human rights & business (and a few other things)

Decision of the Caribbean Court of Justice on Unenforceablility of Arbitral Award on Grounds of Public Policy


In the past weeks I have been doing some research and writing in the field of international investment law and its interplay with human rights. To put it bluntly, my conclusion, as well as many other scholars’, is that there is little (i.e. not enough) consideration for human rights in arbitral awards and that re-balancing in this area would be a welcome move.

In this context, I came across the latest Caribbean Court of Justice (CCJ or the Court) judgement in the case of BCB Holdings Limited and the Belize Bank Limited v the Attorney General of Belize relating to the unenforceablility of an arbitral award on grounds of public policy and rendered on 26 July 2013. To be clear this case, delivered by the Honourable Mr Justice Adrian Saunders and the Honourable Mr Justice Winston Anderson, is not a human rights case by any stretch of the imagination. That said, I sense that this case could serve as a basis for this relatively new Court’s developing caselaw on business and human rights issues (I have reviewed their 2012 decision with regards to migrant workers rights here). In this post I will try to briefly explain why I think this is so.

The case

The BCB case was about whether an arbitral award delivered by the London Court of International Arbitration (LCIA) was enforceable in Belize. The Court noted that, “there is universal consensus that courts will decline to enforce foreign arbitral Awards only in exceptional circumstances” and that “only where enforcement would violate the forum state’s most basic notions of morality and justice would a court be justified in declining to enforce a foreign Award based on public policy grounds” [para. 26]. Having established this high threshold, it went on to say that in the circumstances of the case, the award was indeed unenforceable on public policy grounds.

In this case, the companies and state of Belize had entered into a Tax Deed which created a favourable tax regime for the companies, “at variance with the tax laws of Belize”.  The Deed was never approved by Parliament and following a change of administration in Belize, the new government simply terminated it. The companies went before the LCIA and, controversially, Belize never appeared before the arbitral tribunal. The arbitral tribunal held that Belize was in breach of its obligations and awarded the companies $44 million plus interest. The companies sought to enforce the award before the domestic courts of Belize. The trial judge ruled in their favour but the State successfully appealed to the Court of Appeal of Belize. The companies in turn appealed to the highest Court of Belize, the Caribbean Court of Justice.

In reaching its conclusion of unenforceability, which goes against the pro-enforcement bias that domestic courts ought to have with regards to arbitral awards, the Court based its reasoning on public policy, which according to the Court “must in the first instance be assessed with reference to the values, aspirations, mores, institutions and conception of cardinal principles of law of the people of Belize” [para 23].

However, the Court continued: “Where enforcement of a foreign or Convention award is being considered, courts should apply the public policy exception in a more restrictive manner than in instances where public policy is being considered in a purely domestic scenario. This is because, as a matter of international comity, the courts of one State should lean in favour of demonstrating faith in and respect for the judgments of foreign tribunals. In an increasingly globalised and mutually inter-dependent world, it is in the interest of the promotion of international trade and commerce that courts should eschew a uniquely nationalistic approach to the recognition of foreign awards”  [para. 24].

The public policy argument must be carefully handled and the Court refers to the “international public policy” exception that should be applied in cases where foreign or international judgements, as was the case in that instance, are at stake [para. 27].

Upon analysing the legality of the Deed, the Court concludes that the executive did not possess the power to enter what was essentially “a whole new tax policy for the benefit of the Companies” [para. 51]. Relying heavily on the principle of the separation of powers, they further state: “In our judgment,  implementation of the provisions of the Deed, without legislative approval and without the intention on the part of its makers to seek such approval, is indeed repugnant to the established legal order of Belize” [para. 53]. Moreover, “the public policy contravened in this case falls well within the definition of ‘international public policy’” [para. 61].

The possible “business and human rights” implications

This is a carefully drafted decision that will nonetheless appear bold in a context where business interests are often over-protected in arbitration awards. More importantly for our purposes, I believe it may have implications in the business and human rights area in the future for two main reasons.

First, while the Deed in this case was about tax cuts, we can imagine a state entering into similar agreements purporting to shield a company from the health and safety, environmental or labour law regulations otherwise in force in the country. Indeed this scenario is far from exceptional in the context of foreign direct investment. In such a case, the decision of the CCJ would allow the state, or victims of corporate abuse, to claim that such decisions ought to be approved by Parliament, allowing some degree of transparency, and not negotiated behind closed doors in a Minister’s office.

Second, and more fundamentally, it is interesting to see a Supreme Court such as the CCJ consider public policy arguments with regards to the enforceability of arbitral awards. Having looked into such arguments with regards to that issue, one can hope that for instance if a case on indigenous peoples rights in the context of mining or logging concessions comes before the Court, they will also look at the wider context, “basic notions of morality and justice” to the benefit of the companies, but also to the benefit of local populations in a clear and balanced way. As the CCJ has made clear in the BCB decision, public policy arguments will not always work against business interests. The threshold for the exception to work is so high that in fact it is quite the contrary and it is in the interest of predictability that it remains that way. However, a careful use of this exception can help re-balancing otherwise profoundly unequal relationships.

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