Vijay Construction in financial limbo |23 July 2020

By Christophe Zialor

After 49 years in business, Vijay Construction is ceasing operations following the freezing of their assets.

The downfall of the construction company comes weeks after a Supreme Court ruling made by Judge Ellen Carolus where she ordered Vijay Construction to pay Eastern European Engineering Limited (EEEL) over €20.2 million (approximately R425 million) for breaking the terms of a contract it signed for the development of the Savoy Hotel in 2011.

In a telephone interview yesterday with the managing director of the company, Vijay Patel, he informed Seychelles NATION that due to their accounts being frozen, construction of all their major projects have come to a halt.

As if that was not enough of a major blow to the company, over 1,500 local and foreign workers have been left holding their breath as they do not know their position with the company. Mr Patel has confirmed, however that the process of redundancy will be made and applications to the department of employment will be submitted if the company decides to lay off its workers.

Bernard Georges, the attorney for Vijay Construction, noted that for now the company is in limbo as they are awaiting for a stay of execution ruling from the judge which will temporarily suspend the execution of a court judgment until the process of appeal is completed.

“A company the size of Vijay Construction will not be able to run without the support of its account. If the stay of execution is granted on Friday then the company will be able to operate in the meantime, however if it’s denied then it will have to cease operations,” said Mr Georges.

It should be noted that the process of appeal takes approximately two years which means that if the execution order is not granted there will be 1,500 plus people filing for unemployment during the coming weeks which will surely put further strain on an already unstable economy.

The legal troubles for Vijay Construction started in 2012 when EEEL took them before the International Chamber of Commerce in Paris for breaking the terms of a contract it signed for the development of the Savoy Seychelles Resort & Spa in 2011. The parties had entered into six materially identical contracts. Disputes arose and EEEL eventually terminated the contracts. EEEL referred the disputes to an International Chamber of Commerce (ICC) arbitration seated in Paris. A sole arbitrator was appointed, who issued an award in November 2014 in EEEL’s favour.

In January 2015, Vijay Construction also initiated proceedings in Seychelles, seeking to set aside the award on essentially the same grounds as those on which the challenges were based in the French proceedings. In April 2017, the Seychellois court dismissed all of Vijay’s challenges and held that the award was enforceable. Vijay Construction, however, successfully appealed that decision because, under Seychellois law, there was no power to order enforcement on the basis that the New York Convention had been previously repudiated by Seychelles.

In August 2015, EEEL successfully obtained an order from the English High Court to enforce the award in England and Wales and to enter judgment against Vijay Construction. In October 2015, Vijay Construction applied under section 103 of the Arbitration Act 1996 to set aside the August 2015 Order. That application was stayed while the French and the Seychellois proceedings were pending.

EEEL argued that Vijay Construction’s application should be denied because of issue estoppel and public policy on finality. As to issue estoppel, EEEL argued that the conditions were satisfied because the decision of the French Court was a final merits decision in a court of competent jurisdiction between the same parties.

The English High Court denied Vijay Construction’s application to set aside the August 15 Order. First, the English Court agreed that, in relation to Vijay Construction’s challenge based on jurisdiction, Vijay Construction was estopped as its argument in the English proceeding appeared to be exactly the same as that which was made in the French proceeding.

In regards to the challenge on the ground of procedural unfairness, the court found that Vijay’s argument was “slightly different” in the English proceeding, and thus the court considered the merits of the challenges. In considering each of Vijay’s challenges, the court found that they failed. Thus, the English Court did not have to reach the question of public policy on finality. It, however, noted that it would “have concluded that the balance came down in favour of upholding the public policy on finality,” explaining that the facts here, where Vijay Construction had sought to raise substantially the same challenges to the award in two other courts, one of which had a full evidentiary hearing, “are circumstances which would weigh very heavily against allowing Vijay a third challenge.”

In 2020, the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) was finally recognised under Seychelles law which made the 2014 ruling against Vijay Construction enforceable in Seychelles.

“The Judicial system causes a great impact on the investment climate in the country the judiciary can make a positive and negative impact on it there are no doubts that recent Case Law – EEEL v Vijay case – clearly turned the economic system for the worse it was the mailer of a great interest of foreign investors," said Judge Carolus in her final remarks regarding the case.

She continued by adding that "it looks like that more and more members of business as well now wonder, when does the Supreme Court's motto of ‘Without fear or favour’ bear out in practice?"

Foreign investors and the attractiveness of investing in Seychelles draws more and more attention in investments and this ruling will guarantee insurance when it comes to their business deals.