Paris Court of Appeal, No. 11-20.732

Paris Court of Appeal, Pole 1, First Chamber, 12 April 2016, No. 11-20.732

DEMOCRATIC REPUBLIC OF THE CONGO

vs.

FG HEMISPHERE ASSOCIATES LLC

On 2 April 1980, 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 means of a credit of 15.18 million USD of a high-voltage power line for the benefit of the Zairian public company called SOCIETE NATIONALE D’ELECTRICITE (SNEL).

As the repayment deadlines were not met, ENERGOINVEST, on 2 March 2001, initiated arbitration proceedings on the basis of the arbitration clause stipulated in this agreement.

On 30 April 2003, the arbitral tribunal constituted, under the supervision of the International Chamber of Commerce, of Mr. Ronca and Mr. Tabu-Samra, arbitrators, and Mr. Roncaglia, president, rendered an award in Zurich in case No. 11441/KGA which condemned SNEL and DRC jointly and severally to pay ENERGOINVEST the sum of 11,725,844.96 USD in addition to interest and arbitration costs.

At the request of FG HEMISPHERE, a Delaware law firm, coming to the rights of ENERGOINVEST, the award was made enforceable by an order of the President of the Paris Tribunal of Grande Instance dated 5 November 2009.

On 21 November 2011, the DRC and SNEL appealed this decision.

By an order of 21 March 2014, confirmed by a court ruling of 18 November 2014, rectified by a ruling of 3 February 2015, the French Supreme Administrative Court (in French Conseil d’Etat) declared SNEL’s appeal null and void and dismissed FG HEMISPHERE of its request that the DRC’s appeal be declared null and void.

By an order of 7 May 2015, confirmed by a court ruling of 30 June 2015, the Pre-Trial Judge declared the DRC’s appeal admissible.

By an order of 12 February 2015, confirmed by a court ruling of 12 May 2015, the Pre-Trial Judge declared SNEL’s cross-appeal inadmissible.

By submissions notified on 17 February 2016, the DRC requested the court primarily to rule that it was admissible and well-founded to exercise the disputed right of withdrawal provided for in Article 1699 of the Civil Code, since such a request was not subject to any form, that such a request proceeds from a legal prerogative and can be presented as a principal claim before the court referred of the appeal against the enforcement order (in French Ordonnance d’exequatur) of a minor award that it does not fall within the object of the procedure provided for by articles 1520 and 1525 of the code of civil procedure. The DRC also requested the Court to declare that Article 1699 of the Civil Code is applicable to the present dispute as a mandatory domestic law and, subsidiarily, as a procedural law, that the claim assigned on 20 July 2001 by Energoinvest to FG HEMISPHERE had been contentious since the referral to the arbitral tribunal in March 2001 and that it has again become contentious as a result of the appeal against the enforcement order (in French Ordonnance d’exequatur). Moreover, the RDC requested the Court to declare that although it was notified of the transfer on 16 November 2004, it did not know the actual date, as well as the terms and the price, until March 2012, and that it was therefore well founded to exercise the disputed right of withdrawal by notification of 16 July 2012. The DRC requested the court to rule accordingly that the claim will be extinguished upon payment of the sum of 3,618,232.28 USD for the two cases 11/20730 and 11/20732 (award rendered in Paris on the same day between the same parties), that only 301,474.53 USD remains due, after offsetting the reciprocal debts, i.e., for the award rendered in Zurich alone, the countervalue in euros of 120,830.99 USD, and that it therefore judges the present proceedings to be extinguished.

In the alternative, the DRC requested the court to overturn the enforcement order (in French Ordonnance d’exequatur), invoking, on the one hand, breach of due process (in French Principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure) and, on the other hand, that the award was contrary to international public policy (Article 1520-5 of the Code of Civil Procedure).

In any event, the DRC requests the Court to order FG HEMISPHERE to pay DRC 70,000 euros pursuant to Article 700 of the Code of Civil Procedure.

By submissions notified on 3 February 2016, FG HEMISPHERE applied to the court:

• to find that the SNEL is no longer at the cause,

• to dismiss the DRC’s incidental claim for contentious withdrawal in that such a claim is not admissible before the Court of Appeal hearing the appeal against the order for enforcement of an arbitral award, in that it relates to the merits of the case and in that it is not sufficiently connected to the original claim, that in any case, Article 1699 of the Civil Code, which is neither a domestic mandatory law nor a procedural law, is inapplicable to the assignment of a claim between Energoinvest and itself,

• on the application for reversal of the enforcement order (in French Ordonnance d’exequatur), to declare inadmissible the ground alleging the breach of due process (in French Principe de la contradiction), as the appellant failed to invoke it before the arbitral tribunal, and in the alternative, unfounded, to reject also the ground alleging violation of international public policy, to dismiss the DRC’s appeal and to find that this rejection grants enforcement (in French Exequatur) to the award handed down on 30 April 2003 in Zurich,

• to order the DRC to pay the sum of 70,000 euros pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH :

On the disputed withdrawal claim:

Considering that the DRC was ordered to pay a certain amount to Energoinvest by an arbitral award rendered in Zurich on 30 April 2003, which was declared enforceable by an order of the delegate of the President of the Paris Tribunal of Grande Instance rendered on 5 November 2009 at the request of FG HEMISPHERE, the assignee of the claim;

