Beijing Jianlong v Golden Ocean [2013] EWHC 1063 (Comm)
“The Commercial Court today upheld the jurisdiction of London arbitral tribunals to determine whether a contract is unenforceable on public policy grounds based on foreign illegality.
The underlying arbitrations involve claims by the owners of chartered vessels under a guarantee given by the parent company of the charterer. The guarantee is governed by English law and provides for London arbitration. The owners sought and obtained anti-suit injunctions from the arbitrators restraining the guarantor from pursuing proceedings brought by it in the Chinese maritime courts, in breach of the London arbitration agreement. The guarantor contended that the arbitration agreement was unenforceable, with the result that the arbitrators had no jurisdiction to grant the injunctions. The guarantor’s case was that the guarantees had been entered into as part of a scheme to contravene Chinese exchange control legislation in China and accordingly were unenforceable as a matter of English public policy by virtue of the rule in Foster v Driscoll [1929] 1 KB 470 because they would involve the commission of acts in China that were illegal by Chinese law; and that the arbitration agreements were agreed as part of the same scheme and so were also unenforceable. The guarantor contended that, where an illegal scheme involves a bundle of contracts, the rule in Foster v Driscoll requires all of the contracts to be “swept away” and treated as unenforceable, including any arbitration agreement.
The guarantor’s allegations were denied by the owners but it was assumed for the purposes of the application that they could be proved. The owners nevertheless contended that the assumed unenforceability of the guarantee did not affect the enforceability of the arbitration agreement, which had to be treated as a separate contract. A London arbitration agreement did not involve the commission of any unlawful act in China and there was no reason of English public policy why the arbitrators should not have jurisdiction to apply the rule in Foster v Driscoll to determine whether the guarantee was unenforceable as alleged.
In a reserved judgment, His Honour Judge Mackie QC accepted the arguments of the owners and confirmed the awards. He also refused leave to appeal to the Court of Appeal, with the result that (since the Court of Appeal has no jurisdiction under the Arbitration Act to grant leave itself) his decision will be the final word on the subject.
Richard Gillis QC and Conall Patton appeared for the owners, instructed by Clyde & Co LLP. The full text of the judgment is now available for download.”