Trinity Term

[2021] UKPC 14
Privy Council Appeal No 0109 of 2019

JUDGMENT

Betamax Ltd (Appellant) v State Trading

Corporation (Respondent) (Mauritius)

From the Supreme Court of Mauritius

before

Lord Hodge
Lady Arden
Lord Leggatt
Lord Burrows
Lord Thomas

JUDGMENT GIVEN ON

14 June 2021

Heard on 20 and 21 January 2021

 Appellant Respondent
Mark Howard QC Alain Choo-Choy QC
Salim Moollan QC James Guthrie QC
Siddharth Dhar
(Instructed by Fladgate (Instructed by Royds
LLP) Withy King (London))
LORD THOMAS:

1. In 2008, Mauritius adopted UNCITRAL’s Model Arbitration Law 1985 (as

amended in 2006) (the “Model Law”) by enacting the International Arbitration Act
2008 (the “International Arbitration Act”). In the award in an international arbitration
with which this appeal is concerned (the “Award”), the Arbitrator decided that a
contract of affreightment (the “COA”) did not contravene legislative provisions relating
to procurement and was not illegal. The Supreme Court of Mauritius set aside the Award
under section 39(2)(b)(ii) of the International Arbitration Act (article 34 of the Model
Law) on the grounds that, in its view, the COA contravened the legislative provisions
and the Award conflicted with the public policy of Mauritius. The appeal primarily
raises the issue as to the extent of the permissible intervention by a court in an
international arbitration under section 39(2)(b)(ii) of the International Arbitration Act /
article 34 of the Model Law.

The factual background

2. On 27 November 2009, the appellant (“Betamax”) entered into the COA with
the respondent (“STC”), a public company which operates as the trading arm of the
Government of Mauritius responsible for the import of essential commodities. Under
the COA, which was governed by the laws of the Republic of Mauritius, Betamax was
to build and operate a tanker and make available for a period of 15 years the freight
capacity of the vessel for the transport of STC’s petroleum products from Mangalore in
India to Port Louis in Mauritius.

3. Betamax is a Mauritian company incorporated on 6 May 2009 as a joint venture

vehicle between a Mauritian family and Executive Ship Management Pte Ltd, a
Singaporean company, which had been formed for the purpose of financing the
construction of the tanker and carrying out the COA. The offices of Executive Ship
Management Pte in Singapore and India handled all technical and commercial aspects
of the COA, including crewing and ship management.

4. In 2006-8, the Government of Mauritius, as set out in some detail in the Award,
evaluated the best means of providing for the shipping of petroleum to Mauritius and
thereafter began negotiations with Betamax in 2008-9. With effect from 17 January
2008, a procurement regime entered into force in Mauritius under the Public
Procurement Act 2006 (the “PP Act”) and the Public Procurement Regulations 2008
(the “PP Regulations 2008”) made by the Minister under section 61 of the PP Act. The
PP Act and the PP Regulations 2008 were amended in 2009. In the dispute that emerged
between the parties, one of the principal issues was whether the PP Act and PP
Regulations as they were in force on 27 November 2009 applied to the COA: STC
contended that they did; Betamax contended that the COA was exempted from the

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provisions. If the PP Act applied to the COA, it would have been a contract which
required approval by the Central Procurement Board established under the PP Act. No
such approval was given by the Central Procurement Board and entering into the COA
would have been unlawful under the PP Act.

5. The vessel was constructed and delivered to Betamax which carried the first
cargo under the COA in May 2011.

6. On 30 January 2015, the Cabinet of a new Government in Mauritius which had

come to power in December 2014 announced that it would terminate the COA in light
of “the unlawful procedure and processes regarding the allocation of the contract”. On
4 February 2015, STC gave notice that it was unable to use Betamax’s services under
the COA any longer. On 7 April 2015, Betamax terminated the COA under its default
provisions.

7. The COA contained an arbitration clause which provided that if the dispute could
not be resolved through the dispute resolution provisions of the COA:

“either Party may refer the Dispute by notice to the other to be

finally and bindingly determined by an Arbitrator in accordance
with the [Singapore International Arbitration Centre (SIAC)]
Rules, as amended from time to time...

The Parties will jointly appoint an Arbitrator within twenty (20)

Business Days of the referral of the Dispute to arbitration. If an
Arbitrator is not appointed within the time limits set forth in the
preceding sentence, either Party may request the SIAC to appoint
an Arbitrator as quickly as possible (and the SIAC Court shall be
the appointing authority under the SIAC Rules).”

8. On 15 May 2015 Betamax filed a notice of arbitration under the COA with the
SIAC. A response was filed by STC on 1 June 2015. On 30 June 2015, Dr Michael
Pryles AO PBM, a well-known international arbitrator, was appointed sole arbitrator
pursuant to the joint nomination of the parties (the “Arbitrator”).

9. Betamax claimed damages of over US$150m in the arbitration for breach of the
COA. STC advanced a number of objections to the arbitration and the jurisdiction of
the Arbitrator and a number of defences to the claim. Its principal contentions were:

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 (1) The Arbitrator lacked jurisdiction on the basis that the dispute was not
arbitrable as the issues involved matters concerning ordre public under article
2060 of the Mauritian Code Civile (C Civ) and the arbitration agreement was
void under article 2061 C Civ.

(2) If the dispute was arbitrable, STC was not liable as the COA was subject
to the PP Act and the PP Regulations. As the COA had been entered into without
the approval of the Central Procurement Board, it was illegal and unenforceable.

(3) The COA had been entered into as part of a criminal conspiracy to benefit
Betamax at the expense of the Government of Mauritius and was illegal and
unenforceable.

(4) The decision of the Cabinet of Mauritius was a force majeure event which
discharged any obligations under the COA.

10. The arbitration was held under the 2013 Rules of SIAC. Following lengthy
procedural issues, a hearing for the taking of evidence was held in Mauritius on 8-10
August 2016. The hearing was followed by further submissions on procedural and
evidential issues. The Arbitrator closed the proceedings on 2 June 2017.

11. During the course of the proceedings, it was agreed that although the seat of the
arbitration was in Mauritius, the arbitration was an international arbitration for the
purposes of the International Arbitration Act, as amended. That was because the
condition in section 2(1) of the International Arbitration Act was fulfilled as the ship
management obligations under the COA were to be performed in Singapore and India
and therefore outside Mauritius.

12. The Arbitrator made the Award on 5 June 2017 which determined:

(1) The Arbitrator had jurisdiction over the dispute under the COA as article
2060 C Civ did not prevent the civil consequences of a breach of public policy
being determined in an international arbitration and the arbitration clause was
not void under article 2061 Civ.

(2) Betamax was entitled to terminate the COA on 7 April 2015; STC had
made clear its intention not to perform the COA.

(3) On the proper interpretation of the PP Act and the PP Regulations, the
COA was exempted from the provisions of the PP Act. Therefore the COA had

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 not been entered into in breach of the provisions of the PP Act and there was no
basis for saying that it was illegal.

(4) The COA was not illegal and unenforceable under articles 1131 and 1133
of the C Civ. The Arbitrator concluded that as he had determined the PP Act did
not apply to the COA, there was no basis for considering that the COA was
otherwise illegal or unenforceable.

(5) Based on an extensive review of the evidence, the COA had not been
entered into as a result of any criminal conspiracy.

(6) There was no force majeure event or impossibility of performance arising

out of the decision made by the Cabinet of the Government of Mauritius on 30
January 2015.

(7) Betamax was entitled to damages in the sum of US$115.3m together with
interest and costs.

13. In August and September 2017, applications respectively to set aside and enforce
the Award were made to the Supreme Court of Mauritius (the “Supreme Court”) as the
supervisory court for the arbitration. Under section 42 of the International Arbitration
Act, a panel of three designated judges of the Supreme Court is given that jurisdiction.
STC’s application to set aside the Award was made under section 39(2) of the
International Arbitration Act which provides:

“(2) An arbitral award may be set aside by the Supreme Court

only where -

(a) the party making the application furnishes proof that

-

(i) a party to the arbitration agreement was under

some incapacity or the agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under Mauritius law;

(ii) it was not given proper notice of the

appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present its
case; or

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 (iii) the award deals with a dispute not
contemplated by, or not falling within the terms of,
the submission to arbitration, or contains a decision
on a matter beyond the scope of the submission to
arbitration; or

(iv) the composition of the arbitral tribunal or the

arbitral procedure was not in accordance with the
agreement of the parties or, failing such agreement,
was not in accordance with this Act; or

(b) the Court finds that -

(i) the subject matter of the dispute is not capable

of settlement by arbitration under Mauritius Law;

(ii) the award is in conflict with the public policy

of Mauritius;

(iii) the making of the award was induced or

affected by fraud or corruption; or

(iv) a breach of the rules of natural justice

occurred during the arbitral proceedings or in
connection with the making of the award by which
the rights of any party have been or will be
substantially prejudiced.”

STC’s application to set aside the Award was made on the grounds that the dispute was
not arbitrable, that the arbitration agreement was not valid, and that the Award was in
conflict with the public policy of Mauritius.

14. On 31 May 2019, the Supreme Court held that the Award was in conflict with
the public policy of Mauritius and set it aside under section 39(2)(b)(ii) of the
International Arbitration Act. It considered that all three grounds advanced by STC for
setting aside the Award were underpinned and dependent upon the question of whether
the COA had been subject to the PP Act and PP Regulations and had been entered into
in breach of the PP Act. The Supreme Court concluded that, on the clear meaning of the
PP Act and the PP Regulations, the COA was not exempted from the provisions of the
PP Act and the Arbitrator had been wrong so to hold. As the COA had been entered into

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in breach of the PP Act, it was illegal. That illegality was flagrant. The Award should
therefore be set aside as it was in conflict with the public policy of Mauritius.

