The Supreme Court of Cassation (SC) has recently heard a one-of-a-kind case for setting aside an arbitral award.

DHL Express Bulgaria (DHL) filed a motion for setting aside an arbitral award rendered by an ad hoc arbitrator. DHL claimed that it had never been notified of the arbitration procedure and found out about it upon serving a notification for voluntary payment by a bailiff. Furthermore, DHL claimed to have never concluded an arbitration agreement.

In order to verify whether claimant’s allegations are true, the SC required a copy of the arbitration file to be sent to the SC. However, the alleged arbitrator was never found at the claimed address. This address did not have any relation to arbitral tribunals or institutions. Moreover, the arbitrator’s identity was impossible to be verified.

Thus, the court ruled that the disputable circumstances with regard to the arbitration proceeding could not be proven. Even though the applicable legal act[1] provides that the claimant who seeks setting aside the award shall prove the alleged violations of the arbitration proceeding, in this case SC took another approach. The court apparently perceived that an arbitration procedure as known to the legal world never took place in this case. The missing arbitration file was not a burden for justifying the alleged violations, it even corroborated them.

The above conclusion was supported by the fact that the parties to the fake arbitration proceeding were not properly represented. According to the arbitration award, DHL was represented by a person who appeared not to be registered as a lawyer, although the award “qualified” them as a lawyer.

What is most astonishing is that the other party – an individual domiciled in S.A. (most probably standing for South Africa) seems to have been misrepresented, as well. Their lawyer referred to in the award was not a lawyer, either. The claimant – respondent to the setting aside procedure, actually did not object to DHL’s claim but stood up for investigating the relevant circumstances and discovering the true facts.

As a result, the fake award was set aside on SC on two grounds:

• An arbitration agreement was never executed.
• The claimant was not duly notified about the arbitration proceeding and was unable to take part in it.

Although the outcome was ultimately positive for DHL, the legal defense against the attempted scam was not cheap. The legal costs awarded to DHL by the SC were in the amount of BGN 260,000.

Hopefully, the aggravated party will manage to recover its costs. Hopefully, such scam awards will not emerge again to cause tremendous concerns to the business and the legal system. And hopefully, even if similar awards appear, the court will once again rule wisely upholding the principle “Ius est ars boni et aequi”.

[1] Art. 47 of the International Commercial Arbitration Act

Author: Tsvetelina Koleva