Paris Court of Appeal, No. 09-24.746

Paris Court of Appeal, Pole 1, First Chamber, 17 March 2011, No. 09-24.746

S.A. ANTOINE TABET GROUP vs. THE REPUBLIC OF CONGO Acting through the Minister of the Economy, Finance and the Budget

On 27 April 1992, the Republic of Congo (RC) and ANTOINE TABET, a Lebanese company whose purpose is to carry out and finance public works, entered into a financial agreement (agreement No. 560) for the financing of public works entrusted to a subsidiary of ANTOINE TABET. Later, on 9 March 1993, they entered into a financing agreement by way of a credit facility (agreement 569). A tripartite agreement stipulated that Elf Total Congo (TEP Congo) would provide a payment guarantee drawn on the mining royalty it owes to the Republic of Congo.

Disputes have arisen and the Republic of Congo filed a request for arbitration with the ICC in accordance with the arbitration clause foreseen in each of the contracts.

By a first award dated 30 March 2000, the Arbitral Tribunal ruled on its jurisdiction.

By a second award dated 4 June 2002 the Arbitral Tribunal, inter alia:

(point 5) “ruled that interest shall be charged at the rate of 10 % per annum under Agreement No. 569, on the basis and in accordance with the principles laid down in Para. 196 to 204 of the present award, paragraphs herein reproduced. The Arbitral Tribunal also reserves the right to rule on this claim, and invites the parties to establish, jointly, the calculation of the said interest within forty-five days following the notification of the present Award by the Secretariat of the Court. The case may be brought back before the Arbitral Tribunal at the request of the most diligent party for a ruling on this claim for counterclaim for performance of cause”.

A third award of 8 December 2003 concerns interim and conservatory measures.

A fourth award dated 27 February 2008 declares, inter alia, that ANTOINE TABET’s request for withdrawal of the second award is unfounded.

A fifth award, which is the subject of the present action for annulment brought by ANTOINE TABET, was rendered in Paris on 26 October 2009 by P J K, Chairman, D E and Z C, arbitrators:

  1. “rejects ANTOINE TABET’s request to stay the arbitral proceedings”.

  2. “rejects the request of the Republic of Congo to exclude from the proceedings certain unilateral documents and expert reports communicated by ANTOINE TABET.”

  3. “rejects the requests of ANTOINE TABET for further expertise, for the hearing of the experts on their further expertise and for the hearing of Mr. LM N of Deloitte in Geneva.”

  4. “states that ANTOINE TABET has a claim for compensation for war damages owed by the Republic of Congo amounting to FF 35,119,754, or its equivalent in euros, i.e. EUR 5,353,971.8, and that this claim is entered in the account between the parties resulting from Agreement No. 569 on the date of 31 December 1997’.

  5. “declares that the balance of the account between the parties resulting from Agreement No. 569, including interest on 31 July 2009, amounts to a credit of EUR 31,955,942.50 to the Republic of Congo and rejects, insofar as necessary, ANTOINE TABET’s request to modify the basis of calculation of the account and any request for additional expertise.”

  6. “decides to put an end to the escrow set out in the procedural order No. 10 of 11 December 2003 and to release the amount of EUR 2,904,397.57 appearing in the escrow account in favour of TEP Congo that had paid these sums, after deduction of the escrow costs and addition of the interest earned. Orders that this amount be paid by the receiver to TEP Congo.”

  7. “orders ANTOINE TABET to pay the amount of EUR 31,955,942.50, increased by the amount of EUR 449,889.30 fixed in the fourth partial award and by the amount of EUR 245,390.38, i.e. a total amount of EUR 32,651,222.18 to the Republic of Congo.”

  8. “states that ANTOINE TABET shall owe the Republic of Congo, between 31 July 2009 and the date of the delivery of this final award, daily interest at the fixed rate of 4.5% per annum on the balance of the account, excluding interest of EUR 38,033,367.09.”

In support of its action for annulment, ANTOINE TABET raises two grounds: the first is that the arbitral tribunal was improperly composed (Article 1502-2 of the Code of Civil Procedure) due to the lack of independence and impartiality of the chairman of the arbitral tribunal, and the second is that the recognition or enforcement is contrary to international public policy (Article 1502-5 of the Code of Civil Procedure) due to contradictory decisions, the violation of the force of res judicata and the failure to respect the rights of the defence and the principle of equality of the parties.

In its submissions dated 4 February 2011, ANTOINE TABET requested the court to stay the proceedings pending further rulings by the Court of Cassation, to set aside the award dated 26 October 2009 and to order the Republic of Congo to pay it EUR 80,000 pursuant to Article 700 of the Code of Civil Procedure.