15. As the arbitration was an international arbitration there was an automatic right
of appeal from the Supreme Court to the Judicial Committee of the Privy Council (the
“Board”) under section 42(2) of the International Arbitration Act. Nevertheless, the
practice is for permission to appeal to be sought from the Supreme Court. On 24 June
2019, the Supreme Court granted permission to appeal to the Board. There are three
issues on this appeal:

(1) Was the Supreme Court entitled to review the Arbitrator’s decision set
out in the Award that the COA was not subject to the provisions of the PP Act
and PP Regulations and the making of it, without the approval of the Central
Procurement Board, was not illegal?

(2) If the Supreme Court was entitled to review that decision of the Arbitrator,
was the COA illegal as having been entered into in breach of the PP Act and PP
Regulations on their proper interpretation?

(3) If the COA was illegal, was the Award giving effect to the COA in
conflict with the public policy of Mauritius?

Issue 1: Was the Supreme Court entitled to review the Arbitrator’s decision set out
in the Award that the COA was not subject to the provisions of the PP Act and the
PP Regulations and the making of it, without the approval of the Central
Procurement Board, was not illegal?

16. The first question which the Board addresses is the scope of the power of the
Supreme Court under section 39(2)(b)(ii) of the International Arbitration Act to set
aside an award on the ground that it is in conflict with the public policy of Mauritius.
To do so it is necessary to see how that statutory provision sits within the framework of
the International Arbitration Act.

The International Arbitration Act 2008

17. The International Arbitration Act, based as it is on the Model Law, was intended
to make Mauritius attractive to users of international commercial arbitration. As the
International Arbitration Act makes clear in section 2C(1), it treats international
arbitration as distinct from domestic arbitration. The Act was accompanied by Travaux

Page 7
Préparatoires which are recorded as having been prepared for future users of the
legislation.

18. A number of principles relevant to the issue in the appeal are clearly set out in
the International Arbitration Act:

(1) Very limited court intervention. Section 2A enacts the principle of very
limited court intervention as set out in article 5 of the Model Law:

“In matters governed by this Act, no Court shall intervene except

where so provided in this Act.”

(2) Finality. Section 36(7), modelled on section 19B of Singapore’s

International Arbitration Act and reflecting discussions within the UNCITRAL
working group, provides:

“An award shall be final and binding on the parties and on any
person claiming through or under them with respect to the matters
determined therein, and may be relied upon by any of the parties
in any proceedings before any arbitral tribunal or in any Court of
competent jurisdiction.”

This provision is reinforced by section 39(1) (enacting part of article 34 of the

Model Law) which makes clear that applications to set aside the award are
strictly confined:

“Any recourse against an arbitral award under this Act may be

made only by an application to the Supreme Court for setting aside
in accordance with this section.”

(3) Exclusion of appeals on questions of law. The International Arbitration

Act requires specific consent for an appeal on a question of law. Under section
3B, the parties must expressly agree to opt in to such an appeal under provisions
made in the First Schedule to the International Arbitration Act.

(4) Jurisdiction and Separability. In accordance with modern international

arbitration law, section 20, enacting article 16 of the Model Law with one change
not material to the present appeal, provides for the arbitral tribunal’s ability to
rule on its own jurisdiction (referred to in the Travaux Préparatoires as
“competence competence”) and for the separability of the arbitration clause:

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 “(1) An arbitral tribunal may rule on its own jurisdiction, including
on any objection with respect to the existence or validity of the
arbitration agreement.

(2) An arbitration clause which forms part of a contract shall be

treated for the purposes of subsection (1) as an agreement
independent of the other terms of the contract, and a decision by
the arbitral tribunal that the contract is null and void shall not entail
ipso jure the invalidity of the arbitration clause.”

Procedural provisions for these issues are set out in the Act.

19. Section 2B of the International Arbitration Act sets out the applicable principles
of interpretation. It provides that in interpreting the Act and in developing the law
applicable to international arbitration in Mauritius:

“(a) regard shall be had to the origin of the Amended Model

Law, the corresponding provisions of which are set out in the Third
Schedule, and to the need to promote uniformity in the application
of the Model Law and the observance of good faith;

(b) any question concerning matters governed by the Amended

Model Law which is not expressly settled in that Law shall be
settled in conformity with the general principles on which that Law
is based; and

(c) recourse may be had to international materials relating to

the Amended Model Law and to its interpretation, including -

(i) relevant reports of UNCITRAL;

(ii) relevant reports and analytical commentaries of the

UNCITRAL Secretariat;

(iii) relevant case law from other Model Law

jurisdictions, including the case law reported by
UNCITRAL in its CLOUT database; and

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 (iv) textbooks, articles and doctrinal commentaries on
the Amended Model Law.”

20. The Travaux Préparatoires made clear at para 17(a) that:

“First and foremost, the success of Mauritius as a jurisdiction of

choice for international arbitration will be largely dependent on the
uniform and consistent application by the Mauritian Courts of
modern international arbitration law, and (in particular) on their
strong adhesion to the principles of non-interventionism which is
at the heart thereof. To this end:

(i) The Act strictly adopts the Amended Model Law’s

very limited voie de recours against arbitral awards: see
section 39, which reproduces article 34 of the Amended
Model Law…”

Section 39 is described as enacting “the all-important provisions of article 34 of the

Amended Model Law without any significant modifications”. The modifications are
effected by the addition of the provisions in section 39(2)(b)(iii) and (iv) (fraud or
corruption, and breach of the rules of natural justice). These provisions are akin to those
enacted in Singapore in section 24 of Singapore’s International Arbitration Act.

21. Article 34 of the Model Law, as the UNCITRAL Explanatory Note to the Model
Law makes clear, contains an exclusive list of grounds for setting aside an award. This
is essentially the same list as that contained in the provision in article 36 of the Model
Law for the recognition and enforcement of arbitral awards which was itself taken from
article V of the United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards 1958 (the “New York Convention”). As “public policy” is
determined in the courts of the state before which proceedings are brought, there may
well be differences in the view taken as to the nature and scope of the public policy
between a supervisory court which is considering setting aside the award and a court
enforcing the award in a different state. However, there is no reason for difference as to
the extent of a court’s right of intervention in respect of public policy under articles 34
and 36 and the decisions in this respect on enforcement are applicable in respect of
applications to set aside.

The jurisdiction of the Arbitrator and his Award

22. There was no dispute before the Supreme Court that it was within the jurisdiction
of the Arbitrator to determine whether the COA was exempted from the provisions of

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the PP Act and PP Regulations and therefore not illegal. As is evident from the
Arbitrator’s Award and the argument on the second issue in this appeal, the
interpretation of the legislation on which the legality of the COA turned required
detailed consideration of the provisions in the light of the amendments made in the
period between the enactment of the PP Act in 2006 and the agreement of the COA on
27 November 2009.

23. In the light of the provisions of the International Arbitration Act, particularly
those as to jurisdiction, separability, finality, and the unavailability of appeals on points
of law, the only route open to the Supreme Court to review the decision of the Arbitrator
on the interpretation of the PP Act and PP Regulations was under section 39 of the
International Arbitration Act. As is recognised by the provisions of the Model Law and
as is apparent from a number of cases in different jurisdictions, the question may arise
as to the nature and scope of public policy (see for example the many citations collected
by Professor Stavros Brekoulakis in Public Policy in English Arbitration Law (2016)).
It was common ground that under section 39(2)(b)(ii) of the International Arbitration
Act, it is for the Supreme Court to determine the nature and extent of public policy of
Mauritius and whether the Award is in conflict with it; the dispute on this issue is the
third issue in the appeal. Betamax accepted that if the Arbitrator had determined that
the COA was not exempted from the PP Act and therefore entering into the COA would
have been unlawful, then it was for the Supreme Court to determine whether the
consequences and effect of the illegality were such as to make the Award in conflict
with the public policy of Mauritius.

24. However, in Betamax’s submission, as the Arbitrator had determined that the
COA was exempted and there was no illegality, it was not open to the Supreme Court
to determine the question whether the Award conflicted with the public policy of
Mauritius under section 39(2)(b)(ii) of the International Arbitration; that issue could not
arise before the Supreme Court as it had finally been determined in the arbitration that
there was no illegality under the legislative provisions of the PP Act and PP Regulations.
STC contended that the question as to whether the COA was exempted from the PP Act
was an issue which turned on and was inextricably linked to the issue of the extent and
nature of the public policy of Mauritius. The ambit of section 39(2)(b)(ii) of the
International Arbitration Act therefore enabled the Supreme Court to review the
decision of the Arbitrator on the issue of the interpretation of the provisions of the PP
Act and PP Regulations.

25. It is therefore necessary first to determine whether section 39(2)(b)(ii) of the

International Arbitration Act permits a challenge to the Award of the Arbitrator on the
grounds that the Supreme Court is entitled to decide the interpretation of legislative
provisions which determine the legality of the COA, even though the issue of
interpretation is within the jurisdiction of the Arbitrator and has been decided in the
Award. This is a question, as the decision of the Supreme Court makes clear, distinct
from the question as to the nature and scope of public policy in so far as it affects the

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consequences of any illegality. It was common ground that where an arbitral tribunal
determined that the contract was illegal but that the contract could nonetheless be
enforced, a court was entitled to review the question whether an illegal contract should
be enforced on an application to set aside or enforce the award as that would ordinarily
raise issues of public policy.

