Mauritius case summary: State Trading Corporation v Betamax Ltd

Background of the case

On 27 November 2009, State Trading Corporation (STC), a governmental body corporate dealing inter alia, with the importation of petroleum products into Mauritius, and Betamax, a Mauritian entity, entered into a contract of affreightment (Contract) for the transportation of oil from India to Mauritius.

On 30 January 2015, the Government of Mauritius halted all operations under the Contract on the grounds that the Contract had been entered in breach of the Public Procurement Act 2006 (PPA) (Dispute). Betamax referred the Dispute to the Singapore International Arbitration Centre (SIAC) seeking an award for damages and compensation as result of the wrongful termination of the Contract by the STC. The SIAC ruled in favour of Betamax and was awarded a sum of USD 115 million as damages (Award).

STC challenged the enforcement of the Award and the provisional order granted to Betamax by Supreme Court, by making an application to set aside the Award and a subsequent application to set aside the provisional order.

Salient issues and findings

a)   Effective date of the application to set aside the Award

The Court examined the effective date of the application to set aside the Award. It stated that the effective date is the date on which the said application has been lodged with the Court’s registry and not the date on which a motion as to that effect is made in open court.

b)   Non-respect of the 14 days-delay

The Court considered the consequence of failing to comply with the 14 days-time limit prescribed by the Supreme Court (International Arbitration Claims) Rules 2013 (Rules) in the application to set aside the provisional order. It considered that such a non-compliance would not be fatal to the said application in view of the minimal time lapse between the actual lodging and the prescribed time limit, the lack of consequential prejudice to the opposing party, the delay encountered in the process due to the administrative court process, and the suggestive language used under the operative legislation.

c)    Application of PPA to the Contract

The Court assessed whether the Contract fell under the scope of application of the PPA or whether it was exempted from its application. It highlighted that the wording of Regulation 2A of the Public Procurement Regulations 2009 (PPR 2009) indicated that a public body would not be exempted from the PPA if the contract in question relates to the types of contract listed under Column 2 of the Schedule of the PPA. The said Schedule, requires a contract of goods or services by a specified public body for a prescribed amount of Rs 100 million or more to be submitted to the application of the PPA. The object of the Contract being the provision of freight services was considered to be captured by the words “goods” or in the alternative by the terms “other services”. The Court reached the conclusion that the Contract would fall under the application of Regulation 2A which would in turn trigger the application of the PPA. In light of this, the Court made a finding that the Contract was not exempt from the application of the PPA and therefore the procurement process under the PPA ought to have been complied with prior to entering into the Contract.

d)   Illegality of the Contract

The Court emphasised there was no dispute that the STC was a public body which had entered into a major contract within the meaning of the PPA without complying. This case summary brings a new dimension to the approach of the highest court of the land on international arbitration, with the procurement process and the approval of the Central Procurement Board (CPB) as required by the PPA. For these reasons, the Contract was held to have been entered in violation of the PPA and to have been illegally awarded to Betamax.

e)   Public Policy element

The Court assessed the element of public policy in deciding whether the application to set aside the Award should be granted despite the infringement of the PPA. It highlighted that when considering public policy as grounds for setting aside an arbitral award, consideration must be given to the Mauritian public policy and not the international public policy. The Court observed that in order for public policy to operate as an effective bar to the enforcement of an arbitral award, there is a requirement for it to be in flagrant, actual and concrete breach of a fundamental legal principle of the enforcing state. The Court decided that the public procurement rules were part of Mauritian public policy and thus found that a breach of these procurement rules would trigger and justify the annulment of an international arbitration award. The Court found that the Betamax contract had breached the procurement rules and therefore was contrary to public policy.

Conclusion

Interestingly, whilst the law allows the setting aside of an international arbitral award on the ground that it has contravened the public policy of Mauritius, it seems that ‘public policy’ as referred to in Cruz City 1 Mauritius Holdings v Unitech Ltd referred to ‘public policy in the international context’. In the present matter, the Supreme Court has drawn a distinction between “international public policy” and “the public policy of Mauritius”.

This is, no doubt, a very clear example of how the Supreme Court of Mauritius is equipped to make sophisticated decisions. Indeed, this case marks a huge step in the area of arbitration in Mauritius. It affirms the Court’s position as being the appropriate forum to best assess the issues that have a bearing on the underlying rules pertaining to legal order in Mauritius. It shows the Court’s ongoing commitment in preserving and upholding the overriding principle of public policy. The Court has proven that it will not readily rubber stamp any arbitration decision given by an external forum and has demonstrated that it is willing to delve in depth into arbitration related issues before granting its green light for the enforcement of an award in Mauritius.

Finally, the interest in this case is necessarily going to increase with Betamax having appealed to the Judicial Committee of the Privy Council (JCPC). Whilst some view the JCPC as a necessary last resort ‘Court of Appeal’ for cases that have been decided in Mauritius, others have taken the view that it only adds to the delay in obtaining a final decision which inevitably comes at a huge cost. Arbitration and its spirit should ensure that costs are less than expensive litigation in Courts; clearly the Betamax case is not going to help further this argument.