Twice in the space of four years the Caribbean Court of Justice (“the CCJ”) has had cause to explore the public policy exception under the New York Convention; first in its 2013 judgment in BCB Holdings Limited & Another v The Attorney General of Belize  CCJ 5 (AJ) and more recently in November 2017 in The Belize Bank Limited v The Attorney General of Belize  CCJ 18 (AJ). In both cases, the Government of Belize (“the GoB”) sought to resist enforcement of an LCIA award on public policy grounds.
Superficially, the argument was the same; the underlying agreement was illegal notwithstanding the arbitral tribunal’s determination to the contrary. The CCJ refused to enforce the LCIA award in the BCB Holdings case, but not in the more recent Belize Bank case. The reason for the different approach is easily explained by the different background facts. The BCB Holdings case concerned a settlement agreement conferring tax concessions and the CCJ deemed that legislative approval was required but not obtained. The Belize Bank case concerned a promissory note the Privy Council (the then final court of appeal for Belize) had already determined, in the context of another case, that the GoB did not need legislative approval to issue the promissory note.
But to stop at the different facts is to miss what these cases tell us about the evolving jurisprudence of the CCJ, specifically in relation to its approach to the public policy exception under the New York Convention.
CCJ’s approach to the “illegality versus finality” conundrum
The BCB Holdings case was the first time the CCJ had been asked to formulate its own test in relation to the public policy exception. The CCJ began by recognising that the public policy in play was the public policy of Belize, the jurisdiction in which the arbitral award was being enforced. It went on to say that in the context of enforcement of an arbitral award, domestic public policy was influenced by the international approach under the New York Convention; specifically a pro-enforcement bias and more restrictive approach to the public policy exception than would otherwise be the case in the domestic context. The result, it concluded, was that for a party “to claim the public policy exception successfully the matters cited must lie at the heart of fundamental principles of justice or the rule of law and must present an unacceptable violation of those principles.”
Having set the scene, the CCJ turned to the question at hand; if the public policy allegation is that the underlying agreement is illegal, to what extent should the court inquire into that illegality?
This poses a problem because to recognise the pro-enforcement approach of the New York Convention is to recognise the finality of the arbitral award and not seek to re-open determinations already made by an arbitral tribunal. However, an enforcing court needs to strike a balance between this public policy of finality and not allowing its own executive power to be abused by enforcing an illegal agreement.
to stop at the different facts is to miss what these cases tell us about the evolving jurisprudence of the CCJ
Quite how the CCJ would approach those competing public policies was left a little vague in BCB Holdings. The CCJ said: “…the nature and seriousness of the alleged illegality and the extent to which it can be seen that the same was addressed by the arbitral tribunal are factors we must take into account.” Implicit in the CCJ’s decision in BCB Holdings, but not expressly stated, was what quality of illegality was necessary to justify a review. It concluded that the reasons for not enforcing the settlement agreement, which provided for tax concessions without legislative approval, were compelling. To permit enforcement would be to disregard the sovereignty of Parliament, which was a core constitutional value. However, this conclusion only comes towards the end of the judgment after a full review of the arbitral award has been conducted. Before embarking on its review of the tribunal’s findings, the CCJ appears to consider that it is necessary for the GoB to have shown that there were “credible allegations of illegality put forward by the Government”.
In the Belize Bank case, the CCJ clarified more precisely the nature of illegality required: “…the court conducts a balancing exercise weighing the interest of guaranteeing the finality of the award against the competing interest of ensuring respect for fundamental principles of its legal system such as the rule of law.” It went on to describe BCB Holdings as “exceptional”; the “uncontested” facts revealing “clear and credible evidence of illegality” being the creation of a unique tax regime without legislative sanction which violated separation of powers and the constitutional order of Belize. Therefore, in its later judgment the CCJ appears to find that in order to justify a review of the tribunal’s findings there must be clear and credible evidence (without factual enquiry) of illegality of the type which would breach the fundamental principles of Belize’s legal system.
Is the CCJ’s approach consistent with international jurisprudence?
The CCJ is still a young court compared to other more internationally recognised apex courts. Established in 2005 as the would be final court of appeal for the Caribbean region, it is funded by all 15 members of CARICOM (and has original jurisdiction for the interpretation for the Revised Treaty of Chaguaramas) and yet only four, Barbados, Belize, Dominica and Guyana, have adopted it as their final court of appeal. All of those jurisdictions previously had the Privy Council in London as their final court of appeal (and many of the Caribbean jurisdictions still do). For this historical reason, amongst others, while the CCJ is a young court, it has a wealth of jurisprudence to draw upon; primarily from the English courts.
