Paris Court of Appeal, No. 08/06826 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, Pôle 1 - Chamber 1, 14 January 2010, No. 08/06826

GROUPE ANTOINE TABET (B) VS. THE REPUBLIC OF CONGO

The company GROUPE ANTOINE TABET (hereafter B) is a company under Lebanese law whose purpose is the realization and ﬁnancing of public works.

It concluded with the Republic of Congo on 27 April 1992 (agreement 560) and on 9 March 1993 (agreement 569) two agreements for the purpose of ﬁnancing public works entrusted by the Republic of Congo to AFRIQUE ENTREPRISE TABET (AET), subsidiary of B. It was agreed by the parties, and accepted by ELF CONGO, that ELF CONGO would provide a repayment guarantee on the mining royalty it owes to the Republic of Congo.

Since disputes have arisen between the parties, the Republic of Congo has filed a request for arbitration with the International Chamber of Commerce in application of the arbitration clauses inserted in Conventions 560 and 569. The arbitral tribunal was constituted on 31 May 1999 by Mr. Y and Mr. Z, arbitrators, and Mr. A, President. The latter was replaced, following his death in November 2006, by Mr. F G. The arbitration clauses set the seat of the arbitration in Paris and provided for the application of French law to the merits of the dispute.

Several partial awards were made by the arbitral tribunal and were referred to the Court. The present action for annulment is directed against the Award of 27 February 2008 (Award No. 4).

By a first partial award of 30 March 2000, the Arbitral Tribunal declared itself competent to rule on its jurisdiction and suspended the examination of its jurisdiction until the decision on the merits.

By a second partial award of 4 June 2002 (hereinafter “Award No. 2”), the arbitral tribunal:

held that B’s obligations under agreements 560 and 569 had been fulfilled,
declared the Republic of Congo liable to pay B the sums of 4,397,060.78 euros for the former and 11,201,171.39 euros for the latter,
fixed at 10% per annum the interest due to B on the principal of two terms of the 560 agreement and liquidated this interest at 1,429,044.74 euros as at 31 May 2002,
qualified current account relationship the contractual relationship between the parties within the framework of the agreement 569, ﬁxed the interest rate at 10% per annum and referred the parties to jointly establish the interest calculation,
reserved the determination of the compensation due to B, under Convention 569, for loss and damage attributable to the 1997 civil war.

The action for partial annulment brought by B against Award No. 2 was declared inadmissible by a judgment of this Court of 14 May 2009, against which B has lodged an appeal in cassation currently pending.

In a third award issued on 8 December 2003, the arbitral tribunal ruled on interim and conservatory measures.

In a fourth award issued on 27 February 2008, the arbitral tribunal made the following decision:

declared the plea for partial withdrawal of Award No. 2 to be ill-founded,
said that B was fulfilled for its rights against the Republic of the Congo under Convention 560 by the payment made on 22 May 2006,
established a statement of the dates and amounts of reciprocal payments,
Stated that the balance of the account resulting from each payment made under Convention 569 gave entitlement, subject to the consequences of B’s negligence, to interest at the contractual rate of 10% until 31 December 2004, from the date of its calculation until the date of the next balance, and the production of interest at a rate of 4.5% as from 1 January 2005 according to the same terms and conditions, and decided to call in an expert to establish this account,
states that as compensation for the damage caused to the Republic of Congo by the failure to comply with the interim measures ordered by the third award, B would be deprived of the beneﬁt of interest in the amount of EUR 449,889.30 to be debited to the parties' account,
says there is no compounding of interest,

7), 8) and 9) reserve the right to make claims by the parties relating to the balance of the account, war damage, damage to property, and other claims interim measures and at modiﬁcation of the third award.

B brought an action for annulment of this fourth award.

By submissions of 23 November 2009, it requested the Court to annul points (1), (3), (4), (5) and (6) of the award, to dismiss the proceedings in respect of Exhibit No 13 produced by the Republic of Congo, to dismiss the latter’s application under Article 700 of the Code of Civil Procedure and to order it, on the same basis, to pay the sum of 100,000 euros.

By submissions of 18 November 2009, the Republic of Congo seeks the dismissal of the appeal and the order that B pay it the sum of 120,000 euros pursuant to Article 700 of the Code of Civil Procedure.

By an order of 12 November 2009, the Pre-Trial Judge dismissed B’s application for a stay of the proceedings pending the decision to be taken on the appeal against the judgment on Sentence No. 2.

UPON WHICH:

On the request that Exhibit No. 13 from the Republic of Congo be excluded from the proceedings

Considering that B does not put forward any plea in support of its request that this exhibit, which consists of the pleadings presented on 18 November 2008 by the Republic of Congo in the proceedings for the annulment of Award No. 2, be set aside from the proceedings; that the request shall be dismissed;

On the first plea of annulment based on the failure to comply with the mission conferred to the arbitrators (article 1502-3 of the code of civil procedure):

B argues, on one hand, that the requaliﬁcation of the credit opening agreement binding it to the Republic of Congo under a current account agreement was not included in the terms of reference.

