Paris Court of Appeal, No. 14/17200

Paris Court of Appeal, 22 September 2015, No. 14/17200

REPUBLIC OF EQUATORIAL GUINEA

vs.

ORANGE MIDDLE EAST AND AFRICA (ORANGE) formerly named FRANCE CABLES ET RADIO (FCR)

The REPUBLIC OF EQUATORIAL GUINEA and SA FRANCE CABLES ET RADIO (FCR), now ORANGE MIDDLE EAST AND AFRICA (ORANGE), a wholly-owned subsidiary of ORANGE SA, entered into a shareholders' agreement on 1 June 1994 in relation to the Equatorial Guinean telecommunications company GETESA, in which they hold 60% and 40% of the capital respectively.

On 4 November 2011, the parties put an end to their disputes through a settlement agreement that stipulated, in particular, an exit clause in favor of FCR. Following the issuance by the REPUBLIC OF EQUATORIAL GUINEA of a telecommunications license to a new operator, FCR notified a request to purchase its shares in GETESA. In the absence of an amicable agreement, FCR filed a request for arbitration with the International Chamber of Commerce pursuant to the arbitration clause provided for in the protocol.

By an award handed down in Paris on 8 July 2014, the arbitral tribunal composed of Messrs. Y and X, arbitrators, and Mr. A B, chairman, declared itself competent, said that the protocol was valid, found that the REPUBLIC OF EQUATORIAL GUINEA had breached its obligation to acquire the shares and pay their price, ordered it to pay 131,992. 915 euros corresponding to the price of the shares, in addition to simple interest at the rate of the European Central Bank, it also ordered it to sign the share transfer slip and to have the transfer recorded in GETESA’s registers and in the shareholders' accounts, and finally, ordered it to pay FCR’s defense costs and half of the arbitration costs.

The REPUBLIC OF EQUATORIAL GUINEA appealed against this award by a declaration filed on 7 August 2014.

By an order dated 5 February 2015, the Pre-Trial Judge conferred exequatur on the award.

By submissions served on 7 May 2015, the REPUBLIC OF EQUATORIAL GUINEA seeks the annulment of the award and an order that the opposing party pay the sum of 70,000 euros pursuant to Article 700 of the Code of Civil Procedure. It alleges irregularity in the composition of the arbitral tribunal (Article 1520-2 of the Code of Civil Procedure), violation by the arbitrators of their mission (Article 1520-3 of the Code of Civil Procedure), and disregard of the adversarial principle (Article 1520-4 of the Code of Civil Procedure).

By submissions served on 13 May 2015, ORANGE asked the court, mainly, to reject the action for annulment, to order the REPUBLIC OF EQUATORIAL GUINEA to pay 15,000 euros in damages for dilatory action and to declare the award enforceable, in the alternative, to pronounce a partial annulment and to enforce the uncensored provisions, in any event, to award ORANGE the sum of 60,000 euros pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the first ground of annulment based on the irregularity of the constitution of the arbitral tribunal (article 1520-2 of the code of civil procedure):

The REPUBLIC OF EQUATORIAL GUINEA complains to the president of the arbitral tribunal for not having declared a previous arbitration rendered less than three years earlier in favor of ORANGE, in which one of the arbitrators had denounced, in a dissenting opinion, the partiality of the tribunal. It adds that it filed a challenge within the time limit provided for in the arbitration rules, which was rejected on the merits by the International Chamber of Commerce.

Considering that under Article 1466 of the Code of Civil Procedure: ‘A party who, knowingly and without legitimate reason, fails to invoke an irregularity before the arbitral tribunal in good time shall be deemed to have waived the right to invoke it’;

Considering that the modalities for the presentation of such grounds in the course of the arbitral proceedings are determined, where appropriate, by the arbitration rules to which the parties have agreed to be bound by;

That according to Article 14 (2) of the Rules of Arbitration of the International Chamber of Commerce, the challenge ‘must be submitted by a party, under penalty of foreclosure, either within thirty days of receipt by that party of the notification of appointment or confirmation of the appointment of the arbitrator, or within thirty days of the date on which the party making the challenge has been informed of the facts and circumstances relied upon in support of its challenge, if that date is later than the date of receipt of the notification referred to above’;

Whereas, in the present case, FCR and the REPUBLIC OF EQUATORIAL GUINEA have appointed Mr. Y and Mr. X respectively as arbitrators; whereas in its session of 18 July 2013, the Court of the International Chamber of Commerce appointed as President of the Arbitral Tribunal, Mr. A B, who had indicated in the declaration of independence signed on 14 July 2013 that he was not required to disclose any facts or circumstances of such a nature as to call into question his independence or to create a reasonable doubt in the minds of the parties as to his impartiality;

Considering that on 21 August 2013, the counsel for the CSF sent the following message by e-mail to the arbitral tribunal and to the lawyers of the REPUBLIC OF EQUATORIAL GUINEA:

‘As you know, the present case opposes our client FCR (a wholly-owned subsidiary of the France Telecom - Orange Group) to the REPUBLIC OF EQUATORIAL GUINEA.