The decision of the Supreme Court

26. The Supreme Court did not approach the application under section 39(2)(b)(ii)
of the International Arbitration Act by first considering whether it was permissible to
make such a challenge. It first determined the issue of interpretation and held that, by
entering into the COA, the parties acted in breach of the PP Act and the COA was illegal
in consequence. Then it considered whether the breach of the PP Act was such that it
would be contrary to public policy to enforce the Award. The test to be applied in
determining whether the nature and consequences of the breach were such as to conflict
with public policy was set out by the Supreme Court in the following terms:

“The breach of the legal provisions must be flagrant, actual and

concrete. But it is not any legal breach which would suffice to set
aside the enforcement of an award. The threshold is quite high; it
should be the breach of a fundamental legal principle, a breach
which disregards the essential and broadly recognised values
which form part of the basis of the national legal order, and a
departure from which will be incompatible with the State’s legal
and economic system.”

It concluded that the breach of the PP Act met this test:

“In short the PP Act reflects the public policy of Mauritius in

prescribing and ensuring high standards of integrity, free and open
competition, and protection from fraudulent and corrupt practices
in the award of major public contracts with a view to securing the
efficient use of the public funds of Mauritius. The scheme of the
legislation under the PP Act no doubt prescribes fundamental legal
principles, the breach of which would, for the given reasons, be
injurious to public good and conflict with principles which are
fundamental to the national economic and legal values of
Mauritius. The mandatory provisions of the PP Act, which impose
the application of the PP Act and the procurement process
prescribed by the PP Act in respect of the COA, constitute
fundamental pillars of good governance in Mauritius and are thus
undoubtedly part of the public policy of Mauritius within the

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 meaning of section 39(2)(b)(ii) of the International Arbitration
Act. It is beyond dispute that such a public procurement legislation
constitutes one of the vital pillars of good governance and forms
an integral part of the fundamental legal order of Mauritius.”

27. It was only after reaching these conclusions that the Supreme Court considered
its jurisdiction to determine the question of whether the COA had been entered into in
breach of the PP Act. It said:

“it is incumbent upon this Court whilst exercising jurisdiction

pursuant to section 39(2)(b) of the International Arbitration Act to
exercise ultimate control over the arbitral process by determining
whether the award should be set aside on the basis of a finding by
the Court that the award is in conflict with the public policy of
Mauritius.”

Its judgment on this issue was brief. It concluded that the Supreme Court had a
responsibility not only to determine what constituted public policy but whether or not
the agreement was illegal. It relied on citations from the decision of the Singapore Court
of Appeal in AJU v AJT [2011] 4 SLR 739; [2011] SGCA 41, at para 62 and a citation
from the judgment of Waller LJ in the Court of Appeal of England and Wales in
Soleimany v Soleimany [1999] QB 785, 800.

28. After setting out the importance of the COA to Mauritius and the guaranteed
payments that Betamax would receive for a 15-year period, the Supreme Court
concluded:

“The enforcement of an illegal contract of such magnitude, in

flagrant and concrete breach of public procurement legislation
enacted to secure the protection of good governance of public
funds, would violate the fundamental legal order of Mauritius.
Such a violation breaks through the ceiling of the high threshold
which may be imposed by any restrictive notion of public policy.

We have absolutely no difficulty in holding that the public policy

of Mauritius prohibits the recognition or enforcement of an award
giving effect to such an illegal contract which shakes the very
foundations of the public financial structure and administration of
Mauritius in a manner which unquestionably violates the
fundamental legal order of Mauritius.”

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STC’s submissions on the reasons for the decision of the Supreme Court

29. In STC’s submission, there were good reasons, in addition to the brief reasons
given by the Supreme Court, that supported the Supreme Court’s decision that it was
entitled to determine the question of the legality of the COA. When the Supreme Court’s
inquiry was directed at whether the Award conflicted with the public policy of
Mauritius, it was not in any way bound by what the Arbitrator had determined in the
Award:

(1) The principle of finality did not entitle the Supreme Court to review any
errors of fact. The same principle applied to errors of law unless the errors
engaged public policy considerations, particularly where the issue of illegality
was inextricably linked with the nature and scope of the public policy of
Mauritius. In those circumstances, section 39 qualified the principle of finality.

(2) If an error was made by an arbitral tribunal as to the public policy of

Mauritius, the Supreme Court was entitled to correct it. In the present case, the
Supreme Court was therefore entitled not simply to consider the issue of whether
the PP Act represented the public policy of Mauritius but also whether the PP
Act applied to the COA. Only then could the Supreme Court determine whether
the Award, in holding that the PP Act did not apply to the COA, conflicted with
public policy. The Supreme Court had been right to rely on the judgment in AJU
in deciding that it was for it to determine whether the COA was illegal in so far
as the illegality of the COA turned on what the public policy of Mauritius was.
The scope and nature of the relevant public policy was determinative of and
inextricably linked with the issue of illegality.

(3) As the COA was governed by the law of Mauritius, the issue of public
policy went to illegality as well as to the question of what the public policy of
Mauritius was for the purpose of section 39(2)(b)(ii) of the International
Arbitration Act. The interdependence arose from the fact that the law of
Mauritius was the governing law of the COA and the application to set aside the
Award was being determined under the law of Mauritius by the Supreme Court
of Mauritius as the supervisory court for the arbitration.

(4) The power of the Supreme Court to intervene under section 39(2)(b)(ii)
of the International Arbitration Act was, properly interpreted, symmetrical. It
was common ground that in a case where the decision by the arbitral tribunal had
found the agreement was illegal and yet enforced it, a court was entitled to
consider whether such an award should be enforced as a matter of public policy
under section 39(2)(b)(ii). Where the issue of illegality arose and it was
inextricably bound up with the issue of public policy, the court was also entitled

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 to review the decision that the contract was not illegal as it could not otherwise
consider whether the award was in conflict with the public policy of Mauritius.
The submission of Betamax to the contrary resulted in asymmetrical powers of
intervention.

The relevant case law

30. As the Supreme Court relied on decisions of the Courts of Appeal of Singapore
and England and Wales in AJU and Soleimany respectively, it is convenient first to
consider whether this case law provided a basis for the Supreme Court’s intervention
under section 39(2)(b)(ii) of the International Arbitration Act on the issue of legislative
interpretation which had been determined in the Award.

31. Although the decision of the Court of Appeal of Singapore in AJU is a decision
on the same provision in the Model Law, it is convenient first to consider the decisions
in England and Wales as these decisions, which applied the common law and the
legislative provisions giving effect to the New York Convention (mirroring those of the
Model Law), were considered in AJU. Soleimany, on which the Supreme Court
expressly relied, was an unsuccessful application by a claimant to enforce an award in
a dispute between him and another carpet dealer about the share of the profits which
they had made from a contract to export carpets from Iran. It was accepted that the
export was in breach of Iranian export and revenue controls and hence the contract was
illegal. The dispute about the distribution of the profits was referred to arbitration in
London before the Beth Din, the court of the Chief Rabbi. It decided that, although the
contract for the export of carpets was illegal, it would, applying Jewish law, take no
cognisance of the illegality and assess the share of the profits. It made an award in
favour of the claimant. Enforcement was refused on the basis that it was clear from the
award that the contract was illegal; the parties could not, by procuring an arbitration of
the dispute under the contract, conceal that one of them was seeking to enforce an illegal
contract. The interposition of the arbitration made no difference. Enforcement was
refused.

32. That was the only issue before the Court of Appeal. The decision was based on
the principle that a court would not enforce an award in respect of what the arbitral
tribunal had accepted was an illegal contract, just as it would not, for reasons of public
policy, enforce a contract between highwaymen or bank robbers for the distribution of
the profits of their crimes. Waller LJ nonetheless went on to make observations as to
what a court should do in cases where an arbitral tribunal had found the contract was
not illegal, but one of the parties wished to raise the issue of illegality of the contract in
relation to enforcement. It was these observations on which the Supreme Court relied
in the present case. Waller LJ said at p 800 of [1999] QB:

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 “The difficulty arises when arbitrators have entered upon the topic
of illegality, and have held that there was none… In such a case
there is a tension between the public interest that the awards of
arbitrators should be respected, so that there be an end to lawsuits,
and the public interest that illegal contracts should not be enforced.
We do not propound a definitive solution to this problem, for it
does not arise in the present case. So far from finding that the
underlying contract was not illegal, the Dayan in the Beth Din
found that it was…

In our view, an enforcement judge, if there is prima facie evidence

from one side that the award is based on an illegal contract, should
inquire further to some extent. Is there evidence on the other side
to the contrary? Has the arbitrator expressly found that the
underlying contract was not illegal? Or is it a fair inference that he
did reach that conclusion? Is there anything to suggest that the
arbitrator was incompetent to conduct such an inquiry? May there
have been collusion or bad faith, so as to procure an award despite
illegality? Arbitrations are, after all, conducted in a wide variety of
situations; not just before high-powered tribunals in international
trade but in many other circumstances. We do not for one moment
suggest that the judge should conduct a full-scale trial of those
matters in the first instance. That would create the mischief which
the arbitration was designed to avoid. The judge has to decide
whether it is proper to give full faith and credit to the arbitrator’s
award. Only if he decides at the preliminary stage that he should
not take that course does he need to embark on a more elaborate
inquiry into the issue of illegality.”