Whereas the DRC, which has appealed against this order, seeks the application of Article 1699 of the Civil Code under the terms of which: “A person against whom a disputed right has been transferred may be released from it by the transferee, by reimbursing him/her the actual price of the transfer with loyal costs and fees, and with interest from the day on which the transferee paid the price of the transfer to him/her”;

Whereas the mission of the court of appeal, referred in application of articles 1520 and 1525 of the code of civil procedure, is limited to the examination of the grounds listed by these texts; whereas the request which aims, after an investigation of the merits of the case, at the release of the appellant by the payment to the assignee of the transfer price and various accessories is not included in this mission; whereas it is therefore inadmissible;

On the first ground, alleging ignorance of the principle of contradiction (Article 1520-4 of the Code of Civil Procedure):

The DRC states first of all that consultation of the procedural file kept by the International Chamber of Commerce enabled it to note that several procedural documents were never actually delivered to it, which is proven by the absence of receipts or corresponding remittance vouchers:

• Draft Terms of Reference of 29 January 2002,

• Energoinvest’s comments on the draft Terms of Reference,

• Provisional timetable of proceedings of 3 May 2002,

• Summons to the court hearing in Zurich on 12 September 2002,

• SNEL’s statement of defence of 9 September 2002,

• Summons of 7 November 2002 to the oral argument hearings of 9 and 10 December 2002.

The appellant maintains, secondly, that the procedural timetable was changed in a way that excluded it from the proceedings. Lastly, it complains that the arbitrators failed to take into account the war that was raging on its territory, making it materially impossible to defend itself.

Whereas, in the first place, the DRC was aware of the initiation of the arbitration proceedings as a result of a letter sent on 3 August 2001 by the Minister of Justice to the Court of Arbitration of the International Chamber of Commerce indicating that its Ministry was entitled to represent the Congolese State. Moreover, the Terms of Reference signed by the representative of the DRC were received on 14 June 2002 by the Secretariat of the Court of the International Chamber of Commerce (Award § 37), so that the appellant, who has doubts about the authenticity of this document which are not supported by evidence, cannot complain that it did not receive the draft Terms of Reference. Energoinvest’s comments on this draft were sent to Professor Mazyambo, legal adviser of the Ministry of Justice of the DRC on 14 February 2002 by the global express service of Swiss Post, as it appears from the dispatch note. The provisional timetable was communicated to the parties, as it results from paragraph 39 of the award and, in any event, the date and place of the procedural hearing held in Zurich on 12 September 2002 were reminded to the DRC by an e-mail sent on 14 August 2002 by Energoinvest’s counsel to Professor Mazyambo. For the rest, the DRC cannot complain that it did not receive the submissions of SNEL, a state-owned company in which it holds 100% of the capital, and to which it had, moreover, given a mandate to represent it in the attempt to settle the dispute amicably;

Whereas the DRC can no longer complain that it has not received the procedural timetable drawn up at the hearing of 12 September 2002 at which it deliberately chose not to appear;

Whereas, finally, while the DRC argues that it was in a state of war during the arbitral proceedings, it never invoked this circumstance to request the arbitrators for an adjustment of the procedural timetable. However, in September and October 2001 its representative exchanged with Energoinvest’s counsels numerous e-mails relating to 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 of 7 September 2001, of advisers to the Ministers of Justice and Economy and representatives of the SNEL. The DRC cannot invoke before the court an argument that it refused to put forward before the arbitral tribunal when it was in a position to do so;

Whereas the ground alleging breach of due process (in French Principe de la contradiction) must therefore be rejected;

On the second ground of breach of international public policy (Article 1520-5 of the Code of Civil Procedure):

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

Considering that the alleged fraud consists in the circumstance that the agreements concluded by Energoinvest and FG HEMISPHERE on 20 July 2001 provided for the immediate transfer of the economic interests of the disputed claims, the immediate payment of the price in the hands of an escrow bank and the postponement to a later date, not specified in the deed, of the formal transfer of property deed, which allowed FG HEMISPHERE to artificially postpone the transfer of property and to inform the assigned debtors only on 16 November 2004, at a date when the arbitration ended, the DRC and SNEL could no longer assert before the arbitral tribunal their disputed right of withdrawal;

Whereas fraud against the award presupposes that false documents were produced, false testimony was taken or documents relevant to the resolution of the dispute were fraudulently concealed from the arbitrators, so that the decision of arbitrators was mislead;

Whereas in the present case, the arbitration clause provided for the application of Swiss substantive law; whereas it is neither established nor even alleged that Helvetian law would contain a provision similar to Article 1699 of the French Civil Code; whereas it is therefore not demonstrated that the ignorance in which the DRC, SNEL and the arbitral tribunal were bound by the agreements concluded between Energoinvest and FG HEMISPHERE was such as to influence the solution of the dispute and to surprise the arbitrators' decision;

That the ground of fraud can only be dismissed;

Whereas it follows from the foregoing that the appeal must be dismissed; whereas this dismissal grants enforcement (in French 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 FG HEMISPHERE the sum of 70,000 euros;

FOR THESE REASONS:

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

Declares the litigious claim for withdrawal inadmissible.

Dismisses the appeal against the order of enforceability of the award rendered in Zurich on 30 April 2003 between the parties in the case 11441/KGA.

Holds that the rejection grants enforcement (in French Exequatur) to the award.

Dismisses the claim made by the DEMOCRATIC REPUBLIC OF CONGO under Article 700 of the Code of Civil Procedure.

Condemns 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 HEMISPHERE ASSOCIATES the sum of 70,000 euros pursuant to Article 700 of the Code of Civil Procedure.