South African M&A expec
whether it was correct for the Supreme Court to treat them as part of the relevant public policy.
2019
29/01/2019
The Supreme Court’s decision in Betamax may attract some criticism, but whether one agrees with its conclusion or
not, it is another example of sophisticated decision-making by the Mauritian Supreme Court, taking into account a wide
BREAKING: Haley relocat
range of international authorities to resolve difficult arguments. Johannesburg as Coving
Africa office
It seems unlikely that parties considering Mauritius as a seat of arbitration will be significantly deterred by this 26/10/2018
judgment, although some may feel that concern arises from the fact that the decision was made by the Mauritian court
in favour of the Mauritian government. Dentons’ Mauritian merg
18/10/2018
It remains to be seen whether Betamax decides to appeal against the decision to the Judicial Committee of the Privy
Council in London, the availability of which is another feature of Mauritius which attracts parties to choose it as a seat. Making a MARC on Maur
An appeal would at least have the advantage of ensuring that if the decision was correct, it is confirmed by another 16/10/2018

court.
Rudolph looks forward
Duncan Bagshaw is an international arbitration and litigation partner specialising in energy disputes with Howard 11/09/2018

Kennedy in London. He was previously registrar of the LCIA-MIAC

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