In this context, we would like to inform, for all intents and purposes, the members of the arbitral tribunal and our colleagues, that our client has informed us that our Chairman was appointed several years ago by the ICC in case no. 15653/JRF, in which France Télécom and Orange were parties (award rendered in 2009) (hereinafter the ‘EUSKALTEL International Chamber of Commerce case’).

We are aware that our Chairman was under no obligation to declare this precedent in our current case as (i) he was appointed in each of these cases by the ICC, (ii) he was never appointed as arbitrator by any of the parties to the arbitration, (iii) the EUSKALTEL ICC Case and our present case concern very different markets (Spain in one case and Africa in the other) and unrelated types of contracts (network operation in one case and shareholders’ agreement in the other), (iv) the substantive issues in the two cases are not related, and (v) the award in the EUSKALTEL ICC Case is more than four years old.

Nevertheless, our client would like the existence of the EUSKALTEL ICC Case to be brought to the attention of our colleagues for information purposes. We would like to inform our colleagues that they have 30 days from the date of this letter to raise any objections (article 14 of the ICC Regulation), although we are convinced, for the reasons set out above, that the Tribunal is able to carry out its mission impartially and independently in accordance with article 11 of the ICC Regulation';

Whereas on 24 October 2013, the representative of the REPUBLIC OF EQUATORIAL GUINEA signed the Terms of Reference which stipulates, inter alia, in part VII b) that ‘the parties recognize that the Arbitral Tribunal has been duly constituted and that they have, as of the date of signature, no objection to the arbitrators’;

Whereas on 25 January 2014, the REPUBLIC OF EQUATORIAL GUINEA addressed to the Secretariat of the International Chamber of Commerce a request for the challenge of the President of the Arbitral Tribunal based on the Euskaltel case; whereas this request was rejected by the Court of Arbitration on 27 February 2014;

Considering that, in order to argue that it was not late, the REPUBLIC OF EQUATORIAL GUINEA argues that it was only through an investigation carried out after a procedural order of 24 January 2014, which it considered biased, that it discovered the precise circumstances of this arbitration and in particular the fact that it was more recent than FCR had suggested, that it was on the same subject as the present case, that it had given rise to very high fees, that one of the arbitrators had denounced the bias of the chairman in a dissenting opinion, and that the Spanish press had reported the award in this case as being overly favorable to ORANGE;

Considering, however, that the only evidence that the appellant produces in support of its allegations, according to which, the letter from FCR dated 21 August 2013 did not fully enlighten it about the circumstances of the Euskaltel case, are translations of online Spanish press articles, two of which are dated 28 July 2010 and 11 February 2011; that, supposing that such information cannot be regarded as notorious at the time of the appointment of Mr. A B, whose name appears expressly in those sources, it was readily available within thirty days of the letter of 21 August 2013, since the attention of the REPUBLIC OF EQUATORIAL GUINEA had been drawn by the other party to the existence of that previous arbitration;

Considering that the appellant, having belatedly exercised its right of challenge during the arbitration, is deemed to have waived the ground based on the lack of independence or impartiality of a member of the arbitral tribunal, it being of little importance that the request for challenge was the subject of a decision of rejection by the Court of Arbitration of the International Chamber of Commerce and not of inadmissibility;

Considering that the first ground for annulment must therefore be rejected;

On the second ground for annulment alleging the arbitrators' failure to comply with their mission (Article 1520-3 of the Code of Civil Procedure):

The appellant submits that the arbitrators applied Spanish law and not Equatorial Guinean law that was chosen by the parties.

Considering that the mission of the arbitrators, as defined by the arbitration agreement, is mainly delimited by the subject matter of the dispute as determined by the parties' claims;

Considering that in the present case, part IX of the Terms of Reference, signed by both parties and the members of the Arbitral Tribunal, reads as follows:

‘IX Law applicable to the merits

The arbitration clause of the Protocol stipulates that the law applicable to the merits is Equatorial Guinea law.

The defendant also stated in its Answer to the Request that Spanish substantive law is directly applicable in matters of contract law and obligations as follows: ‘the law of Equatorial Guinea on obligations and contracts is identical to that of the Kingdom of Spain’, and then continued its demonstration on the basis of Spanish substantive law. The appellant, for its part, agreed to the application of Spanish substantive law of contracts and obligations in its letter of 12 August 2013 and confirmed its position during the conference call of 21 August 2013.

