Paris Court of Appeal, No. 05/01597 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 15 June 2006, No. 05/01597

THE REPUBLIQUE OF GABON vs. PRODOIL COMPANY

The Republic of Gabon, in the person of its Minister of Mines, Energy, Petroleum and Hydraulic Resources, brought an action for annulment on 21 January 1005 against an arbitral award 12226 TE/MW/AVH made under the supervision of the International Chamber of Commerce (“ICC”) in Paris on 1 September 2004 by M. M. B and Parléani, arbitrators, Z, chairman who decided in the dispute concerning a contract for the exploitation and production sharing of an oil exploitation area between him and the company Prodoil, that:

1° The Claimant’s standing is admitted, and its claims, namely the request for rescission based on the failure to execute without delay the arbitral award of 26 March 2002 as well as the claim for damages based on the initial fraud as well as on the rescission of the contract and thus implicitly on the non-execution of the said award, are admissible.

2° As it is admissible, the claimant’s claim to terminate the contract for breach of the obligations set out therein, as formulated in its statements, is rejected.

3° As it is admissible, the Claimant’s claim for compensation is partially admitted and the Respondent is ordered to pay it an amount of USD 3,992,402, with interest at the legal rate applicable in Gabon from the date of the award, this amount being payable within thirty days from the notification of this award.

4° The costs and fees of the Arbitral Tribunal, fixed by the Court at USD 310,000, shall be divided between one third to be borne by the Claimant, that is USD 103,333, and two thirds to be borne by the Respondent that is USD 206,667. Taking into account the advances made, the Respondent shall reimburse the Claimant the amount of USD 51,667, payable within 30 days from the notification of this Award.

5° The Respondent owes the Claimant an indemnity in part of EUR 80,000, payable within thirty days from the notification of this award.
6° All other submissions are rejected.

This action for annulment is also directed against the award rendered on 13 December 2004 on an application for correction and interpretation of the award of 1 September 2004 in which the arbitral tribunal decided that:

1° The request for interpretation concerning the starting point of the interests is admitted: number 3 of the award is to be interpreted as meaning that the interests start to run after a period of 30 days from the notification of the award,

2° All other conclusions are rejected.

The Republic of Gabon raises two grounds of annulment against these two awards on the grounds of non-compliance with due process (in French Principe de contradiction) (Article 1502-4 of the New Code of Civil Procedure) and the fact that it was not recognised or enforced in accordance with international public policy (Article 1502-5 of the New Code of Civil Procedure). The Court orders Prodoil Gabon to pay the costs and the sum of EUR 10,000 under Article 700 of the New Code of Civil Procedure.

Prodoil Gabon claims that the appeal should be rejected and that the Republic of Gabon should be ordered to pay compensation of EUR 20,000 on the basis of Article 700 of the New Code of Civil Procedure and to pay a civil fine of EUR 20,000 for an appeal made in bad faith and in abuse of process.

UPON WHICH

On the annulment of the award:

The Republic of Gabon alleges that Prodoil Gabon produced on 17 September 2003, five days before a hearing, a document consisting of more than 800 invoices accompanied by a detailed table whose structure was similar to that previously produced in a statement of reply but whose figures for certain heads of claim could vary widely. Subsequently, the Republic of Gabon emphasised in its submissions that the inconsistency between the classification of costs referred by Prodoil and the pile of invoices produced did not allow it to fully exercise its rights of defence, and at the end of the arbitration proceedings, it argued that in view of the late production of documents by Prodoil, of the inconsistency of the documents produced and the short time allowed to it, new investigations relating both to the reality of the costs incurred by Prodoil and to its production capacity and therefore its loss of earnings were necessary, unless the rights of the defence were to be violated. The arbitral tribunal did not follow the Republic of Gabon, so it alleges that the award should be set aside, as it was given only 48 days plus 15 days for the rejoinder on the quantum of the claim for compensation, compared with 243 days for Prodoil, nor was it given the opportunity to present witnesses or experts who could enlighten the arbitrators on difficult issues.

