Court of Cassation, No. 18-18.088 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 15 January 2020, No. 18-18.088

MINISTÈRE DE LA JUSTICE DE LA RÉPUBLIQUE D’IRAK

Vs.

SOCIÉTÉ FINCANTIERI CANTIERI NAVALI ITALIANI SPA, SOCIÉTÉ FINMECCANICA, PÔLE 1

On the sole ground:

Whereas, according to the judgment under appeal (Paris, 16 January 2018), on 2 August 1980, the Iraqi Ministry of Defense entered into several contracts with the Italian company Cantieri Navali Riuniti (now known as Fincantieri) for the delivery of warships, the supply of spare parts, the training of its personnel, as well as for engineering and technical assistance services for the construction of a shipyard ; on the same day, the Ministry concluded a separate agreement with the Italian company Oto Melara (now known as Finmeccanica) for the delivery of missiles and munitions for the ships ordered; whereas each of these agreements included an arbitration clause under the aegis of the International Chamber of Commerce; whereas, following a dispute between the parties following the embargo measures decided by the United Nations Security Council following Iraq’s invasion of Kuwait, the Iraqi Ministry of Justice implemented the arbitration clause; whereas, by a preliminary award handed down in Paris on 18 June 2006, the tribunal declared that the claims of the Ministry of Justice of Iraq were inadmissible, and then by a final award, ruled on 5 February 2007, on the award of costs;

Whereas the Iraqi Ministry of Justice complains that the judgment dismissed the action for annulment of the preliminary award and the final award, then according to the ground:

1°/ that the annulment judge is the judge of the award to admit or refuse its insertion in the French legal system and not the judge of the case for which the parties have concluded an arbitration agreement; that with regard to the violation of international public order, only the recognition or enforcement of the award is examined by the annulment judge with regard to the compatibility of its solution with this public order; that by holding that “an award which, after the Republic of Iraq has been placed in a position to discuss the scope of the sanctions adopted by the Security Council of the United Nations and of a community regulation adopted for their application, declares its claims inadmissible as falling within the scope of provisions prohibiting the acceptance of claims relating to a contract whose performance had been directly or indirectly, in whole or in part, affected by the embargo measures, is not vitiated by a denial of justice and does not involve any manifest, effective and concrete violation of international public order”, the Court of appeal ruled on grounds drawn from the arbitrators' assessment of the rights of the parties with regard to the public order provisions invoked, when it should have pronounced on the effects of the solution given to the dispute, so that in so ruling, without considering whether the recognition or enforcement of the award in France did not offend French international public order, the Court of appeal deprived its decision of a legal basis with regard to article 1520. 5° of the Code of Civil Procedure ;

2°/ that an arbitral award issued in France in international arbitration may be set aside when its recognition or enforcement is contrary to international public order; that French international public order, which enshrines the right of the judge, precludes the Iraqi State from being deprived of the right to file a claim whose cause is prior to the measures decided pursuant to Resolution No. 661 and related resolutions of the United Nations Security Council or Community Regulations No. 2340-90 of 8 August 1990 and No. 3155-90 of 29 October 1990, as long as these measures have not affected the existence or content of the claim; that by ruling as it did, without investigating, as it was required to do, whether the Iraqi State had not been deprived of the right to access a judge in order to bring a claim that concerned a failure to execute prior to the embargo measures and that had not been affected, in its existence or content, by those measures, the Court of appeal deprived its decision of legal basis in the light of article 1520. 5° of the Code of Civil Procedure;

Whereas, however, FIRST, the judgment recalls, firstly, that following the invasion of Kuwait by the Iraqi State troops, the United Nations Security Council, by resolution 661 (1990) of 6 August 1990, enjoined the Member States to take all measures to the effect of ceasing all commercial and financial relations of their nationals with Iraq and this “notwithstanding any contract concluded or any license granted before the date of this resolution” and that, by resolution 687 of 3 April 1991, article 29 provides that “all States, including Iraq, shall take the necessary measures to ensure that no claim shall be allowed by the Government of Iraq, by any natural or legal person in Iraq or by third parties acting through or on behalf of Iraq relating to any contract or transaction the performance of which has been affected by the measures decided by the Security Council in resolution 661 (1990) and its annexed resolutions"; whereas the judgement states, secondly, that this embargo was implemented within the European Economic Community by Council Regulation EEC No. 3541/92 of 7 December 1992, article 2.1 which “prohibits the granting or taking any action to grant a claim by any natural or legal person in Iraq, arising out of or in connection with a contract or transaction the performance of which has been affected directly or indirectly, in whole or in part, by the measures decided pursuant to resolution 661 (1990) of the United Nations Security Council and its related resolutions” and that article 3 of that text excludes from the scope of article 2, “claims relating to contracts or transactions, except for any financial guarantee or counter-guarantee, in respect of which the natural or legal persons referred to in article 2 demonstrate before a court of a Member State that the request was accepted by the parties prior to the measures decided upon in accordance with United Nations Security Council Resolution 661 (1990) and related resolutions, and that these measures did not affect the existence or content of the request"; whereas, finally, the arbitral tribunal held that, as a result of the reconciliation of articles 2 and 3 of the above-mentioned regulation, the only claims that could have been exempted from the prohibition were those that would have been accepted before the embargo was put in place, which did not correspond to the case in point, that it observed that, while UN Security Council Resolution 1483/2003 of 22 May 2003 had lifted the prohibitions on trade with Iraq, it was with the exception of sales of arms or related materiel that Regulation 3541/1992 did not contain an expiry clause and had not been expressly repealed, so that it remained in force, which was confirmed by recital 16 of Council Regulation (EEC) No 1210/2003, and that it inferred that exporters who had complied with the UN sanctions during the embargo should be protected by the same rules afterwards and that the claims of the Iraqi State were included in the scope of the provisions prohibiting the acceptance of claims related to a contract whose performance had been affected directly or indirectly, in whole or in part, by the embargo measures ;

Whereas, SECOND, the judgment holds that the Republic of Iraq has been placed in a position to discuss the scope of the sanctions adopted by the United Nations Security Council and the Community regulation adopted for their application;

Whereas, in the light of these statements and assessments showing that the solution given to the dispute by the arbitral tribunal was not contrary to international public order and had not consecrated any denial of justice, the Court of appeal, which carried out the research allegedly omitted, legally justified its decision;

FOR THESE REASONS:

DISMISSES the appeal;

Condemns the Legal Department of the Ministry of Justice of the Republic of Iraq to pay the costs;

In view of article 700 of the Code of Civil Procedure, rejects its request and orders it to pay the companies Fincantieri and Finmeccanica the global sum of EUR 3,000;

Thus concluded and judged by the Court of Cassation, First Civil Chamber, and pronounced by the Chairman in his public hearing of fifteen January two thousand two.