Paris Court of Appeal, No. 13/05975
Paris Court of Appeal, 2 December 2014, No.13/05975
NIGERIAN NATIONAL PETROLEUM CORPORATION
vs.
LUTIN INVESTMENT LIMITED
The Nigerian National Petroleum Corporation (hereinafter referred to as NNPC), a Nigerian company incorporated under Nigerian law, whose objects include oil exploration and exploitation in Nigeria, concluded, on 23 December 1992, a strategic storage reserve contract with Lutin Investments Limited (hereinafter referred to as LUTIN), the contract being subject to the law in force in the Federal Republic of Nigeria.
By letter dated 9 July 1993, NNPC terminated the contract with immediate effect, on the grounds that LUTIN had delivered vessels that did not comply with the contractual stipulations.
On 15 December 1993, company LUTIN notified company NNPC of a request for arbitration.
By a partial award of 25 October 1994, the arbitral tribunal composed of Mr. B C, sole arbitrator, rendered a partial award settling two incidents, including one regarding its own jurisdiction.
In a judgment of 13 January 2006, the Nigerian Supreme Court, seized of the question relating to the lack of jurisdiction of the arbitrator, upheld the arbitrator’s decision, on the grounds that NNPC did not provide proof of the existence of two separate companies named LUTIN.
On the 2 May 2007, the arbitral tribunal rendered an award ordering NNPC to pay to the company LUTIN a sum of approximately US$55 million and almost 4.7 million naira.
By an order of 6 July 2007, the Paris Trial Court granted the enforcement of this arbitral award.
On 31 July 2007, NNPC lodged an action for annulment of the arbitral award before the Federal High Court in Abuja on the grounds that the arbitrator had ruled without an arbitration agreement and that the award violated Nigerian public policy.
By declaration dated 25 March 2013, NNPC appealed against the exequatur order.
In view of the submissions notified by A on 17 September 2014 by the appellant in which it asks the court to:
- Mainly,
— declare NNPC admissible in its appeal;
— say that LUTIN is inadmissible to obtain the recognition of the arbitral award of 2 May 2007 in France;
— consequently, refuse to recognise the Award and overturn the Order of the Paris Trial Court of 6 July 2007;
— and order LUTIN Investments Limited to pay the sum of €150,000 pursuant to Article 700 and to pay all the costs, including that of distraction in accordance with the provisions of Article 699 of the Code of Civil Procedure;
- Alternatively,
— stay the proceedings pending the outcome of the Nigerian proceedings on the annulment of the homologation judgment;
- Alternatively still,
— say that the arbitrator ruled without an arbitration agreement; and/or
— say that the recognition of the Award is contrary to international public policy; and/or
— say that the arbitrator did not comply with his mission;
— and consequently, refuse to recognise the Award and overturn the Order of the Paris Trial Court of 6 July 2007; and
— order LUTIN Investments Limited to pay the sum of €150,000 pursuant to Article 700 and to pay all the costs, including that of distraction in accordance with the provisions of Article 699 of the Code of Civil Procedure;
- On an infinitely subsidiary basis, if the Court were to recognise the Award:
— partially overturn the Order of the Paris Trial Court of 6 July 2007;
— say that the Award does not result in an order to pay interest;
— alternatively, refuse to acknowledge the sentence ‘I consider that the parties are entitled to the requested interest of 10%, 10% and 21%’.
Having regard to the submissions notified by A on 24 September 2014 by the respondent, which seeks the dismissal of the appellant, the confirmation of the enforcement order of 6 July 2007 and the allocation of the sum of 77,500 euros pursuant to Article 700 of the Code of Civil Procedure and the benefit of the provisions of Article 699 of the same code;
UPON WHICH,
On the motion to dismiss arising from the termination of the arbitral award resulting from a transaction between the parties.
Whereas NNPC’s main claim is that LUTIN’s application for enforcement is inadmissible for lack of purpose, on the grounds that the arbitral award does not exist since the transaction between the parties on 7 October 2009, which was recorded in a homologation judgment rendered on 20 October 2009 by the Federal High Court in Abuja.
