Sun Travel v Hilton: High Court Confirms Recognition and Enforcement of Arbitral Awards as Two Different and Separate Processes
In a recent decision in Sun Travel v Hilton, the High Court of the Maldives grappled with the question of whether a party applying for the enforcement of a foreign arbitral award is required to apply for both recognition and enforcement of the award.
The judgment adds another loop to the long-running dispute involving the arbitration proceedings conducted at the International Chamber of Commerce (“ICC”) between Sun Travel and Tours Pvt Ltd (“Sun”) and Hilton International Manage (Maldives) Pvt Ltd (“Hilton”).
The arbitration proceedings between Sun and Hilton arose out of a resort management agreement entered between the parties in the year 2009 where Hilton was engaged by Sun to manage Irufushi Beach & Spa (“Resort”) owned by Sun, for a period of 20 years.
When Sun terminated the agreement in 2013, primarily on grounds of misrepresentation, Hilton commenced arbitration proceedings against Sun at the ICC alleging wrongful repudiation.
The ICC’s arbitration tribunal dismissed Sun’s claims of misrepresentations and held that Sun’s termination of the contract was a wrongful repudiation of the contract and, rendered the final award in favour of Hilton.
Hilton subsequently sought enforcement of the arbitral award at Maldivian courts. Following the many back-and-forths between courts in the enforcement proceedings on the issue of the correct forum to enforce foreign arbitral awards, the issue was settled by the High Court in April 2017 when the Court held that it was the Civil Court that has jurisdiction to hear enforcement proceedings of foreign arbitral awards.
Following that judgment of the High Court, Hilton applied for the enforcement of the award for a second time at the Civil Court. This time, however, Civil Court again declined to enforce the award on the basis that by the time Hilton reapplied for enforcement, the Civil Court had in March 2017 rendered a judgment in a separate case whereby the Court in effect examined the merits of the dispute at arbitration and held in favour of Sun (March 2017 Judgment).
However, when the High Court overturnedthe March 2017 judgment at appeal, in August 2020 Hilton filed for the enforcement of the award at the Civil Court for a third time.
Third time being the charm for Hilton, this time, the Civil Court held in favour of Hilton and ordered Sun to pay the due amounts in full to Hilton within a period of 1 month.
We take up the case now following the judgment of the High Court in the appeal of the Civil Court’s that enforcement order.
The Case Before the High Court
The High Court by a majority of two to one overturned the order of the Civil Court in the enforcement case.
In doing so, the court addressed the case on two fronts:
Whether recognition and enforcement of foreign arbitral awards are two different and separate processes.
If question 1 is answered in the affirmative, what are the consequences of Hilton applying only for the enforcement of a foreign arbitral award.
Recognition and enforcement as two different and separate processes
Drawing on the distinction between the recognition of foreign arbitral awards and enforcement of foreign arbitral awards, the majority of the Court firstly noted the semantical differences between the ‘recognition’ of an award on the one hand and the ‘enforcement’ of the award on the other hand.
Secondly, the justices then noted the practical differences between the recognition of a foreign arbitral award and the enforcement of a foreign arbitral award. In that regard, the Court noted that the purpose of recognition of an award is to confirm the authenticity and bindingness of an award.
On those two bases, the Court ruled that recognition of an award and enforcement of an award are two different processes, adding that the two processes needed to be completed separately.
Consequence of Hilton applying only for enforcement
The majority noted that section 73 of the Arbitration Act, which reads:
A request for enforcement of an award in Maldives shall be made to the relevant court. An award shall be enforced in Maldives according to an order issued by the relevant court.
The Court then noted section 74 of the Arbitration Act which expressly provides for the requirements to be met to challenge not only the enforcement but also the recognition of an arbitral award.
Accordingly, the Court reasoned that the provisions of the Arbitration Act must be interpreted to provide the parties with all the opportunities envisaged for them under the Act. On that basis, the majority was of the view that when the two provisions; sections 73 and 74 of the Arbitration Act are read together, the words ‘an order’ in section 73 of the Arbitration Act indicates that a recognition order issued by a relevant court is a necessary precursor for domestic courts to proceed with the enforcement of an award.
Having interpreted the relevant sections of the Arbitration Act as such, the Court noted that the arbitral award, in this case, has never completed the recognition process as required under the Arbitration Act. For that reason, the majority was of the opinion that the order issued by the Civil Court enforcing the arbitral award in this case, was an invalid order.
Following the judgment of the High Court, a party seeking enforcement of a foreign arbitral award in the Maldives now is expected to, first obtain a ‘recognition order’ in its favour. Once the award is recognised, i.e. a recognition order in favour of the applicant is rendered, then only can the enforcing court proceed with deciding upon the enforcement of the arbitral award.
It, however, is left to be seen, which domestic court has jurisdiction to decide upon the recognition of an award. Considering the difficulties faced by the courts in the past in deciding upon which court has jurisdiction to enforce arbitral awards, one is left with the question of whether the same will be the fate of parties applying for recognition of foreign arbitral awards in their attempt to follow the instructions of the High Court.
It is also relevant to consider whether a party seeking recognition and enforcement of a foreign arbitral award will be required to separately file for recognition and then for enforcement of the award. Perhaps, the High Court’s intention was merely to instruct courts to sua sponte decide upon the recognition issue before proceeding with the enforcement of the award.
Alas, we await the decision of the Supreme Court…
Sun Travel and Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd 2022/HC-A/26.
Hilton International Manage (Maldives) Pvt Ltd v Sun Travel and Tours Pvt Ltd 2017/HC-A/91.
Hilton International Manage (Maldives) Pvt Ltd v Sun Travel and Tours Pvt Ltd 1282/Cv-C/2017.
See Sun Travel and Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd 2283/Cv-C/2016.
Hilton International Manage (Maldives) Pvt Ltd v Sun Travel and Tours Pvt Ltd 2017/HC-A/237.
The High Court’s decision was upheld by the Supreme Court in Sun Travel and Tours Pvt Ltd v Hilton International Manage (Maldives) Pvt Ltd  SC 77.
Hilton International Manage (Maldives) Pvt Ltd v Sun Travel and Tours Pvt Ltd 1652/Cv-C/2020.
Civil Court’s Enforcement Order Number 144-B5-CR4/CA/2021/6107.