The arbitration’s case file shows that Prodoil’s request for arbitration was filed on 5 July 2002, to which the Republic of Gabon replied on 17 January 2003, a statement of claim was then filed on 24 March 2003, followed by a statement of defence on 5 May 2003, then a statement of reply on 7 July 2003, to which the Republic of Gabon replied with a rejoinder on 8 September 2003. On 17 September 2003, Prodoil took the initiative of communicating proof of its claims for reparation accompanied by an additional statement of case. The Republic of Gabon then filed a submission on 4 November 2003, Prodoil on 8 December 2003 and finally the Republic of Gabon on 22 December 2003. The various day-by-day breakdowns proposed in a general and arbitrary manner by the appellant did not demonstrate an inevitable inequality of treatment between the parties, since procedural equality does not presuppose any principle of automaticity.

The arbitral tribunal held a case management meeting with the parties on 22 September 2003 during which it referred to the incident that had occurred when Prodoil on 17 September communicated a document containing more than 800 invoices to establish its damages. The arbitrators, after hearing the parties on the issue, decided to admit these documents and granted the Republic of Gabon until the following 4 November to take position on this issue. The Republic of Gabon did so by filing a submission on quantum, to which, as recalled, and according to what the arbitral tribunal asked the parties on 27 November 2003, Prodoil replied on 8 December 2003, and finally the Republic of Gabon replied again on 22 December 2003.

In these last pleadings, the Republic of Gabon observed with regard to quantum ‘that the latest comments of the Claimant, belatedly produced, could not explain the inconsistencies. It is the case of the classification of costs that the Claimant claims to have borne and the heap of alleged invoices that it produces, not allowing the Defendant to fully exercise its rights of defence’. The defendant added on the loss of income and the principle of a request for termination of the contract that it did not intend to respond in detail to the Claimant’s scattered assertions regarding its technical production capacities, which would require long and difficult technical developments that could not be developed in the context of the present brief. It will simply point out that the issue could not be addressed in its previous statement(s) because of the Claimant’s failure to produce in due time its documents relating to the existence and quantum of its damage, documents which alone made it possible to determine the inadequacy of the work carried out on the platform. In these circumstances, requiring the Defendant to provide full proof of its technical arguments within the period of a few weeks allotted to it for each of its brief(s) and without authorising the production of expert reports would constitute a violation of its rights of defence.

The Republic of Gabon, as noted by the arbitrators in the award (point 47), was able to take position on the damages claimed three times, namely on 8 September, 9 November and 22 December 2003, the last time in order to waive its right to reply. This choice in its defence is incumbent on it and its counsel.

It should also be recalled that the minutes of the meeting of 22 September 2003 stated that “in principle, there will be no other investigative measures”, and that the appropriateness of such measures must be assessed in terms of their usefulness or relevance to the establishment of the truth. The arbitrators who must do it so, in view of the information available to them and the progress of the proceedings, were not obliged to order measures of inquiry on the nature and purpose of which the Republic of Gabon had not provided any details. Thus, the arbitral tribunal ensured that the proceedings were conducted efficiently, especially regarding the taking of evidence, without any reproach being made to it in this respect.

The condemnation of the Republic of Gabon in the arbitration is due to reasons other than the violation of its procedural rights, which is not established. The Republic of Gabon’s claim is rejected, none of the means of cancellation being founded.

On the civil fine, the costs and article 700 of the new code of civil procedure:

Whereas the conditions for the pronouncement of a civil fine are not met, this request of the company Prodoil is rejected, that the equity orders to allocate it a sum of EUR 20,000 on the basis of Article 700 of the new Code of Civil Procedure, the claim of the Republic of Gabon, which bears the costs, being rejected.

FOR THESE REASONS

Dismisses the action for annulment against ICC Award No. 12226 TE/MW/AVH rendered on 1 September 2004 and the Award on Correction and Interpretation of 13 December 2004,

Orders the Republic of Gabon to pay the company Prodoil Gabon a sum of EUR 20,000 in application of Article 700 of the new Code of Civil Procedure,

Rejects all other claims of the parties,

Orders the Republic of Gabon to pay the costs and admits SCP Monin d’Auriac de Brons, avowed, to the benefit of the right provided for in Article 699 of the new Code of Civil Procedure.