The Privy Council has delivered its verdict in the Betamax appeal case today.
The State of Mauritius will have to foot the bill of Rs 5,6 billion to the owners of Betamax as the judgment has gone against the State Trading Corporation.
The facts of the case as summed up by Privy Council –
(1) In the context of an application to set aside an arbitral award in favour of the appellant for the respondent’s breach of contract, was the Supreme Court entitled to decide whether the contract been entered into in breach of public procurement rules? If yes, was the contract subject to public procurement rules and awarded illegally in breach of those rules?
(2) Did the alleged breach of public procurement rules justify setting aside the arbitral award as contrary to the public policy of Mauritius?
Facts
The respondent, State Trading Corporation (STC) is a public corporate body and trading arm of the Government of Mauritius responsible for the importation of essential commodities. In 2009, it entered into a contract with the appellant, Betamax, for the transport of petroleum products to Mauritius (the Contract). The Contract provided for arbitration under the rules of the Singapore International Arbitration Centre. In 2015, following a general election and change of government, the Cabinet issued a decision to terminate the operation of the Contract on the basis that it had been entered into in breach of the Mauritian Public Procurement Act 2006 (the PPA), which entered into force in 2008. Following the Cabinet decision, STC informed Betamax that it would no longer procure services from it. Betamax subsequently initiated arbitration proceedings against STC. In 2017, the appointed arbitrator decided in favour of Betamax and awarded damages for STC’s failure to perform its obligations under the Contract. In 2019, the Supreme Court set aside the arbitral award on the grounds that the Contact was entered into in breach of the PPA, was illegal and unenforceable and therefore the arbitral award was contrary to the public policy of Mauritius under the Mauritian International Arbitration Act 2008.
Here are the conclusions of the Privy Council:
Therefore, it follows that even if the Supreme Court had been correct in its interpretation of section 39(2)(b)(ii) of the International Arbitration Act, it was wrong in its decision on the meaning of the PP Act and PP The Arbitrator reached the right conclusion in the Award on the exemption of the COA from the procurement regime.
If the COA was illegal, was the Award giving effect to the COA in conflict with the public policy of Mauritius?
As the Board is of the view that the Supreme Court was not entitled to review the finding in the Award on illegality and that the COA was not in any event illegal, it is neither necessary nor helpful to address the third issue in the appeal. Considerations in relation to the scope and extent of public policy in relation to an illegal contract are best considered in circumstances where the illegality is established and its seriousness can be judged in that context. Moreover, a determination of the public policy of the Republic of Mauritius in relation to any such illegality is an issue on which it would be necessary, particularly in relation to public procurement, to have close regard to the determination of the Supreme Court when such an issue actually arises. The Board therefore does not consider it desirable to lengthen this judgment by consideration of this
Overall conclusion
The Board therefore allows the appeal, sets aside the Order of the Supreme Court and allows the application of Betamax to enforce the Award.
