Paris Court of Appeal, No. 15/24578

Paris Court of Appeal, Pole 1 – First Chamber, 23 May 2017, No. 15/24578

Previous decision: Paris Tribunal of Grande Instance, 14 December 2015, No. 15/24578

MR. MABANGA MOTO MATOKO , NAMEMCO ENERGY (PTY) LIMITED
vs.
VODACOM INTERNATIONAL LIMITED , VODACOM CONGO SA , VODACOM CONGO DRC S.P.R.L , VODACOM GROUP LIMITED

In the early 2000s, in order to establish itself in the Democratic Republic of Congo (DRC), the telephone operator Vodacom International Ltd (VODACOM), a company incorporated under Mauritian law, set up a joint venture with a local operator, Vodacom Congo SA (VDRC), under Congolese law. In 2007, VODACOM successively concluded two consultancy contracts with Namemco Energy Ltd (Namemco), a Cypriot company whose sole shareholder is a South African national, Mr. Mabanga Moto Matoko.

A dispute arose between the parties concerning the amount of fees due.

Following a judgement of the Kinshasa/Gombe Commercial Court of 24 January 2012 ordering VODACOM to pay Namemco a sum of USD 20,000,000 VODACOM, its parent company Vodacom Group Ltd (Vodacom, a company incorporated under South African law), and VDRC entered into a settlement agreement in February 2013 with Namemco and Mr. Mabanga Moto Matoko which provided for the waiver of the enforcement of the judgement in return for two successive payments of US$ 5 million, the taxes, costs and administrative charges being borne by Namemco. This agreement contained an arbitration clause under the supervision of the International Chamber of Commerce.

A new dispute arose between the parties over the payment of the proportional duty of USD 630,000 claimed by the Congolese tax authorities. As Namemco failed to pay this amount, VODACOM withheld it from the second payment of USD 5 million. The administration proceeded to collect from VDRC.

The three Vodacom companies initiated emergency arbitration proceedings on 24 October 2013. By an order dated 14 November 2013, the arbitrator granted the request for a stay of proceedings in the DRC and dismissed the application for authorisation to withhold the sum of USD 750,000 corresponding to the proportional fee plus interest and costs, considering that the plaintiffs had proceeded de facto.

On 4 November 2013, the Vodacom companies filed a request for arbitration on the merits. On 3 November 2015, the arbitral tribunal composed of Messrs. Le Boulanger and Kébé, arbitrators, and Mrs. Nappert, chairman, rendered an award in Paris which found that it had jurisdiction to rule on the dispute, stated that the settlement agreement was still in force and declared the request for an order to pay a sum of USD 747,000 in damages and the request to retain this sum deposited by VODACOM to be well founded. The arbitral tribunal also ordered Namemco and Mr. Mabanga Moto Matoko to pay the sum of USD 326,379.14 in respect of costs incurred by Vodacom companies in connection with the legal proceedings brought in the DRC in violation of the provisions of the emergency arbitration, as well as all costs and fees that would be incurred in these proceedings. In addition, the arbitrators ordered Namemco and Mr. Mabanga Moto Matoko to pay the Vodacom companies the sum of USD 683,403.90 as compensation for the damage suffered as a result of these violations. Finally, the arbitral tribunal ordered the defendants to desist from any action to enforce the judgment and from any action based on the first and second contracts, subject to a daily penalty of USD 15,000.

By declarations of 2 December (RG 15/24366) and 4 December 2015 (RG 15/24578), Namemco and Mr. Mabanga Moto Matoko filed an action for annulment against this award, which was declared enforceable by order of the President of the Paris Tribunal de Grande Instance of 14 December 2015. By submissions notified on 18 March 2017, they requested the court to set aside the award, to declare the withholding of USD 750,000 unlawful, to order its restitution, to declare unfounded all requests made on the basis of the settlement agreement and to jointly and severally order the opposing parties to pay them the sum of EUR 25,000 pursuant to Article 700 of the Code of Civil Procedure. They claim that the court has no jurisdiction (Article 1520-1 of the Code of Civil Procedure), that due process (in French Principe de la contradiction) has not been respected (Article 1520-4) and that there has been a violation of international public policy (Article 1520-5).

By submissions filed on 21 March 2017, the Vodacom companies mainly request the court to declare the grounds of appeal inadmissible and unfounded, to dismiss the action for annulment, to confirm the enforcement order (in French Ordonnance d’exequatur) and to reject the claims of the opposing parties. In the alternative, they claim partial annulment of the provisions relating to interest and the imposition of a penalty payment and partial reversal of the enforcement order (in French Ordonnance d’exequatur) on these two points. They request, in any case, the joint condemnation of the claimants to pay each of them € 150,000 of civil fine and the same sum in application of article 700 of the Code of Civil Procedure.

UPON WHICH:

On the joinder of procedures:

Considering that it is in the interest of a good administration of justice to joinder the cases registered under numbers RG 15/24366 and 15/24578;

On the first ground of annulment based on the lack of jurisdiction of the arbitral tribunal (article 1520-1 of the Code of Civil Procedure):

The claimants invoke, firstly, the non-arbitrability of public order in fiscal affairs, secondly, the nullity of the settlement agreement, in that, it claims to proceed to tax exemptions or reductions, and in that it was not homologated by the Kinshasa Court of Appeal contrary to the provisions of its article 3.2, thirdly, the fact that the protocol did not concern proportional rights.

