Paris Court of Appeal, No. 19/15819

Paris Court of Appeal, 5th Pole - Chamber 16, 25 February 2020, No. 19/15816

Company DOMMO ENERGIA S.A
vs.
Company ENAUTA ENERGIA S.A. , Company BARRA ENERGIA DO BRAZIL PETROLEO E GAS LTDA

I. Reminder of the facts and proceedings

1. Dommo I S.A. companies (hereinafter “Dommo”), L I do Brasil Petróleo e Gás Ltda (hereinafter “L”) and Queiroz Galvão Exploração e Produção S.A., which became H I S.A. (hereafter “H”) are three Brazilian companies involved in an offshore oil exploration and exploitation project in Brazil.

2. They were members of a Consortium governed by a joint operating agreement (“JOA”) entered into on 22 December 2000. The JOA sets out the financing obligations of the members of the Consortium, with Company H being designated as the operator.

3. A dispute arose between the members of the Consortium, with the company Dommo complaining that the company H had not fulfilled its obligations as operator and had caused, due to its management, delays in the start-up of the project, which led to additional costs and generated cash calls that the company Dommo refused to pay.

The Dommo company has decided to sell the major part of its participation in the Consortium.

4. On 11 October 2017, the companies’ L and H notified the company Dommo of its exclusion from the JOA for non-payment of calls for funds by invoking clause 8.4(D) of the JOA. This exclusion had the consequence of preventing from selling its shareholding.

5. It was under these circumstances that Dommo filed a request for arbitration against L and H before the London Court of International Arbitration (“LCIA”) to declare null and void the clause 8.4(D) of the JOA under Brazilian law, and to order L and H to cease all actions likely to affect its participation in the Consortium and to pay compensation for its loss.

6. With a view to constituting the arbitral tribunal, Dommo has appointed Mr. X of C D and L and H have appointed Mr. E Y as arbitrators.

7. On 11 and 27 November 2017, the arbitrators submitted their declarations of independence and impartiality. On 11 January 2018, the parties appointed Mr. A B as President of the arbitral tribunal. The LCIA confirmed this appointment on 16 January 2018.

8. On 21 February 2018, the arbitral tribunal so constituted made an interim award in Paris and decided to split the proceedings into several stages.

9. On 24 September 2018, the arbitral tribunal delivered in Paris an award known as the “‘Phase I Award’”, which deals with several preliminary issues under Brazilian law. On this occasion, the arbitral tribunal decided that clauses 8.4 and 8.6 of the JOA were valid under Brazilian law.

10. On the 2nd of November 2018, L informed the parties and the arbitral tribunal that a new attorney had joined the team of advisors, which led Mr. Y to provide the parties with an update of his declaration of independence on 5 November 2018.

11. On 24 December 2018, the arbitral tribunal delivered an award in Paris regarding the costs of the arbitration (additional award). On the same date, the arbitral tribunal issued another award regarding corrections to H’s address and certain tax information (Consented Addendum to the Award in Phase 1).

12. On 31 December 2018, Dommo requested Mr. Y to provide additional information after his declaration of 5 November 2018.

13. On the 2nd of January 2019, Mr. Y responded to Dommo’s requests, which concerned in particular his relationship with the law firm Blakes.

14. On 14 January 2019, the arbitral tribunal delivered an award in Paris terminating the 21 February 2018 Interim Award.

15. On 17 January 2019, Dommo filed a recusal demand before the LCIA against Mr. Y, the arbitrator appointed by the companies’ L and H.

16. On 28 January 2019, the arbitral tribunal delivered in Paris a partial award in phase 2 of the arbitration (Award in Phase 2) ordering Dommo to pay L and H respectively the sum of 16,996,914.19 reals, plus interest, in respect of unpaid calls for funds.

17. On 20 February 2019, the Professor Uff, appointed by LCIA, rejected Mr. Y’s recusal demand.

18. On 5 April 2019, Dommo filed an appeal for annulment before the Paris Court of Appeal against the arbitral award issued in Paris on 24 September 2018 (“the Phase I Award”) registered under number RG 19/07575.

19. It then filed on 5 September 2019 four appeals against the other awards, registered under numbers RG 19/15816, 19/15817, 19/15818 and 19/15819, with the arbitration continuing, as Phase III is still ongoing.

