The below case is an interesting case. One of the first matters I worked on as a qualified solicitor was to argue (successfully) that a contract was unenforceable due to it being ‘void ab initio’. This is a latin term for void from the start.
Any contract based on illegality is not enforceable. For example, I would not be sued by a drug dealer who I took drugs from and then refused to pay. Strictly speaking though, a contract was in place - he provides drugs, I provide payment.
In the case below, it was argued that the contract should not be enforceable because it was void ab initio due to it being entered into on grounds of bribery. The court rightly stated that this is not an illegal contract and one that could be enforced.
There is a vast difference between bribery and duress. On face value, it appears that company B were arguing that the contract would not have been entered into was it not for bribery. The point here is, bribery is a two way street. Someone got paid (backhander) in order to have a contract awarded. The court will not intervene in such matters.
Richard Howlett - Solicitor 02077925649
Many in the commercial world may be surprised to hear of an important High Court ruling which established that there is no rule of English public policy which precludes enforcement of contracts which have been procured by bribery.
The case concerned a very substantial gas supply contract. Hundreds of millions of pounds had been spent on infrastructure in preparation for supplies to commence but the buyer, company A, launched arbitration proceedings against the seller, company B, on the basis that no deliveries of gas had in fact been made.
Following a 30-day hearing, arbitrators in London rejected company B’s challenge to their jurisdiction to consider the dispute. They found that the contract was valid and binding on both parties and that company B had for several years been in breach of the same. Although there had been misconduct by a number of persons involved in negotiating the deal, the contract had not been procured by corruption.
In rejecting company B’s challenge to that decision, the Court found that the contract itself was not illegal and that company A’s action to enforce it did not arise from any disgraceful conduct. There was no English public policy requiring the Court to refuse to enforce a contract procured by bribery or which had been preceded by a failed attempt at bribery. The Court noted that to introduce a concept of ‘tainting’ of an otherwise legal contract would be to create legal uncertainty.
Directing enforcement of the arbitrators’ award, the Court found that company B in any event had no realistic prospect of overturning their conclusions, which had been reached on the basis of full argument and evidence.
