Paris Court of Appeal, No. 19/07260

Paris Court of Appeal, Pôle 5 - Chamber 16, 7 January 2020, No. 19/07260

Divine Inspiration Group (PTY) Ltd (“DIGOil”)

Vs.

Democratic Republic of Congo (“the DRC”)

I- FACTS

  1. On 14 December 2007 the Democratic Republic of Congo (hereinafter referred to as “the DRC”) and the association formed between the company Divine Inspiration Group (PTY) Ltd (hereinafter referred to as “the company DIGOil”) and the Congolaise des Hydrocarbures (Cohydro), have entered into a production sharing contract (PSC) for hydrocarbon resources covering blocks 8, 23 and 24 of the Cuvette Centrale.

  2. On 21 January 2008, the DRC and the association formed by the consortium of DIGOil, Petro SA, H-Oil Congo Limited, Congolaise des Hydrocarbures, Congo Petroleum and Gas Sprl and Sud Oil Sprl signed another production sharing contract (PSC) for hydrocarbon resources in Block 1 of the Albertine Graben.

  3. Having noted that these two production sharing contracts had not been approved by the President of the DRC and, considering that the DRC had failed to fulfil its commitments by deciding to award the operation of one of the construction sites (Block 1 of the Albertine Graben) to another consortium (the Caprikat Ltd and Foxwhelp Ltd association), DIGOil initiated arbitration proceedings.

II- PROCEEDINGS

  1. By an arbitral award issued in Paris on 7 November 2018 under the aegis of the International Court of Arbitration of the International Chamber of Commerce, the Arbitral Tribunal, composed of Ms Z A-Thieffry (President), Mr E F G and Ms H I J, has, in particular:

  • ruled that the DRC had committed a fault by not delivering to the company DIGOil, the Presidential Order approving (i) the production sharing contract concluded between the DRC, on the one hand, and DIGOil, on the other hand, the association of the company DIGOil and the Congolaise des Hydrocarbures, and (ii) the production sharing contract concluded between the DRC on the one hand, and on the other hand, the association Consortium of the company DIGOil, Petro SA, H-Oil Congo Limited, the Congolaise des Hydrocarbures, […];

  • ruled that the DRC had committed a fault by claiming to unilaterally terminate the production sharing contract concluded between the DRC, on the one hand, and, on the other hand, the association Consortium DIGOil, Petro SA, H-Oil Congo Limited, la Congolaise des Hydrocarbures, […], […] of 21 January 2008;

  • pronounced the resolution of the two above-mentioned production sharing contracts to the exclusive detriment of the DRC;

  • declared that the DRC must fully compensate DIGOil for all damages it has suffered due to the non-performance and termination of the above-mentioned contract of 14 December 2007 and the contract of 21 January 2008;

  • Ordered the DRC to pay to DIGOil the sum of USD 617,400,178 plus interest calculated at the 20-year US Treasury bond yield plus 2% from the date of the final award until full payment;

  • declared that the DRC shall bear the totality of the costs of the Arbitration set by the Court in the amount of EUR 691,437, and the costs incurred by the company DIGOil for its defence in the amount of USD 1,109,933.62;

  • declared that the DRC shall pay DIGOil the sums of USD 760,000 and USD 1,109,933.62 plus interest calculated at the 20-year US Treasury bond yield plus 2% from the date of the final award until full payment;

  • Rejected all other requests of the parties.

  1. The DRC filed an action for annulment against this award by declaration of 2 April 2019.

III- CLAIMS OF THE PARTIES

  1. At the end of its latest summary brief notified electronically on 10 October 2019, the DRC requests the court, under article 150 par. 3 of the former Congolese constitution of the transition period of 2003 and articles 1518, 1519, 1520-3° et 1520-5° of the Code of Civil Procedure, to:

  • Receive the appellant in her writings and uphold it;

  • Say that the arbitral tribunal ruled without complying with its mission;

  • Say that recognition or enforcement of the award would be contrary to international public order;

  • Announce the annulment of the arbitral award rendered on 7 November 2018 by the arbitral tribunal acting under the aegis of the International Court of Arbitration;

  • Therefore, bring up the case again and give it a final solution;

  • Order the company Divine Inspiration Group (PTY) Ltd to pay to the Democratic Republic of Congo the sum of EUR 30,000 as irrecoverable costs (Article 700 CPP) and to pay all costs.