20. Closing was pronounced on 16 December 2019.

II. Claims of the Parties

21. According to the summary conclusions communicated electronically on 8 November 2019, Dommo requests the court to kindly:

• ANNUL the Interim award of 21 February 2018 and the Interim Final award of 14 January 2019 based on article 1520 K.2 of the Civil Procedure Code;
• CONDEMN the companies’ L I DO BRASIL PETROLEO E GAS LTDA and H I S.A. to pay the sum of 5,000 euros pursuant to the provisions of article 700 of the Civil Procedure Code;
• CONDEMN the companies’ L I DO BRASIL PETROLEO E GAS LTDA and H I S.A. to pay the entire costs.

22. In accordance with the conclusions transmitted electronically on 28 November 2019, L requests the court to approve articles 32-1, 700 and 1520 of the Civil Procedure Code and article 1240 of the Civil Code:

• REJECT the appeal for annulment in its entirety;
• CONDEMN the Dommo company to pay L damages of EUR 100,000 under article 32-1 of the Civil Procedure Code;
• CONDEMN the company Dommo to pay L the sum of EUR 50,000 under article 700 of the Civil Procedure Code and to pay all costs.

23. Pursuant to the conclusions transmitted electronically on 28 November 2019, the company H requests the court to approve articles 9, 1456 K.2, 1506 K.2 and 1520 K.2 of the Civil Procedure Code:

• TO STATE AND JUDGE that the appellant does not prove the existence of a reasonable doubt of such a nature as to affect the independence and impartiality of Mr. Y and, by the same token, to taint with irregularity the composition of the arbitral tribunal that delivered the contested awards;

Consequently,

• TO STATE AND JUDGE MISFULLY IN ALL IT INCLUDES the appeal for annulment of the company Dommo and to disallow the latter of all its purposes, claims and conclusions;

• CONDEMN the company Dommo to pay the sum of 250,000 euros to the company H pursuant to article 700 of the Civil Procedure Code, as well as to the entire costs of the proceedings, including distraction to the benefit of SELARL LEXAVOUE PARIS-VERSAILLES, lawyer, in accordance with the provisions of article 699 of the same code.

III. Pleas of the parties

24. Dommo claims in substance that, having undertaken extensive research into Mr. Y’s links with the defendants, it discovered by chance that Mr. Y, before carrying on his business independently, had close links with the law firm Blakes, whose regular clients include the controlling shareholders of L and their subsidiaries. Dommo contends that Mr. Y failed to disclose these ties and that these business relationships between Blakes and the shareholders of L are such as to cast doubt on Mr. Y’s independence and impartiality, the doubt being sufficiently reasonable in light of his impartiality and independence to annul the awards.

25. Dommo recalls that the meanings of independence and impartiality are to be assessed objectively so that it is the appearance of non-independence resulting from undisclosed circumstances and the doubt that the latter are likely to raise in the mind of a party that makes it possible to characterize a breach of the obligation of independence, that the relations of an arbitrator’s firm with one of the party or affiliated companies are, in the view of a reasonable observer, such as to cast doubt on the independence and impartiality of the arbitrator.

26. Dommo adds that the impartiality and independence of the arbitrator must be assessed not only at the time of the appointment of the arbitrator but also by taking into consideration the past situation and that the relations between Mr. Y and the Blakes law firm that existed between 2012 and 2015 ceased only two and a half years before the commencement of the arbitration, which is close enough to be taken into consideration as a risk to Mr. Y’s independence.

27. Dommo contests that it can be held against it for not having requested the disqualification of Mr. Y as soon as he was appointed. It points out that the duty of curiosity imposed on the parties at the beginning of the arbitration only requires the performance of reasonable diligences, the parties not being required to carry out in-depth research. In this respect, she argued that the relations between Mr. Y and Blakes was not a well-known and that the curriculum vitae that Mr. Y provided to the parties at the commencement of the arbitration proceedings did not establish a connection between Mr. Y and Blakes. It adds that information relating to the relations between Mr. Y, Blakes and the controlling shareholders of L was not readily available, as these links did not appear either directly or indirectly on Mr. Y’s CV. She refutes the presumption of notoriety drawn from the sole publication on the Internet, this publication is not necessarily easily accessible simply because it is on the internet.

