A dispute arose out of a construction contract incorporating FIDIC dispute resolution rules. Following non-payment of sums allegedly due to Defendant, a public entity in an African state ('State X'), by Claimant, a private company registered in the same state, Claimant gave notice of termination and both parties sought the implementation of the dispute resolution provisions, which stated that the dispute should first be referred to the Engineer and then, if need be, to arbitration. Defendant initiated state court proceedings to have Claimant's termination declared invalid and to restrain Claimant from removing its material from the site. Claimant responded by seeking a stay of the court proceedings and applied for an injunction protecting it from trespass by the forces of order. Claimant submitted a request for arbitration in which, amongst other things, it claimed damages for Defendant's alleged unlawful interference in its property. In response, Defendant objected to the arbitral tribunal's jurisdiction to determine the claims. According to the Terms of Reference, the merits of the dispute were to be decided in accordance with the law of State X, which the arbitrators assumed to be the same as the common law of England unless informed otherwise.

• Jurisdiction over tort claims

• Arbitration clause

• Trespass

• Oppression by government servants

• Damages

'Tort Claims:

Jurisdiction

97. It appears to us to be common ground between the parties that the decision of the English Court of Appeal in Ashville Investments Ltd. v. Elmer Contractors Ltd. [1989] 1 QB 488 would be applied by the Courts of [State X], in the interpretation of Clause 67 of the General Conditions of Contract. That begins:

If any dispute or difference of any kind whatsoever shall arise between the Employer and the Contractor or the Engineer and the Contractor in connection with, or arising out of the contract, or the execution of the works, whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the contract, it shall . . . [be referred to arbitration].

98. In Ashville Investments Ltd. v. Elmer Contractors Ltd. the English Court of Appeal had to consider the ambit of an arbitration clause which provided that:

In case any dispute or difference shall arise between the Employer or the Architect on his behalf and the Contractor . . . as to the construction of this contract or as to any matter or thing of whatsoever nature arising thereunder or in connection therewith . . . then such dispute or difference shall be hereby referred to [arbitration].

99. In that case the English Court of Appeal held that the words were wide enough to give an arbitrator jurisdiction over claims based upon allegations of mistake at the time the contract was entered into and allegations of misrepresentation or negligent misstatement since they were disputes which arose "in connection with" the contract and accordingly were within the scope of the arbitration clause, and that an arbitrator could grant rectification of the contract or award damages if those allegations were made out.

100. In this case the Claimant claims in tort for trespass to land or goods and/or the conversion of its property. These claims arise out of the seizure by the Government of the Claimant's plant and equipment in March 1988.

101. In our judgment these are claims which in principle fall within our jurisdiction since they are claims which give rise to disputes or differences between the Employer and the Contractor and arise either "in connection with" or "out of" the contract. We would draw particular attention to the words "any dispute or difference of any kind whatsoever" and to the reference to the dispute or difference being one which may arise "after the termination, abandonment or breach of the contract". These are claims which could not have been made but for the contract and we are satisfied that we have jurisdiction to deal with them.

Exemplary or Punitive Damages

102. It is part of the Claimant's case that the gravity of the Government's action and the fact that it appears to have been brought about by a lack of good faith on the part of the Government justify the award of exemplary or punitive damages. This claim may be considered under two heads:

(a) Damages for breach of contract;

(b) Damages in tort.

103. The Claimant has given us no authority for the proposition that we are entitled to award exemplary or punitive damages for breach of contract. We are not surprised since we do not consider that there is any authority to support a claim for exemplary or punitive damages for breach of contract under the law of [State X], unless, which we have not been told, it departs from the law of England. We find the law to be that set out in paragraph 1781 of Chitty on Contracts, 26th Edition, (the leading English textbook on contracts) which states:

Exemplary damages are damages awarded against the defendant as a punishment, so that the assessment goes beyond mere compensation of the plaintiff, such "punitive" or "vindictive" damages were permitted in some cases of tort until 1964 when the House of Lords in Rookes v. Barnard [1964] AC 1129 at pages 1220-1231 severely restricted their use in such cases by specifying only two categories where they may be awarded at common law. The right to receive exemplary damages for breach of contract was, for many years before 1964, confined to the single case of damages for breach of promise of marriage, but this cause of action was abolished in 1970. In 1909, the House of Lords in Addis v. Gramophone Co. Ltd. [1909] AC 488 held that exemplary damages could not be awarded for wrongful dismissal; . . . The principle of this decision is not confined to cases of wrongful dismissal, and it is submitted that it now prevents the recovery of exemplary damages for any breach of contract.

104. The Claimant makes two claims in tort: trespass to goods and/or conversion of goods by the Government and misfeasance in public office by the Government. In the case Rookes v. Barnard to which we have already referred the door was left open to the award of exemplary damages.

105. However in the case of the claim for trespass to goods and/or conversion we do not consider that we can consider a claim for damages since the trespass was subsequently lawfully authorised and ratified by the decision of the Chief Justice, upheld by the Court of Appeal. We do not think that it is for us to usurp the function of the Courts of [State X] in determining whether, in addition to such damages the Claimant may be entitled [to] in respect of trespass and/or conversion, there was also a liability for exemplary damages.

106. The second head is a claim for oppression by Government servants. There is clearly foundation for the Claimant's claim: not only did the Government plainly plan to terminate the contract without any foundation, (but were pre-empted by the Claimant's action in acting on the Clause 69 Notice), they also quite wrongly sent the police to assert a right before they had themselves established the lawfulness of their actions by the application to the Chief Justice. In Rookes v. Barnard Lord Devlin envisaged the award of liquidated damages where there have been "oppressive, arbitrary and unconstitutional action by the servants of the Government". He said ([1964] AC 1129 at 1226):

Where one man is more powerful than another, it is inevitable that he will try to use his power to gain his end; and if his power is much greater than the others, he might, perhaps, be said to be using it oppressively. If he uses his power illegally, he must of course pay for his illegality in the ordinary way. But he is not to be punished simply because he is the more powerful. In the case of the Government it is different, for the servants of the Government are also the servants of the people and the use of their power must always be subordinate to their duty of service.

107. These observations were obiter to the decision in that case which concerned trade unions and trade disputes. Furthermore, it seems to us that for practical purposes the claim is subsumed in the heads of the contractual claims and the claims for breach of contract and the claims in tort. In addition it seems to us to be a claim which essentially requires consideration of the constitutional rights of a citizen of The Republic of [State X]. We do not consider that we are the appropriate tribunal to determine such rights. Our decision therefore is not intended to and does not therefore decide this issue and is not intended to preclude the Claimant from taking such steps as it may think fit to obtain such redress as it may be entitled to.'