But whereas the transaction which puts an end to the dispute only subject to its execution can be opposed by a party only if it has respected its conditions;
that in the present case, if the parties had signed on 7 October 2009 a Memorandum of Settlement Agreement under which LUTIN accepted ‘payment of the sum of fifty-five million two hundred and eighty-one thousand US dollars only as a full and final settlement of LUTIN’s claims … in arbitration and before the Federal Court of Abuja’, NNPC did not execute this transaction, which it claims was signed by a person who did not have the power to bind it, and it is pursuing the annulment of the decision which homologated it at LUTIN’s request before the Federal Court of Abuja, to oppose any act of forced execution;
that the ground must be set aside;
On the application for a stay of proceedings
Whereas, in the alternative, NNPC is asking the Court to stay the proceedings pending the outcome of the ongoing proceedings in Nigeria seeking to obtain the annulment of the homologation judgment.
But whereas the outcome of these proceedings is insufficient to exert a decisive influence on the dispute before the court since, for the reasons set out above, the settlement agreement of 7 October 2009 cannot be opposed by NNPC to LUTIN;
On the merits.
Whereas NNPC argues that the enforcement of the arbitral award should be dismissed because it does not meet the conditions set out in Article 1520 of the Code of Civil Procedure since:
— LUTIN was never a party to the arbitration clause, the arbitrator wrongly declared himself competent;
— the award is contrary to international public policy on the grounds, on the one hand, that the arbitrator violated the principle of equality of the parties and, on the other hand, that LUTIN obtained the award by fraud;
— by compensating LUTIN’s lost earnings and by failing to rule on some of NNPC’s claims, the arbitrator did not comply with his mission.
Whereas on the first ground that NNPC maintains in the first place that the arbitrator ruled without an arbitration agreement on the grounds that LUTIN BVI was never a party to the contract which was signed by a company Lutin Investment Limited with its registered office in Geneva (Switzerland) and not by a company incorporated in the British Virgin Islands which cannot benefit from the extension of the arbitration clause to its benefit;
Whereas, however, there is no evidence that Lutin Investment Limited, signatory of the contract of 23rd December 1992 stipulating an arbitration clause, and designated in the deed as ‘a company based in Geneva with its registered office in XXX’, is a legal person distinct from Lutin Investment Limited incorporated in the British Virgin Islands (BVI);
That indeed the registration of company LUTIN in the BVI does not preclude it from having a registered establishment in Switzerland;
that, moreover, NNPC signed a memorandum of settlement, on 7 October 2009, with Lutin Investment Limited, and vainly contested the standing of the latter during the arbitration proceedings. By this memorandum of settlement, under the terms of which LUTIN accepted ‘payment of the sum of fifty-five million two hundred and fifty-one thousand US dollars only as a total and final settlement of its claims … in arbitration and before the Federal Court of Abuja’, NNPC necessarily admitted the unity of the legal personality of that company;
furthermore, the assessment of LUTIN’s standing is a question of the admissibility of the action brought before the arbitral tribunal and not a question of the arbitrator’s jurisdiction and cannot be challenged before the exequatur judge on the basis of Article 1520-1 of the Code of Civil Procedure;
Whereas on the second ground of appeal that NNPC has opposed to Lutin Investment Limited, a company incorporated in the British Virgin Islands (BVI), the motion to dismiss arising from its lack of capacity to implement the arbitration under the arbitration clause stipulated in the contract of 23 December 1992, for not having been a party to that agreement, notwithstanding the identity of the company’s name, it was up to it to prove the existence of two distinct legal persons, namely Lutin Investment Limited company incorporated in the British Virgin Islands (BVI) and Lutin Investment Limited company under Swiss law, so that the arbitrator, in placing this proof in its charge, did not breach the equality between the parties;
furthermore, NNPC fails to show that the award was obtained by fraud since, for the reasons set out above, it could not have been mistaken by the identity of the other contracting party which, contrary to what is claimed, never presented itself as being a company under Swiss law but as ‘a company based in Geneva with its registered office in XXX’;
finally, under cover of the ground alleging that, by producing before the arbitrator the reports of the Committee’s meetings of 22 July and 5 August 1993, in which it did not dispute that LUTIN took part, NNPC, which claims by mere assertion that these documents were obtained unlawfully, in reality intends to discuss the arbitrator’s assessment of the probative value of these documents, which is beyond the powers of the exequatur judge;