28. Dommo contests any belated nature of her recusal demand, the elements having come to her knowledge only after the second declaration of independence and after extensive research, the situation not being well known. She seeks the annulment of the two awards.

29. In response, L. argues that the arbitrators' obligation to disclose must be assessed in light of the notoriety of the situation under criticism, its link with the dispute and its impact on the arbitrator’s judgment.

30. It recalls that the arbitrator must only inform the parties of any relationship that is not of a notorious nature and that, as such, the parties have an obligation of curiosity before the beginning of the proceedings when they can effortlessly access knowledge of the facts complained of, which Dommo has not done.

31. It states that the failure to disclose is not in itself sufficient to constitute a doubt as to a lack of independence or impartiality and that it must still be shown how the concealed elements affect the arbitrator’s independence, that the circumstances so concealed must be such as to create a “‘reasonable doubt’' in the minds of the parties as to the arbitrator’s independence.

32. In this respect, L Co. states that Mr. Y’s alleged links with Blakes, apart from being notorious because they were public and easily accessible on the Internet at the time of the appointment of the arbitrator, were also old and of short duration and no longer existed at the time of the acceptance of the arbitrator’s mission, that it was an insignificant fact, that it was not of such a nature as to affect the arbitrator’s judgment, nor to create a reasonable doubt in the minds of the parties as to his independence.

33. It indicates that the information according to which Blakes included among its own clients the shareholders of L was also available on the Internet, that in any event, Mr. Y declared several times and firmly that he had never had any link whatsoever with either First Reserve Corporation or O P, the said shareholders, that finally, the alleged links were very indirect and not established.

34. Finally, Company L claims that the demand for recusal was made out of time, and asks for the rejection of the annulment as well as for damages for abusive proceedings.

35. Company H states that it was the responsibility of the Dommo company to take minimal steps to get informed of the independence of the arbitrator, that it had easy access to information on the Blakes law firm and its links with Mr Y, and that the Dommo company failed in its duty to “‘react’”.

36. Company H also argues that the arbitrator’s duty of disclosure relates to circumstances prior to his appointment, and that this duty of disclosure fades or disappears if, on the day of the appointment of the arbitrator, the arbitrator is not aware of any such circumstances, the links are too old, believing that two or three years are sufficient for any links directly involving the arbitrator, if they no longer exist at the date of appointment, to no longer affect the arbitrator’s judgment.

37. Finally, she argues that there is no “‘direct’” conflict of interest between Mr. Y and the parties to the arbitration or any entity within their respective groups, nor is there any “‘indirect’” conflict of interest of the arbitrator with any entity that is a party to the arbitration, as Mr. Y has not been associated with J K-U for nearly two and a half years and has not maintained any connection with Blakes, thereby absolving him from any duty of disclosure with respect to that past.

38. It further indicates that the Dommo firm does not provide proof of the links it alleges, for which the burden of proof rests on it.

The Court refers, for a fuller statement of the facts and claims of the parties, to the decision referred and to the aforementioned writings, pursuant to the provisions of article 455 of the Civil Procedure Code.

IV. Reasons for the decision

On the admissibility of the challenge,

39. The inadmissibility of the request for annulment on the ground that the challenge to the arbitrator’s independence and impartiality would be belated was not formulated in the claims of the parties set out in the operative part of their conclusions, but appears only in the pleas developed by L to challenge the request for annulment on the merits, on the grounds that Dommo had waived, because of the belated nature of its challenge, the right to rely on any circumstance relating to its alleged links with Blakes and that this appeal would be abusive and dilatory, seeking only the rejection of the application for annulment and damages for abusive procedure.

40. In application of article 954 K 3 of the Civil Procedure Code, the court is therefore not seized of a request for inadmissibility of the appeal for annulment.

On the sole ground for annulment based on the irregularity of the composition of the arbitral tribunal (article 1520-2) of the Civil Procedure Code),

On the arbitrator’s duty of disclosure:

41. According to article 1456-2 of the Civil Procedure Code, applicable to international arbitration under article 1506 of the same code: ‘It is up to the arbitrator, before accepting his mission, to disclose any circumstances likely to affect his independence or impartiality. It is also up to him to disclose without delay any circumstance of the same nature which may arise after acceptance of his mission’.

