Key takeaways
Court rejects delay tactics on arbitration awards
Attempts to pause enforcement were seen as unfair challenges.
Dubai proceedings didn’t justify a stay
Foreign ownership disputes weren’t enough to block payment.
Final awards must be respected and enforced
English courts support swift action once awards are confirmed.
The Court has resisted attempts to stay execution of enforcement orders, issued in relation to English arbitration awards, because it considered that the stay application, together with proceedings commenced by related parties in Dubai, were collateral attacks on the arbitration awards.
The background facts
Deinon Insurance Brokers LLC (Deinon) was a UAE registered insurance company. Mr Reen was a UK resident. K.M. Dastur Holdings Ltd (KMDH) was an English registered company.
There were two English-seated arbitration proceedings: one between Deinon and Mr Reen, the other between Deinon and KMDH. The disputes arose out of loan agreements and the main issue was whether there were enforceable agreements for the repayment of the principal plus interest under the arrangements that had been made between the parties.
Mr Reen and KDMH were found liable to Deinon under the respective loan agreements. In total, there were four arbitration awards in Deinon’s favour.
Deinon subsequently applied to the English Court, pursuant to s.66 Arbitration Act 1996 (AA 1996), to register and enforce the arbitration awards as though they were judgments of the English Court. The Court issued six enforcement orders and money judgments were entered in Deinon’s favour in the terms of the awards.
The stay application
The defendants, Mr Reen and KMDH, were unsuccessful in their attempts to challenge the arbitration awards, as well as the enforcement orders which became final and immediately enforceable. The defendants then applied for a stay of execution and enforcement of the orders pursuant to CPR 83.7.
The defendants’ case was that Deinon was controlled by Mr Khairaz who wrongfully claimed to be the company’s beneficial owner and who was behind the arbitrations that led to the awards and orders. Mr Khairaz’s status as Deinon’s beneficial owner was being challenged by Mr Dastur and was currently the subject of legal proceedings in Dubai. Mr Dastur was said to be a director of KDMH and a person with significant control over it. However, the defendants were not parties to the Dubai proceedings.
The defendants argued that if Mr Dastur was successful in the Dubai proceedings in demonstrating that Mr Khairaz was not the “rightful owner” of Deinon and that if Mr Dastur was himself in control of Deinon, he would not then seek to enforce the awards or orders. However, if the defendants had to pay Deinon before the Dubai proceedings were concluded, they were at risk of real prejudice.
It was not in dispute that Deinon’s shareholders were Mr Khairaz (49%) and a local Dubai sponsor. It was also not in dispute that KMDH was a holding company whose shareholders were members of the Dastur family and that Deinon was not part of the KM Dastur Group.
The Commercial Court decision
The defendants/appellants would have to show special circumstances had arisen that made it inexpedient to enforce a money judgment or order. The orders entered on the awards conclusively determined that the sums were payable immediately. All recourse against those awards had been exhausted. Failing full payment, Deinon should be free to invoke the full enforcement machinery available to it in this jurisdiction.
An English award debtor or judgment debtor entered on an English seated award was only entitled to challenge the finality of the award or have recourse against it or the judgment through the procedures permitted under the AA 1996. In the Court’s view, the applicants could not invoke, as special circumstances to support a stay of execution of English enforcement litigation, the Dubai proceedings which were plainly brought in order to manufacture a defence against the execution of the awards and the consequent orders.
Furthermore, the fact that the Dubai proceedings were not brought by the appellants reinforced that those proceedings did not provide grounds to interfere with the execution of the orders. No judgment of the Dubai court could legitimately find that Mr Reen or KMDH were not liable for the sums found to be due and owing in the final and binding awards. Furthermore, the relief sought in the Dubai proceedings was declaratory orders as to the beneficial ownership of Deinon, which did not touch on the appellants’ indebtedness to Deinon.
The Court concluded that there were no legitimate grounds for a stay. The loans should have been repaid years ago. The Dubai proceedings, when combined with the stay application, were a collateral attack on the awards.
Comment
The Court clearly thought that the appellants in this case were engaged in tactical manoeuvres to delay the time when they would have to pay Deinon. Its decision reflects the English courts’ policy of upholding, recognising and enforcing valid and binding arbitration awards.