Non-signatory security cheque can support enforcement of a foreign arbitral award against the issuer.

A non-signatory to a charterparty and arbitration may still be proceeded against in enforcement where it voluntarily issues a cheque as security for the exact liability claimed in the arbitration. The text states that such conduct, when undertaken with knowledge of the underlying dispute and possible enforcement difficulties against the primary debtor, can amount to a conscious undertaking to secure satisfaction of any award. It further notes that prior conduct and group-company links may reinforce this position and prevent the security provider from later denying liability on the basis of non-signature or non-participation in the arbitration.

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Issues: Whether the appellant could enforce the foreign arbitral award and corrective award against the 2nd respondent, though it was not a signatory to the charterparty or a party to the arbitration, on the basis that it had issued a cheque as security for the liability of the 1st respondent.

Analysis: The dispute arose from demurrage payable under the charterparty and the deferred payment arrangements between the appellant and the 1st respondent. The 2nd respondent was not part of the underlying charterparty or the arbitral proceedings, but it had voluntarily stepped in and issued a cheque for the precise amount claimed in the arbitration as security for the disputed demurrage. The Court treated this act as a conscious undertaking to secure satisfaction of any award passed on that claim. Since the cheque was issued with full knowledge of the dispute, the arbitration, and the possibility of enforcement failure against the 1st respondent, the 2nd respondent could not later deny liability by invoking absence of signature or non-participation in the arbitration. The Court also found that the group-company relationship and prior conduct supported the conclusion that refusal to permit enforcement would aid deception and frustrate the award.

Conclusion: The appellant was entitled to enforce the foreign arbitral award and corrective award against the 2nd respondent jointly and severally with the 1st respondent.

Ratio Decidendi: A person who, with knowledge of the underlying arbitration claim, voluntarily issues security specifically for satisfaction of any award on that claim may be proceeded against in enforcement, even if not a signatory to the main contract or a party to the arbitration.

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