Short Reads

English Court enforces arbitral award including a contractual penalty

English Court enforces arbitral award including a contractual penalty

English Court enforces arbitral award including a contractual penalty

05.02.2016 EU law

The English High Court has enforced a Swiss-seated arbitral award (the Award) issued by the Court of Arbitration for Sport (CAS), notwithstanding that the Award ordered a payment representing enforcement of a contractual penalty.

The claimant entered into two contracts with an Italian football club regarding the sale of financial rights consisting of the "registration rights" of a football player. The contracts required payment by instalments. The second contract was governed by Swiss private law and provided for arbitration under the rules of the CAS. After the football club had failed to pay a sum due, the claimant launched arbitration proceedings. The CAS arbitration panel ordered that the football club pay a sum which included the payments due and an additional Penalty Sum on the basis of a provision of Swiss law, providing that a judge should reduce a contractual penalty which is considered excessive. On appeal by the club, the Award was upheld by the Swiss court. The claimant subsequently sought to enforce the Award in England.

Punishing clauses are not enforceable under English law. The Court did however not consider that the Award of the penalty was contrary to public policy regulation for the purposes of Article V(II) of the New York Convention 1958. The Court concluded that the prohibition of the enforcement of penalty clauses does not protect a "universal principle of morality" and the penalty clause was not "injurious to the public good" to the extent that enforcement thereof should automatically be refused.  On this basis, the governing law as applied by the CAS arbitration panel was considered by the Court. The parties had chosen Swiss law as the law governing the contract and the CAS had exercised its power to reduce the penalty, so that this reduction was found compliant with Swiss law.

The decision is groundbreaking in the context of international transactions, in which the parties may choose a governing law of a particular jurisdiction to govern their contractual obligations, in casu Swiss law, but may look to another jurisdiction for enforcement.  It is particularly important given that penalty clauses are a relatively regular feature in transactions in many sectors and jurisdictions. 

 

Team

Related news

09.01.2020 BE law
Stibbe announces new Counsel and Of Counsel appointments

Inside Stibbe - Brussels, 9 January 2020 – The Brussels office of Stibbe has promoted Delphine Gillet (EU/Competition), Jan Proesmans (Employment, Benefits, and Pensions) and Sophie Bourgois (Dispute Resolution) to Counsel and Elisabeth Baeyens (Dispute Resolution) to Of Counsel. The new appointments have taken effect on 1 January 2020.

Read more

09.01.2020 BE law
Stibbe benoemt nieuwe Counsels en Of Counsel

Inside Stibbe - Brussel, 9 januari 2020 – Het Brusselse kantoor van Stibbe benoemt Delphine Gillet (EU-recht en mededingingsrecht), Jan Proesmans (arbeids- en pensioenrecht) en Sophie Bourgois (geschillenbeslechting) tot Counsel en Elisabeth Baeyens (geschillenbeslechting) tot Of Counsel. De nieuwe benoemingen gaan in vanaf 1 januari 2020.

Read more

09.01.2020 BE law
Stibbe nomme trois Counsels et un Of Counsel

Inside Stibbe - Bruxelles, le 9 janvier 2020 – Le bureau bruxellois de Stibbe a nommé Delphine Gillet (droit européen et de la concurrence), Jan Proesmans (droit social et des pensions) et Sophie Bourgois (droit des litiges) en tant que Counsels. Elisabeth Baeyens (droit des litiges) est, quant à elle, nommée Of Counsel. Les nouvelles nominations ont pris effet le 1er janvier 2020.

Read more

Our website uses functional cookies for the functioning of the website and analytic cookies that enable us to generate aggregated visitor data. We also use other cookies, such as third party tracking cookies - please indicate whether you agree to the use of these other cookies:

Privacy – en cookieverklaring