SMITH COGENERATION (BANGLADESH) PVT. LTD AGAINST BANGLADESH POWER DEVELOPMENT BOARD

Factual and Procedural Background

This case concerns an action brought by the Plaintiff to enforce an arbitration award issued on 30 October 2003 by a tribunal of three arbitrators in London under the ICC International Court of Arbitration. The award granted the Plaintiff five sums totaling over $11 million. The arbitration originated in 1999, resolving disputes between the Plaintiff, the Defendant, and the Government of Bangladesh related to a Power Purchase Agreement for a barge-mounted power plant in Bangladesh and an associated Implementation Agreement.

A significant delay occurred before the Plaintiff initiated enforcement proceedings in Scotland by serving a summons on the Defendant in Bangladesh on 15 February 2023. The Defendant initially sought an extension to respond but failed to enter an appearance. Consequently, the Plaintiff enrolled for decree in absence, which was granted on 31 May 2023. The Defendant later filed a motion to recall this decree and allow late defences, which was heard by the court.

Legal Issues Presented

1. Whether the Defendant satisfied the three conditions under Rule of Court 19.2(5) to recall a decree in absence and allow defences to be received late:
1. That without fault on the Defendant's part, it did not have knowledge of the summons in sufficient time to defend;
2. The Defendant disclosed a prima facie defence to the action on the merits;
3. The motion was enrolled within a reasonable time after knowledge of the decree or within one year of the decree.
2. If the conditions are met, whether the court should exercise its discretion to recall the decree and allow the defences.

Arguments of the Parties

Defendant's Arguments

• The Defendant contended that all three conditions of Rule of Court 19.2(5) were satisfied and divided submissions accordingly.
• Regarding the prima facie defence, the Defendant argued that the defence need not be on the merits strictly but could include jurisdictional and competency challenges. The Defendant cited Lord Emslie's opinion in Bank of Scotland indicating that a colourable or arguable case is sufficient at this stage.
• The Defendant challenged the court's jurisdiction, asserting that the award was not a "Convention award" under section 18 of the Arbitration (Scotland) Act 2010 and thus the court lacked jurisdiction under section 19. They further argued no other jurisdictional basis existed, including under Schedule 8 of the Civil Jurisdiction and Judgments Act 1982 or common law, as the Defendant had no presence in Scotland.
• Competency was challenged on the basis that enforcement of a Convention award should be by petition under specific Rules of Court, whereas the Plaintiff had proceeded by action for declarator and payment.
• The Defendant raised a time bar defence, asserting the applicable law to enforcement was Bangladeshi law with limitation applying, or alternatively English law with limitation under the Limitation Act 1980.
• Defences were also advanced on validity and enforceability grounds, including ongoing proceedings in Bangladesh and forum non conveniens.
• On the knowledge of the summons, the Defendant explained delays due to Bangladeshi governmental and legal culture, including difficulties in obtaining board and central bank approvals to pay solicitors in foreign currency, which prevented timely instruction of Scottish solicitors and defence preparation.
• The Defendant asserted that the motion to recall was enrolled within a reasonable time, considering these constraints, and requested the court exercise discretion in its favour due to the significant sums at stake and the Defendant’s bona fide efforts to defend.

Plaintiff's Arguments

• The Plaintiff submitted that the Defendant failed to satisfy each part of the Rule 19.2(5) test and that the court should refuse to recall the decree.
• The Plaintiff challenged the characterization of the Defendant as an inexperienced litigant, noting the Defendant’s status as a national power company with prior international arbitration experience.
• The Plaintiff contended that the Defendant had assets within the jurisdiction and had paid sums on account to solicitors, undermining claims of inability to instruct counsel.
• Regarding knowledge of the summons, the Plaintiff emphasized an objective test and identified key dates where the Defendant was advised to lodge defences but failed to act, constituting fault.
• The Plaintiff argued that the Defendant’s procurement difficulties were implausible and that the Defendant lacked a proper system to handle litigation.
• On the timing of the motion, the Plaintiff submitted that almost six months delay from knowledge of the decree was unreasonable.
• While accepting the Defendant need only show a prima facie defence, the Plaintiff contended the defences did not disclose such a case, particularly disputing the jurisdictional challenge and time bar arguments.
• The Plaintiff asserted the award was a "Convention award" under section 18, consistent with the New York Convention, and that enforcement by action for declarator and payment was competent.
• The Plaintiff noted no pending challenges to the award in England or Bangladesh and stressed the prejudice it would suffer if the decree were recalled, urging the court to exercise discretion against the Defendant.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Governor and Company of the Bank of Scotland v Brigitte Kunkel-Griffin 2005 SCLR 538	Assessment of prima facie defence; requirement that the defender show a colourable or arguable case; fault and sufficiency of time to defend under Rule 19.2(5)(a).	The court relied extensively on Lord Emslie’s analysis, applying the principles to assess the Defendant’s fault and sufficiency of time to defend, distinguishing the present facts from those in Bank of Scotland.
Thoars' Judicial Factor v Ramlort Limited 1998 SC 887	Interpretation of jurisdictional provisions under the Arbitration (Scotland) Act 2010 and limits on jurisdiction conferred by section 19.	The court considered the Defender’s argument that section 19 does not confer jurisdiction but only recognition and enforcement, requiring other jurisdictional grounds.
Eui Limited v Mrs Anna Bialas-Krug 2014 GWD 28-553	Assessment of fault and reasonableness in failing to enter appearance; comparison of litigant sophistication.	The court distinguished the Defendant’s position from this precedent due to the Defendant’s differing status and circumstances.
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corp [2005] EWHC 726 (Comm)	Enforcement of arbitration awards and challenges to validity in the country of origin.	The court noted no challenge had been made to the award in England, supporting the Plaintiff’s position on enforceability.

Court's Reasoning and Analysis

The court first considered whether the Defendant met the three conditions of Rule of Court 19.2(5). Regarding knowledge of the summons, the court accepted the Defendant’s explanation of difficulties arising from Bangladeshi governmental and legal culture, including delays in obtaining board and central bank approvals to pay solicitors in foreign currency. These were found to be genuine and not implausible. The court noted the Defendant’s early attempts to engage Scottish solicitors and correspondence with the court indicating an intention to defend. The court distinguished the facts from Bank of Scotland, where the defender had taken no steps to obtain legal advice.

On the prima facie defence requirement, the court held that the Defendant’s defences disclosed a reasonable basis for believing the defence might be well founded, particularly the jurisdictional challenge under section 19 of the 2010 Act and the time bar defence based on applicable law. The court emphasized that it was not required to finally determine these issues at this stage.

Regarding the timing of the motion, the court found that the Defendant enrolled the motion within a reasonable time after knowledge of the decree, considering the same surrounding circumstances and procedural complexities.

Finally, the court exercised its discretion to grant the motion, finding it in the interests of justice to allow the Defendant an opportunity to vindicate its position given the significant sums involved and the unusual circumstances. The court was not persuaded that the prejudice to the Plaintiff warranted a different outcome and noted that these issues might be relevant to future expenses discussions.

Holding and Implications

The court’s final decision was to RECALL THE DECREE IN ABSENCE pronounced on 31 May 2023 and to allow the Defendant to lodge defences late. The action will proceed as a commercial case before the court.

This decision directly affects the parties by reopening the case to allow the Defendant to defend the action despite the late appearance. No new legal precedent was established, but the ruling underscores the court’s willingness to consider contextual and procedural fairness, particularly when dealing with foreign public bodies facing genuine administrative constraints.