  1. At the end of its latest summary brief notified by electronic means on 8 November 2019, Divine Inspiration Group (Pty) Ltd asks the court, under articles 32-1, 696, 700, 1504, 1520-3°, 1520-5° and 1527 of the Code of Civil Procedure, to:
  • Dismiss the DRC’s demands, purposes and conclusions in full;

Consequently,

  • Declare that the exequatur is conferred on the ICC award rendered on 7 November 2018 in case CCI 22370/DDA and affix it to its certified copy in accordance with Article 1527 of the Code of Civil Procedure;

  • Condemn the DRC to pay EUR 30,000 euros (thirty thousand euros) to the company Divine Inspiration Group (PTY) Ltd for abusive recourse against the ICC award rendered on 7 November 2018 in affaire ICC 22370/DDA, in application of Article 32-1 of the Code of Civil Procedure ;

  • Condemn the DRC to pay EUR 70,000 euros (seventy thousand euros) to Divine Inspiration Group (PTY) Ltd on the basis of Article 700 of the Code of Civil Procedure;

  • Condemn the DRC to pay the entire costs, in application of Article 696 of the Code of Civil Procedure.

IV- MEANS OF THE PARTIES

  1. In support of its appeal, the DRC considers that the arbitral tribunal ruled without conforming to the mission intrusted to it and that the recognition or enforcement of the award would be contrary to international public order.

  2. It explains that the arbitral tribunal ruled without complying with the mission that had been entrusted to it since Congolese law was applicable, the arbitral tribunal refused to take into account a decision of the former Supreme Court of Justice (now the Council of State) on the discretionary powers of the President of the Republic so that it went beyond the scope of its mission. It states that the court could not find a fault on the part of the DRC for failure to issue the Presidential Order, whereas the Supreme Court of Justice ruling, on the contrary, stated that such approval was within the sovereign discretionary power of the President of the Republic.

  3. It states that according to Article 150 paragraph 3 of the Congolese Constitution, the courts and tribunals are required to comply with the precedent of the Supreme Court of Justice and that the court pretended to interpret this precedent, in order to better set it aside, its objective having been to interpret Law No. 81/015 of 2 April 1981 on mines and hydrocarbons in its own way, without taking into account the aforementioned decision of the Supreme Court.

  4. The DRC considers that there was no reason for the arbitral tribunal not to adopt the same reasoning as that of the Supreme Court of Justice, because even if the facts submitted to it were not exactly the same as those before the Congolese court, it nevertheless raised the same questions of law regarding the presidential order.

  5. The DRC adds that international public order is made up of principles of universal justice considered in public opinion to have absolute international value and that the application by a lower court of precise and clear precedent is a fundamental and universally recognised general principle. It states that by having decided not to comply with the precedent of the Supreme Court of Justice of the DRC, when it was obliged to apply Congolese law in the examination of the case submitted to it, the court contradicted the principles and values of universal justice in such a way that the recognition or enforcement of the award would be contrary to international public order.

  6. In response, DIGOil claims that the DRC is attempting, under the guise of the alleged violation of its mission by the Tribunal, to obtain a review of the merits of the Award. It states that by claiming that the Tribunal had not “complied” with the 2010 judgment, or that it had “refused” to apply it, the DRC is merely challenging the Tribunal’s interpretation and application of the provisions of the contracts, Congolese law and applicable customs, whereas the Tribunal had, on the contrary, as its mission required, applied the contracts, Congolese law and customs concerned.

  7. It states in this regard that the arbitral tribunal, after having recalled and examined the respective claims of the parties as well as the documents submitted by them on this point, and taking into account administrative practice in the DRC, as well as Congolese law, concluded that the DRC had a contractual obligation to make every effort to enable the issuance of the order under the conditions provided for by Congolese law, and that this obligation should be executed within a period of up to two years and four months.