B argues, on the other hand, that the arbitration clauses imposed the application of French law to the merits of the dispute, without reference to amiable composition; it claims that the arbitrators exceeded their mandate by deciding, without relying on any rule of French law whatsoever, that from 31 December 2004 the contractual rate of 10% ceased to apply to the parties' accounts and had to be replaced by a rate of 4.5%, intermediate between this contractual rate and the legal rate.

With regard to the requaliﬁcation of the contract:

Considering that the partial Award No. 2 has qualiﬁed the agreement 569 of current account contract;

Considering that if the decision on this point had in principle for eﬀect to relinquish jurisdiction, the arbitrators were nevertheless bound, as they pointed out, to render a new award on the request for partial withdrawal submitted to them by B on the grounds of procedural fraud committed by the Republic of Congo, which would have altered the court’s assessment of the nature of the contractual relations;

Considering, however, that the debate on the request for withdrawal is confined to the issues of the novelty of the documents allegedly concealed by the Republic of Congo, the lawfulness of the conditions for obtaining them and their relevance to the outcome of the dispute; that Award No. 4 rejects the request for withdrawal by ruling on these points alone; that B has no grounds, in the present proceedings, to argue that the arbitrators have disregarded their mission in requalifying the contract, since this requaliﬁcation does not result from Award No. 4, but only from Award No. 2, which is not before the Court;

That the plea presented on this ground can only be dismissed;

Concerning the interest rate:

Whereas Article 19 of Convention 569 provides the application of the French law to the merits of the dispute; whereas the arbitration agreement, like the letter of engagement, does not appoint the arbitrators as amiable compositeurs;

But whereas, contrary to what B maintains, it was, in accordance with the general principles of French contract law, in seeking the common intention of the parties, that the arbitrators considered, without availing themselves of the prerogatives of amiable compositeurs, that the duration of the repayable loan was nine years, in addition to the delayed eighteen-month period, that the parties had agreed to limit the application of the contractual rate of 10% per annum to this period and that a rate of 4.5%, intermediate between this contractual rate and the legal interest rate, should be applied subsequently to the outstanding sums;

That on this second ground, the plea alleging violation by the arbitral tribunal of its mission, which in fact criticises the substance of the award, must be rejected;

On the second plea for annulment based on breach of due process (in French: principe de contradiction) (Article 1502-4 of the Code of Civil Procedure):

B argues that the requaliﬁcation of the contractual relations in current account agreement, as well as the ﬁxation of a rate of 4.5%, different of the contractual interest rate, as of December 31, 2004, were retained ex officio by the arbitrators without being subject to the adversarial debate.

With regard to the qualiﬁcation of the contract:

Considering, as has been said, that this qualiﬁcation results from Award No. 2, which is not before the Court; that the question whether this award was preceded by a contradictory debate on the nature of the contractual relations between the parties cannot be discussed on the occasion of an appeal against Award No. 4, which was limited to examining whether the conditions for a withdrawal for procedural fraud of the provisions of Award No. 2 relating to the qualiﬁcation of the contract were met;

That the means cannot be welcomed on this account;

Concerning the interest rate:

Considering that, contrary to what is argued by B, the parties had, prior to Award No. 4, presented submissions on the question of a date beyond which the contractual interest rate of 10% per annum would cease to apply; that the Republic of Congo argued that the rate of contractual interest should be stopped on 22 July 2002, or at least on the date of Award No. 3, and to use the legal rate thereafter; that B, for its part, concluded that the contractual interest should be applied until the award was made; thus, both the limitation in time of the interest rate to 10% per annum and the principle of a reduction in the interest rate beyond a date yet to be determined were in dispute, so that the arbitrators, who were not required to submit the reasons for their award to the parties for discussion prior to rendering it, were able, without breching due process (in French: principe de contradiction), to adopt a rate of 4.5% as from 31 December 2004;

That the ground must be discarded;

On the third ground for annulment based on breach of international public policy (Article 1502-5 of the Code of Civil Procedure):

B argues, firstly, that the arbitrators tainted their awards with two contradictions; one, aﬀecting only the Award no. 2, results, according to the appellant, from the fact that the tribunal provided that the contractual rate of 10% per annum would apply to Agreement 560 until a date close to the notiﬁcation of the award (i.e. 31 May 2002), without prejudice to the statutory interest for the subsequent period, when the last repayment due date was ﬁxed on 30 May 1999; a second contradiction results, according to B, from the fact that the tribunal decided, in Award No. 2, with regard to Convention 560, that the interest rate was ﬁxed at 10% until a date close to the notification of the award, which it retained, in Award No. 4, for Agreement 569, that the same rate of 10% per annum would only run until 31 December 2004, and not until a date close to the notiﬁcation of the Award, and that thereafter the interest rate would be ﬁxed at 4.5% per annum;

B argues, secondly, that the arbitrators could not hold it liable for the damage resulting from the wrongful failure to comply with the interim measures prescribed by Award No. 3, even though they delayed to rule on the parties' requests for interim measures and the modiﬁcation of that third award;

Finally, B alleges procedural fraud committed by the Republic of Congo, which misled the arbitrators' decision by providing them with a deliberately truncated version of a decisive piece of evidence for the resolution of the dispute;

