Lord ordinary recalls decree in absence in $11m arbitration dispute between Bangladeshi energy company and public body

About this case:

• Citation:
  [2024] CSOH 48
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Richardson

Smith Cogeneration (Bangladesh) Pvt Ltd was originally granted decree in absence in its action against Bangladesh Power Development Board in May 2023. The defender sought to challenge the decree on the grounds of jurisdiction, competency, prescription, and enforceability, and cited understandable, if unusual, delays to its instructing Scottish solicitors.

The case was heard by Lord Richardson in the Outer House of the Court of Session. J Mackenzie, solicitor advocate, appeared for the pursuer and Ellis KC for the defender.

Characterised as fault

Arbitration proceedings were commenced by the pursuer in 1999 in order to resolve a dispute which had arisen between the pursuer, the defender and the Government of Bangladesh. The dispute concerned both a Power Purchase Agreement between the pursuer and the defender for the construction of a barge-mounted power plant in Haripur, Bangladesh and an Implementation Agreement in respect of the PPA.

Summons in the present case was signeted on 3 February 2023. On 28 March 2023, solicitors who stated they were “to be instructed” by the defender contacted the pursuer’s solicitors seeking a delay to the lodging of the summons for calling. The pursuer’s solicitors duly delayed lodging until 28 April 2023. However, after no appearance was entered by the defender on 17 May 2023, the pursuer enrolled for decree in absence.

After correspondence was received from the solicitors confirming that they had not been instructed by the defender, decree in absence was granted on 31 May. On 1 December 2023, the defender intimated a motion seeking recall of the decree and allowance of defences, arguing that the delay had been due to seeking board approval to pay Scottish solicitors’ fees, which from a Bangladeshi perspective were significant sums of money.

Senior counsel for the defender further explained that, having obtained board approval, it still required approval from the central bank, which involved a number of meetings with the deputy governor and further investigations. Therefore, without fault on its part, the defender did not have knowledge of the summons in sufficient time to defend due to the controls imposed on it as a Bangladeshi public body.

For the pursuer it was submitted that the actions of the defender fell properly to be characterised as being at fault. The reason why it did not have sufficient time to defend the action arose from its own failures to enter appearance and lodge defences, having been properly advised by Scottish solicitors.

Highly unusual circumstances

In his decision, Lord Richardson said of the scope of the motion: “Determination of the defender’s motion turns on, first, whether it has satisfied the three conditions of Rule of Court 19.2(5) and, second, on the assumption that the conditions of the rule are met, whether I should exercise my discretion in favour of the defender. It is necessary for the defender to satisfy each of the three conditions set out in subsection (5).”

On the first of these conditions, he said: “It is apparent to me that the defender, by 15 March 2023, had made contact with Scottish lawyers which resulted in advice being given to them; and by 23 March 2023 had corresponded directly with the court indicating that the defender intended to appear and deny the pursuer’s claim and requesting additional time to do this. Thereafter, the remainder of the time appears to have been taken up trying to obtain board approval together with permission to release the sums of foreign currency required to pay Scottish solicitors and thereby enable those solicitors to act.”

He continued: “In these admittedly highly unusual circumstances, I am satisfied that the defender did not have knowledge of the summons in sufficient time to defend. The defender indicated to the court that it wished to appear to defend the action and then sought to obtain the legal representation necessary to achieve this. I do not consider that the defender can properly be characterised as being at fault for the difficulties which it experienced in seeking to obtain legal representation which appear to have arisen from Bangladeshi constraints.”

Addressing the remaining defences, Lord Richardson said: “In all the circumstances and essentially for the reasons which I have set out in respect of the three parts of the rule, I am satisfied that I should grant the motion. In summary, I consider that it is in the interests of justice that, in the particular and unusual circumstances of this case, the defender ought to be given an opportunity to vindicate its position as articulated in the defences in response to the very significant claim being advanced by the pursuer.”

The court therefore recalled the decree in absence and allowed the defences to be received, with the action to proceed thereafter as a commercial action before the same judge.