Paris Court of Appeal, No. 08/23901

Paris Court of Appeal, Pole 1 – 1st Chamber, 25 March 2010, No. 08/23901

COMMERCIAL CARIBBEAN NIQUEL

vs.

OVERSEAS MINING INVESTMENTS LIMITED

By an agreement dated 12 September 1998, the companies COMMERCIAL CARIBBEAN NIQUEL SA (CCN) and OVERSEAS MINING INVESTMENTS Ltd (OMI) decided to create a joint venture for the exploitation of Nickel deposits in Cuba.

As this cooperation agreement was terminated by CCN, OMI contested the grounds put forward by CCN and filed a request for arbitration under the UNCITRAL Arbitration Rules in accordance with the arbitration clause provided for in the contract.

By award in Paris on 10 October 2008, the arbitral tribunal composed of Horacio A. Griguera Naon, chairman, and G B and Y Z of E F, arbitrators, decided that:

‘(I) CCN is the exclusive defendant in this arbitration, and this final arbitral award is issued solely to OMI and CCN;

(II) the contracts were terminated on 6 August 2004 as a result of the termination letter sent by CCN ;

(III) the contracts are not capable of being performed and the claimant has no basis to request their actual performance;

(IV) by terminating the contracts, CCN violated Article 16 of the AGREEMENT;

(V) by attempting to impose Minmetals as a partner in the M.E. without the consent of OMI, CCN has violated the AGREEMENT and any agreements or understandings of the parties in relation thereto;

(VI) by committing the contractual breaches referred to in (IV) and (V) above, CCN has also breached the duty to act in good faith pursuant to clause 12, paragraph 1 of the AGREEMENT;

(VII) OMI is not entitled to a declaration that CCN has breached its confidentiality undertakings pursuant to clause 11 of the AGREEMENT;

(VIII) CCN’s counterclaim is dismissed;

(IX) OMI is entitled to be indemnified by CCN with the amount of USD 45,814,560 for the termination of the contracts and other contractual violations for which CCN is liable;

(X) CCN is entitled to be reimbursed by OMI for sunk costs resulting from the cancellation of the hearing which should have started on 30 March 2007, for an amount of USD 28,555.54.

(XI) CCN shall pay to OMI the sum of USD 45,786,004.46 obtained by offsetting the sum of USD 25,555.54 against the sum of USD 45,814,560;

(XII) CCN shall bear its own legal costs and shall pay the claimant its reasonable legal costs and fees in this arbitration, namely: (a) GBP 2,482,952.32; (b) GBP 190,316.06; (c) USD 264,858.82; and (d) AUD 5,480.89;

(XIII) CCN will pay the costs and fees of the arbitrators, which amount to USD 2,150,000. CCN shall therefore reimburse to OMI the sum of USD 999,233.66 paid by OMI into the account of the Arbitration Tribunal for this arbitration;

(XIV) CCN shall pay to OMI interest at an annual rate of 9%, to be compounded annually, on all amounts in or calculated in U.S. dollars for the purpose of calculating interest pursuant to this final arbitral award on such amounts payable by CCN to OMI pursuant to sub-paragraphs (XI), (XII) and (XIII), from the date of this final arbitral award until the date such amounts have been paid in full to OMI; and

(XV) any other relief, declaration, order, claim or counterclaim introduced or sought in this arbitration but not expressly accepted within the meaning of section 241 has been dismissed.’

CCN has filed an action for annulment against this award. It formulates three grounds: the arbitral tribunal ruled without complying with its mission (article 1502-3 of the Code of Civil Procedure), the arbitral tribunal violated international public policy (article 1502-5 of the Code of Civil Procedure), the arbitral tribunal did not respect equality of arms violating both due process (in French Principe de contradiction) and procedural public policy (article 1502-4 and 1502-5 of the Code of Civil Procedure).

In its submissions of 18 February 2010, CCN therefore requests the court to set aside the award and to order OMI to pay 80,000€ under Article 700 of the Code of Civil Procedure.

In its submissions of 23 February 2010, OMI opposes the request and request the court to declare that the dismissal of the appeal will confer recognition and enforcement to the award and to order CCN to pay it 140.000€ under article 700 of the Code of Civil Procedure.