With regard to claims of contradiction:

Considering, on one hand, that B cannot invoke in the context of the present action a plea alleging an internal contradiction to Award No. 2 which is not before the Court;

Considering, on the other hand, that, contrary to B’s contention, the mere fact that the arbitrators, in Awards No. 2 and No. 4, set out the different methods for calculating the interest due in application of two separate contracts signed between the same parties does not in itself constitute a contradiction;

With regard to the finding of culpable non-execution of Award No. 3:

Considering that Award No. 3, of 8 December 2003, ordered B to ask Elf Congo to pay into an escrow account a fraction of the decision rendered by the Geneva Court of Justice;

Considering that Award No. 3 was recognised by order of 19 December 2003, notified to B on 12 January 2004; that the action for annulment of this award was rejected by a decision of this Court of 11 May 2006 against which B’s appeal in cassation was rejected on 6 February 2008; that in breach of Award No. 3, B was paid in full on 31 August 2006 the sums for which the Swiss courts declared Elf Congo in debt to it.

Considering that B argues that Award No. 4 could not hold it liable for the wrongful failure to comply with Award No. 3 while suspending the proceedings on its request for withdrawal of the latter;

Considering, however, that the appeal for withdrawal of Award No. 3, filed by B on 8 April 2004, is not suspensive in nature, the appellant does not show how the solution adopted by the arbitrators would be contrary to international public order;

That the ground can only be ruled out;

With regard to the allegation of procedural fraud:

Considering that procedural fraud committed in the context of an arbitration may be penalised with regard to the international procedural public policy; it supposes that forged documents have been produced or that documents relevant to the resolution of the dispute have been fraudulently concealed from the arbitrators, so that the arbitrators' decision was misled;

Considering that in the present case, by Award No. 2, the arbitrators considered:

that, contrary to B’s allegations, Convention 569 did not provide for immutability of the repayment schedule for the advances made by B to the Republic of the Congo, a schedule which, in the court’s view, had had to be drawn up in 1993, when Convention 569 was concluded, but was of a purely theoretical nature,
that, under Convention 569, interest was to be calculated on the sums made available to the Republic of Congo as and when they were made available,
since the parties had, from the outset of their relations, departed from the contractual stipulations concerning the provision of funds and the regularisation of contracts to be imputed to Convention 569, it was appropriate, on the basis of their real intention, on one hand, to take as the basis for calculating interest, for each contract imputed to that Convention, the date on which the funds had been made available to the contractor, on the other hand, to take into account the dates of the transfers made by the Republic of Congo within the framework of the current account which had been established between the parties, the Republic of Congo having at times been in a credit position, in particular following the immediate payment to B by the Republic of Congo of an ‘advance’ of 125,000,000 FF which reduced the real amount of the loan from 500,000,000 FF to 375,000,000 FF;

Considering that B asked the arbitrators to retract their award in that they had decided that the timetable for the proceedings, which they assumed to be contemporaneous with the signing of the agreement 569, was not ‘immutable’, that it was only of a ‘theoretical’ nature, and that the relations between the parties took place within the framework of a current account;

Considering that in support of his action for withdrawal, B argued that the Republic of Congo had deliberately concealed several letters from its Minister of the Economy, from which it emerged that the disputed schedule was annexed to a letter of 20 October 1994, which was therefore subsequent to the signing of the agreement 569 and ﬁxed deﬁnitively the repayment schedule;

Considering that in Award No. 4, the arbitrators, having analysed the documents which B accused the Republic of Congo of having fraudulently concealed and having found that these documents were neither new nor useful for the resolution of the dispute (paras. 70-74), declared the application for withdrawal of Award No. 2 unfounded;

Considering that, in its action for the annulment of Award No. 4, B argues again that Award No. 2, which is not before the Court, would have been misled by fraudulent reticence; that, on the other hand, it in no way alleges that Award No. 4 is based on procedural fraud; that therefore, by complaining that the arbitrators misjudged the request for withdrawal of Award No. 2, B is in fact inviting the Court to undertake a review of the merits of Award No. 4, which is exclusively before it, which the annulment judge is prohibited from doing;

Whereas it follows from all the foregoing that the action for annulment of Award No. 4 must be dismissed; whereas B, who is unsuccessful, must pay the Republic of Congo the sum of 100,000 euros pursuant to Article 700 of the Code of Civil Procedure;

FOR THESE REASONS:

Rejects B’s request that Exhibit No. 13 from the Republic of Congo be excluded from the proceedings.

Dismisses the action for annulment of Award No. 4 of 27 February 2008.

Condemns the company GROUPE ANTOINE TABET to pay the Republic of Congo the sum of 100,000 euros pursuant to Article 700 of the Code of Civil Procedure.

Rejects the request made by GROUPE ANTOINE TABET under Article 700 of the Code of Civil Procedure.

Condemns the company GROUPE ANTOINE TABET to pay the costs and admits the SCP BERNARBE, CHARDIN, CHEVILLER, confessed, for the benefit of article 699 of the code of civil procedure.