UK Court Considers Separability, Assignment and Illegality

A UK court was recently asked to consider three issues of general importance being (1) the issue of separability of the arbitration clause was governed by English law and, if it was, whether the clause was separable; (2) the first defendant had obtained the claimant's consent to the assignment of the contract; (3) the award was unenforceable by reason of being contrary to public policy within the meaning of s.68(2)(g) ie tainted because of illegality.

The court held in respect of (1) that, on the facts and unless contrary to a clear choice of law provision, the arbitration clause was to be treated as being separate from the underlying contract so that it could not be invalidated simply by reason of the latter's invalidity. As to (2) although the claimant had authorised the assignment by a formal board resolution, it had never supplied a copy of that resolution to the defendants. It therefore argued that its written consent had not been "obtained". The arbitrators had properly rejected that argument. Consent was obtained when the resolution was passed and minuted, and delivery to the defendants of a written copy of the resolution was unnecessary. As to (3), the arbitrators had found that the contract was not illegal and had not been procured by corruption eventhough persons connected with the defendants had discussed bribery, they had not carried it out. The claimant's case was that the contract was tainted by those discussions such that it could be said to have been procured by corruption. The court held that a contract procured by bribery was not unenforceable by reason of English public policy, and there was no public policy reason to refuse to enforce a contract which had been preceded, but was unaffected, by a failed attempt to bribe, and that to determine that a contract was tainted by the failed bribery attempt would create uncertainty and undermine party autonomy.