What is interesting about the BCB Holdings and Belize Belize CCJ judgments is that in them the CCJ softens the stance adopted in the English courts with respect to the public policy exception.
In Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd  3 All ER 864, the Court of Appeal (in a majority decision) held that where there were allegations of illegality a two-stage test should be employed in order to preserve respect for the finality of the arbitral award.
The first question for the Court to answer is; is it open to the defendants in the enforcement proceedings to challenge the arbitrators’ findings of fact on the illegality issue? Four factors indicated that this course of action was not open to the court in the Westacre case: (i) there was evidence before the tribunal that this was a straightforward, commercial contract; (ii) the arbitrators specifically found that the underlying contract was not illegal; (iii) there was nothing to suggest incompetence on the part of the arbitrators; and (iv) there was no reason to suspect collusion or bad faith in the obtaining of the award. In other words, if the illegality had been looked at by the tribunal and there was nothing apparently wrong about the way in which they had reached that conclusion, the enforcing court would not look behind it.
As for the bigger picture, it is important to keep in mind that part of the raison d’etre of the CCJ is to more closely reflect the values of society in the Caribbean.
Had the first question been answered differently, and had the defendants gone on to prove illegality, then the English court could proceed to the second question: should the award be enforced? Only at this second stage was the seriousness of the illegality to be given any weight as part of the balancing exercise between the competing public policy considerations of finality and illegality.
In the CCJ’s analysis the two steps are conflated. In other words, if the illegality is sufficiently serious, then it does not matter whether the tribunal considered and dismissed allegations of illegality and that there is no reason for impugning the tribunal’s decision, the door is open to review the tribunal’s determination. Had the CCJ followed the majority approach in Westacre in the BCB Holdings case, they would not have reached the second stage of the analysis because the tribunal had considered and dismissed the alleged illegality and there was nothing to impugn the arbitration proceedings.
It is worth noting that the US courts have taken an even more robust approach in the context of enforcement of the same LCIA Award which concerned the CCJ in the BCB Holdings case. In BCB Holdings Limited v. Government of Belize, 110 F.Supp.3d 233 (2015), the US District Court of the District of Columbia refused the GoB’s argument that the underlying agreement was corrupt and should not be enforced as a matter of public policy. It observed that while the United States has a strong public policy against corruption abroad, this policy does not reach the threshold required to outweigh the policy in favour of enforcement.
By not interposing the first step identified in the Court of Appeal’s decision in Westacre, the CCJ allows itself more latitude to consider whether it agrees with the analysis of the tribunal. The recent decision in the Belize Bank case makes clear that there are certain limitations on this; the alleged illegality must be sufficiently serious (contravene a “fundamental rule of the legal system”) and there must be clear and credible evidence of the alleged illegality. But there is still much to be worked out even in these two limitations alone.
By fundamental rule, it is important to bear in mind that both CCJ cases were concerned with whether GoB had authority to enter into a contract without legislative approval, which the CCJ deemed to be a constitutional transgression because the executive branch had not respected the sovereignty of parliament. Not every allegation of illegality (including allegations of lack of Government authority or contravention of legislation) will necessarily meet this standard. BCB Holdings concerned disregard of revenue laws and that may be regarded as a separate category.
there is still much to be worked out even in these two limitations alone
As for ‘clear and credible evidence’, it is not clear whether this must be evidence on the face of the arbitral award or supplementary evidence. Presumably it could be either, but equally the CCJ would be slow to act as a first instance court if the allegations would require testing through cross-examination or the like. It may also be slower to intervene if the relevant facts could and should have been presented to the arbitral tribunal in the first instance and were not.
As for the bigger picture, it is important to keep in mind that part of the raison d’etre of the CCJ is to more closely reflect the values of society in the Caribbean. This may well have been the driving concern in BCB Holdings; the CCJ notes at one point in its judgment that: “To disregard [the sovereignty of Parliament and Separation of Powers] is to attack the foundations upon which the rule of law and democracy are constructed throughout the Caribbean.” While not expressly stated, the CCJ may have been concerned to send a signal that governments must adhere to these constitutional principles because they are vulnerable in the Caribbean region.
The English and the US courts have been more robust on the question of finality versus illegality, which carries with it certainty of approach. In order to create the same level of certainty as to the CCJ, more enforcement decisions, preferably those which are less politically sensitive, are required to more clearly define the contours of the CCJ’s approach to balancing the public policies of finality and illegality.