In its submissions dated 27 January 2011, the Republic of Congo requests the Court of Appeal to dismiss this action for annulment and to order ANTOINE TABET to pay it EUR 150,000 pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH,

On the application for a stay of proceedings:

Whereas ANTOINE TABET requests a stay of proceedings pending the decision of the Court of Cassation, to which appeals have been filed concerning the judgments rejecting its appeals for annulment of the second, third and fourth awards, in particular the second arbitral award of 4 June 2002; whereas the Republic of Congo claims that this application is inadmissible before the court pursuant to Articles 771 and 779(4) of the Code of Civil Procedure and the Pre-Trial Judge had sole jurisdiction and moreover rejected this application by an order of 14 October 2010;

Whereas according to Article 771 of the Code of Civil Procedure the Pre-Trial Judge has exclusive jurisdiction to rule on procedural exceptions and on incidents that end the proceedings; whereas the application for a stay of proceedings constituting an incident of proceedings that does not end the proceedings the application is admissible before the court;

Whereas ANTOINE TABET argues that the award of 26 October 2009, which is the subject of the present proceedings, is dependent on the interim award of 4 June 2002, which held that the relationship between the parties was a current account;

However, the arbitral tribunal was initially seized more than 10 years ago and ANTOINE TABET has appealed against all the decisions taken; that with regard to the second award of 4 June 2002, it first requested the arbitral tribunal to withdraw the award, which said tribunal refused on 27 February 2008 (4th partial award); that ANTOINE TABET did not bring an action for annulment until after that decision of February 2008; that the said action for annulment was dismissed by the judgment of 14 May 2009, and is the subject of an appeal as above-mentioned; that if the proceedings overlap, it is only because ANTOINE TABET has chosen to apply for withdrawal by reserving the right to bring an action for annulment, which it brought almost six years after the award was handed down;

That under these conditions, to grant a stay of proceedings that would result in a further extension of the proceedings, whereas an appeal in cassation has no suspensive character, would be dilatory, and consequently not in conformity with the proper administration of justice;

That the application is rejected;

On the first ground for annulment: the arbitral tribunal was improperly composed (Article 1502-2 of the Code of Civil Procedure):

ANTOINE TABET argues that Total (TEP Congo) is involved in the dispute with the Republic of Congo and that there are links between Total and the Chairman of the arbitral tribunal, Mr. J K, who is thus suspected of a lack of independence and impartiality.

ANTOINE TABET explains that TEP Congo was first implicated by a letter of 24 January 1996 (tripartite agreement) by which it guaranteed the payment of the Republic of Congo’s debts to ANTOINE TABET under agreements No. 560 and No. 569 in the event of judicial or arbitral condemnations; that by a general protocol concluded in 2001, TEP Congo’s payment guarantee was extended to condemnations likely to exceed the amount of the work and TEP Congo thus became the front-line debtor of all of ANTOINE TABET’s outstanding debts to the Republic of Congo; that while these first two agreements reserved TEP Congo’s action against the Republic of Congo for the payments made, a third agreement known as the General Settlement Agreement (GSA) concluded in 2003 provides for the payment of USD 70 million in respect of a possible claim of ANTOINE TABET against the Republic of Congo, to be paid by TEP Congo, which waived its right to claim reimbursement from the Republic of Congo. TEP Congo is thus personally liable for any condemnation that might be pronounced against the Republic of Congo and therefore directly concerned by the solution brought before the arbitral tribunal.

ANTOINE TABET considers that in these circumstances Mr. J K did not offer the necessary guarantees of independence and impartiality, insofar as he is linked to the Total group and that the risk of conflict of interest is obvious; that he holds a position as director in a company that is a shareholder of the group, that he is a partner in a major business law firm advising the Total group for Belgium and that he is the advisor of the FRERE group, which holds 5% of Total’s shares.

The Republic of the Congo argues that the complaint is inadmissible on the ground that it has not been raised in due course, with regard to both the provisions of the ICC Rules on the challenge procedure and the duty of procedural fairness.

Whereas under the terms of its first two commitments - Tripartite Agreement of 24 January 1996 and general protocol of 2001 - TEP Congo guarantees payments but is immediately called upon by the Republic of Congo and this action is far from being an illusion considering the oil royalties owed by TEP Congo; the letter of 24 January 1996 specifies that “(…) the payments covered by our acceptance are limited to the amount of the oil royalty payable by our company to the Republic of Congo(…)” and the general protocol of 2001 stipulates that the Republic of Congo shall compensate TEP Congo within 15 calendar days following receipt of a request to this effect with interest in the event of delay; that these mechanisms are obviously neutral for TEP Congo;

That the same applies to the 2003 GSA; that in fact, if according to this agreement (article 3.5.2 para.3) “TEP Congo, as a settlement and as an exception, agrees to bear seventy (70) million US dollars in respect of costs incurred and financial sentences likely to be pronounced against TEP Congo and/or its Affiliates or the RC for the benefit of ANTOINE TABET as a result of a judicial or arbitral decision (…)” and (article 3.3.3 para.1)” In addition to the provisions referred to in article 3.5.2. below, the RC hereby requests TEP Congo, as a settlement, to refrain from requesting reimbursement from the RC, in accordance with the provisions of general protocol, of the payment or payments referred to in paragraph 3 of article 3.5.2 (…)'. The same article (para. 2) specifies that in the event that the amounts effectively borne by TEP Congo or its Affiliates:

[I. exceed seventy (70) million US dollars, as defined in article 3.5.2, then TEP Congo will be entitled to obtain reimbursement by the RC of these amounts and to apply the procedure described in general protocol of 2001 to this effect.