33. These observations were considered just over a year later by the Court of Appeal
in Westacre Investments Inc v Jugoimport SPDR Holding Co. Ltd. [1999] QB 740 and
[2000] QB 288, a case arising out of an action to enforce an International Chamber of
Commerce (ICC) award under the legislative provisions then in force giving effect to
the New York Convention. The ICC award on a contract governed by Swiss law had
been made by an arbitral tribunal sitting in Geneva. Its enforcement in England and
Wales was disputed on the basis that it would be contrary to the public policy of England
and Wales; it was alleged that the contract had been one which was intended to be
performed through the exercise of improper influence and bribery in Kuwait. Questions
in relation to bribery had been considered by the arbitral tribunal. The arbitral tribunal
had found that on the evidence presented, the contract did not have this purpose and
was not invalid; if there had been bribery, the contract would have been invalid. The
respondent appealed to the Swiss Federal Tribunal on the basis that the award was
contrary to public policy. The appeal failed, as the Swiss Federal Tribunal had to decide
the issues on the facts found by the arbitrators. The challenge in England and Wales
was supported by written evidence filed by the respondent setting out additional facts

Page 16
said to establish that the contract was one for bribery. The challenge then proceeded on
the basis of a preliminary issue whether the award was enforceable on the assumption
that the respondent could establish the facts it alleged. At first instance, Colman J, in a
comprehensive judgment given before the decision in Soleimany, decided the award
should be enforced. As the arbitral tribunal had jurisdiction to determine the issue of
illegality and had determined it on the evidence presented to it, the courts of England
and Wales should prima facie enforce the award. Balancing all the considerations of
public policy including finality, the prior determination of the issue of illegality before
the arbitrators and the need to combat corruption, the award should be enforced. In the
Court of Appeal, the majority did not permit the issue to be raised and affirmed Colman
J’s decision. Waller LJ, who dissented, followed the approach he had suggested in
Soleimany and would have reopened the issues relating to bribery.

34. These decisions were considered by the Singapore Court of Appeal in AJU. The
parties had entered into a settlement agreement, referred to as the Concluding
Agreement, governed by Singapore law with a SIAC arbitration clause. The arbitral
tribunal rejected the respondent’s case that the Concluding Agreement was an attempt
to stifle a prosecution in Thailand. It held that consequently the Concluding Agreement
was not illegal in Thailand or in Singapore nor contrary to the public policy of Thailand
and Singapore. It therefore upheld the validity of the Concluding Agreement. On the
respondent’s application to the High Court of Singapore to set aside the award under
article 34(2)(b)(ii) of the Model Law (enacted by Singapore’s International Arbitration
Act), it was common ground that an agreement to stifle a prosecution was illegal under
Singapore and Thai law and contrary to public policy, and that no issue of public policy
arose unless the court could reopen the arbitral tribunal’s findings and determine for
itself whether the Concluding Agreement was illegal. The High Court decided it should
reopen the decision of the arbitral tribunal on the basis that the arbitral tribunal had not
considered all the surrounding circumstances and had confined itself to a narrow
interpretation of the Concluding Agreement; looked at properly, the Concluding
Agreement was one to stifle a prosecution and therefore illegal. The award would be set
aside.

35. The Court of Appeal, in its judgment given by Chan Sek Keong CJ, reversed the
decision. After reviewing the judgments in Soleimany and Westacre extensively, the
Court of Appeal concluded at para 60 that it did not agree with the approach taken by
Waller LJ in Soleimany. The decision of Colman J and the majority in Westacre was
consonant with the legislative policy in Singapore’s International Arbitration Act. It
held that the arbitral tribunal had not ignored illegality (paras 63-65); the arbitral
tribunal, whilst accepting that an agreement with the objective of stifling a prosecution
would be illegal, had reached the conclusion that the Concluding Agreement was not
an agreement to stifle a prosecution. Although the judge had reached a different opinion
on the Concluding Agreement based on his view of the surrounding circumstances, the
arbitral tribunal had considered the surrounding circumstances. This was not an
appropriate case for the judge to reopen the finding that the Concluding Agreement was
valid and enforceable.

Page 17
36. Although the Court of Appeal had reached this conclusion, it considered at para
66 that it was necessary for it to clarify the general principle laid down in an earlier
decision of the Singapore Court of Appeal, PT Asuransi Jasa Indonesia (Persero) v
Dexia Bank SA [2006] SGCA 1, where Chan Sek Cheong CJ had also given the
judgment of the court. After referring to the decision of the Supreme Court of India in
Oil & Natural Gas Corporation Ltd v SAW Pipes Ltd [2003] SC 3629, he said at para
57 of PT Asuransi:

“In our view, the legislative intent of the Indian Act reflected in
the Indian decision is not reflected in the Act which, in contrast,
gives primacy to the autonomy of arbitral proceedings and limits
court intervention to only the prescribed situations. The legislative
policy under the Act is to minimise curial intervention in
international arbitrations. Errors of law or fact made in an arbitral
decision, per se, are final and binding on the parties and may not
be appealed against or set aside by a court except in the situations
prescribed under section 24 of the Act and article 34 of the Model
Law. While we accept that an arbitral award is final and binding
on the parties under section 19B of the Act, we are of the view that
the Act will be internally inconsistent if the public policy provision
in article 34 of the Model Law is construed to enlarge the scope of
curial intervention to set aside errors of law or fact. For
consistency, such errors may be set aside only if they are outside
the scope of the submission to arbitration. In the present context,
errors of law or fact, per se, do not engage the public policy of
Singapore under article 34(2)(b)(ii) of the Model Law when they
cannot be set aside under article 34(2)(a)(iii) of the Model Law.”

In AJU, after referring to this paragraph, the Court of Appeal observed at para 66:

“This passage recognises the reality that where an arbitral tribunal

has jurisdiction to decide any issue of fact and/or law, it may
decide the issue correctly or incorrectly. Unless its decision or
decision-making process is tainted by fraud, breach of natural
justice or any other vitiating factor, any errors made by an arbitral
tribunal are not per se contrary to public policy.”

37. Although the Court of Appeal had decided that the award should not be set aside
and reached the conclusion set out as to the effect of the passage in its judgment in PT
Asuransi Jasa, the Court of Appeal thought it necessary to clarify the statement that
“errors of law or fact, per se, do not engage the public policy of Singapore”. Earlier in
the judgment, in the passage relied on by the Supreme Court, the Court of Appeal had
said (para 62):

Page 18
 “… since the law applied by the Tribunal was Singapore law, the
question that arises is whether, if a Singapore court disagrees with
the Tribunal’s finding that the Concluding Agreement is not illegal
under Singapore law, the court’s supervisory power extends to
correcting the Tribunal’s decision on this issue of illegality. In our
view, the answer to this question must be in the affirmative as the
court cannot abrogate its judicial power to the Tribunal to decide
what the public policy of Singapore is and, in turn, whether or not
the Concluding Agreement is illegal (illegality and public policy
being … mirror concepts in this regard), however eminent the
Tribunal’s members may be. Accordingly, we agree with the Judge
that the court is entitled to decide for itself whether the Concluding
Agreement is illegal and to set aside the Interim Award if it is
tainted with illegality, just as in Soleimany, the English Court of
Appeal refused to enforce the Beth Din’s award as it was tainted
with illegality.”

38. At paras 67-69, the Court of Appeal went on to say:

“It is a question of law what the public policy of Singapore is. An

arbitral award can be set aside if the arbitral tribunal makes an error
of law in this regard, as expressly provided by section 19B(4) of
the International Arbitration Act, read with article 34(2)(b)(ii) of
the Model Law. Thus, in the present case, if the Concluding
Agreement had been governed by Thai law instead of Singapore
law, and if the Tribunal had held that the agreement was indeed
illegal under Thai law (as the respondent alleged) but could
nonetheless be enforced in Singapore because it was not contrary
to Singapore’s public policy, this finding - viz, that it was not
against the public policy of Singapore to enforce an agreement
which was illegal under its governing law - would be a finding of
law which, if it were erroneous, could be set aside under article
34(2)(b)(ii) of the Model Law (read with section 19B(4) of the
International Arbitration Act).

Taking the present case as an example, we have held that the

respondent is bound by the Tribunal’s factual finding that the
Concluding Agreement did not require the appellant to do anything
illegal under Thai law and was therefore not an illegal contract. If
the Tribunal had made the converse finding of fact instead - ie, if
the Tribunal had found as a fact that the Concluding Agreement

Page 19
 did indeed require the appellant to engage in illegal conduct in
Thailand and was therefore an illegal contract - and if the Tribunal
had erred in this regard, the appellant would equally have been
bound by this finding as it would have no recourse under the
International Arbitration Act (read together with the Model Law)
against such an error of fact.”

39. It is not easy to reconcile the statements contained in these paragraphs which,
given the decision in the case, were no more than observations. It has not been
questioned that it is for the court to determine the nature and extent of the public policy
of the state; and that, if an arbitral tribunal decides that an agreement is illegal, but
makes an award which enforces the agreement, the court is entitled to set aside the
award under section 39(2)(b)(ii) of the International Arbitration Act as conflicting with
public policy. That was the actual position in Soleimany. In AJU, the judge had reversed
the determination in the award on the interpretation of the Concluding Agreement
governed by Singapore law, held it was illegal and set the award aside. The Court of
Appeal held that the judge should not have reopened the finding on the legality of the
Concluding Agreement in these circumstances and should not have set it aside. The
better view of the observations in the judgment in AJU which are set out above is that
they did no more than affirm the position that: (a) in the absence of fraud or other
vitiating factors (as set out in section 24 of Singapore’s International Arbitration Act -
the equivalent of sections 39(2)(b)(ii) and (iv) of the International Arbitration Act) a
decision of fact or law within the jurisdiction of the arbitral tribunal was final and
binding; and (b) the determination of the nature and extent of public policy was a
question of Singapore law for determination by the courts of Singapore. The
observations in para 62 referring to it being in the power of the courts under article
34(2)(b)(ii) to review the determination in the award of the legality of the agreement
went further than was necessary for the decision in the case and are inconsistent with
the judgment read as a whole. As had been observed in PT Asuransi Jasa, to read article
34 broadly in this way would be inconsistent with the principle of finality in respect of
matters determined by the arbitral tribunal within its jurisdiction.

