‘Would it not be appropriate that those who collectively agreed to rescind the contract should foot the bill of nearly Rs 6 bn out of their own pockets?’
Betamax Ltd v STC
* ‘There might be a case to investigate this matter further so as to situate responsibilities and preempt any future similar recurrence’
By LEX
In today’s contribution, LEX sheds light on the legal procedures and rationale that led to the Privy Council’s decision about the Betamax case, and how that impacts the ambition of the country to become an international arbitration centre. A case is also made for investigating further the Cabinet decision to rescind Betamax’s contract from the standpoint of a conspiracy offence.
* The Privy Council has just issued a judgment in the Betamax case that has sent ripples amongst politicians and lawyers. Betamax had earlier won its case before the Arbitration Tribunal. Why did it lose before the Supreme Court?
Betamax lost because the Supreme Court after an analysis of the legal provisions relating to procurement procedures concluded that the contract was awarded without the concurrence of the Central Tender Board. The normal rule is that when a parastatal or the government awards a contract it is done through a bidding, and the Central Board considers the list of bidders and awards the contract.
In the procurement legislation, there is a provision for exempt bodies, and the criteria for them are spelt out in the legislation and regulations. Betamax was considered an exempt body both by the then government and the arbitrator. The Supreme Court came to an opposite conclusion.
* The Privy Council came to an opposite conclusion to that of the Supreme Court. What was the distinction?
The Privy Council held that once an arbitrator has made a finding in law or on facts, this finding should not lightly be set aside in the absence of what the Privy Council calls vicissitudes. In other words, if the factual findings are perverse or the legal analysis is patently wrong, then the court can intervene.
* Briefly when can a party resort to arbitration?
In most contracts nowadays, there is an arbitration clause that would state that in case of a dispute the parties would resort to arbitration. Care must be taken as to how the clause is drafted and what law would govern the contract.
* Once an arbitration tribunal gives an award, on what grounds can the losing party challenge the award?
An award may be challenged under Section 39 of the International Arbitration Act for a number of reasons, namely –
– If a party to the arbitration agreement was under some incapacity or the agreement is not valid under the law to which the parties have subjected it.
– If a party was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present its case.
– If the award deals with a dispute not contemplated by, or not falling within the terms of, the submission to arbitration, or contains a decision on a matter beyond the scope of the submission to arbitration.
– If the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement.
– If the Court finds that – (i) the subject matter of the dispute is not capable of settlement by arbitration under Mauritius Law; (ii) the award is in conflict with the public policy of Mauritius; (iii) the making of the award was induced or affected by fraud or corruption; or (iv) a breach of the rules of natural justice occurred during the arbitral proceedings or in connection with the making of the award by which the rights of any party have been or will be substantially prejudiced.
* In 2015, the government argued forcefully that the contract between the State Trading Corporation and Betamax was illegal. What was the basis of that argument?
The main reason for the rescission of the contract was purely political. The 2014 government pursued a vindictive agenda against Labour Party members and those close to the Labour Party. Betamax and the British American Insurance are the well-known casualties.
In order not to give the impression that it was a political decision, the government led by the late Sir Anerood Jugnauth and surrounded in the main by ministers Roshi Bhadain and Ashit Gungah launched a vitriolic attack against Navin Ramgoolam, the former Prime Minister and Anil Baichoo, former minister of commerce. They deemed that the contract was tainted with corruption and was against public interest.
Unfortunately, the Supreme Court aligned itself with this view and held that the contract was against the public policy of Mauritius.
* The government rescinded the contract. Could the government have had recourse to any other procedure to end the contract, for instance by offering to pay a reasonable compensation to Betamax?
Of course. If only the then Lepep government was not blinded and motivated solely by political considerations, a better way of putting an end to the contract could have been found through negotiations with a reasonable compensation being paid. But they became a law unto themselves and they bulldozed their way ahead.
* When an award is challenged, what are the powers of the court in reviewing the award?
The court should intervene sparingly as the Privy Council has pointed out. This what it said: It is therefore the policy of modern international arbitration law to uphold the finality of the arbitral tribunal’s decision on the contract made within the arbitral tribunal’s jurisdiction, whether right or wrong in fact or in law, absent the specified vitiating factors.’
* Could the Supreme Court’s judgment have had a negative impact on Mauritius’ ambition to become an international arbitration centre?
It is appropriate to borrow what former Judge Vinod Boolell wrote in l’express on 17 June to answer this question:
‘The decision of the Supreme Court in the matter of Betamax could have had a negative impact on international arbitration taking place in Mauritius. It would have given an impression that the court in Mauritius would be at liberty to interfere in any awards. The Privy Council hinted on this point and pointed out the risks of undue interference in an arbitrator’s findings on interpretation of the law or facts.
‘As Mauritius is positioning itself to be an international centre for arbitration, the Privy Council judgment is a breath of fresh air in international arbitration in Mauritius. As rightly pointed out by Mr Rishi Pursem, a lawyer for Betamax, the Privy Council judgment will have an international impact on arbitration. The court in Mauritius will have to tread carefully from now on when an arbitral award is being challenged.’
* It was the Government of Mauritius itself which was toying with the idea of positioning Mauritius as an international arbitration centre. And the next day, it goes on to contest an award determined by an Arbitrator in accordance with the Singapore International Arbitration Centre Rules. What message will this send to international investors?
During the discussions on the International Arbitration Act, it was stated: ‘First and foremost, the success of Mauritius as a jurisdiction of choice for international arbitration will be largely dependent on the uniform and consistent application by the Mauritian courts of modern international arbitration law, and (in particular) on their strong adhesion to the principles of non-interventionism which is at the heart thereof.’
The pro-enforcement policy was emphasized, and this is the international trend in international arbitration.
* At the end of the day, it’s taxpayers who will have to foot the bill for the rash decision to rescind the Betamax-STC contract. A private company will generally not be able to escape punishment for any wrongdoing. Will the political class be held liable for what they’ve done in this matter?
The late Sir Anerood Jugnauth in a statement made in Parliament, following the decision to rescind the contract, said it was a collective decision of the then Cabinet. Since that was the case, would it not be appropriate that those who collectively agreed to rescind the contract should foot the bill of nearly six billion rupees out of their own pockets.
On the other hand, it could be considered whether there might be a case to investigate this matter further so as to throw light on what led to this catastrophic decision, the idea being to situate responsibilities and preempt any future similar recurrence in the national interest.
* Published in print edition on 18 June 2021
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