The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Albert J. Magri and Mr Justice Tonio Mallia, in the case Dr Renato Cefai in representation of Tarros International Spa (today known as Tarros Spa) vs Valletta Freight Services Ltd, on December 3, 2010, held (among other things) that in a case to enforce a foreign decision in Malta the Maltese court’s function was limited to considering whether the foreign decision violated public policy or whether the foreign decision could be attacked on the basis of the re-trial provisions in the Maltese civil procedure. The Maltese courts should not reopen the merits of the foreign case already decided by the foreign tribunal.
The facts in this case were as follows.
The foreign company Tarros International spa and the Maltese company Valletta Freight Services Ltd Spa entered into a liner agency agreement dated July 25, 1991. The agreement was regulated by Italian law and it was agreed that any dispute had to be referred to arbitration in Monaco, according to the rules of the Chambre Arbitrale Maritime de Monaco. Clause 6 of the agreementstated that:
“6.02 This agreement is subject to Italian Law;
“6.04 Any controversy about interpretation, fulfilment or termination of this agreement or claims arising out of or relating to this agreement shall be referred to arbitration in Montecarlo in the event that an amicable agreement between both parties cannot be reached; arbitration will be made in accordance with the Rules of Chambre Arbitrale Maritime de Monaco, arret No. 73/329, and award will be binding and final and will be brought to execution before any court having jurisdiction.”
Under the agreement, any party was free to terminate commercial relations by giving six months prior written notice.
It resulted that Tarros International Spa opted to terminate the agreement in 1995.
The parties, however, could not agree on the amounts outstanding.
The dispute was later referred to arbitration in terms of the agreement.
On January 29, 1996, the arbitration tribunal delivered its award, condemning Valletta Freight Services Ltd to pay Tarros International Lm76,418.00 as well as one half the costs of the arbitration (17,500 French francs).
As Valletta Freight Services failed to make payment, Tarros International proceeded to take legal action in Malta to enforce the arbitration award in Malta.
It requested the Maltese courts:
1. To declare the award to be enforceable in Malta;
2. To condemn Valletta Freight to pay Lm76,418 and 17,500 French francs, covering 50 per cent of the costs of arbitration.
Valletta Freight Services Ltd, in reply, opposed the enforcement of the award. It submitted that:
1. The award conflicted with Maltese public policy. It was alleged that there were several infringements of natural justice principles in the course of the arbitration proceedings;
2. It had not validly consented to the arbitration clause in the agreement; the award decided on issues which were beyond the scope of the arbitration (extra petita). It also failed to decide that the Maltese courts were the proper forum to determine the dispute;
3. It was not correct that Tarros International was owed anything. If at all, it was owed a much lower amount (Lm6,291).
Valletta Freight Services also filed a counter claim. In this counter-claim, it pleaded that:
1. The award violated Maltese public policy. It said that the arbitration tribunal had not decided its plea that the Maltese courts should decide the dispute and that Maltese law should have been declared the law which governed the agreement;
2. The award should not be enforceable in Malta;
3. A lower amount was outstanding (Lm6,291).
Valletta Freight Services put forward the argument that the applicable law was Maltese law and the Maltese courts had jurisdiction. It said that the agreement was signed and executed in Malta. All facts, evidence and documents were located in Malta. The agreement was also in the English language which was one of the official languages in Malta. It disputed having to suffer part of the costs of the arbitration.
Tarros International, in reply, contested the counter-claim, which it said was null and void. There was no claim, it said, that was separate and distinct from its legal action, in the counter-claim.
Tarros International maintained that the award was not vitiated by any defect. The agreement was regulated by the law, chosen by the parties. In addition, the arbitration tribunal was competent to decide the dispute.
On March 20, 2001, the First Hall of the Civil Court dismissed Valletta Freight Services’ first two pleas: that the award violated Maltese public policy and that the arbitration clause was not valid. This decision was confirmed on appeal and the case was sent back to the first court for continuation.
Thereafter, on July 2, 2009, the First Hall rejected Valletta Freight Services’ third plea: that a lower amount was due.
The court considered that this plea was connected with the merits of the case, which was determined by arbitration in Monaco.
Tarros International refused to bring evidence on the merits. It asked the court to decide whether Valletta Freight Services pleas were acceptable, without having to reopen the merits of the proceedings.
The First Hall noted that these proceedings were not an appeal on the award. The issues determined by the award were closed and this court could not reconsider the merits.
As the amount due to Tarros International had already been decided in the award, the court said that it was not necessary for it to hear further evidence.
Valletta Freight Services proceeded by filing a constitutional case, claiming to have suffered a breach of its fundamental rights to a fair hearing under Article 39 of the Malta Constitution and Article 6 of the European Convention of Human Rights.
On April 29, 2010, the First Hall of the Civil Court, however, refused to stay proceedings, until the outcome of the constitutional case was determined.
On June 4, 2010, the First Hall dismissed Valletta Freight Services’ counter-claim and pleas and accepted Tarros International’s requests. The award was declared enforceable in Malta and Valletta Freight Services was condemned to pay Lm76,418 as well as FF17,500 (€2,667).
It considered that a choice-of-law clause in the agreement was binding upon on the parties. The competent forum was the Chambre Arbitrale de Maritime de Monaco and not the Maltese courts, as agreed in the contract. The Maltese courts were not competent to decide this issue. The arbitration clause was binding upon the parties, concluded the First Hall.
Aggrieved by the decisions and decree of the First Hall, Valletta Freight Services entered an appeal calling for its revocation.
On December 3, 2010, the Court of Appeal gave judgment by dismissing the appeal and by confirming the decisions of the First Hall.
The following reasons were given for its decision:
• The grievances raised by Valletta Freight Services were without legal basis:
Reference was made to Schoeller International GmbH et vs Ellul dated May 10, 1957, where it was held that, in a case to enforce a foreign decision, the Maltese court’s function was limited. It should not reopen the merits which were decided by the foreign tribunal. It should limit its considerations to:
1. Whether the foreign decision could be attacked for reasons mentioned in articles 811-et seq of Chapter 12 of the Laws of Malta;
2. If a foreign decision was given without the presence of a party, whether such party was contumacious according to foreign law;
3. That the foreign decision did not contain conflicting dispositions contrary to public order and Maltese public policy.
• The First Hall was correct to state that it did not need to hear further evidence to decide Valletta Freight Services’ third plea. There was a basic rule that a court should not consider irrelevant facts.
• Once it had already been decided that the foreign award did not infringe natural justice principles, the court noted that the case between the parties had already been determined and any additional evidence was irrelevant.
Valletta Freight Services did not have any right to produce additional evidence. The First Hall was not obliged to stay proceedings pending the outcome of the constitutional case. This was purely in its discretion. Reference was made to Mifsud vs Hon. Prime Minister, dated July 20, 1994.
Staying proceedings was an exceptional measure as it slowed the normal course of justice, for the delivery of an expeditious decision: this being contrary to the maxim that justice had to be given within a reasonable time.
In addition, the court concluded that a counter-claim should not be used to reopen the merits of a judgment delivered by a foreign tribunal, which had to be enforced in Malta.
The First Hall was not obliged to rehear the case and to reconsider evidence, relating to the merits of a foreign decision/award.
Dr Grech Orr is partner at Ganado & Associates.