40. In RBRG Trading (UK) Ltd v Sinocore International Co Ltd [2018] EWCA Civ
838; [2018] 2 Lloyd’s Rep 133, the Court of Appeal of England and Wales considered
both Soleimany and Westacre. The Supreme Court in the present case did not refer to
RBRG Trading. The appeal arose out of proceedings for the enforcement of a CIETAC
(China International Economic and Trade Arbitration Commission) award under
section 103 of the Arbitration Act 1996 (the legislation currently giving effect to the
New York Convention). The CIETAC award was made under a contract of sale
governed by Chinese law; it awarded damages to the sellers for breach of the contract
by purchasers under which payment for the goods was to be by letter of credit. The
challenge was made on the basis that the enforcement of the award would be contrary
to public policy on both a narrow ground that the seller’s claim was based on the
presentation of forged bills of lading under the letter of credit, and on a broader ground
that the courts of England and Wales would not assist a party which had committed

Page 20
fraud. The presentation by the sellers of forged bills of lading had been considered in
the arbitration, but the arbitral tribunal had found that the presentation was not causative
of the breach by the purchasers and that the purchasers had not been deceived. An
application to the Chinese courts had failed. In rejecting the challenge to enforcement,
Hamblen LJ, in giving the judgment of the Court of Appeal, expressed the court’s view
at para 25(2):

“Where the arbitration tribunal has jurisdiction to determine the

relevant issue of illegality and has determined that there was no
illegality on the facts the English court should not allow the facts
to be reopened, save possibly in exceptional circumstances. In this
connection, I consider that the views expressed on this issue by the
majority of the court in Westacre are to be preferred to those put
forward by Waller LJ in the same case and in Soleimany.”

In considering whether and, if so, to what extent public policy was engaged, the Court
of Appeal said that the degree of connection between the claim sought to be enforced
and the relevant illegality would be important. On the facts of the case, the connection
between the seller’s fraud in presenting forged bills of lading and the enforcement of
the award in favour of them was not sufficient to engage public policy or, if public
policy was engaged, to justify refusal of enforcement. The court would not go behind
the findings of the arbitral tribunal.

41. The Board was also referred to decisions involving infringements of EU law
(including the decisions of the Court of Justice of the European Union in Eco Swiss
China Time Ltd v Benetton International NV [1999] ECR I 3055 and Claro v Centro
Movil Milenium SL [2006] ECR I 10421). However, the considerations relating to the
EU legal order and circumstances in those decisions are so different from international
commercial arbitration that the Board does not consider them to be of material
assistance.

Conclusion on the first issue

42. The International Arbitration Act sets out the clear principles applicable in
international arbitration to the jurisdiction of the arbitral tribunal to determine its own
jurisdiction, the separability of the arbitration agreement, the finality of awards and the
limited scope for intervention by the court.

43. In treating international arbitration as distinct from domestic arbitration, the

policy of the International Arbitration Act is to treat setting aside or enforcement of
awards made under the International Arbitration Act in the same way as it treats the
enforcement of foreign awards. The Award which is the subject of this appeal, even

Page 21
though the seat of the arbitration was in Mauritius, is an award in an international
arbitration.

44. It is common ground that it was within the jurisdiction of the Arbitrator to
determine the issue of the interpretation of the legislative provisions and whether the
provisions had the effect of making the COA illegal. The Board therefore approaches
the scope of the court’s power under section 39(2)(b)(ii) on the basis that decisions on
issues of law as well as fact were for determination by the Arbitrator in the Award. As
there was no opt in to permit an appeal on questions of law, the Supreme Court had no
power to review that decision unless it could do so under section 39(2)(b)(ii) of the
International Arbitration Act.

45. In the present case the determination of the legality of the COA turned on
detailed questions of interpretation of difficult legislative provisions which are set out
in detail in relation to the second issue in the appeal. As the Supreme Court observed
after setting out the arguments before it:

“The able arguments which have been submitted by both Counsel

have indeed brought into sharp focus the difficulties in interpreting
whether the COA falls within the definition of the type of contract
which would qualify for exemption under the Schedule to the PP
Regulations 2009.”

46. The questions of interpretation gave rise to no issue of public policy. It was
undisputed that the purpose of the PP Act and PP Regulations was to bring public
procurement under clear control and to make certain contracts subject to the approval
of the Central Procurement Board, so that procurement was transparent and corruption
was deterred. The issue in relation to legality was simply whether the COA was
exempted from the provisions - a question of the detailed interpretation of provisions
that had been amended in a far from straightforward manner.

47. In these circumstances, the argument advanced by STC, if correct, would enable
section 39(2)(b)(ii) to be used as a means of reviewing any decision of an arbitral
tribunal in an award on an issue of interpretation of the contract or of legislative
provisions where, on one of the alternative interpretations of the contract or the
legislative provisions, the result was that the agreement was illegal. That is because the
argument has as its premise that, where the law governing the contract and the curial
law are the same law, the question of the legality of a contract (either on its terms or its
compliance with state regulation or other legislative provisions) gives rise to public
policy considerations in relation to the award. The acceptance of this premise would
involve a significant expansion of section 39(2)(b)(ii) of the International Arbitration
Agreement. It would result in there being in effect an appeal on an issue of law wherever

Page 22
one party had alleged illegality in the arbitration but the arbitral tribunal had rejected
the contention, despite the clear provisions of the International Arbitration Act. As the
alleged illegality of a contract not infrequently arises in relation to the interpretation of
regulations or other legislative provisions said to be applicable to the contract, the ambit
of the court’s intervention would be increased significantly by this route to a review of
an award under section 39(2)(b)(ii) of the International Arbitration Act.

48. This would be inconsistent with the purpose of the International Arbitration Act
and the Model Law. The Model Law is premised on the principle that where a matter
has been submitted to an arbitral tribunal and is within the jurisdiction of the arbitral
tribunal, the arbitral tribunal’s decision is final whether the issue is one of law or fact.
The parties have so agreed in their contract to submit the dispute to arbitration. It is
therefore the policy of modern international arbitration law to uphold the finality of the
arbitral tribunal’s decision on the contract made within the arbitral tribunal’s
jurisdiction, whether right or wrong in fact or in law, absent the specified vitiating
factors.

49. The intervention of the court is specifically limited to setting aside the award on
the grounds set out in section 39(2) of the International Arbitration Act. In relation to
the issue of whether the award conflicts with public policy, the court’s intervention
proceeds on the court’s application of public policy to the findings (whether of fact or
law) made in the award. To read section 39(2)(b) more widely would be contrary to the
clear provisions as to the finality of awards. The provision can be given full application
by respecting the finality of the matters determined by the award and confining the
ambit of the section to the public policy of the state in relation to the award. The question
for the court under section 39(2)(b)(ii) is whether, on the findings of law and fact made
in the award, there is any conflict between the award and public policy. For example, if
the Arbitrator had held that the COA had been concluded in breach of the PP Act, but
the contract was enforceable as it was not contrary to public policy, the court would be
entitled to determine under section 39(2)(b)(ii) whether that decision by the Arbitrator
conflicted with the public policy of Mauritius. The effect of section 39(2)(b)(ii) is
simply to reserve to the court this limited supervisory role which requires the court to
respect the finality of the award. It cannot, under the guise of public policy, reopen
issues relating to the meaning and effect of the contract or whether it complies with a
regulatory or legislative scheme.

50. This conclusion accords entirely with the actual decisions in the four cases which
are considered in this judgment. In one (Soleimany), the illegality of the contract was
made clear in the award; the court therefore was entitled to determine that enforcement
should be refused on public policy grounds. In the other three cases, the arbitral tribunal
had determined in the award that there was no illegality; the court did not overturn those
determinations.

Page 23
51. In both Soleimany and AJU, the courts went further in the observations made. In
Soleimany, the observations give guidance, though not propounding a definitive
solution, as to what the position might be where a challenge was made to the finding of
illegality. In AJU, the Court of Appeal of Singapore sought to “clarify” the general
principle it had propounded that errors of law or fact did not per se engage the public
policy of Singapore. The guidance given in Soleimany has rightly not been followed. In
AJU, the observations are best understood as affirming the finality of awards on both
fact and law, whilst making it clear that the issue of public policy is a question of law
for the court if the court has to decide whether the award itself conflicts with public
policy. It is the Board’s view that, if the observations are to be read as suggesting that
the court can review the decision of an arbitral tribunal on the issue of the legality of a
contract under article 34 of the Model Law (section 39(2)(b)(ii) of the International
Arbitration Act), the observations were incorrect.

52. The issue in this appeal is the scope of section 39(2)(b)(ii) of the International
Arbitration Act in relation to a decision of an arbitral tribunal which decided that a
contract was not illegal on the basis of its interpretation of legislative provisions and
regulations that were applicable to a contract. There may be unusual circumstances
where different considerations may apply. More likely, as appears from the decided
cases and observations made in them, are cases where the arbitral tribunal has expressly
considered issues which have required the arbitral tribunal to inquire into circumstances
suggesting illegality and set out their reasons for holding as a matter of fact and of law
that there was no illegality. In cases of that kind, the arbitral tribunal’s decision on fact
and on law is a decision for the arbitral tribunal, if within its jurisdiction; if it holds that
the contract is not illegal, then that decision will be final, in the absence of fraud, a
breach of natural justice or any other vitiating factor. There may be some exceptional
cases, where the court under the Model Law provision may be entitled to review the
decision on legality, but it is not easy to think of such a case arising in practice. In the
light of experience, it would not be helpful to seek in this appeal to go further by
delineating possible circumstances or making observations about them. There would be
a risk that such observations could be deployed in the cases which are in practice likely
to arise in misguided attempts to expand the ambit of intervention under section
39(2)(b)(ii) of the International Arbitration Act / article 34 of the Model Law.

