Last week in commercial law: AFSA Too-Expedited Rules, finding love, and don’t cheat the Danish tax man

A municipality appoints Kipp Consulting to build a road. A few years later, the municipality refuses to pay Kipp Consulting for what the municipality says is a job not well done, and cancels the contract. Kipp Consulting says it did a fine job and refers a claim for payment to arbitration. The AFSA Expedited Rules apply. Kipp Consulting later files an amended statement of claim. The municipality misses the deadline for filing an amended statement of defence. The arbitrator sets a new deadline and warns the municipality that if it misses the new deadline it will automatically forfeit its right to continue participating in the proceedings, which Article 9 of the Expedited Rules envisages. The municipality misses the new deadline and the arbitrator’s forfeiture ruling kicks in. The arbitrator pushes on without the municipality and makes an award for Kipp Consulting. The municipality reviews. Gauteng Division, Pretoria: imposing a “permanent and comprehensive exclusion of a party from all facets of the arbitration proceedings” under Article 9 of the Expedited Rules is contrary to public policy, at least if an arbitrator does so mechanically [your summarist won’t apologise for preferring to hold parties to reasonable arbitration rules that impose reasonable sanctions on late litigants, but will apologise for sneaking in this judgment from June into this edition through the back door of the judgment dismissing leave to appeal, and also won’t apologise for thinking it’s now time to let Mont Chevaux Trust enjoy a well-deserved retirement; the test for leave is higher, we get it even if we think that’s wrong].

Insurance news from England. Petrofac, a big energy company, has a Directors and Officers insurance policy [or a D&O policy, as it’s known to its friends] for the benefit of, well, their directors and officers. The Serious Fraud Office charges two former Petrofac directors with bribery. Their criminal trial is coming up soon [the insurers have so far paid the directors’ extremely expensive extremely reasonably priced lawyers around £30 million, or 650 million of your finest ZARs]. The insurers pull the plug, arguing that there was fraudulent misrepresentation, based on facts that have come to light in the lead up to the criminal trial. A clause in the policy says that the insurers may not avoid the policy for misrepresentation “except with respect to … an Insured who has fraudulently misrepresented or fraudulently non-disclosed material information prior to the conclusion of this contract … where such fraudulent conduct is established by a final decision of a court, tribunal or regulator or by a formal written admission of the Insured.” Not a fan of small print in insurance policies, the insurers argue that the “final decision” does not have to come before they exercise their right to avoid the policy. The insurers also argue that the clause is contrary to public policy because if the insurers are made to wait for a “final decision” on fraud, then that is tantamount to letting these baddies alleged baddies benefit from their own fraud. Commercial Court: the insurers’ first argument is no good because the text of the clause clearly qualifies the insurers’ right to avoid the policy on a “final decision”, so the “final decision” must come first, and the second argument ignores that there has not yet been any finding that they are, in fact, baddies—so pay up, and if they are convicted then there will be a “final decision” that will allow the insurers to avoid the policy.

Your summarist hopes to one day find himself someone who loves him like the English courts love exercising jurisdiction. Intralinks, a US company, has a contract to provide IT services to Nexans, a French company. Nexans does not pay what Intralinks says it owes. Intralinks sues in England. Commercial Court: there’s jurisdiction in England because there’s a good arguable case that English law governs the contract (even though Nexans points to a competing set of terms governed by French law with a French exclusive jurisdiction clause) and because Nexans’s breach probably happened in England (because Nexans was supposed to pay into Intralinks’s UK bank account), and England is an appropriate forum, even though all the witnesses are in France, because English law is best left to English judges.

And finally, some exciting news from the US via Denmark [let it never be said that your summarist doesn’t show you the world]. Several investment funds concoct a way to make a lot of money do some old-fashioned tax evasion, which ultimately involves fraudulently claiming tax refunds from the Danish tax man, Skatteforvaltningen [bless you]. Skatteforvaltningen sues in several jurisdictions to recover the payments, including in the US. The defendants concede that they never owed any Danish tax and so they were never entitled to Danish tax refunds, but they argue that something called the revenue rule blocks Skatteforvaltningen’s suit. The revenue rule is a common law rule that precludes the courts of one country from adjudicating claims that amount to the enforcement of another country’s revenue laws (or, as the leading text puts it, a court has “no jurisdiction to entertain an action … for the enforcement, either directly or indirectly, of a penal, revenue or other public law of a foreign State”). A jury doesn’t buy it and awards Skatteforvaltningen $500 million. Second Circuit: the revenue doesn’t apply because the whole point of Skatteforvaltningen’s claim is that the defendants did not owe any Danish tax in the first place, so they were not entitled to tax refunds [which aligns with the UK Supreme Court’s conclusion on the revenue rule in Skatteforvaltningen’s English litigation, where it recovered more than £1 billion].

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