Paris Court of Appeal, No. 12/01370 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, First Chamber, 12 November 2013, No. 12/01370

REPUBLIC OF EQUATORIAL GUINEA

Vs.

FITZPATRICK EQUATORIAL GUINEA LTD (FEG)

On 16 February 2004, the Equato-Guinean company FITZPATRICK EQUATORIAL GUINEA LTD (FEG) and the REPUBLIC OF EQUATORIAL GUINEA concluded a contract for the construction of a freeway. Following a dispute between the parties, an arbitration procedure, under the aegis of the International Chamber of Commerce, was initiated by FEG on 6 September 2006, on the basis of Article 40 of the contract.

The arbitral tribunal, composed of Mr. Owen and Mr. Leboulanger, arbitrators, and Mr. de Ly, Chairman, rendered an interim award in Paris on 14 May 2009, in which it declared itself competent to rule on the dispute and decided that FEG would be represented by its directors and not by its liquidator.

The appeal filed against this award by the REPUBLIC OF EQUATORIAL GUINEA was rejected by a decision of the said court issued on 7 April 2011.

In a final award issued in Paris on 23 December 2011, the arbitral tribunal, in substance, held that the REPUBLIC OF EQUATORIAL GUINEA had breached the contract by failing to make due payments, that FEG was entitled to terminate the contract and to claim compensation for the resulting losses, loss evaluated at the sum of EUR12,278,958.95 that the REPUBLIC OF EQUATORIAL GUINEA was ordered to pay in addition to interests at the rate of 5% per annum as of 14 March 2005. The arbitral tribunal also rejected the remaining claims and ordered the REPUBLIC OF EQUATORIAL GUINEA to bear the costs of its opponent as well as the arbitration costs.

The REPUBLIC OF EQUATORIAL GUINEA appealed to set aside this award on 23 January 2012.

In its submissions of 23 April 2012, THE REPUBLIC OF EQUATORIAL GUINEA asked the Court, primarily, to stay the proceedings pending the decision to be issued on the third party opposition filed against the judgment of 7 April 2011 by M. Y acting as syndic-liquidator of the company FEG It requests the court, alternatively, to set aside the award of 23 December 2011 and to grant it the sum of EUR30,000 pursuant to Article 700 of the French Code of Civil Procedure. It argues that if the partial award is set aside for violation of the principle of divestment of the debtor in liquidation, the same must apply to the final award. It adds that by refusing to take into consideration some of its claims, in the absence of payment of its share of the advance payment, the arbitral tribunal has disregarded the requirements of a fair trial and in particular the right of access to a judge and the principle of due process.

In its submissions dated 20 August 2012, FEG seeks the rejection of the application for a stay of proceedings, the dismissal of the claimant’s action to set aside the award. FEG also asks the court to be awarded the sum of EUR80,000 pursuant to Article 700 of the Code of Civil Procedure. FEG claims that the third-party opposition is inadmissible and unfounded. It adds that the opposing party is in no way impecunious, that said party did not make any reservation before the arbitrators on the consequences of the non-payment of the additional advance. Finally, supposing that the arbitral tribunal had ruled infra petita, this circumstance is not a ground for setting aside an arbitral award.

UPON WHICH:

On the application for a stay of proceedings:

Whereas there is no need to stay the proceedings pending the decision to be issued on the third-party opposition of M. Y, this action having been declared inadmissible by an award rendered on that day.

On the grounds of the annulment of the award of 23 December 2011 relating to the violation of the principle of divestment of the debtor in compulsory liquidation (Article 1520-5 of the Code of Civil Procedure):

Whereas the partial award held that FEG would be represented in the arbitration proceedings by its managers and not by its liquidator; whereas the action for annulment of this award was rejected by a judgment of this court of 7 April 2011 and that the third-party opposition of Mr. Y. was declared inadmissible by an award rendered on that day; whereas the grounds must thus be dismissed;

On the ground for the annulment of the award of 23 December 2011 based on the violation of international public policy and the principle of due process (in French Principe de la contradiction) (Article 1520-5 and -4 of the Code of Civil Procedure):

The REPUBLIC OF EQUATORIAL GUINEA explains that it brought, for the first time before the arbitrators, by a memorandum of 8 February 2010, a request for a declaration of the nullity of the contract for fraud and for an allocation of damages as compensation for the damage caused by the fraudulent misconduct of the FEG. The arbitral tribunal considered that these requests were withdrawn as soon as the additional advance payments had not been settled. By refusing to examine the application for annulment of the contract, which was not, under the arbitration rules of the International Chamber of Commerce, a counterclaim for a pecuniary award justifying an increase in the advance payment, the arbitral tribunal disregarded the requirements of a fair trial, the right of access to a judge and the principle of due process.

Whereas according to article 1466 of the Code of Civil Procedure: “A party who, knowingly and without legitimate reason, fails to raise an irregularity before the arbitral tribunal in due course shall be deemed to have waived the right to raise it”;

Whereas according to article 30 (4) of the Arbitration Rules of the International Chamber of Commerce in force at the time: ‘Where a request for an advance on costs is not complied with, the Secretary General may, after consultation with the Arbitral Tribunal, request the Arbitral Tribunal to suspend its activities and fix a time limit, which shall not be less than fifteen days, on the expiry of which the claim or counterclaim to which the advance on costs relates shall be deemed to have been withdrawn. In the event that the party concerned intends to oppose this measure, it shall be incumbent upon it to request, within the above-mentioned time limit, that the matter be decided by the Court. Such a withdrawal will not deprive the party concerned of the right to reintroduce the same claim or counterclaim at a later date in another proceeding’;

Whereas it follows from the statements of the award that the advance on costs was reassessed in March 2010 and that the REPUBLIC OF EQUATORIAL GUINEA had not paid the balance due within the additional time limit set for it, i.e. until 18 November 2010, that the Secretariat had informed the parties that the counterclaims were considered withdrawn at the end of the month of March 2010 in the absence of any opposition to the application of article 30 (4) of the arbitration rules (award SS 92).

Whereas the REPUBLIC OF EQUATORIAL GUINEA did not introduce any documents in the French language showing that it had contested before the arbitral tribunal the application of Article 30 (4) of the Arbitration Rules to all of its counterclaims, including those relating to the nullity of the contract for fraud, this ground cannot be usefully presented to the judge in the appeal;

Moreover, the REPUBLIC OF EQUATORIAL GUINEA does not allege any obstacle to the possibility offered to it by the aforementioned Article 30 (4) to submit to another arbitral tribunal the claims which were not examined by the award of 23 December 2011;

Whereas the ground must therefore be dismissed;

Whereas it follows from the foregoing that the action must be dismissed;

That the REPUBLIC OF EQUATORIAL GUINEA, the unsuccessful party, would not benefit from the provisions of article 700 of the Code of Civil Procedure; whereas it will be condemned on this basis to pay the sum of EUR50,000 to FEG;

FOR THESE REASONS:

Said that there is no reason to stay the proceedings.

Rejects the appeal for annulment of the award rendered between the parties on 23 December 2011.

Condemns the REPUBLIC OF EQUATORIAL GUINEA to pay the sum of EUR50,000 to FITZPATRICK EQUATORIAL GUINEA LTD in accordance with Article 700 of the Code of Civil Procedure.