53. The Board therefore considers that the Supreme Court was in error in reviewing
the decision of the Arbitrator that the COA was exempt from the provisions of the PP
Act and PP Regulations. That decision was final and binding on the parties and therefore
no issue arose under section 39(2)(b)(ii) of the International Arbitration Act as to
whether the Award was in conflict with the public policy of Mauritius.

Page 24
Issue 2: If the Supreme Court was entitled to review the decision of the Arbitrator,
was the COA illegal as having been entered into in breach of the PP Act and PP
Regulations on their proper interpretation?

54. Given the Board’s conclusion on issue 1, issue 2 does not arise. The Board will
nonetheless set out the reasons for its view that the Arbitrator was correct in the
conclusion he reached that the COA was exempted from the PP Act and PP Regulations
and was therefore not illegal under those provisions.

The legislative provisions relating to procurement

55. As has been set out, between the enactment of the PP Act in 2006 and the making
of the COA on 27 November 2009, the PP Act and the PP Regulations were amended.
It was common ground that for the purpose of determining whether the COA was
exempt from the PP Act, the relevant provisions were those in force on 27 November
2009 when the COA was entered into. It was agreed that at that time:

(1) STC was a public body for the purposes of the PP Act.

(2) The COA would have been a major contract within section 2 of the PP
Act if not exempted and therefore would have required the approval of the
Central Procurement Board.

(3) The Central Procurement Board did not approve the award of the contract.

The sole question was whether the COA fell within the scope of the exemptions from
the PP Act.

The legislation as in force in 2008

56. The PP Act applied to all procurement by public bodies. The definition of
procurement was wide as set out in the definition section, section 2:

“‘procurement’ means the acquisition by a public body by any

contractual means of goods, works, consultant services or other
services;

Page 25
 ‘procurement contract’ means a contract between a public body
and a supplier, contractor or consultant resulting from procurement
proceedings…”

57. Detailed provisions were made in the PP Act for the procurement process,
including procurement methods (sections 15-25), the bidding process (sections 26-42),
appeals (sections 43-45), the contents of procurement contracts (sections 46-48) and
provisions as to integrity (sections 49-53). The PP Act also established a procurement
policy office (sections 4-7) and a Central Procurement Board (sections 8-14).

58. Specific provisions were made for major contracts. Section 14 provided that any
major contract into which a public body proposed to enter be approved by the Central
Procurement Board. Section 2 of the PP Act defined a major contract as one to which a
public body proposed to be a party and where the estimate of the fair and reasonable
value exceeded the “prescribed amount”:

(1) the “prescribed amount” was the amount “specified in column 3 of the
Schedule [to the PP Act] corresponding to the public body specified in column 1
in relation to the type of contract specified in column 2”.

(2) The Schedule to the PP Act as originally enacted was divided into Parts
I-V, each Part dealing with the various public bodies. STC was listed with 19
other public bodies in column 1 of Part IV. Columns 1, 2 and 3 read in respect
of STC:

Column 1 Column 2 Column 3

Public body Type of contract Prescribed
amount
State Trading Goods, Civil Engineering Rs 25
Corporation Works & Capital Goods million
Consultancy Services Rs 5
million
Other Services Rs 10
million

(3) The term “goods” was defined in section 2 of the PP Act as meaning:

“objects of every kind and description including commodities, raw

materials, manufactured products and equipment, industrial plant,
objects in solid, liquid or gaseous form, electricity, as well as
services incidental to the supply of the goods such as freight and
insurance…”

Page 26
59. The PP Act as enacted provided for two exemptions from its provisions:

(1) Procurement to protect national security or defence. This was provided

for in section 3:

“(1) Notwithstanding any other enactment, this Act does not apply to
procurement undertaken to protect national security or defence, where -

(a) the Prime Minister so determines by notice in the Gazette;

and

(b) the procurement is undertaken by the most competitive

method of procurement available in the circumstances.

(2) This Act applies to any other procurement effected by a public

body.”

(2) Procurement by an exempt organisation. Provision for this exemption was

made in section 2 by the definition of public body and exempt organisation:

“‘public body’ (a) means any Ministry or other agency of the

Government; (b) includes - (i) a local authority; (ii) a parastatal body; and
(iii) such other bodies specified in the Schedule; but (c) does not include
an exempt organisation…”

‘exempt organisation’ means a body which is, by Regulations, excluded

from the application of this Act…”

60. Provision was made for procurement by an exempt organisation by the Public
Procurement Regulations 2008 (GN No 7 of 2008) (the “PP Regulations 2008”) which
came into force at the time the PP Act came into force on 17 January 2008. Regulation
2 of the PP Regulations 2008 defined “exempt organisation” to mean:

“a public body, as specified in the First Schedule [to the PP

Regulations 2008], which is excluded from the application of the
[PP] Act…”

Page 27
The only body specified in the First Schedule to the PP Regulations 2008 was the
Independent Commission Against Corruption.

61. Accordingly, as STC was a public body to which the PP Act applied when the
PP Act came into force, the COA would then have been a major contract as it would
have been over the prescribed amount in Part IV of the Schedule to the PP Act. It would
have required approval by the Central Procurement Board.

The amendments made in 2009

62. The dispute between the parties arose as to the effect of a series of amendments
made in 2009 to the PP Act and the PP Regulations 2008. It is convenient to take these
chronologically.

63. The first set of amendments was made on 29 June 2009 when the Public
Procurement (Amendment No 2) Regulations 2009 (GN No 68 of 2009) (the “PP
Amendment Regulations”) were made by the Minister amending the PP Regulations
2008 with effect from 2 July 2009 in three relevant respects:

(1) By Regulation 3 of the PP Amendment Regulations, the definition of

exempt organisation in Regulation 2 of the PP Regulations 2008 was replaced
by a new definition:

“a public body which is excluded from the application of the [PP]

Act in relation to contracts referred to in the First Schedule…”

The effect of this change was that instead of the exemption being granted to the one
public body specified for all procurement (as was the position under the PP Regulations
2008), the definition in the PP Amendment Regulations provided that exemption was
to be granted for specific types of contract for different organisations as set out in the
Schedule to the PP Amendment Regulations.

(2) The First Schedule to the PP Regulations 2008 was revoked by Regulation
5 and replaced by the Schedule to the PP Amendment Regulations. The Schedule
to the PP Amendment Regulations was divided into a number of parts but with
only two columns: the first of the columns was headed “Public body” and the
second of the columns was headed “Type of contract”. There was no column in
respect of the value of the contract.

Page 28
 Part I of the Schedule included STC and other bodies (Agricultural Marketing
Board, Central Electricity Board and the Outer Islands Development Board). As
applied to STC, Part I of the Schedule to the PP Amendment Regulations read
as follows:

Public body Type of contract

State Trading Goods purchased for resale,
Corporation including services incidental to
the purchase or distribution of
such goods.

The definition of type of contract for STC was different to the contract specified
in column 2 of the Schedule to the PP Act; it was narrower in scope, but it had
similarities as it included “services incidental”.

Part II of the Schedule listed the Independent Commission Against Corruption

in a manner that left its position the same as it had been under the PP Regulations
2008 as originally made:

Public body Type of contract

Independent Commission All contracts.
Against Corruption

(3) By Regulation 4 of the PP Amendment Regulations, a new regulation,

Regulation 2A, was inserted into the PP Regulations 2008:

“Nothing in these regulations shall be construed as excluding the

application of the [PP] Act to a public body referred to in the First
Schedule to these regulations and the Schedule to the [PP] Act in
respect of a procurement contract to which the public body intends
to be a party and which is specified in column 2 of the Schedule to
the [PP] Act.”

64. The second set of amendments was made on 30 July 2009 when section 35 of
the Finance (Miscellaneous Provisions) Act 2009 and Schedule 4 to that Act amended
the PP Act.

(1) The way public body was defined in the PP Act was changed. Section 2
of the PP Act was amended by deleting from the definition of public body “an
exempt organisation” and by amending section 3(2) so that that sub-section read:

Page 29
 “This Act applies to any other procurement effected by a public
body, other than an exempt organisation…”

The definition of “exempt organisation” remained unchanged (see para 59(2)

above).

(2) The Schedule to the PP Act was replaced with a new Schedule to the PP
Act. The new Schedule retained the same columns as the original Schedule. STC
was listed with the Central Electricity Board and Mauritius Broadcasting
Corporation in Part V of the new Schedule which set out the type of contact and
prescribed amount as:

Column 1 Column 2 Column 3

Public body Type of contract Prescribed amount
State Trading Goods, Civil Rs 100 million
Corporation Engineering
Works & Capital
Goods
Consultancy Rs 100 million
Services
Other Services Rs 100 million

The legislative scheme in November 2009

65. Therefore, at the time that the COA was entered into:

(1) The PP Act applied to all procurement (except for national security and
defence) effected by a public body other than an exempt organisation (section 3
of the PP Act as amended in 2009).

(2) An exempt organisation was defined by reference to the PP Regulations

2008 as amended in 2009. It is convenient to call the PP Regulations 2008 as
amended by the PP Amendment Regulations the PP Regulations 2009 because
the Arbitrator and the Supreme Court referred to them in this way.

(3) Regulation 2 of the PP Regulations 2009 defined exempt organisations as

“a public body which is excluded from the application of the [PP] Act in relation
to contracts referred to in the First Schedule” to the PP Regulations 2009.

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 (4) The First Schedule to the PP Regulations 2009 listed STC in respect of
contracts for:

“Goods purchased for resale, including services incidental to the

purchase or distribution of such goods.”

(5) The PP Regulations 2009 incorporated Regulation 2A:

“Nothing in these regulations shall be construed as excluding the

application of the [PP] Act to a public body referred to in the First
Schedule to these regulations and the Schedule to the [PP] Act in
respect of a procurement contract to which the public body intends
to be a party and which is specified in column 2 of the Schedule to
the [PP] Act.”

