Data

Date:: 29-07-2008
Country:: International Centre for Settlement of Investment Disputes (ICSID)
Number:: ARB/05/21
Court:: International Centre for Settlement of Investment Disputes (ICSID)
Parties:: African Holding Company of America INC. et Société Africaine de Construction au Congo S.A.R.L. v. Congo

Keywords

STATE CONTRACTS - LONG-TERM CONTRACTS - CONSTRUCTION CONTRACT - BETWEEN A CONGOLESE COMPANY CONTROLLED BY A UNITED STATES COMPANY AND THE CONGOLESE GOVERNMENT - REFERENCE TO UNIDROIT PRINCIPLES TO INTERPRET NATIONAL LAW (CONGOLESE LAW)

DISPUTE OVER THE LATTER'S FAILURE TO PAY THE FULL AMOUNT OF THE PRICE OF A CONSTRUCTION CONTRACT ENTERED INTO WITH THE FORMER

JURISDICTION OF ICSID ARBITRAL TRIBUNAL CHALLENGED ON THE GROUND THAT NO CONTRACT HAD EVER BEEN CONCLUDED OR HAD NOT BEEN CONCLUDED IN WRITING - OBJECTION REJECTED - REFERENCE TO ARTICLES 2.1.1 AND 1.2 OF UNIDROIT PRINCIPLES 2004

JURISDICTION OF ICSID ARBITRAL TRIBUNAL CHALLENGED ON THE GROUND THAT DISPUTE HAD ARISEN WHEN COMPANY WAS NOT YET CONTROLLED BY A US NATIONAL - OBJECTION ACCEPTED - MERE NON-PERFORMANCE AS DEFINED IN ARTICLE 7.1.1 OF UNIDROIT PRINCIPLES 2004 AMOUNTS TO DISPUTE

DISSENTING OPINION BY ONE OF THE ARBITRATORS - DECISION IF AND WHEN TO TRANSFORM OBLIGOR'S FAILURE TO PERFORM INTO DISPUTE UP TO OBLIGEE - REFERENCE TO ARTICLES 7.1.4 AND 7.1.5(1) OF UNIDROIT PRINCIPLES 2004

Abstract

African Holding Company of America Inc. (“African Holding”), a US company, and Société africaine de construction au Congo s.a.r.l. (“SAFRICAS”), a Congolese company, submitted a request for arbitration to the International Centre for the Settlement of Investment Disputes (ICSID), invoking the violation by the Government of the Democratic Republic of the Congo of the 1984 bilateral treaty between the United States and the Democratic Republic of the Congo on the mutual promotion and protection of investments. Plaintiffs claimed that Defendant had breached a construction contract it had entered into with SAFRICAS which subsequently assigned its claim to African Holding.

Defendant denied the competence of the ICSID Arbitral Tribunal. First of all it objected that the alleged construction contract had never been concluded or at least was invalid as it had not been made in writing. Moreover, whereas according to the bilateral investment treaty the Tribunal was competent only with respect to disputes arising between nationals of the two Contracting Parties, in the case at hand the dispute had arisen at a time when SAFRICAS was not yet controlled by the US nationals as it had become in the meantime and African Holding was not yet the assignee of SAFRICAS’s claim against Defendant.

The Arbitral Tribunal rejected Defendant’s first objection on the ground that contracts do not necessarily have to be concluded in writing according to Congolese law or to international law, and in this respect expressly referred to Article 1.2 of the UNIDROIT Principles 2004. Moreover, the Arbitral Tribunal stated that in the case at hand the conduct of the parties was sufficient evidence of the existence of the construction contract, and in this respect it expressly referred to Article 2.1.1 of the UNIDROIT Principles 2004.

However, as to the second objection the Arbitral Tribunal found in favour of Defendant. In so doing it held that for a dispute to arise it is sufficient that there is a case of non-performance as defined in Article 7.1.1 of the UNIDROIT Principles 2004, i.e. any failure by a party to perform its obligations under the contract, including defective performance and late performance. Consequently, in the case at hand the dispute had arisen back in 1990 when Defendant failed to pay the price after completion of construction by SAFRICAS, and since at that time SAFRICAS was not yet controlled by a US national, the Tribunal lacked jurisdiction over the dispute.

In a dissenting opinion one of the three Arbitrators expressed his disagreement with the other Arbitrators’ conclusion with respect to the second objection. In his view mere non-performance did not necessarily constitute a dispute. It was up to the obligee to decide whether and when to transform the obligor’s failure to perform its obligations into an actual dispute, and in this context the Arbitrator called for a reading of Article 7.1.1 of the UNIDROIT Principles together with the other provisions contained in Chapter 7, in particular with Article 7.1.5(1) according to which in a case of non-performance the aggrieved party may by notice to the other party allow an additional period of time for performance, and with Article 7.1.4 on the right to a cure by the non-performing party. In the case at hand the Plaintiffs did formally react only when Defendant expressly announced its intention not to pay the full amount due, and since this occurred after 2000, i.e. at the time when SAFRICAS was controlled by African Holding, the Tribunal had jurisdiction over the dispute.

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