The law applicable to the merits is, therefore, by mutual agreement of the Parties, Equatorial Guinean law, OHADA law and, for interpretation purposes, Spanish substantive law of obligations and contracts’;

Considering that the REPUBLIC OF EQUATORIAL GUINEA maintains that, with regard to these stipulations, the arbitrators could only have recourse to Spanish case law and doctrine to clarify the provisions of Equatorial Guinean law, and not directly apply the rules of the Spanish Civil Code in matters of contract law;

But considering that the REPUBLIC OF EQUATORIAL GUINEA argued in the arbitration proceedings that the Protocol was unlawful, on the one hand, in that it provided for an arbitration clause to settle a non-arbitrable dispute, as it was related to the use of the public telecommunications domain and, on the other hand, in that it prevented the issue of new licenses and thus contravened the rules on the maintenance or abuse of a dominant position; that the arbitral tribunal examined these grounds under Equatorial Guinean law, CEMAC law and OHADA law (Award § 83 to 110);

That, with regard to the merits of the dispute, the arbitral tribunal purely and simply applied the provisions of the Protocol on the basis of the principles of binding force and good faith execution of the agreements set out in the Spanish Civil Code; that by interpreting the Protocol in the light of these principles, which are substantive rules of international arbitration law, the arbitrators merely adopted the position which the REPUBLIC OF EQUATORIAL GUINEA - which did not conclude on the merits - had set out in its initial response to the request for arbitration, namely that: ‘the Equatorial Guinean law of obligations and contracts is identical to that of the Kingdom of Spain’;

Considering that the ground alleging that the arbitrators had failed to comply with their mission should therefore only be dismissed;

On the third ground for annulment alleging disregard of the adversarial principle (in French Principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure):

The appellant argues that the arbitrators disregarded the adversarial principle, firstly, by substituting one national law for another without the parties discussing it, secondly, by excluding from the proceedings, through Procedural Order No. 3, its pleading No. 3 and the documents, even though this sanction had not been requested by FCR and had not been discussed between the parties, and finally, by relying on Article 1100 of the Spanish Civil Code, not invoked by the parties, to fix the interests.

On the first branch of the ground:

Considering that, as has been said, since the REPUBLIC OF EQUATORIAL GUINEA did not conclude on the merits, the arbitrators applied the contractual stipulations in the light of Spanish law in accordance with the will expressed by that party in the Terms of Reference;

On the second branch of the ground:

Considering that Procedural Order No. 3 of 18 November 2013 excluded from the proceedings, on the one hand, all documents from the REPUBLIC OF EQUATORIAL GUINEA which had not been produced by 12 November 2013 at the latest, in accordance with the Arbitral Tribunal’s directive of 9 November 2013 having granted that party a new time limit for production, and on the other hand, Brief No. 3 which, in disregard of the instructions of Procedural Order No. 1, merely developed pleas of lack of jurisdiction without addressing the merits of the dispute;

Considering that, contrary to what the appellant claims, FCR expressly requested that these writings and documents be set aside from the proceedings, by an e-mail of 14 November 2013, to which the REPUBLIC OF EQUATORIAL GUINEA replied on the same day (Order No. 3, § 8 and 9);

That in its first two branches, the ground can only be set aside;

But on the third branch of the ground:

Considering that in order to attach to the principal an order to pay interest at the ‘simple interest rate for periods of twelve months, regularly published by the European Central Bank for refinancing operations’, the award states (§130):

‘The Appellant requested the Arbitral Tribunal to order the Defendant to pay interest for late payment due to its failure to pay the Final Assignment Price in due time, without indicating the applicable interest rate, and without the Defendant having made any decision on this issue or the date from which interest would be added to the price. The fact that the Appellant’s letter of 25 July 2012, by which it requests the payment of the Assignment Price that became final on 22 August 2012, validly gave formal notice to the Defendant if this Price was not paid within the time limit set out in Article 9 of the Protocol, i.e. by 22 August 2012 at the latest (Article 1100 of the Spanish Civil Code), and in view of the fact that the State has not paid this Price within this period, default interest is due to the Appellant starting from that date on the final Transfer Price denominated in Euros, without opposition from the Defendant, which requires that the applicable interest rate is in line with the European nature of the payment currency’;

That in so deciding, when the rate adopted was not the result of a contractual stipulation and did not appear in FCR’s records, so that its opponent had not been put in a position to discuss it, the arbitrators violated the adversarial principle;

that the award shall be set aside on this ground alone;

On the claim for damages:

Considering that, having regard to the meaning of the judgment, there is no cause for damages for abusive recourse;

On Article 700 of the Code of Civil Procedure:

Considering that the REPUBLIC OF EQUATORIAL GUINEA, which is not successful for the major part of its claims, cannot benefit from the provisions of article 700 of the code of civil procedure and will be condemned on this basis to pay ORANGE the sum of 10,000 euros;

FOR THESE REASONS:

Annuls the award but only in so far as it pronounces a condemnation of the REPUBLIC OF EQUATORIAL GUINEA to pay interest for late payment on the sum of 131,992,915 euros.

Dismisses the appeal for the remainder.

Holds that the uncensored provisions of the award are subject to exequatur.

Rejects the claim for damages.

Orders the REPUBLIC OF EQUATORIAL GUINEA to pay the costs and to pay the company ORANGE MIDDLE EAST AND AFRICA the sum of 10,000 euros pursuant to Article 700 of the Code of Civil Procedure.

THE CLERK F/THE PRESIDENT PREVENTED FROM ATTENDING