Bcb Holdings Ltd and the Belize Bank Ltd v Attorney General
| Jurisdiction | Caribbean States |
| Judge | Saunders, J. |
| Judgment Date | 26 July 2013 |
| Court | Caribbean Court of Justice |
| Docket Number | CCJ Appeal No. CV 7 of 2012; BZ Civil Appeal No. 4 of 2011 |
| Date | 26 July 2013 |
Caribbean Court of Justice
Byron, P. CCJ; Saunders, J. CCJ; Bernard, J. CCJ; Wit, J. CCJ; Anderson, J. CCJ.
CCJ Appeal No. CV 7 of 2012; BZ Civil Appeal No. 4 of 2011
Arbitration - Award — Enforcement — Whether it is contrary to public policy to enforce the award — Convention award — Whether the Act is valid — Whether the award should be refused because it is in respect of a matter not capable of settlement by arbitration — Restrictive scope and high threshold of the public policy exception — Whether enforcement of the award will violate some fundamental principle of powers — Prerogative powers — Constitutionality of the 1980, Arbitration Ordinance — Whether ultra vires legislation is saved as existing law — Whether Belize was estopped from arguing that the New York Convention is not applicable — Income and Business Tax Act, Section 95 — Arbitration Act, Cap. 125.
The London Court of International Arbitration (“the Tribunal”) gave an arbitral Award against the State of Belize in favour of BCB Holdings Limited and The Belize Bank Limited (“the Companies”). The arbitration arose from a Settlement Deed made between the Companies and the Government of Belize which afforded the Companies a unique tax regime independent of Belizean tax laws. The Deed was executed in March 2005 and executed by the Companies' representatives and the Prime Minister (then Minister of Finance) of Belize and the Attorney General. Its purpose was to settle a pre-existing dispute between the parties and to specify tax rates and liabilities of the Companies. Under its terms the Companies refrained from pursuing claims they had against the Government in relation to this dispute and the Government agreed that the Companies would be entitled to special tax privileges effective from April 1, 2005.
The Deed was to be governed by English law and it contained a clause that provided for arbitration should disputes arise. The Deed was not legislated by the parliament of Belize. The tax regime created by the Deed was enjoyed by the Companies for two years before it was repudiated by the Government in 2008 following a general election in Belize and a change in administration. Following this repudiation the Companies commenced arbitration proceedings in accordance with the arbitration clause of the Deed.
The Tribunal found Belize to be in breach of the Deed and awarded damages and costs to the Companies totaling approximately US $44M with interest at 3.38% compounded annually (“the Award”). These damages were calculated based on the postulation that the Companies would have enjoyed the benefit of their special tax arrangement until at least 2020, at which point BCB's public investment company status would expire.
The Companies applied to the High Court of Belize to have the Award enforced. The Attorney General resisted the application on the grounds that (i) the Act pursuant to which enforcement of the award was sought was unconstitutional in that it was enacted by Belize colonial legislature specifically for the purpose of giving effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”) at a time when Her Majesty had not yet accepted the Convention on behalf of Belize; (ii) the dispute was not arbitrable as it related to the tax rates and liabilities of the Companies which was a matter for the Parliament of Belize; and (iii) enforcement of the award would be contrary to public policy since the Deed was repugnant to the legal order of Belize. The judge granted the application of the Companies to enforce the Award and the Attorney General appealed to the Court of Appeal. In upholding the appeal, the Court of Appeal declined to address the arbitrability and public policy points but agreed with the Attorney General's submissions that the Act was invalid. The Companies appealed to the Caribbean Court of Justice (“the Court”).
The Court considered three key issues: (i) the validity of the 1980 Arbitration Ordinance (the “Act”); (ii) whether, if the Act was considered to be valid, the Court should remit the case to the Court of Appeal so that the latter could address the arbitrability and public policy points; and (iii) if the Act is valid and the case not remitted to the Court of Appeal whether the application should be refused on grounds either that the dispute was not arbitrable or that enforcing the Award would be contrary to public policy.