(6) The reference to the Schedule to the PP Act was the Schedule to the PP
Act as amended in 2009. Read in respect of STC, it stated:

Column 1 Column 2 Column 3

Public body Type of contract Prescribed amount
State Trading Goods, Civil Rs 100 million
Corporation Engineering
Works & Capital
Goods
Consultancy Rs 100 million
Services
Other Services Rs 100 million

The interpretation of the legislative provisions in the Award

66. The Arbitrator considered that there were two questions before him in relation
to the issue as to whether the COA was subject to the requirement of approval by the
Central Procurement Board:

(1) whether the COA was within the exemption as a contract for goods
purchased for resale, including services incidental to the purchase or distribution
of such goods under the PP Regulations 2009; and

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 (2) whether, even if the COA was within that exemption, it was brought
within the requirements of the PP Act by Regulation 2A of the PP Regulations
2009.

67. On the first question, the Arbitrator decided that, on the proper interpretation of
the legislative provisions, the COA was exempted under the PP Regulations 2009. The
COA was a contract for services relating to the acquisition, construction, financing,
management and operation of a tanker to transport petroleum products being purchased
by STC for resale. On the ordinary meaning of “incidental to”, those additional services
were incidental to the purchase and distribution of petroleum products. The COA was
such a contract and therefore within the type of contract set out in the Schedule to the
PP Regulations 2009 (“Goods purchased for resale, including services incidental to the
purchase or distribution of such goods”) and therefore exempted by the definition in
Regulation 2 of the PP Regulations 2009.

68. As regards the second question, he noted that the argument on Regulation 2A
had only been raised by STC in its rejoinder. He dealt with the issue briefly concluding
that Regulation 2A could only apply if the COA was a contract for “other services”. As
he had held it was a contract for “Goods purchased for resale, including services
incidental to the purchase or distribution of such goods” within the exemption, it was
not a contract for other services.

69. The Arbitrator then considered the question as to whether the contract was illegal
and unenforceable under articles 131 and 1133 C Civ. As he had concluded that the PP
Act did not apply, there had been no breach of the PP Act. The COA was not illegal or
unenforceable under articles 1131 and 1133 of C Civ.

The decision of the Supreme Court

70. The Supreme Court approached the issue as to the application of the PP Act to
the COA by first considering whether it was open to Betamax to rely on the PP
Regulations 2009 to establish it was an exempt organisation in the light of Regulation
2A. The question in its view was whether the COA was governed by the PP Act or by
the PP Regulations 2009:

“The first pivotal issue therefore which has to be determined is

whether the COA is governed by the PP Act or by the PP
Regulations 2009. Is it the PP Regulations 2009, by virtue of which
the COA may be exempt from the PP Act and the procurement
process prescribed under the PP Act? Or, have the PP Regulations
2009 themselves been ousted by their Regulation 2A as a result of
which it is the PP Act which would be applicable to the COA?”

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71. Therefore, before considering whether STC was an exempt organisation in
respect of the COA under the PP Regulations 2009, it was necessary to decide if the PP
Regulations 2009 were applicable at all because Regulation 2A retained the application
of the PP Act to certain types of contract. It concluded:

“What Regulation 2A is plainly stating is that the 2009

Regulations, which provide for ‘exempt organisations’, cannot
operate to exclude the application of the PP Act in respect of a
procurement contract which is specified in column 2 of the
Schedule to the PP Act. In other words, there can be no exemption
from the procurement process of the PP Act by virtue of the PP
Regulations 2009 if the COA is a type of contract which falls
within the scope of application of column 2 of the Schedule to the
PP Act. The COA would then be subject to the application of the
PP Act and the procurement process prescribed therein.”

72. The Supreme Court then considered the Schedule to the PP Act (as amended)
and held:

“It has been seen that, as at 27 November 2009, Regulation 2A

excluded the application of the PP Regulations 2009 to any
procurement contract specified in column 2 of the Schedule to the
PP Act to which the STC as a public body intended to be a party.
Thus any contract for acquisition by the STC of ‘goods’ or ‘other
services’, for the prescribed amount of 100 million rupees or more,
would be excluded from the PP Regulations 2009 and would be
subject to the PP Act and its procurement process.”

73. As the subject matter of the COA was essentially in respect of freight as a service
incidental to the supply of petroleum products, it was within the definition of goods in
section 2 of the PP Act and was therefore a contract of a type specified in column 2 of
Part V of the Schedule to the PP Act (as it had been amended in 2009). In addition, even
if it were not within the extended definition of goods, it would be a contract for “other
services” within column 2 as, in the Supreme Court’s view, this term would encompass
any services other than consultancy services.

74. The Supreme Court therefore held that the Arbitrator had been wrong in his
decision. Betamax was also wrong in its arguments that: (a) Regulation 2A was simply
a saving provision which made clear that the PP Act would continue to apply to the
relevant public bodies in respect of procurement contracts entered into other than the
contracts specified in the First Schedule; and (b) Regulation 2A could not have been
intended to override the specific provisions of the PP Regulations 2009.

Page 33
75. Although the Supreme Court accepted that Regulation 2A was a saving
provision, it saved the application of the PP Act and not the PP Regulations 2009. It
ensured that the Act prevailed over anything in the PP Regulations 2009:

“The plain meaning and force of the wording used in Regulation

2A annihilate the application of any exemption under the
Regulations in relation to any of the contracts referred to in the
First Schedule to the Regulations, where the intended contract by
the public body is one which falls within the specifications set out
in column 2 of the Schedule to the PP Act. The STC could not
therefore by virtue of Regulation 2A qualify as an ‘exempt
organisation’ under the PP Regulations 2009 in respect of the
COA.”

As the COA was not exempted, the COA was a contract that had been illegally awarded
in breach of the PP Act.

76. The Supreme Court, in view of its conclusion on this issue, did not then go on to
consider the question as to whether the COA was a contract within the scope of the
exemption in the PP Regulations 2009 as a contract for “Goods purchased for resale,
including services incidental to the purchase or distribution of such goods”, though, as
set out at para 73, it considered that the COA was a contract for goods within the
Schedule to the PP Act.

The two questions of legislative interpretation on this appeal

77. On this appeal, two questions arise as to the proper interpretation of the
legislation:

(1) Did Regulation 2A of the PP Regulations 2009 deprive Regulation 2 and

the Schedule to the PP Regulations 2009 of any effect in relation to the entering
into of the COA?

(2) If it did not, was the COA a contract for “Goods purchased for resale,
including services incidental to the purchase or distribution of such goods”
within the Schedule to the PP Regulations 2009?

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Did Regulation 2A deprive Regulation 2 of any effect in relation to the entering into of
the COA?

The contentions of STC on Regulation 2A

78. In supporting the conclusion reached by the Supreme Court as to the effect of
Regulation 2A, STC advanced a more nuanced argument by seeking to explain how
Regulation 2A and the other provisions of the PP Regulations 2009 could be read
together:

(1) The PP Act and the processes specified in it applied to procurement by all
public bodies save for the limited categories set out in section 3(1) (national
security and defence) and for “exempt organisations”.

(2) The purpose of the Schedule to the PP Act was limited to defining the
types and values of contract that qualified as major contracts which were subject
to additional requirements for such contracts. It was not intended to be a list of
public bodies or of contracts to which the PP Act itself applied, as the PP Act
applied to procurement by all public bodies with two limited exceptions (national
security and defence and exempt organisations).

(3) The First Schedule to the PP Regulations 2009 identified types of contract
in respect of particular public bodies, irrespective of value; there was no column
for value.

(4) The effect of the new definition of “exempt organisations” substituted by

Regulation 2 of the PP Regulations 2009 would, if unqualified, therefore exempt
high value contracts of the type specified from the scope of the whole of the PP
Act regime; it simply identified the public body and the contracts.

(5) Regulation 2A was therefore needed to restrict the scope of the

amendment introduced by Regulation 2 and by the Schedule to the PP
Regulations 2009. Its purpose and effect was to ensure that the requirements of
the PP Act in respect of major contracts were continued as that had been the
essential purpose of the Schedule to the PP Act. By specifying column 2 of the
Schedule to the PP Act, Regulation 2A applied the requirements to contracts in
respect of the type covered by the Schedule, that is to say the types of contracts
which were over the specified amount. For example, in the case of STC it
covered contracts in column 2 (goods etc) which were above the prescribed
amounts in column 3. The drafter must be presumed to have known that the
essential function of the Schedule to the PP Act was to define the contracts which

Page 35
 would qualify as major contracts. The reference to column 2 of the Schedule to
the Act in Regulation 2A was intended as a reference to the contracts in column
2 of the Schedule to the Act that exceeded the prescribed amount in the Schedule
to the PP Act.

(6) Read in this way, Regulation 2A provided content to Regulation 2 of the

PP Regulations 2009 and to the Schedule to the PP Regulations 2009, as public
bodies identified in the Schedule to the PP Regulations 2009 were exempted
from the PP Act in respect of contracts identified in the Schedule to the PP
Regulations 2009 which (i) were not referred to in the Schedule to the PP Act or
(ii) in respect of contracts identified in the PP Act but which were not major
contracts as they were below the prescribed amount.

(7) This accorded with the obvious intention that the PP Act should apply to
major contracts. Prior to the PP Regulations 2009, only the Independent
Commission Against Corruption had been exempted from the Act. The
amendments made in 2009 were intended to be limited in scope and there was
no reason to think that the legislature had intended to remove the requirements
in respect of major contracts.

(8) It was therefore wrong to say that the Supreme Court’s interpretation
negated the effect of the amendment made by Regulation 2 of the PP Regulations
2009. It reduced the scope of the exemption as was intended, but provided for an
exemption from the requirements of the PP Act in respect of contracts which
were not major contracts or which were not identified in the Schedule to the PP
Act.