42. It follows that the arbitrator’s obligation to disclose arises both before the acceptance of the mission and afterwards, depending on whether the circumstances in question pre-exist or arise after the acceptance of the mission. These circumstances may be varied and may relate to possible conflicts of interest, relationships of interest or a course of business that the arbitrator may have had with the parties or third parties who may have an interest in the dispute.

43. The arbitrator’s duty of disclosure must be assessed in the light of the notoriety of the situation complained of, its connection with the dispute and its impact on the arbitrator’s judgment.

44. In the present case, it results from the documents filed in the proceedings, and in particular from the declaration of independence of E Y of 27 November 2017, to which was attached his curriculum vitae taken from the Who’s Who website, that he did not declare having worked between 2012 and 2015 as a lawyer in a Saudi law firm called Dr. J K-U., affiliated of the law firm Blakes, two of whose clients are US investment funds, themselves majority shareholders of the L company, the parties opposing on the notorious nature of this information and on the reasonable doubt that this information may generate on the qualities of impartiality and independence of the arbitrator.

On the notoriety of the undisclosed information:

45. It should be recalled in this respect that only easily accessible public information, which the parties could not fail to consult before the commencement of the arbitration, is likely to characterize the notoriety of a situation likely to temper the content of the obligation of disclosure incumbent on the arbitrator.

46. In the present case, it results from the facts and the documents filed in the proceedings that E Y’s declaration of independence and his CV made no mention of his background as a lawyer in any law firm, only the mention of “‘general counsel, country manager, financial director, commercial manager and economist’” appearing in the Who’s Who file, without precision, and that it was only after the appointment of a new counsel for L that Dommo was informed of on the 2nd of November 2018, of exchanges of new declarations of independence (5 November 2018) and questions on the possible links that the arbitrators might have had with this new firm, that Dommo undertook research that led it to question Mr. Y on 31 December 2018 on his links with this new board (Mr. Z) and on his links with Blakes, whose clients discovered were First Reserve Corporation and O P Q, majority shareholders of L.

47. Mr. Y then answered this question in an e-mail on the 2nd of January 2019, stating that he had been “‘senior international counsel’” between April 2012 and July 2015 at the law firm Dr. J K-U in Saudi Arabia, a firm having an alliance with the law firm Blakes. In the same email, E Y indicated that he was not familiar with First Reserve Corporation and was not aware of any work that Blakes may or may not have done for First Reserve Corporation.

48. In this respect, with regard to Mr. Y’s employment as an attorney in the law firm Dr. J K-U affiliated with Blakes, it has not been established that Dommo could have had knowledge of these elements other than through the statements thus provided by the interested party, nor that this information was easily accessible to a normally diligent party.

49. Indeed, although L maintains that this information could have been known by simply consulting Mr. Y’s website, it should be noted that this website does not in any way mention in a clear, obvious and transparent manner any collaboration of the interested party with a law firm and that it is only by carrying out research on each of the eleven conferences listed on the “Disputes - Related Experience” page of the website and by consulting the details of these conferences that it is possible to find the information according to which Mr. Y was presented as “Senior International Counsel” of Blakes.

50. Similarly, it is apparent from the evidence in this case that it was only after an advanced consultation of the publications of the interested party accessible on the “Knowledge ' Publications” page of the site that it was possible to discover that two of them mentioned the law firm Blakes.

51. It follows from these elements that access to this information on the Internet is possible only after a thorough review and careful consultation of the arbitrator’s website, which requires him to open all the links relating to the conferences in which he participated and to consult, one after the other, the content of the publications to which he contributed.

52. Thus, access to information requires several successive operations that are similar to investigative measures that cannot characterize easily accessible information in such a way that the information cannot be considered as notorious and that the arbitrator should therefore have revealed it in his or her first statement.

On the relationship of the situation criticized to the dispute and its impact on the arbitrator’s independence and impartiality:

53. It should be recalled that the arbitrator’s failure to disclose information is not sufficient to constitute a lack of independence or impartiality. These elements must be such as to give rise to reasonable doubt in the minds of the parties as to the arbitrator’s impartiality and independence, the assessment having to be made on objective grounds and taking into consideration the specific features of the case.

