European Engineering Ltd v. SJ (Seychelles) Ltd

At a glance

Parties

European Engineering Ltd (Applicant; Defendant in the main suit) v. SJ (Seychelles) Ltd (Respondent; Plaintiff in the main suit)

Case no.

MA 101/2019 (arising in CC 2/2019); [2019] SCSC 641

Court

Supreme Court of Seychelles

Treaty

Contract arbitration clause 20.2 (ICC arbitration); Seychelles Commercial Code Articles 113, 147, 150

Court

Twomey CJ

Sector

Construction / engineering contract

Outcome

Application to stay the court proceedings in favour of arbitration refused; the case proceeds to a hearing on the merits.

The dispute

On 28 January 2019 SJ (Seychelles) Ltd sued European Engineering Ltd in the Supreme Court of Seychelles for breach of contract and claimed damages. European Engineering applied for a stay of the proceedings under clause 20.2 of the contract, which provides for arbitration under the ICC Arbitration Rules. The contract is governed by Seychellois law. SJ (Seychelles) argued that arbitration would be futile. In Vijay Construction v Eastern European Engineering (2017), the Court of Appeal held that the New York Convention does not apply to Seychelles, that Articles 146–150 of the Commercial Code have no legal effect, and that foreign arbitral awards are therefore not enforceable there. European Engineering is a Seychellois company with assets only in Seychelles. SJ (Seychelles) therefore argued that the arbitration clause was invalid or contrary to public policy.

Key holdings

1. The Supreme Court is bound by the Court of Appeal's decision in Vijay Construction that foreign arbitral awards made under such clauses cannot be enforced in Seychelles. It is bound even though the Chief Justice had reservations about how the Court of Appeal read section 227 of the Code of Civil Procedure and Articles 146–150 of the Commercial Code. ¶¶ 14–15
2. Arbitration under the clause is not impossible, but no award could be enforced in Seychelles. The purpose of arbitration, which is to resolve disputes quickly and at reasonable cost, could therefore no longer be achieved. Drawing on case law on pathological clauses (Insigma v Alstom; Russian Federation v Badprim), the Court held that it must intervene so that the dispute can be resolved. ¶¶ 27–30
3. The Court gave the word "valid" in Article 113(1) of the Commercial Code a purposive interpretation. It held the arbitration agreement void because any award arising from it would be unenforceable. The Court may therefore exercise jurisdiction. ¶¶ 30, 32
4. Domestic arbitration in Seychelles under Articles 110–145 of the Commercial Code remains open to the parties. The Court stressed that it defers to arbitration and will assume jurisdiction only in the very limited circumstances the law permits. ¶¶ 31, 33
5. The stay application is refused and the case will proceed to a hearing on the merits. ¶ 34

Procedural history

1. 28 January 2019SJ (Seychelles) Ltd files its plaint for breach of contract (CC 2/2019).
2. 22 May 2019 – 26 June 2019Hearing of European Engineering Ltd's application for a stay of proceedings.
3. 29 July 2019Ruling of Twomey CJ refusing the stay; the case is to proceed to a hearing on the merits.

Tribunal, counsel and experts

Decided by

• M Twomey Judge, Supreme Court of Seychelles

For the claimant

Bernard Georges

For the respondent

Elvis Chetty

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Keywords

• stay of proceedings
• arbitration clause
• Seychelles
• New York Convention
• Seychelles not a party to the New York Convention
• enforcement of foreign arbitral awards
• Vijay Construction
• ICC arbitration
• futility of arbitration
• pathological arbitration clause
• Article 113 Commercial Code
• validity of arbitration agreement
• purposive interpretation
• public policy
• domestic arbitration
• construction contract

Summary generated with AI from the published documents — refer to the award for the authoritative text.