II. would not exceed seventy (70) million US dollars, as defined in article 3.5.2, then TEP Congo will pay to the RC, as a transactional indemnity, the difference between seventy (70) million US dollars and the said amounts (…);]

It is therefore clear that the mechanism is neutral for TEP Congo, who will pay USD 70 million whether or not the Republic of Congo is sentenced, this payment being made either to ANTOINE TABET or to the Republic of Congo; that this assessment is sufficient without it being necessary to investigate the causes of this confidential agreement;

That it follows that the outcome of the arbitration proceedings will have no impact on the financial situation of TEP Congo, which is not involved in the case;

The complaint - presumably admissible - alleging a possible conflict of interest leading to a risk of lack of independence and impartiality on the part of Mr. J K is in fact lacking;

That the first ground of appeal is therefore rejected;

On the second ground taken in its two parts: Recognition and Enforcement are contrary to international public policy (Article 1502-5 of the Code of Civil Procedure):

ANTOINE TABET first states that partial award No. 2 dated 4 June 2002 states in paragraph 107 with regard to the 1996 Convention “On the basis of all the relevant elements submitted to it, the arbitral tribunal decides, insofar as necessary, that the 1996 Memorandum of Understanding is valid and has effect regardless of the conditions under which it was negotiated and concluded, ‘thus recognising the contractual and not theoretical nature of the repayment schedules, which excludes the concept of a current account finally adopted. The award of 4 June 2002 is therefore contradictory in that it admits both that the Protocol ‘takes full effect’ and that the repayment schedules fall into a current account. Consequently, the award which is the subject of the present action, which refers only to the current account, disregards the res judicata effect of Award No. 2 relating to the effects of the 1996 Protocol, an effect which it thus flagrantly, certainly and effectively violates.

ANTOINE TABET further argues that the rights of the defence and the principle of equality of arms have not been respected. It said that the proceedings had been marked by numerous decisions which must be put into perspective in order to assess the fairness of the proceedings. It points out in particular that the arbitral tribunal in award No. 2 requalified the agreement No. 569 without prior discussion. In award No. 4 the arbitrators refused to re-examine the issue of the current account. ANTOINE TABET complained about contradictory decisions to which he had been subjected without being heard of the “ultra petita”. ANTOINE TABET unsuccessfully requested a stay of proceedings pending the outcome of the appeals brought against the partial awards. Since that date, in view of the appeals pending before the Court of Cassation, the possibility of a violation of his fundamental procedural rights cannot be ruled out, it cannot be excluded that its fundamental procedural rights have been violated and that thus the final award “by definition carries with it the stigma of the procedural errors committed by the arbitral tribunal throughout the proceedings, which it refused to remedy despite ANTOINE TABET’s insistent requests”. Finally, it adds that while acknowledging the shortcomings of the expertise ordered, the arbitral tribunal relied on its results in rejecting all the requests for additional operations or a counter-expertise made by the concluding party.

Whereas however, on the first part of the second ground: ANTOINE TABET argues that Award No. 2 of 24 June 2002 contained a contradiction which would vitiate the final award, which in turn, ruled only on the current account would ignore the effect of res judicata concerning the validity of the 1996 Protocol. By arguing in that way, ANTOINE TABET calls into question the validity of Award No. 2, which, according to ANTOINE TABET, contains contradictory grounds, when in fact this decision is not subject to review by the court in the context of the present action for annulment. Moreover, ANTOINE TABET does not establish that the final award would disregard what was judged by Award No 2 and, in any event, does not show how its recognition or enforcement would be contrary to international public policy;

On the second part of the second ground: It must be noted that ANTOINE TABET merely lists its complaints, proceeding by assertions and without ever demonstrating that its complaints or arguments were not contradictory. The fact that they were not upheld is irrelevant. Once again it does not show how recognition or enforcement of the award would be contrary to international public policy;

That consequently the second ground is dismissed and hence the action for annulment;

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

Whereas ANTOINE TABET, who is unsuccessful, is dismissed from its request and shall pay the Republic of Congo EUR 80,000;

FOR THESE REASONS

DECLARES the application for a stay of proceedings admissible;

REJECTS the request for a stay of proceedings;

REJECTS the application for annulment;

ORDERS Group ANTOINE TABET to pay the Republic of Congo EUR 80,000 pursuant to Article 700 of the Code of Civil Procedure;

REJECTS all other requests;

ORDERS Group F G to pay the costs and admits SCP Bernabé Chardin Cheviller, avowed, for the benefit of article 699 of the code of civil procedure.