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1922 Supreme(SC) 15
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
VISCOUNT CAVE, LORD SHAW, LORD PHILLIMORE, SIR JOHN EDGE, AND MR. AMEER ALI.
L. OPPENHEIM AND COMPANY - Appellant
Versus
MAHOMED HANEEF - Respondents
On Appeal from the High Court at Madras.
Decided On : March 7, 1922.
Solicitors for appellants: Morris, Veasey & Co.
When parties agree to arbitration in a specific jurisdiction "in the usual manner," the law of that jurisdiction governs. Challenges to the award based on irregularity must follow that jurisdiction's procedural requirements and cannot be raised as a defense in an enforcement suit if the law requires a motion to set aside.
Headnote:(A) Arbitration - Choice of Law - Where a contract provides for arbitration in a specific foreign jurisdiction in the usual manner, the law of that jurisdiction governs the arbitration proceedings and the validity of the award.
(B) Arbitration - Challenge to Award - Under the law of the chosen jurisdiction, if an irregularity or misconduct in the arbitration process is not challenged by a motion to set aside or remit the award within the prescribed time, such irregularity cannot be raised as a defense in a subsequent action to enforce the award.
Facts of the case:
A contract for the sale of goods contained a clause for arbitration in a foreign city in the usual manner. A dispute arose regarding the quality of the goods, and an arbitrator was appointed. The respondent did not participate in the proceedings, and the arbitrator issued an award without providing notice that the arbitration was proceeding. The appellant sought enforcement of the award in a domestic court. The respondent contended that the award was not binding because no notice had been given by the arbitrator.
Findings of Court:
The court held that the arbitration was governed by the law of the foreign jurisdiction specified in the contract. Under that law, any objection relating to an irregularity in bringing an award into existence must be taken by motion to set aside or remit the award; if not so taken, it cannot be raised by way of defense to an action on the award. Since no such motion was made, the award became binding.
Issues: Whether an irregularity in the arbitration process, specifically the lack of notice, can be raised as a defense in a suit for enforcement of an award when the parties agreed to arbitration in a foreign jurisdiction in the usual manner.
Ratio Decidendi: Parties who agree to arbitration in a specific jurisdiction "in the usual manner" are bound by the procedural laws of that jurisdiction. If the governing law precludes raising irregularities as a defense in an enforcement action, requiring instead a motion to set aside the award, the parties are precluded from pursuing a different remedy in a domestic court.
Result: Appeal allowed.
Legal Category Hierarchy
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practice and procedure
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civil procedure
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arbitration
- choice of law
- enforcement of awards
- challenge to awards
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arbitration
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civil procedure
Judgement
Appeal (No. 31 of 1920) from a judgment and decree (November 6, 1918) of the High Court in its appellate jurisdiction, reversing a decree of the Court in its original civil jurisdiction.
The suit which gave rise to the appeal was brought in the High Court at Madras by the appellants, merchants carrying on business in London, against the respondent, a merchant at Madras. Among other causes of action the appellants sued upon an award in their favour made under a submission to "
Law Rep. 49 Ind. App. 174 ( 1921- 1922)
L. Oppenheim and C ompany V. Mahomed Haneef
53
arbitration in London in the usual manner " contained in a contract of sale made between the parties. To that cause of action the respondent pleaded that the award was not binding upon him, as no notice had been given him by the arbitrator that he was proceeding to arbitrate. The facts are more fully stated in the judgment of the Judicial Committee.
The trial judge (Coutts Trotter J.) made a decree for the amount awarded, holding that under the submission the arbitration was to be governed by the law applicable to arbitrations in England, and that upon the authority of Tharburn v. Barnes (( 1867) L. R. 2 C. P. 384.) the defence could not be raised in the suit.
On appeal the decision was reversed by Sir John Wallis C.J. and Napier J. The learned Chief Justice (with whose judgment Napier J. agreed) was of opinion that the rule in England that misconduct in making an award was not a good plea to an action on the award did not apply in India, since there was no distinction between law and equity and any ground for equitable relief could be raised as a defence. They referred to three decisions of the Courts in India mentioned in the argument for the appellants, and concluded by saying that the English doctrine on which the above rule rested was of a highly technical character and could not, in their opinion, be imported into India under the terms of justice, equity or good conscience.
1922. Feb. 17. De Gruyther K.C. and Harold Morris K.C. for the appellants. The alleged irregularity was not a defence to the suit upon the award. The contract provided for " arbitration in London in the usual manner." It was clearly the intention of the parties that their rights under that part of the contract should be governed by the law prevailing in England, and consequently that law applied Hamlyn & Co, v. Talisker Distillery. ([ 1894] A. C. 202, 207.) It is well established in English law that in an action upon an award, irregularity or misconduct in the arbitration proceedings is not a defence Thorburn v. Barnes . (( 1867) L. R. 2 C. P. 384.) The award can be set aside if those grounds-are established upon motion under s. 11 of the Arbitration Act, 1889 ; that was the only course available in this case if the validity of the award was to be attacked. Bindessuri Per shad Singh
v. Jankee Per shad Singh (( 1889) I. L. R. 16 C. 482.) ; Surjan Raot v. Bhikari Raot (( 1893) I. L. R, 21 C. 213.) ; and Ghellabhai Atmaram v. Nandubai (( 1895) I. L. R, 20 B. 238.) were cases as to arbitrations in India, and do not apply where the parties have by their contract submitted to arbitration in England. The appellate Court in the present cases thought that the English rule was of a technical character, and not within justice, equity, or good conscience. It is, however, submitted that the parties having, by the law which they have agreed is to apply, a good remedy, are fairly precluded from pursuing a different remedy. [Reference was also made to the Code of Civil Procedure, 1882, ss. 520, 521, 525 ; and the Code of Civil Procedure, 1908, clauses 20, 21.]
The respondents representatives did not appear.
March 7. The judgment of their Lordships was delivered by
VISCOUNT CAVE. This is an appeal from a decree of the High Court of Judicature at Madras, in the exercise of its appellate jurisdiction, allowing an appeal from a decree made by Coutts Trotter J. in the exercise of the ordinary original c