(9) In contrast, Betamax’s interpretation denuded Regulation 2A of any

effect.

Conclusion on Regulation 2A

79. It is common ground that Regulation 2A of the PP Regulations 2009 operated as

a saving provision:

(1) On the interpretation advanced by STC and as accepted by the Supreme

Court, it operated to bring most of what was exempted by Regulation 2 and the
Schedule to the PP Regulations 2009 back into the PP Act regime;

Page 36
 (2) On the interpretation advanced by Betamax, it made it clear that the PP
Act applied to public bodies in respect of contracts within the Schedule to the PP
Act that had not been exempted in the Schedule to the PP Regulations 2009.

80. The Supreme Court’s view, as explained above, was that as column 2 of Part 5
of the Schedule to the PP Act (as amended) set out in respect of STC contracts for goods
and other services, Regulation 2A operated to exclude the COA from exemption. As
the Supreme Court accepted, this interpretation of Regulation 2A largely rendered the
exemptions provided for in the other amendments meaningless or, as the Supreme Court
pithily expressed it in the passage quoted at para 75 above, “annihilated” their effect.

81. This cannot be the correct interpretation as, on this basis, the PP Regulations
2009 would have contained provisions that were incompatible with each other.
Moreover, STC’s more nuanced argument that the provisions are not incompatible with
each other makes little sense for two reasons.

82. First, if the purpose had been to ensure major contracts were excluded from the
exemption, there would have been a much simpler way of providing for this in clear
language. Furthermore, Regulation 2A would have referred not simply to column 2 of
the Schedule to the PP Act (the type of contract) but also to column 3 of that Schedule
(the prescribed amount), as on this basis it would have been column 3 that was more
important.

83. Secondly, the contracts to be exempted by the Schedule to the PP Regulations

2009 were on analysis a narrower category of types of contract within the contracts
specified in the Schedule to the PP Act. In the case of STC, the category exempted in
the Schedule to the PP Regulations 2009 was contracts for “Goods purchased for resale,
including services incidental to the purchase or distribution of such goods” rather than
all contracts in respect of goods as set out in the Schedule to the PP Act. As the category
of type of contract was wider in the Schedule to the PP Act than in the Schedule to the
PP Regulations 2009, using Regulation 2A would have been a strange way of reducing
the effect of the exemption intended by the specific provisions of the PP Regulations
2009.

84. Under the PP Regulations 2008, the only exempt body was the Independent
Commission Against Corruption; that exemption applied to all its contracts. Under the
amendments made by Regulations 3 and 5 of the PP Amendment Regulations, a
different approach was adopted. Many more bodies were exempted, but only in respect
of the contracts specified in the Schedule to the PP Amendment Regulations. It is
difficult to understand what the purpose of Regulations 3 and 5 of the PP Amendment
Regulations was if the Supreme Court’s interpretation of the effect of Regulation 4 of

Page 37
the PP Amendment Regulations in inserting Regulation 2A was the correct
interpretation.

85. It would also appear that the interpretation placed on Regulation 2A by the
Supreme Court would have meant that the Independent Commission Against
Corruption, which was entirely exempted by the PP Regulations 2008, would have lost
some of the exemption. Although the Independent Commission Against Corruption is
referred to in the Schedule to the PP Regulations 2008, it is not expressly mentioned in
the Schedule to the PP Act as amended in 2009. However, Part I of the Schedule refers
in column 1 to “parastatal bodies” not specified in the other Parts of the Schedule; in
respect of parastatal bodies, the type of contract in column 2 is listed as “all contracts”
and in column 3 the prescribed amount is Rs 15m. Parastatal bodies are not expressly
defined in the PP Act but are defined in Regulation 2 of the PP Regulations 2008 as “an
organisation established under an enactment whether body corporate or not and which
depends wholly or partly on government funding”. If this definition is taken as a
generally applicable definition, the Independent Commission Against Corruption is a
parastatal body and would therefore have lost some of the exemptions it had previously
enjoyed on the Supreme Court’s interpretation.

86. As explained earlier, the new approach in the PP Regulations 2009 was to
exempt public bodies in respect only of specified contracts rather than the blanket
exemption applied to the one public body mentioned in the PP Regulations 2008 (the
Independent Commission Against Corruption). Given that approach, the purpose of
inserting Regulation 2A was, in the Board’s view, to make it clear that the PP Act
remained applicable in respect of all contracts made by those public bodies other than
the contracts specified in the PP Regulations 2009. That saving may have been thought
necessary as there was a change to the definition of “public bodies” (previously, it had
been used on the basis that the only organisation that was exempted by the PP
Regulations 2008 was exempted from all its contracts). On this interpretation the
addition of Regulation 2A may not have been strictly necessary, but it provides for
consistency and avoids conflict between the different provisions in the PP Act and the
PP Regulations 2009.

87. This interpretation is also consistent with the subsequent amendment to the PP
Act in July 2009 in the way in which exempt organisations were defined. Under the PP
Act as it was enacted originally, an exempt organisation was excluded from the
definition of public body. The amendment to the PP Act in 2009 brought exempt bodies
within the definition of public body, thus emphasising, consistently with the new
approach of the PP Regulations 2009, that the PP Act applied to all public bodies in
respect of all procurement unless a specific type of contract was exempted.

88. Another view that could be taken of the purpose of Regulation 2A as a saving
provision achieves the same result. The PP Act only permitted the full exemption of a

Page 38
public body in the definition section (section 2) as originally enacted and in section 3(2)
when amended. It did not contemplate the exemption of a public body only in respect
of some of its contracts. Provision was made for the exemption of some contracts by
Regulation 2 of the PP Regulations 2009. Regulation 2A therefore operated to make it
clear that the full exemption in the PP Act did not apply to Regulation 2 of the PP
Regulations 2009 but otherwise applied to all other procurements other than those listed
in the Schedule to the PP Regulations 2009.

89. For these reasons, the Board concludes that Regulation 2A did not have the effect
which the Supreme Court held. Therefore, the issue was simply whether the COA was
a contract for “Goods purchased for resale, including services incidental to the purchase
or distribution of such goods” as set out in the Schedule to the PP Regulations 2009.

Was the COA a contract for goods purchased for resale, including services incidental
to the purchase or distribution of such goods?

STC’s contention

90. STC’s contention was that the COA was not within the description of a contract
for “Goods purchased for resale, including services incidental to the purchase or
distribution of such goods”. It was a contract for the transportation of petroleum
products. It was therefore not a contract for the purchase of such products for resale and
the services were not incidental to the purchase of such products under such a contract;
the goods had to be purchased under a contract that was exempted, not another contract
such as the COA.

The Board’s conclusion

91. The COA was exempted, Regulation 2A apart, if the COA was a contract for
“Goods purchased for resale, including services incidental to the purchase or
distribution of such goods”.

92. Section 5(6) of the Interpretation and General Clauses Act 1974 provides that a
definition in an Act must be applied to subsidiary legislation. The definition of goods
in the PP Act must therefore be applied to the same term in the PP Regulations 2009.
Although the type of contract in the PP Regulations 2009 was narrowed to contracts for
goods purchased for resale, the wide definition of “goods” in the PP Act had to be
applied. Included within the term “goods” in the definition in the PP Act were not only
what can be described as physical goods but services incidental to the supply of the
goods (see para 58(3) above); the illustrations given were freight and insurance. In the
PP Act, these services were treated as distinct from physical goods (as described in this

Page 39
judgment) and, for the purposes of the definition, were “goods” quite irrespective of
whether the services were incidental to the particular contract for the supply of goods.
Provided the services were of a kind incidental to the supply of goods, the services could
be provided under an entirely different contact to the contract for the supply of the
physical goods.

93. The phrase “purchase or distribution” in the Schedule to the PP Regulations 2009
in relation to services, simply reflected the narrower category of contracts. In the
Board’s view, it is therefore clear that the exemption was to apply to any contracts for
services incidental to the purchase or distribution of goods purchased for resale.
According to the language of the PP Regulations 2009, it was not restricted to services
provided under the same contract for the purchase of the physical goods. This
conclusion follows both from the context of the PP Act, in which the phrase in the PP
Regulations 2009 must be interpreted, and from the language of the PP Regulations
2009. What is required is that the service was incidental to the goods purchased for
resale; it is not required that the service is incidental to the specific contract under which
goods were purchased for resale. As STC was purchasing petroleum for resale and as
the COA was a contract for the supply of freight incidental to that purchase for resale,
it was within the exemption provided for in the Schedule to the PP Regulations 2009.

Conclusion on issue 2

94. Therefore, it follows that even if the Supreme Court had been correct in its
interpretation of section 39(2)(b)(ii) of the International Arbitration Act, it was wrong
in its decision on the meaning of the PP Act and PP Regulations. The Arbitrator reached
the right conclusion in the Award on the exemption of the COA from the procurement
regime.

Issue 3: If the COA was illegal, was the Award giving effect to the COA in conflict
with the public policy of Mauritius?

95. As the Board is of the view that the Supreme Court was not entitled to review
the finding in the Award on illegality and that the COA was not in any event illegal, it
is neither necessary nor helpful to address the third issue in the appeal. Considerations
in relation to the scope and extent of public policy in relation to an illegal contract are
best considered in circumstances where the illegality is established and its seriousness
can be judged in that context. Moreover, a determination of the public policy of the
Republic of Mauritius in relation to any such illegality is an issue on which it would be
necessary, particularly in relation to public procurement, to have close regard to the
determination of the Supreme Court when such an issue actually arises. The Board
therefore does not consider it desirable to lengthen this judgment by consideration of
this issue.

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Overall conclusion

96. The Board therefore allows the appeal, sets aside the Order of the Supreme Court
and allows the application of Betamax to enforce the Award.

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