  8. DIGOil adds that as regards to the ground based on Article 1520-5° of the Code of Civil Procedure, the DRC does not invoke in its support any rule of French international public order, nor does it maintain or demonstrate that the recognition and/or enforcement of the Award itself would be manifestly, effectively and concretely contrary to French international public order.

  9. It argues that the arguments raised by the DRC amount to asserting that the provision in question in the Congolese Constitution and the interpretation by the Supreme Court formulated in the 2010 judgment, and resulting from different facts and questions, would prohibit any interpretation of Congolese law other than that of the DRC, and that this interpretation would be imposed on the Tribunal, in the name of an international public order unknown in French international arbitration law.

  10. DIGOil also claims that the Award was issued in the context of international arbitration and is therefore not subject to appeal or evocation, so that the DRC’s request that the Court refer to this case in the event that the Award is annulled is therefore inadmissible.

  11. It considers at last that this appeal is abusive as it is not based on an incorrect assessment by the DRC of its rights and that it is in practice intended to delay the execution of the Award and is only intended to justify a request for a delay of recognition and execution of the Award outside France, because it renders illusory and costly for DIGOil any procedure for enforcement of the Award outside the seat of arbitration as long as the Paris Court of Appeal has not ruled on this recourse, particularly in the signatory countries of the 1958 New York Convention other than France, since this convention provides in its article V.1(e), that the judge hearing a request for enforcement or recognition of such an award made abroad may refuse to grant it if the award has been annulled instead of being pronounced.

V- REASONS FOR THE DECISION

On the ground alleging violation by the arbitral tribunal of its mission (Article 1520-3 of the Code of civil procedure);

  1. Pursuant to Article 1520-3 of the Code of Civil Procedure, the action for annulment is open if the arbitral tribunal has ruled without complying with the mission that had been entrusted to it.

  2. In the present case, it is not disputed that at the end of the disputed contracts (Article 27), the interpretation and performance of these contracts are subject to the law of the Democratic Republic of Congo and that the arbitration agreements (Article 30) of each of these contracts refer to the Rules of Arbitration of the International Chamber of Commerce in Paris, Article 21 of which stipulates that “1- The parties are free to choose the rules of law to be applied by the Arbitral Tribunal to the substance of the dispute (' ) 2 - The Arbitral Tribunal shall take into account the provisions of the contract between the parties, where applicable, and all relevant trade usages (' )”.

  3. It is apparent from the award issued on 7 November 2018 that the arbitral tribunal based its decision on the law of the Democratic Republic of Congo, as is clear from paragraph 113 of the award, which reads as follows “that it results from the cumulative application of the provisions of Article 189 of the law of 2015 [law n°15/012 on the general regime of hydrocarbons of 1st August 2015] and of the stipulations of Article 28 of the disputed contracts, that the Congolese law applicable to them is the law of 1981 [Ordinance-Law No. 081-013 of 2 April 1981 on general legislation on hydrocarbons] and it is in the light of the provisions of the law of 1981 that it is necessary to examine the respective claims of the parties, first of all their claims relating to the consequences of the non-issuance of the Presidential Order approving the disputed contracts”

  4. Similarly, in order to assess the consequences of the non-issuance of the Presidential Order, it should be noted that the arbitral tribunal referred to Article 79(5) of the Congolese Law of 2 April 1981 cited above, according to which the “oil agreements, although duly signed by the parties, have effect only after having been approved by an ordinance of the President of the Republic” (paragraph 114) to find that the non-issuance of the Presidential order “has the effect of suspending certain effects of the disputed contracts, the parties remaining bound by the obligations they contain”(paragraph 121).

  5. Having further noted that under the terms of “Article 29 of the disputed contracts, the state is required to take all necessary measures to facilitate oil activities, in particular obtaining the necessary approvals, including the order of the President of the Republic”(paragraph 125), it ruled that “the issue of the Presidential Order approving the disputed contracts does indeed constitute, under Article 29 of the disputed contracts, a commitment by the State, guaranteeing the application of its own legislation, from which it can be released only if the conditions laid down by that legislation for its issue are not met, which it is now necessary to determine” (paragraph 126).

