The parties were Iranian Jews, father and son. The son arranged to export carpets from Iran in contravention of Iranian law. The father and son fell into dispute about their contracts and arranged for the issues to be resolved by the Beth Din according to Beth Din rules which incorporated Jewish Law. The son applied to record the award as a judgment under the 1950 Act. The son resisted enforcement, saying the contract was illegal and should not be enforced. Under the laws of the Beth Din, a contract to perform an illegal contract was enforceable, but under English law it would not be.
Held: An English court is not to enforce a valid arbitration award where it was based upon a contract which was illegal under English Law. The court was dealing with judgment which found as a fact that it was the common intention to commit an illegal act, but still enforces the contract. If the award were a judgment of a foreign court, the English court would not enforce it. Did the fact that it was an arbitration make a difference? ‘An English court would not recognise an agreement between highwaymen to arbitrate their differences any more than it would recognise the original agreement to split the proceeds.’ The reference itself was valid, and the Beth Din had jurisdiction, but: ‘The court is . . . concerned to preserve the integrity of its process, and to see that it is not abused. The parties cannot override that concern by private agreement. They cannot by procuring an arbitration conceal that they, or rather one of them, is seeking to enforce an illegal contract. Public policy will not allow it.’ and ‘In our view, an enforcement judge, if there is prima facie evidence from one side that the award is based on an illegal contract, should enquire further to some extent. . . The judge has to decide whether it is proper to give full faith and credit to the arbitrator’s award. Only if he decides at the preliminary stage that he should not take that course does he need to embark on a more elaborate enquiry into the issue of illegality.’
Judges:
Lord Justice Morritt, Lord Justice Waller, Sir Christopher Staughton
Citations:
Times 04-Mar-1998, [1998] EWCA Civ 285, [1999] QB 785, [1998] 3 WLR 811, [1999] 3 All ER 847, [1998] CLC 779
Links:
Statutes:
Jurisdiction:
England and Wales
Citing:
Cited – St John Shipping Corporation v Joseph Rank Limited 1956
The defendants held a bill of lading for part of the cargo carried on the plaintiffs’ vessel from Mobile, Alabama, to Birkenhead. The vessel was over laden and the plaintiffs were guilty of an offence under the 1932 Act. The defendants relied on the . .
Cited – Royal Boskalis Westminster NV and others v Mountain and others CA 28-Feb-1997
Effect of illegality on a contract.
Held: Reversed . .
Cited – Archbolds (Freightage) Ltd v S Spanglett Ltd (Randall, third party) CA 1961
The court considered the effect of illegality on a contract. Devlin LJ said: ‘The effect of illegality on a contract may be threefold. If at the time of making the contract there is an intent to perform it in an unlawful way, the contract, although . .
Cited – Foster v Driscoll, Lindsay v Attfield, Lindsay v Driscoll 1929
During the American prohibition, a group in England and Scotland planned to ship 7,500 cases of whisky to North America, and hoped to make extraordinary profits. But they fell out and resorted to litigation between themselves.
Held: Sankey LJ . .
Cited – Regazzoni v Sethia HL 1957
The House considered a mutual intention of both parties to perform a contract, which was not illegal on its face, but in a manner which was contrary to the law of the place where it was to be performed.
Held: Lord Reid said: ‘To my mind, the . .
Cited – Taylor v Barnet CA 1953
‘an arbitrator has no jurisdiction or authority to award damages on an illegal contract’ . .
Cited – Tinsley v Milligan HL 28-Jun-1993
Two women parties used funds generated by a joint business venture to buy a house in which they lived together. It was vested in the sole name of the plaintiff but on the understanding that they were joint beneficial owners. The purpose of the . .
Cited – Soinco S A C I and Another v Novokuznetsk Aluminium Plant and others CA 16-Dec-1997
The contract provided for arbitration under the International Arbitration Rules of the Zurich Chamber of Commerce. The arbitrators considered an assertion of illegality by NKAP, and rejected it with reasons. Thereafter a decision of a Russian court, . .
Cited – Vervaeke v Smith HL 1983
A petitioner for a decree of nullity of an English marriage in the English courts on the grounds of lack of consent to the marriage, having failed to obtain such decree, obtained a declaration from the Belgian court that the English marriage, was . .
Cited – Joe Lee Ltd v Lord Dalmeny 1927
Bets were disputed, and particularly the status of a clause in the bookmaker’s book of rules which provided: ‘Should unfortunately any dispute arise we stipulate that the matter be referred within 30 days to the editor of any paper in which we . .
Cited – Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd CA 7-Apr-1993
An action was brought by re-insurers for a declaration that reinsurance policies were void for illegality, and that the plaintiffs were not liable under them. The illegality alleged was that the defendants were not registered or approved to carry on . .
Cited – London Export Corporation v Jubilee Coffee Roasting Co Ltd 1958
The court considered any discretion not to enforce a valid arbitration award: ‘When the arbitration agreement has been construed and no breach of the agreed procedure found there may nevertheless arise a second and quite separate question: that is, . .
Cited – Israel Discount Bank of New York v Hadjipateras CA 1983
An application was made to enforce a judgment in England. The respondent alleged that he had signed a guarantee under the undue influence of his father.
Held: The Court reversed the decision of the first instance judge. The substance of the . .
Cited – James Laing Son and Co Ltd v Eastcheap Dried Fruit Company 1962
McNair J said: ‘An English court exercises control over the enforcement of the arbitral award as part of the lex fori, whatever the proper law of the arbitration agreement or the place where the arbitration is conducted. If a claimant wishes to . .
Cited – Holman v Johnson 5-Jul-1775
ex turpi causa non oritur actio
A claim was made for the price of goods which the plaintiff sold to the defendant in Dunkirk, knowing that the defendant’s purpose was to smuggle the goods into England. The plaintiff was met with a defence of illegality.
Held: The defence . .
Cited – Westacre Investments Inc v Jugoimport-SDPR Holding Co Ltd ComC 19-Dec-1997
There was a consultancy agreement, under which it was said to be contemplated or intended (or both) that the plaintiffs would bribe Kuwaiti officials in order to obtain contracts for the purchase of military equipment. The contract was governed by . .
Cited – Binder v Alachouzos CA 1972
A contract recited that the parties had been advised by solicitors and counsel that the Moneylenders Acts did not apply to transactions which were the subject of legal proceedings between them, and went on to provide for a compromise.
Held: . .
Cited – Birtley and District Co-operative v Wendy Nook and District Industrial Co-operative Society 1960
Two co-operative societies disputed the areas they were to cover, and went to arbitration. The dispute was followed by an award.
Held: ‘There is nothing on the face of the award to indicate that it is an unreasonable restraint of trade, . .
Cited – Prodexport State Company for Foreign Trade v E D and F Man Ltd 1973
An arbitrator has jurisdiction to hear a case where the contract has been affected by supervening rather than ab initio illegality. . .
Lists of cited by and citing cases may be incomplete.
Contract, Arbitration
Updated: 14 November 2022; Ref: scu.89392