Court of Cassation, No. 84-17.274 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 6 January 1987, No. 84-17.274

SOUTHERN PACIFIC PROPERTIES LTD (SPP)

SOUTHERN PACIFIC PROPERTIES (MIDDLE EAST) LTD (SPPME)

vs.

REPUBLIC OF EGYPT

According to the judgment under appeal (Paris, 12 July 1984), Southern Pacific Properties Ltd (SPP) and Southern Pacific Properties (Middle East) Ltd (SPPME), companies with registered offices in Hong-Kong, signed a contract on 12 December 1974 with an Egyptian public entity, Egyptian General Organization for Tourism and Hotels (EGOTH), for the creation of two touristic centers, one of which is located near the site of the pyramids of Giza, contract bearing, in addition to the signature of the parties, that of the Egyptian Minister of Tourism, preceded by the mention “approved, agreed and ratified”. Subsequently, the plateau of the pyramids was classified by the competent administrative authority as being in the public domain of antiques, which led to the halting of the work and the cancellation of the project .

Availing themselves of the arbitration clause included in the contract, SPP and SPPME petitioned the Arbitration Court of the International Chamber of Commerce (ICC). The Terms of Reference, drawn up the 3 May 1980 in accordance with the rules of this arbitration court, specified that the seat of the arbitration would be in Paris and noted the express reserves of the Republic of Egypt regarding the jurisdiction of the arbitral tribunal. However, by an award of the 13 February 1983, the arbitral tribunal dismissed the jurisdictional objection and, rejecting EGOTH’s liability, condemned the Republic of Egypt to pay to SPPME the sum of US$ 12,500,000 for damages.

The Court of Appeal, petitioned for annulment under Article 1504 of the new Code of civil procedure, combined with Article 1502-1 of the same Code, and holding that the award had been rendered jurisdiction (in French: sans compromis) regarding the Arab Republic of Egypt, annulled the award.

On the first ground:

SPP and SPPME maintain that the court of appeal, petitioned for annulment based on the absence of an arbitration agreement, could only check for clear violation or misrepresentation of this agreement, the arbitral tribunal having discretion to interpret it, and that the said Court of Appeal could not therefore question this interpretation in order to assess for itself whether the arbitral tribunal had ruled beyond its jurisdiction (in French: hors compromis).

However, if the role of the court of appeal, seized under Articles 1502 and 1504 of the new Code of Civil procedure, is limited to the examination of the defects listed by these texts, no limitation is imposed on the court’s power to seek in law and in fact all the elements concerning the defects in question; in particular, it is its responsibility to interpret the contract to assess for itself whether the arbitrator ruled without an arbitration agreement. Therefore, this ground is not founded.

On the second ground, taken in its two branches:

It is alleged that the Court of Appeal distorted the Terms of Reference of the arbitrators, under the terms of which, according to the plea, the Republic of Egypt had declined arbitration only until the final award, which means, that it did not intend to question the decision of the arbitrators deciding on their own jurisdiction, and for not having responded to the pleadings of the companies claiming that the terms of reference was an acknowledgment on jurisdiction (in French: un compromis sur la compétence), and not on the merits of the case.

However the Court of Appeal, in response to the pleadings, found, without denaturing, on the one hand, that the arbitration agreement could not be constituted only by the arbitration clause inserted to the contract of 12 December 1974, and not by the Terms of Reference whose purpose was only to define the contentious points and, on the other hand, that the Terms of Reference, in which the Republic of Egypt argued that there was no arbitration agreement, could not hold the place of the latter; that in none of its branches the ground is founded.

On the third ground:

The two companies also allege that the Court of Appeal denied the signature of the Egyptian Minister Tourism preceded by the mention “approved, agreed and ratified”, affixed to the contract dated 12 December 1974, the value of a commitment of the Egyptian State, thereby failing to draw the legal consequences of its findings regarding the principles and practices of international commerce.

However it is not for the Court of Cassation to control the existence and application of the principles and practices of international commerce; that the ground is therefore not admissible;

And on the fourth ground, taken in its two branches:

The plea finally alleges that the Court of Appeal failed to search whether, in the same contract of 12 December 1974, EGOTH, assuming it endowed with an autonomous legal personality, acted as a representative of the Egyptian State, which would constitute both a breach of contract, which used the word “ratified”, and a failure to answer to pleadings.

However the invoked passage of the pleadings did not clearly support the thesis presented today at the Court of Cassation and did not call for an answer on this alleged willingness to represent the Egyptian State; that the ambiguity of the terms preceding the Minister’s signature required interpretation, which the Court of Appeal gave when saying that it was only the intervention of a supervisory authority; that thus, in none of its branches, this ground cannot furthermore be welcomed;

FOR THESE REASONS:

DISMISSES the appeal