  6. The DRC invoked in support of its defence a judgement RA.1006 of 10 December 2010 of the Supreme Court of Justice, administrative division sitting in first and last instance in matters of annulment, at the end of which the Court was called upon to rule on an action for annulment brought by a Dutch oil company against a joint-ministerial order of the Minister of Hydrocarbons dated 17 October 2017 having reopened the exploitation of Block 1 of the Albertine Graben in disregard, according to the oil company, of the production sharing contract it had entered into. To dismiss the action for annulment, the Supreme Court of Justice, in its reasons, “notes that the production sharing contract was concluded under a suspensive condition, not yet fulfilled, in this case the approval of the President of the Republic. It also notes that, under Congolese law, the latter does not have a bound competence in this matter that would absolutely oblige him to give its approval; that, on the other hand, it is a discretionary power implying its sovereign appreciation in consideration of the elements of the case as well as the interests of the Congolese State, and for the exercise of which it is not bound by a time limit. The court therefore considers that in the absence of the Presidential order of approval provided for by the legal and contractual provisions that have been recalled, since the contract in question has not yet begun to produce its effects, the plaintiff’s action is manifestly premature and therefore inadmissible.”

  7. In this regard, it should be noted that the arbitral tribunal, after recalling the divergent analyses of the parties as to the powers of the President of the Republic to issue an approval order (mere formality to be collected, or discretionary power), expressly relies on this precedent of the Supreme Court of Justice by stating that it “emphasises that the power of the President of the Republic is discretionary” and that this “power implies without sovereign appreciation of the elements of the case as well as the interests of the Congolese state” but considers that the “interests of the State are those deriving from the rights of the State over the subsoil of which the President of the Republic is the guarantor under the terms of the Constitution and the law of 1981” and that “it is therefore up to the President of the Republic to make a sovereign assessment of the extent to which an oil convention is likely to undermine national independence, the territorial integrity, national sovereignty and international treaties and agreements and, where appropriate, to refuse to issue the approval order if he is not satisfied that this is the case”(paragraph 132).

  8. The Arbitral Tribunal notes that not only was the order not issued, but also that “no decision rejecting it by the President of the Republic, including any reasoning whatsoever, was produced during the proceedings, nor even its alleged existence” and it notes in paragraph 150 of the award that “the situation of the 2008 contract under consideration here differs from the elements of the case before the Supreme Court in the proceedings which gave rise to its judgment of 10 December 2010” in the sense that “in the light of the elements of the case as assessed by the President of the Republic, the continuation of this contract could prove contrary to the interests of the state” (paragraph 151) whereas with regard to the 2008 contract “no public interest motives were alleged”, so that according to the arbitral tribunal: “nothing among the elements appearing in the debate therefore makes it possible to consider that the conditions for the issuance of the Presidential Order under the law of the DRC would not have been fulfilled by the 2008 contract” (paragraph 152).

  9. Thus, the arbitral tribunal considered that “the fact, as the Supreme Court of Justice of the DRC decided in its judgment, that the RP has a discretionary power does not mean that this power can be exercised arbitrarily” (paragraph 153); That “the non-issuance of the Presidential Order approving the 2008 contract has the effect of suspending its execution pursuant to Article 79(5) of the law of 1981, but does not have the effect of releasing the parties from the obligations arising therefrom” (paragraph 154) and that “in the absence of any allegation by the defendant of a reason in the public interest justifying a refusal to issue the Presidential Order, the plaintiff pertinently maintains that the defendant’s unilateral decision to allocate the rights it held under the 2008 contract to a third party constitutes a ‘blatantly unlawful act’ which contravenes the provisions of Article 33 of the Decree of 30 July 1888(…)” (paragraph 159), which states that “legally formed agreements take the place of law for those who have made them. They can only be revoked by their mutual consent for the causes which the law authorises”.

