RBRG claimed that the award gave effect to a claim based on forged bills of lading. They argued that the enforcement of the award would be contrary to public policy within the meaning of s103 of the 1996 Act.
Sinocore agreed to sell RBRG a cargo of steel coils. The sale contract was expressly governed by Chinese law and contained a CIETAC arbitration clause providing for arbitration in Beijing. The goods were shipped on the "MAGIC STRIKER" and genuine bills of lading were issued. Sinocore, however, later presented forged bills of lading with different dates to its bank in an attempt to obtain payment under the letter of credit opened by RBRG. The bank refused to pay. Sinocore terminated the sale contract and resold the coils to another buyer at a lower price.
CIETAC arbitration proceedings were commenced in China. The Tribunal acknowledged that Sinocore had presented forged bills of lading, but held RBRG in breach of contract and awarded Sinocore substantial damages. The breach found was that RBRG had instructed its bank to amend the letter of credit without Sinocore's permission. The arbitrators found that this was the real reason Sinocore did not obtain payment.
The Commercial Court dismissed RBRG's arguments and gave Sinocore permission to enforce the award. The sale contract itself and its intended performance were entirely lawful. The award did not, on its face, uphold a claim for payment against presentation of forged bills of lading. The award was for damages for breach of the sale contract by RBRG.
The Tribunal were aware of the forgeries and concluded that this did not afford RBRG a defence and was not the cause of Sinocore's losses. This is a somewhat surprising conclusion on the limited facts recited in the judgment. However, as his Lordship put it:
It is important to grasp the subtle distinction here. Sinocore seem to accept that the attempt to recover from the bank was a fraud. They were able to convince the CIETAC that this could be treated separately from a claim against RBRG. RBRG had not been deceived, so it was found, but instead were at fault by making a purported and ineffective amendment to the Letter of Credit.
To an English lawyer the background to the CIETAC award makes uncomfortable reading. Equally though, the High Court judgment starkly reinforces the position that the grounds for refusing enforcement of an arbitration award made in a New York Convention state are narrow. The catch all public policy defences must be treated with extreme caution. Unrealistic as it may be to say this, given the huge commercial clout some organisations enjoy, it is a cautionary tale. Parties have to be extremely careful when agreeing the forum for dispute resolution.