Considering that following the judgement of the Kinshasa/Gombe Commercial Court condemning VODACOM to pay Namemco a sum of USD 20,000,000, the Vodacom companies concluded with Namemco and M. Mabanga Moto Matoko a settlement agreement which provided that VODACOM would pay in two instalments a settlement indemnity of USD 10 million, that taxes, fees and charges of an administrative nature would be borne by Namemco, that the parties would withdraw from the proceedings opposing them in the DRC and would jointly ask the Kinshasa Gombe Court of Appeal to homologate their agreement; that a dispute arose between the parties regarding the burden of the proportional duty imposed by Congolese regulations; that arbitration was initiated on this issue under the arbitration clause stipulated by the settlement agreement;

Considering, first of all, that while disputes relating to the basis of assessment, the quantum or the requirement of the tax are, by their very nature, outside the scope of arbitration, the same does not apply to disputes relating to the implementation of an agreement by which the parties share between them the burden of the taxes generated by their legal relationship; that the dispute in question is therefore arbitrable and that the arbitration clause is not null and void;

Considering, secondly, that the arbitration clause is legally independent of the main contract which contains it, directly or by reference; that its existence and effectiveness are to be assessed, in accordance with international public order, not by reference to any national law but by the application of a substantive rule derived from the principle of validity of the arbitration agreement based on the common will of the parties and on the requirement of good faith;

Considering the fact that the settlement agreement was not submitted for approval by the Kinshasa Court of Appeal, contrary to what it stipulated, has no influence on the existence and effectiveness of the arbitration agreement contained in this contract;

Considering, thirdly, that the sum at stake results from the application by the Congolese authorities of an order of 23 December 2009 fixing the rates of duties, taxes and fees to be collected at the initiative of the Ministry of Justice, which provides for the collection of duties equal to 6% of the sums allocated to the civil parties;

That such a dispute falls within the scope of the arbitration clause which stipulates that any dispute arising out of or in connection with the settlement agreement shall be submitted to arbitration. The settlement agreement provides in its article 2.1 that ‘all taxes, charges or fees imposed by the administrative authorities or by any other authority’ in connection with the settlement compensation shall be borne by Namemco;

Whereas it follows from the foregoing that the ground alleging the lack of jurisdiction of the Arbitral Tribunal must be dismissed;

On the second ground for annulment, alleging breach of due process (in French Principe du contradictoire) (Article 1520-4 of the Code of Civil Procedure):

The claimants argue that the arbitral tribunal refused to grant additional time to conclude to the second council they constituted, and that it closed the proceedings prematurely while continuing to receive documents from the opposing parties.

Whereas the arbitration on the merits was initiated by a request filed by the Vodacom companies on 6 November 2013. Since the origin of the proceedings, the defendants have contested the regularity of the proceedings and have refused to appoint an arbitrator and to sign the Terms of Reference. Following a conference held on 26 November 2014 at which they abstained from participating, the arbitral tribunal issued a procedural order setting 19 January 2015 as the deadline for filing the statement of claim and 9 March 2015 as the deadline for the defendants to submit their statement of defence. The claimants submitted their statement of claim on 19 January 2015. On 26 February 2015, the Secretariat of the ICC informed the parties and the Arbitral Tribunal that the ICC Tribunal rejected the Defendants' challenges to the regularity of the composition of the Arbitral Tribunal. As the defendants did not answer the questions of the opposing party and the arbitral tribunal about whether they intended to settle the case on the merits, the arbitral tribunal, by e-mail sent to the parties on 3 March 2015, set out the arrangements for the organisation of the hearing. On 3 April 2015 the arbitral tribunal informed the parties that the hearing would be held on 10 June 2015 in Paris. In a letter dated 18 June 2015, Mr. Z sent a complaint to the “President and General Secretary” of the ICC concerning the irregularities of the procedure. On 25 June 2015, the claimants filed a note under advisement and a statement of costs. On 10 July 2015, Mr. Z sent an e-mail dated 9 July to the ICC, the Arbitral Tribunal and counsel for the opposing party, accompanied by a direct summons before the Paris Criminal Court for VODACOM and his lawyer, which stated: “the judgment in this case cannot be served until the direct summons has been finalised in accordance with the DRC and French law”. In an e-mail dated 22 July 2015, the chairman of the arbitral tribunal, answering to a question from the claimants' lawyer concerning the closure of the proceedings, indicated that the proceedings had not yet been closed in view of the questions put to this party in a separate e-mail of the same day, questions relating to the law applicable to the claim for interest. On 27 July 2015, a new lawyer, Mr. A, acted on behalf of the defendants and, in view of the fact that the proceedings had not been closed, requested a time limit to file their submissions. On the same day the President of the Arbitral Tribunal informed him that he did not justify his power of representation. This justification was provided on the same day. By two e-mails also sent on 27 July 2015, the claimant’s lawyer commented on the legal consequences of the direct summons, as well as on the powers and an answer to the request for an explanation by the arbitral tribunal. On the same day, 27 July 2015 at 21:54, the arbitral tribunal declared the proceedings closed. The award was rendered on 3 November 2015.