UPON WHICH

On the ground of annulment taken from the violation of due process (in French Principe de contradiction) and procedural public order (article 1502-4 and 1502-5 of the Code of Civil Procedure):

In this respect, CCN complains that the arbitrators, on the one hand, accepted the KPMG expert report presenting a complex set of figures on which the arbitral tribunal based the amount of compensation, even though this document was produced belatedly by OMI, after more than two years of exchanges, and that CCN, despite its protests, was given only a short time to respond to it. On the other hand, CCN complains that the arbitrators chose to compensate OMI for a loss of opportunity without this point having been discussed by the parties, regardless that the issue of a loss of opportunity was raised with respect to CCN’s counterclaim.

OMI submits that CCN had sufficient time to respond on the merits to the KPMG report, which it did, and that the arbitrators ruled on the basis of a contractual liability expressly invoked and that they are not obliged to subject their reasoning, in this case their reasoning on the assessment of damages, to an adversarial discussion beforehand;

Considering on the first point that CCN asserts that it would not have been able to discuss the KPMG report for lack of time without identifying how a longer period of time (the report was tabled for discussion on 31 May 2007 and the last submission was CCN’s 1 October 2007 submission) would have allowed it to make a different and more decisive case than it could have made; that this branch of the argument is in fact lacking;

Considering on the second point that the arbitral tribunal stated (§220 and 221) that IMO is entitled to compensation which according to it consists ‘in the lost profit calculated in accordance with the economic model for the KPMG project’ or alternatively represents ‘38% of the cash flow it would have received by applying the parameters of the AMLC report’ then (§223, 224 and 225).

The Tribunal then challenged the calculation of the compensation claimed and decided (§226) ‘For all the above reasons, the Arbitration Tribunal considers that instead of the compensation criteria set out in the above-mentioned letter of 16 May 2007 from IMO, IMO should be compensated for the loss of opportunity to continue the project (…)’.

He then specifies that (§227) ‘(…) The possible economic benefit that has been lost cannot be measured with certainty, but the lost chance of recovering it can undeniably be assessed’.

The arbitral tribunal adds that (§228) ‘(…) The model of compensation based on loss of opportunity implies a less certain economic calculation, but the arbitral tribunal is satisfied with a less restrictive and conservative approach than that defended by IMO (…)’.

Finally, before assessing the loss of opportunity (§229), the court concluded that ‘(…) Compensation for the loss of opportunity is not the same as that for the lost gain (…) because it is based on the prediction not that the victim of the damage should be compensated for the lost gain which he claims, but, on the contrary, that he should be compensated for the economic value of the lost opportunity (…)';

Thus, in their reasoning, the arbitrators substituted the compensation claimed by OMI, based on the loss of profit which seemed to them to be inadequate, with the compensation in this case based on the loss of opportunity to see the realisation of the project that OMI had not invoked;

That this substitution does not constitute a simple mean of assessing the loss but modifies the basis of OMI’s compensation; that by failing to invite the parties to explain themselves on this point, the arbitrators disregarded due process (in French Principe de contradiction), the fact that CCN, in its counterclaim, would have referred, as far as it was concerned, to the loss of opportunity being of no consequence in this respect;

That the arbitral award should accordingly be set aside without consideration of the other parts of the ground and other grounds raised;

On the requests under Article 700 of the Code of Civil Procedure:

Considering that OMI, which succumbs, is unsuccessful in its claim and pays CCN 80.000€;

FOR THESE REASONS:

SETS ASIDE the arbitral award rendered in Paris on 10 October 2008 by Horacio A. Griguera Naon, G B and Y Z of E F;

ORDERS the OVERSEAS MINING INVESTMENTS Ltd company to pay the COMMERCIAL CARIBBEAN NIQUEL SA company € 80.000 under Article 700 of the Code of Civil Procedure;

ORDERS the OVERSEAS MINING INVESTMENTS Ltd company to the costs and admits SCP Duboscq-Pellerin, solicitor, for the benefit of article 699 of the Code of Civil Procedure.