Paris Court of Appeal, No. 11-20.730

Paris Court of Appeal – 1st Pole – First Chamber, 12 April 2016, No.11-20.730

DEMOCRATIC REPUBLIC OF THE CONGO vs. FG HÉMISPHÈRE ASSOCIATES LLC

On 4 March 1986, the REPUBLIC OF ZAIRE (now the DEMOCRATIC REPUBLIC OF CONGO or DRC) and the Bosnian company Energoinvest concluded an agreement for the realisation and financing by a loan of 22.525 million USD of a hydroelectric development on the Ubangui in benefit of the Zairian public enterprise called SOCIETE NATIONALE D’ELECTRICITE (SNEL).

As the repayment deadlines were not honoured, Energoinvest, on 2 March 2001, initiated arbitration proceedings under the arbitration clause stipulated by this agreement.

On 30 April 2003, the arbitral tribunal constituted, under the supervisio of the International Chamber of Commerce, of MM. Ronca and Tabu-Samra, arbitrators, and Mr. Roncaglia, Chairman, rendered in Paris in case No. 11442/KGA an award which ordered SNEL and the DEMOCRATIC REPUBLIC OF CONGO jointly to pay Energoinvest the sum of $ 18,430,555.47 in addition to interest and arbitration fees.

At the request of the Delaware law company, FG XZ (X), coming to the rights of Energoinvest, enforcement (in French Exequatur) was granted to the award by an order of the delegate of the president of the Paris Tribunal of Grande of 5 November 2009.

On 21 November 2011, the DRC and SNEL filed an action for annulment of the award.

By an order dated 21 March 2014, confirmed by a decision of 18 November 2014, rectified by a judgment of 3 February 2015, the pre-trial judge declared the SNEL’s action for annulment null and void and dismissed X of its request, which leads to declare the action of DRC null and void.

By an order of 7 May 2015, confirmed by a decision of 30 June 2015, the pre-trial judge declared the action of DRC admissible.

By an order of 12 February 2015, confirmed by a decision of 12 May 2015, the pre-trial judge declared the incidental action of SNEL inadmissible.

By submissions served on 17 February 2016, the DRC requests the court principally to declare that it is admissible and well-founded to exercise the disputed right of withdrawal provided for by Article 1699 of the Civil Code, since such an application is not subject to any form, that it is a legal prerogative and can be presented as a main claim before the court seized of an action for annulment, regardless of the fact that it does not fall within the scope of the proceedings provided for by Articles 1520 and 1525 of the Code of Civil Procedure. The RDC also mentions that article 1699 of the Civil Code is applicable to this dispute as a police law and, alternatively, as a procedural law, and that the claim assigned on 20 July 2001 by Energoinvest to X was in dispute since the referral to the arbitral tribunal in March 2001 and that it became contentious again because of the action for annulment. It also states that if the assignment was notified to it on 16 November 2004, it did not know the real date, as well as the terms and the price until March 2012, which it was therefore well founded to exercise the right of withdrawal in dispute by notification of 16 July 2012. The DRC requests the court to rule accordingly that the claim will be extinguished upon payment of the sum of USD 3,618,232.28 for two cases 11/20730 and 11/20732 (award rendered in Zurich on the same day between the same parties), which after compensation of reciprocal debts only 301,474.53 USD is due under the sole award rendered in Paris, the equivalent in euros of 180,643.54 USD, to therefore judge the present proceedings to be extinguished.

Subsidiarily, the DRC requests the court to sey aside the award by invoking, on the one hand, the violation of due process (in French Principe de la contradiction) (article 1520-4 of the code of civil procedure), on the other hand, the violation of international public order (article 1520-5 of the code of civil procedure).

In any event, the DRC requests the Court to order X to pay it 70,000 euros in application of article 700 of the code of civil procedure.

By submissions filed on 3 February 2016, X requests the court:

• to note that SNEL is no longer a party to the proceedings,
• to dismiss the incidental request for disputed withdrawal made by the DRC in that such a request is not admissible before the court of appeal seized of an appeal for annulment of an arbitration award, because it concerns on the merits of the case and because it is not linked by a sufficient link to the original request. Moreover, X requests the court to state that in any event, Article 1699 of the Civil Code, which is neither a law of police or a procedural law, is inapplicable to the assignment of receivables between Energoinvest and itself,
• on the request for annulment of the award, to declare inadmissible the ground alleging disregard of the principle of contradiction, bacause the claimant did not raise it before the arbitral tribunal, and to declare it unfounded. X also requests the Court to reject the ground alleging violation of international public order, and to dismiss the DRC of its action and to find that this rejection confers the enforcement (in French Exequatur) on the award rendered on 30 April 2003 in Paris,
• to order the DRC to pay the sum of 70,000 euros in application of article 700 of the code of civil procedure.

UPON WHICH:

On the disputed withdrawal request:

Whereas the DRC was ordered to pay a certain sum to Energoinvest by an arbitration award rendered in Paris on 30 April 2003, covered by the enforcement (in French Exequatur) by an order of the delegate of the president of the Paris Tribunal of Grande Instance issued on 5 November 2009 at the request of X, assignee of the debt;

Whereas the DRC, which filed an action for the annulment of this award, requests the application of article 1699 of the civil code according to which: “A person against whom a litigious right has been assigned may have himself released by the assignee by reimbursing him for the actual price of the assignment with the expenses and fair costs, and with interest from the day when the assignee has paid the price of the assignment made to him”;

Whereas the mission of the court of appeal, seized in application of article 1520 of the code of civil procedure, is limited to the review of the grounds enumerated by this text; that the request which tends, after a review of the merits of the case, to the discharge of the claimant by the payment to the assignee of the price of transfer and various accessories is not included in this mission; that it is therefore inadmissible;

On the first ground for annulment based on disregard of the principle of contradiction (article 1520-4 of the code of civil procedure):

The DRC first states that consultation of the procedural file kept by the International Chamber of Commerce enabled it to observe that several procedural documents were never actually delivered to it, which is proved by the absence of receipts or corresponding discount coupons:

• draft of the terms of reference of 29 January 2002,
• Energoinvest comments on the draft of the terms of reference,
• provisional procedural timetable of 3 May 2002,
• summons to the hearing in Zurich on 12 September 2002,
• Statement of defence of SNEL dated 9 September 2002,
• summons of 7 November 2002 to the pleadings hearings of 9 and 10 December 2002.