Regarding the validity of the Act, the Court held that passage of the Act by the Parliament of Belize prior to the Convention being accepted by the Executive neither constituted a breach of the separation of powers nor an interference with executive authority. By passing the Act, parliament was legislating the way in which foreign awards would be recognized and enforced in Belize. The Act did not make Belize a party to the Convention and Parliament's passage of the Act was in accordance with its broad power “to make laws for the peace, order and good government of the Territory.” The Court held that the Act was therefore intra vires the authority of the legislature.
Having found the Act to be valid, the Court declined to remit the case to enable the Court of Appeal to pronounce on the arbitrability or public policy points. The Court held that this would occasion additional expense especially as it was possible that the arguments would have had to be re-heard before a differently constituted Court of Appeal.
Addressing the public policy issue, the Court found that it was the public policy of Belize that was in issue as that was the country where enforcement would take place. The Court stated, however, that enforcement of a foreign arbitral award should be refused only in the rarest of circumstances because courts must always act with great respect for the judgments of foreign tribunals. In order for the court to decline enforcement, the claimed intrusion upon public policy must be violate core principles of justice and the rule of law.
In order to assess whether this high threshold was met in this matter, the Court addressed several issues. The Court noted that the Deed created a unique tax regime that claimed to be unalterable by parliament. Even if the Minister may have had the authority to make such an agreement, its implementation without legislative approval, which was neither sought nor granted, was not lawful. The Deed purported to alter and regulate taxation and under the Belize Constitution and statutes this could only validly be done by parliament. To allow the Executive to assume essential law-making functions beyond its constitutional or legislative authority would put democracy at peril. Neither the Crown's Executive prerogative nor any statute authorized the Minister to make the promises made to the Companies. Accordingly, the deed was illegal, void and contrary to public policy and Caribbean courts have an obligation to strike down executive action that undermines the authority of the legislature. For these reasons, the Court found that the enforcement of the Award should be refused and it was therefore unnecessary to consider the arbitrability point.
In deciding the issue of costs, the Court found that given the Government's refusal to participate in the arbitration proceedings, as well as the Companies' success on the arguments raised on the constitutionality of the Arbitration Ordinance, in addition to the Court's respect for the arbitral process enshrined in the Act, each party should bear its own costs.
Mr Edward Fitzgerald QC, Mr Eamon Courtenay SC and Mrs Ashanti Arthurs-Martin for the appellants.
Mr Michael Young QC, Ms Magalie Perdomo and Ms Iliana Swift for the respondent.
Saunders, J. CCJ.: The London Court of International Arbitration (“the Tribunal”) determined that the State of Belize should pay damages for dishonouring certain promises it had made to two commercial companies, namely, BCB Holdings Limited and The Belize Bank Limited (“the Companies”). The promises were contained in a Settlement Deed as Amended (“the Deed”) executed in March 2005. The Deed provided that the Companies should enjoy, from the 1st day of April, 2005, a tax regime specially crafted for them and at variance with the tax laws of Belize.
This unique regime was never legislated but it was honoured by the State for two years until it was repudiated in 2008 after a change of administration in Belize following a General Election. The Companies then commenced arbitration. The Tribunal found the State of Belize in breach and awarded damages against Belize in addition to arbitration costs and legal, professional and other fees (“the Award”). The Award totalled approximately $44 million and it carried interest at the rate of 3.38% compounded annually. The damages were calculated on the hypothesis that the Companies would have continued to benefit from the special tax regime at least until 2020; the year when, in keeping with the laws of Belize, BCB Holdings Limited^s status as a public investment company was due to expire.
The Companies are applying now to enforce the award. The State resists enforcement. The critical question is whether it is or is not contrary to public policy for the Court to enforce the same. For the reasons that follow it is our judgment that it would be contrary to public policy to recognise the Award and accordingly we decline to enforce it.
The Deed arose, at least in part, out of the stated intention of the Minister of Finance and the Companies to settle a pre-existing dispute between them. The prior dispute had to do with a share purchase deed and an option deed the parties had previously negotiated. That initial dispute had itself been submitted to the Tribunal for resolution by arbitration because of...
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