  10. The arbitral tribunal thus decides in paragraph 167 of the award that “the defendant committed a fault (i) by failing to issue the Presidential Order approving the disputed contracts and (ii) by reallocating Block 1 of the Albertine Graben to a third party in breach of the provisions of the 2008 contract, thereby dispossessing the plaintiff of its exclusive rights under the 2008 contract without counterpart”.

  11. With regard to the contract of 14 December 2007, the arbitral tribunal “finds” in paragraph 171 of its award that “the action underlying the appeal to the Supreme Court was an action for annulment of an administrative act (the annulment order of the Tullow Contract) based on an excess of power on the part of the author of that act. As it stands, he cannot draw any instruction from this in the context of the situation before him since, as already noted above, contrary to the case before the Supreme Court, the 2007 contract has not been annulled and, notwithstanding the non-issuance of the Presidential Order, the parties remain bound by the appropriate obligations” to conclude at paragraph 174 that “the defendant was at fault in failing to issue the Presidential Order approving the 2007 contract within a reasonable time”.

  12. It is clear from these reasons that not only did the arbitral tribunal give reasons for its award in the light of Congolese law, but that it also expressly assessed the impact of the judgment of 10 December 2010 of the Supreme Court of Justice alleged by the DRC in support of its defence, it being observed that it is not for this Court to assess the application of the said law, unless it embarks on a process of revision of the merits of the award, which is not within the scope of its office.

  13. Furthermore, if the arbitral tribunal is bound to apply the law of the DRC, it does not deviate from its mission by interpreting it.

  14. In the light of the foregoing, the ground for annulment shall be dismissed.

On the ground alleging violation by the arbitral tribunal of international public order (Article 1520-5);

  1. Pursuant to Article 1520-5 of the Code of Civil Procedure, an action for annulment is available if the recognition or enforcement of the award is contrary to international public order, which is understood to be the conception of the French legal system, i.e. the values and principles of which the French legal system cannot disregard, even in an international context.

  2. In the present case, by interpreting in the light of the law of the DRC, including a decision of the Supreme Court of Justice of that State, the consequences of the failure of the President of the Republic of that State to issue an order approving the disputed production-sharing contracts, even if he had departed from the interpretation given by a decision of that Supreme Court rendered in circumstances which were, moreover, distinct, the arbitral tribunal did not disregard any of the aforementioned values and principles.

  3. This ground will therefore be dismissed, and together with the action to have the award annulled.

  4. Pursuant to Article 1527 of the Code of Civil Procedure, the dismissal of the action for annulment confers exequatur on the arbitral award.

On the request made under the abusive procedure;

  1. The exercise of a legal action constitutes in principle a right and only degenerates into an abuse which may give rise to damages in the event of fault likely to engage the civil liability of its author.

  2. In the present case, DIGOil’s demand will be dismissed on this ground in the absence of proof of fault or blameworthy negligence on the part of the DRC, which may have misunderstood the extent of its rights, and in the absence of proof of the existence of a prejudice other than that suffered as a result of the costs incurred for its defence.

On costs and expenses;

  1. The DRC, the losing party, should be condemned to pay the costs to be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure.

  2. In addition, the DRC must be condemned to pay the company DIGOil, which had to incur irrecoverable costs in order to assert its rights, compensation under Article 700 of the Code of Civil Procedure that it is equitable to fix it at the sum of EUR 30,000.

VI- RULING

For these reasons, the court:

1- Rejects the appeal for annulment of the award rendered on 7 November 2018 by the International Court of Arbitration of the International Chamber of Commerce (affaire n°22370/DDA);

2- Confers the exequatur of this arbitral award;

3- Rejects the request made under the abusive procedure;

4- Condemns the Democratic Republic of Congo to pay the company Divine Inspiration Group (PTY) Ltd the sum of EUR 30,000 under Article 700 of the Code of Civil Procedure;

5- Condemns the Democratic Republic of Congo to pay the costs to be recovered in accordance with the provisions of Article 699 of the Code of Procedure.