54. In the present case, Dommo justifies that Blakes represented L’s controlling shareholders, First Reserve Corporation and OPQ, between 2008 and 2014, which Mr. Y denied knowing, having declared on the 2nd of January 2019, in response to Dommo’s request before the London Court of International Arbitration (LCIA), that he had never heard of First Reserve Corporation when he was working for the Saudi law firm Dr. Khan. J K-U affiliated with Blakes, nor had he ever heard of the work Blakes was doing for that firm at that time. It further appears from his statement of 28 January 2019, that Mr. Y also indicates that he had not heard of O Holding Q.

55. While such an answer may be surprising, given that these companies are among the known investment funds in the energy sector, that the website of Company L mentions them as its controlling shareholders and that Mr. Y has presented himself as a specialist in the energy sector for thirty-five years, these circumstances do not demonstrate that, even supposing that he was aware of this shareholding in Company L, he had a direct or indirect link, material or intellectual, with the said shareholders or their subsidiaries, whether through the law firm Dr. Y, or through the law firm Dr. L., he would not have been aware of the existence of such a link. J K-U, or Blakes, or that a business relationship existed between the arbitrator and these shareholders.

56. However, in order for the failure to disclose his activity as an attorney in the law firm of Dr. J K-U to allow raising reasonable doubt as to his impartiality or independence, such activity would have to have generated such a relationship with the shareholders of L and created a business relationship between the arbitrator and First Reserve Corporation or O P Q, which is not established, or he had or still has an interest with Blakes that could create a conflict of interest, as argued by Dommo, which is also not established.

57. It does not appear from any documents that Mr. Y has at any time advised, represented or assisted the shareholders of the company L.

58. The fact that Mr. Y worked as “‘Senior International counsel with Blakes in Saudi Arabia’”, or the fact that he used Blakes' e-mail address, are also not elements that make it possible to establish the existence of any link between Mr. Y and the shareholders of the company L, nor are they of such a nature as to create a reasonable doubt as to Mr. Y’s independence and impartiality, especially since the links between Mr. Y and the Blakes law firm were indirect, through the intermediary of the law firm Dr. J K-U and had ceased two and a half years before the commencement of the arbitration, which may not be a sufficient period of time in the event of failure to disclose direct links or information likely to affect the arbitrator’s impartiality, but which in this case is irrelevant since there is no evidence that there could have been any connection between Mr. Y and L’s shareholder companies at the time Mr. Y worked for the law firm Dr. J K-U or afterwards.

59. The ground for annulment must be dismissed and the appeal for annulment rejected.

On the claim for damages for abusive appeal made by L,

60. The company L claims that the present action would constitute an abusive and dilatory maneuver on the part of the company Dommo and on this basis claims 100,000 euros in damages. It claims that Dommo has done everything possible to oppose the execution of the partial award Phase 1, by attempting to resist the transfer of its interest in the project to L and QGEP and that Dommo continues to refuse to execute the partial award No. 2 which ordered it to pay the Cash Calls.

61. In response, the Dommo company claims that the actions for annulment, which do not have suspensive effect, have not had any impact on the way the project is being carried out and that the rights of the L company in the arbitration have not been affected. She adds that she has agreed to a very accelerated procedural timetable because she wants her claim to be decided quickly and efficiently in the interest of all parties. She further contests that the remedies would be aimed at obtaining a review of the Phase 1 award on the merits.

62. She argues that there is no evidence that, by using the remedies available under the act, she has abused her right to sue, so that the company L must be dismissed of her claim for damages for abusive proceedings.

On costs and expenses,

63. Dommo, which cannot claim the benefit of the provisions of article 700 of the Civil Procedure Code, must be condemned on this same basis to pay each of the defendants the sum of 15,000 € for these proceedings, the other proceedings being dealt with autonomously and giving rise to a separate decision in this respect.

FOR THESE REASONS, THE COURT:

1- Notes that no request for inadmissibility of the appeal has been submitted,

2- Dismisses Dommo’s appeal for annulment of the awards of 21 February 2018 and 14 January 2019,

3- Dismisses Company L’s claim for damages for abusive appeal,

4- Condemn the company Dommo and H to pay the sum of EUR 15,000 each, pursuant to article 700 of the Civil Procedure Code, and condemns Dommo to pay all costs, including distraction in accordance with the provisions of article 699 of the same Code.