The claimant maintains, secondly, that the procedural timetable has been modified in a way which excluded it from the proceedings. Finally, it complained to the arbitrators that they failed to take into account the war that was raging on its territory and made it physically impossible to defend itself.

Whereas, in the first place, that the DRC was aware of the initiation of the arbitration proceedings, as this results from a letter sent on 3 August 2001 by the Minister of Justice to the Court of Arbitration of the Chamber of international trade indicating that its ministry was competent to represent the Congolese state; that the Terms of reference, signed by the representative of the DRC, was received on 14 June 2002 by the secretariat of the Court of the International Chamber of Commerce (award § 37), so that the claimant, who issues on the authenticity of this exhibit doubts that are not supported by evidence, cannot complain of not having received the draft Terms of reference; that Energoinvest’s comments on this project was sent to Professor Mazyambo, legal adviser to the Ministry of Justice of the DRC on 14 February 2002 by the global express service of the Swiss Post as shown in the dispatch note; that the provisional timetable was communicated to the parties, as follows from paragraph 39 of the award and, that in any event, the date and place of the procedural hearing held in Zurich on 12 September 2002 was reminded to the DRC by an email sent on 14 August 2002 by the council of Energoinvest to Professor Mazyambo; that for the rest, the DRC cannot complain of not having received the submissions of SNEL, a State company in which it holds 100% of the capital, and to which, moreover, it gave a mandate to represent it during the attempt to settle the dispute amicably;

Whereas the DRC can no longer make a complaint for not having received the procedural timetable set at the hearing of 12 September 2002 at which it deliberately chose not to appear;

Whereas, finally, while the DRC argues that it was at war during the arbitral proceedings, it never took advantage of this circumstance in order to request an adjustment of the procedural timetable from the arbitrators. However, in September and October 2001 its representative exchanged with the Energoinvest councils on a meeting to be held in Paris, which did not mention any material difficulties other than that of obtaining visas from the French embassy for the Congolese delegation composed, according to an e-mail from Professor Mazyambo dated 7 September 2001, of counsellors from the Ministers of Justice and Economy and representatives of the SNEL; that the DRC cannot invoke before the court an argument that it had refrained from putting forward before the arbitral tribunal when it was in a position to do so;

Whereas the ground based on the disregard of the principle of contradiction must therefore be dismissed;

On the second ground for annulment based on the violation of international public order (Article 1520-5 of the Code of Civil Procedure):

The DRC raises a fraud which deprived it of the right to exercise the disputed withdrawal before the arbitral tribunal.

Whereas the alleged fraud was based on the fact that the agreements concluded by Energoinvest and X on 20 July 2001 provided for the immediate transfer of the economic interests of the disputed claims. The alleged fraud was also based on the fact that the agreements provided for the immediate payment of the price to an escrow bank and the postponement to a later date, not specified in the deed, of the formal transfer of the title deeds. This postponement allowed X to artificially postpone the transfer of ownership and to inform the assigned debtors only on 16 November 2004, at a date when the arbitration proceedings ended. Thus, the DRC and SNEL could no longer assert before the arbitral tribunal their disputed right to withdraw;

Whereas the fraud of the award supposes that false documents have been produced, that false witness statements have been collected or that documents relating to the solution of the dispute have been fraudulently concealed from the arbitrators, so that their decision was misled;

Whereas in the present case, the arbitration clause provided for the application of Swiss substantive law; that it is neither established, nor even alleged, that the Swiss law would include a provision similar to Article 1699 of the French civil code; therefore it has not been demonstrated that the ignorance in which the DRC, SNEL and the arbitral tribunal were bound by the agreements concluded between Energoinvest and X were such as to influence the solution of the dispute and to mislead the decision of the arbitrators;

That the ground based on fraud can only be dismissed;

Whereas it follows from the foregoing that the appeal must be dismissed; that such dismissal confers exequatur to the award;

On article 700 of the code of civil procedure:

Whereas the DRC, which succumbs, cannot benefit from the provisions of article 700 of the code of civil procedure and will be condemned on this basis to pay to X the sum of 70,000 euros;

FOR THESE REASONS:

Notes that it is no longer seized of the appeal for annulment brought by the SOCIETE NATIONALE D’ELECTRICITE.

Declares the disputed withdrawal request inadmissible.

Dismisses the appeal for annulment of the award rendered in Paris on 30 April 2003 between the parties in the 11442 / KGA case.

Holds that dismissal confers exequatur to the award.

Dismisses the request made by the DEMOCRATIC REPUBLIC OF CONGO on the basis of article 700 of the code of civil procedure.

Orders the DEMOCRATIC REPUBLIC OF CONGO to pay the costs, which may be recovered in accordance with the provisions of article 699 of the code of civil procedure, and to pay the company FG XZ the sum of 70,000 euros in application of article 700 of the code of civil procedure.