Whereas it follows from this chronology that the defendants received, through their counsel, copies of all correspondence addressed by the Arbitral Tribunal to the parties; whereas they were repeatedly invited to participate in the proceedings during proceedings which lasted two years and refused to do so through their counsel, M. Z. The latter in particular expressly confirmed that the Defendant would not appear at the hearing on 10 June 2015, although he was reminded that, pursuant to Article 21.2 of the ICC Rules of Arbitration, the hearing could nevertheless be held in the absence of his clients;

Considering, on the one hand, that under the terms of Article 1464, paragraph 3, of the Code of Civil Procedure, applicable to international arbitration by reference to Article 1506-3: “The parties and the arbitrators shall act expeditiously and fairly in the conduct of the arbitration”. Namemco and M. had every opportunity to present their defence under fair conditions, the fact that they had, in extremis and without justification for their late choice, appointed new counsel to represent them did not, contrary to what they claim, have the effect of giving them the right to obtain a new time limit to file their statements;

Whereas, secondly, according to article 22.1 of the ICC Rules of Arbitration [in force between 1 January 1998 and 31 December 2011]: “The Arbitral Tribunal shall declare the proceedings closed when it considers the parties have had a sufficient opportunity to be heard. After that proceedings are closed, no further submission, arguments or evidence may be made, unless requested or authorised by the arbitral tribunal". The fact that the Vodacom Board of Companies, in accordance with the announcement made on the closing date, sent the following day a translation into English, the language of the arbitration, of two case law decisions previously communicated in French in response to the request of the arbitral tribunal on the law applicable to interests, cannot be considered as a violation of due process (in French Principe du contradictoire);

Considering that it follows from the foregoing that the second ground should be rejected;

On the third ground for annulment alleging the breach of international public policy (Article 1520-5 of the Code of Civil Procedure):

Considering, first of all, that, as stated above, an award which pronounces on the conventional apportionment of the burden of a tax between the parties does not conflict with any principle of international public policy;

Considering, in the second hand, that the alleged breach by the award of res judicata by the judgment of the Commercial Court of Kinshasa/Gombe of 24 January 2012 is not a matter of international public policy;

Considering, in the third place, that the claimants argue that:

“The famous paragraph 386 in its lit. b of the award is manifestly contrary to Congolese public policy in that it is worded as follows:

b) The traumatic consequences for the Claimants of the seizures of the Claimants' assets by the Defendants in the DRC: the Tribunal must keep in mind that an asset now worth more than USD 530,000,000 has been frozen in a jurisdiction (country) that offers little or no legal certainty to challenge an unfounded claim of USD 1,000,000' [Supplementary Statement, paragraph 200].

It should be noted that paragraph 386 lit. b of the award refers to the assets of VODACOM seized from VODACOM CONGO (RDC) SA (‘VODA RDC’) in the amount of USD 530,000,000. Whereas the financial statements of VODA RDC for the financial year 2014 filed at the one-stop shop for business creation show assets in the order of FC 526,526,643, i.e. USD 566,157,681 taken at the rate of FC 930 to USD 1.

The fact that VODACOM declared before the arbitrators that its assets seized within VODA RDC are of a higher value than that appearing in the financial statements for the financial year 2014 of VODA RDC deposited at the guichet constitutes an act of tax evasion and a concealment of the offending origin of the assets in addition to the fact that the consequent tax appears unpaid.

This conduct on the part of the defendants falls within the scope of Article 324-1-1 of the French Criminal Code relating to the offence of money laundering' (submissions of Mabanga Moto Matoko and Namemeco, § 156 to 159);

But considering that the complaint thus articulated, which relates to an element of reasoning of the award, does not characterise a manifest, effective and concrete violation of international public policy by the decision of the arbitrators;

The third ground of appeal cannot be accepted in any of its parts;

Whereas it follows from the foregoing that the action for annulment must be dismissed and the order for enforcement (in French Ordonnance d’exequatur) confirmed;

On the application based on Article 32-1 of the Code of Civil Procedure:

Whereas it has not been shown that the use of the remedies has degenerated into abuse; whereas the application based on Article 32-1 of the Code of Civil Procedure will be rejected;

On Article 700 of the Code of Civil Procedure:

Considering that the claimants, who succumb, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure and will be ordered in solidum on this basis to pay each of the defendants the sum of € 80,000;

FOR THESE REASONS

Orders to join the files registered under RG 15/24366 and 15/24578.

Dismisses the action for annulment of the award rendered in Paris between the parties on 3 November 2015. Confirms the exequatur order of 14 December 2015.

Rejects the claim for damages for abusive proceedings.

Orders in solidum the company Namemco Energy (PTY) Ltd and Mr. Mabanga Moto Matoko to pay the costs and the payment to each of the companies Vodacom International Ltd, Vodacom Group Ltd and XXX of the sum of € 80,000 pursuant to Article 700 of the Code of Civil Procedure.