Whereas, on the third ground, the mission of the arbitrators, as defined by the arbitration agreement, is delimited mainly by the object of the dispute as determined by the claims of the parties;
that under the terms of the contract of 23 December 1992, Y essentially undertook to supply ships on the basis of a charter of ships to be used for the storage of white or black petroleum products, i.e., a total volume of one million metric tons for an initial period of three years, starting from 23 December 1992, in the context of NNPC’s use of a strategic stockpile intended to supplement strategic supplies and to increase the capacity of the stockyard according to the need to adjust the metric tonnage, in order to optimise the efficiency of domestic supplies;
that, for its part, NNPC obliged itself for a volume between 0 and 149,999.99 metric tons to pay a low duty of $3,562.00 per month, for the next 350,000 metric tons stored an additional monthly duty calculated for volumes above 149,999.99 metric tons stored per month and multiplied by 1.05 cents per litre and finally for a total average per month between 500,000 metric tons and 1 million metric tons, a basic duty of $8,277.841;
that the arbitration clause stipulated in the contract shall apply to ‘any dispute arising from this contract which is not settled on the basis of mutual agreement’;
that Article 15 of the contract finally states that ‘at no time shall either party be held responsible towards the other for any damage, whether special, indirect or collateral’;
Whereas it appears from the pleadings filed by the parties before the arbitral tribunal that LUTIN has pursued compensation for the losses consisting of loss of profit and costs incurred (costs not covered on support vessels and costs covered on all vessels) suffered as a result of the wrongful suspension and termination of the contract by NNPC, while the latter reproached LUTIN for breach of its contractual obligations and requested reimbursement of the sums paid as advances;
that the arbitrator who, after deciding that the termination of the contract by NNPC was wrongful, assessed the amount of the gain that LUTIN was deprived of as a result, ruled on the damage resulting directly from NNPC’s breach of its contractual obligations;
that NNPC pointlessly invoked before the enforcement judge that the arbitrator had disregarded the parties' agreement by awarding compensation for special damages within the meaning of Nigerian law which the parties had, under the terms of Article 15 of the contract, excluded from their forecasts, since the alleged distortion of the contractual documents by the arbitrator could not be assimilated to a breach by the arbitrator of his obligation to comply with his mission;
Whereas, finally, contrary to what NNPC claims which criticises the arbitrator for having disregarded his mission by failing to respond to several grounds, the arbitrator considered, endorsing LUTIN’s argument, that all the vessels necessary to provide storage space of one million metric tons did not have to be made available on the day the contract was signed, but within a reasonable period of time, which is what LUTIN had done, the million metric tons having been made available in less than four months after the contract was signed; that the arbitrator also ruled that not all of the ships delivered had been inspected, taking into account, in order to avoid the consequences that NPPC claimed to draw from the provisions of paragraph 2 of the contract, the absence of any objection from NPPC;
that this ground is in fact lacking;
On the request for payment of interest.
Whereas NNPC requests, in the event of confirmation of the exequatur decision, that it be specified that the arbitrator’s award does not entail an order to pay interest, as the arbitrator has not pronounced an award in this respect.
But whereas the arbitrator expressly stated in the reasons of the award with regard to the interest claim before him that both the principal claimant and the counterclaimant were ‘entitled to the interest claimed of 10%, 10% and 21%';
that NNPC which intends, under cover of a ground that is lacking in fact, to obtain a review of the merits of the award, prohibited by the exequatur judge, must have its application rejected.
Whereas NNPC is unsuccessful in its claims and must bear the costs, it cannot claim compensation pursuant to Article 700 of the Code of Civil Procedure and shall be ordered to pay on the same basis a sum of 77,500 euros.
FOR THESE REASONS:
Sets aside the motion to dismiss arising from the termination of the arbitration award as a result of a settlement between the parties;
Says that there is no need to stay the proceedings;
Confirms the order referred;
Orders the Nigerian National Petroleum Corporation, a Nigerian company governed by state law, to pay the costs which will be recovered in accordance with the modalities provided for in article 699 of the Code of Civil Procedure and to pay the company Y Investment Limited incorporated in the British Virgin Islands a sum of 77,500 euros on the basis of article 700 of the same code.
Dismisses all other claims.
THE CLERK THE PRESIDENT