Mozambique alleged that officials had been bribed in connection with government guarantees for major supply contracts. Those contracts contained arbitration clauses. The Supreme Court had to identify which disputed issues the English proceedings actually required a judge to decide before it could decide whether any should be sent to arbitration.
The dispute arose from three transactions in 2013 and 2014. Special purpose vehicles indirectly owned by the Republic entered supply contracts with Privinvest companies for ships, aircraft, fishing vessels, a shipyard and related services, apparently connected with Mozambique’s exclusive economic zone. Credit Suisse companies and VTB lent the purchase money, and the borrowing was secured by sovereign guarantees signed by Manuel Chang, then Minister of Finance, purportedly for the Republic. Each supply contract contained a Swiss-law arbitration agreement. The facilities and guarantees chose English law and the exclusive jurisdiction of the English courts.
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In February 2019 the Republic sued in England. It alleges a conspiracy involving bribes of over US$136 million to Mozambican officials and Credit Suisse employees, exposing it to a potential liability of about US$2 billion under the guarantees and to further losses. Its claims include bribery, conspiracy to injure by unlawful means, dishonest assistance, knowing receipt and proprietary relief. These remain allegations. Privinvest admits certain payments but says they were legitimate and unconnected with the contracts, which it says were genuine commercial bargains. Credit Suisse has also sued Privinvest. Credit Suisse is not party to an arbitration agreement with Privinvest covering these transactions, so those issues will be tried in any event.
Privinvest sought a mandatory stay under section 9. For that preliminary issue the court assumed, without deciding, that Swiss law bound the Republic and the subcontractors to the supply-contract arbitration agreements. Whether they are in fact parties was left to a later Commercial Court trial. If the Republic is not a party, the stay question does not affect liability.
The courts below
The High Court refused a stay. The Court of Appeal considered that disputes over the validity and genuineness of the contracts fell within the arbitration clauses. Mozambique accepted that its original allegation that the contracts themselves were instruments of fraud belonged there and said it would not pursue that allegation against Privinvest. It maintained a separate case based on alleged bribes.
What counts as a matter
Section 9 requires a stay so far as proceedings concern a matter which the parties have agreed to refer to arbitration, unless the agreement is null and void, inoperative or incapable of being performed. Lord Hodge, with whom the other Justices agreed, read it with article II(3) of the New York Convention and with similarly worded authority from other common-law arbitration centres.
The statutory test has two steps. The court identifies the substantial issues that the claim and reasonably foreseeable defences require it to decide. It then interprets the arbitration agreement to see which of those issues the parties agreed to refer. A peripheral factual disagreement does not become an arbitrable matter simply because it concerns the same transaction. The court may stay only part of the proceedings where the test is met for that part.
Liability did not turn on the contracts’ validity
Having withdrawn the instrument-of-fraud allegations against Privinvest, the Republic was not challenging the validity of the supply contracts. The substance of the controversy was whether the transactions were obtained by bribery and whether the defendants knew of the alleged illegality of the guarantees and of Mr Chang’s lack of authority.
A bribery claim, as described by the Court, depends on a secret inducement to an agent creating a realistic prospect of conflict, paid to someone involved in the decision. It does not require the supply contract to be invalid. A plea that the contracts were commercial would not answer a claim to account for a bribe, because the law assumes that the price was increased by at least the amount of the bribe. The same was true of the unlawful-means and dishonest-assistance claims as pleaded: value for money was not essential to liability and could matter only to any loss beyond the alleged bribes. There was no basis, at this stage, for going behind the Republic’s assertion that Privinvest’s entry into the contracts was pleaded as a factual step in the alleged assistance.
Value for money and the scope of the clauses
Whether Privinvest gave value for money could still affect quantum. Lord Hodge found it unnecessary to decide whether that dispute was itself a matter, because it was not within the clauses.
Scope depended on Swiss law. Waksman J’s unchallenged findings were that construction is objective and contextual, that a principle favouring arbitration cannot override language and context, that multiple arbitration clauses are relevant, and that a broad connecting phrase still requires a sufficient connection. Three separate clauses, in contracts made at different times, suggested that each was principally for its own contract. The allegations establishing liability were outside the clauses. In that setting, a request for credit against damages for value allegedly received was a subordinate factual issue. Rational business people would not be taken to have agreed to send only that issue to arbitration, and section 9 was to be applied with common sense. Lord Hodge also noted the absence of recorded section 9 cases splitting quantification from liability claims which were themselves outside the arbitration agreement.
Verdict: The Supreme Court unanimously allowed Mozambique’s appeal. Neither a stay of the English claims against Privinvest nor a partial stay on the value-for-money issue was required. The Court decided where the issues could be tried. It made no finding that a bribe had been paid.
