This post follows the post originally published on 19 January 2016 (here).
In November 2015, the Cour Commune de Justice et d'Arbitrage (CCJA) ruled that an award in an arbitration between French company Getma International ("Getma") and the Guinean State should be set aside on the grounds that the arbitrators had entered into a separate fee agreement with the parties to the arbitration, in breach of the CCJA Rules. The arbitrators responded to the annulment decision by taking the unusual step of publishing an open letter to the arbitration community, heavily criticising the CCJA's decision.
Unsurprisingly, the CCJA's annulment decision, as well as the arbitrators' open letter, has since attracted much attention from the arbitral community. It has sparked a lively debate regarding the interaction between tribunals and institutions, and the extent to which institutions should give effect to party agreements.
Enforcement proceedings in the US courts which had been stayed pending the CCJA annulment proceedings, were restarted shortly after the CCJA made its ruling. In the latest instalment of the Getma v Guinea saga, on 9 June 2016, the United States District Court recognized the CCJA annulment and held that it would not confirm and enforce the Getma award.
Background to the Getma v Guinea arbitration and annulment by the CCJA
In 2011, French company Getma International commenced arbitration proceedings against the Guinean State for wrongful termination of a port and railway concession contract. The proceedings were held under the arbitral rules of the CCJA with a Tribunal comprised of three arbitrators: Professor Ibrahim Fadlallah, Eric Teynier Esq and Juan Antonio Cremades Esq.
In April 2014, the Tribunal ruled in favour of Getma, ordering Guinea to pay over €38 million in damages plus interest. Getma commenced proceedings to enforce the award in the US courts.
During this time, Guinea applied to set-aside the award before the CCJA, a court created by the OHADA Treaty, on the grounds, amongst others, that the tribunal had not fulfilled its mandate and had breached CCJA provisions by entering into the private fee agreement with the parties. In a judgment on 19 November 2015, the CCJA ruled that the award should be set aside on the grounds that the arbitrators had indeed breached their mandate by negotiating directly with the parties over their fees, in breach of a 2011 court order issued by the CCJA which limited their fees to 40 million CFA francs (approximately €60,000).
This decision attracted attention at the time, not only for the harsh consequences such an annulment decision carried for Getma, but also for the unusual reaction it generated from the Tribunal. The arbitral members of the Tribunal in the Getma arbitration, on 16 December 2015, published an open letter to the arbitral community publicly criticising the CCJA decision which it called a “judicial heresy”, and calling for their colleagues’ support. The Tribunal, at the time, criticised the CCJA decision for failing to recognise the agreement reached between the parties with regards to an increase in the Tribunal's fees. It similarly criticised the CCJA for failing to take into account assurances allegedly made by CCJA representatives, that the Tribunal was free to agree a revised fee arrangement with the parties.
The US enforcement proceedings
After the award in the arbitration proceedings was handed down in its favour, Getma commenced enforcement proceedings in the United States District Court for the District of Columbia. These proceedings were stayed pending the CCJA annulment proceedings.
The enforcement proceedings resumed following the CCJA annulment of the award. Getma pursued enforcement, despite the CCJA annulment, and raised a number of arguments including that:
- The CCJA was at fault for initially encouraging the Tribunal to consult with and solicit an agreement from the parties regarding an increase in arbitrator fees, only to subsequently reverse its position. Getma relied here on the initial correspondence from the CCJA Secretary General to the Tribunal on 15 April 2013 authorising it to raise the question of fees with the parties, and requesting that the Tribunal report back to him regarding the outcome of the discussions. Following a discussion with the parties, the Tribunal's request for increased fees was eventually agreed to in June 2013. On 28 June 2013, the CCJA Secretary General informed the Tribunal that he would contact the CCJA to adjust the Tribunal fees. Following this, the CCJA declined to increase the initial arbitrator fees on two occasions, both in August and October 2013.
- The CCJA's refusal to increase the Tribunal's fees was an attempt to 'sabotage the arbitration', as its refusal to increase fees threatened the possibility that the tribunal would suspend its work and would forestall the issuance of an award adverse to an OHADA member state.
- The CCJA should have honoured that parties' agreement to pay the increased arbitrators' fees.
- Getma also accused Guinea of improperly causing a Guinean Judge (Fodé Kante) of being appointed to the CCJA for the purpose of annulling the arbitral award, and separately for engaging in ex parte communications with the Judge Kante during the proceedings.
On 9 June 2016, District Judge Walton ruled that the United States District Court would not confirm and enforce the Getma award, on the grounds that it had been annulled.
In reaching its decision, the US District Court relied on the provisions of the Federal Arbitration Act (through which the New York Convention is enforced) which provide, amongst others, that a court "shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention" (see 9 U.S.C § 207). One of the grounds for refusal of enforcement of an award is where such award has been set aside or suspended by a competent authority of the country in which, or under the laws of which, that award was made.
District Judge Walton acknowledged that the New York Convention confers upon courts the discretion to enforce an annulled award, but found that this discretion is narrowly confined, and should only be exercised where basic notions of justice or morality have been violated (Termo Rio, 487 F.3d at 938). He found that the CCJA annulment of the Getma award did not violate the most basic notions of justice.
District Judge Walton made the following findings:
- The parties had agreed, in the concession contract, to be bound by the CCJA Arbitration Rules which provided that the CCJA was the highest court of review. District Judge Walton found that the CCJA had ultimate discretion, under the CCJA Rules of Arbitration to fix arbitrator fees. "The fact that the CCJA rejected the parties' purported and concerted attempt to strip it of that responsibility is neither unjust nor extraordinary".
- Even if the Secretary General's communication with the Tribunal had served as proxy for the CCJA's tacit consent to the Tribunal soliciting additional fees from the parties (which the judge did not state was the case), the CCJA's later rescission of that approval was well within its rights and was consistent with CCJA precedent. District Judge Walton found that "[a]t worst, the CCJA conceivably abused its discretion – but even such a transgression would be an insufficient ground to ignore the annulment".
- District Judge Walton dismissed Getma's accusations of improper interference by Guinea with due process by causing Judge Kante to be appointed to the CCJA. Judge Kante had joined the CCJA two months after Guinea's last submission in the annulment proceedings. Guinea was unable to supplement its submissions thereafter in any substantive manners as the CCJA did not conduct oral arguments during the annulment proceedings. Further, the fact that Judge Kante was a Guinean judge was not in itself proof that he was biased in favour of annulling the award in favour of Guinea.
The Getma v Guinea saga has raised a number of interesting questions about where the power lies to amend arbitrator fee arrangements in the context of an institutional arbitration. All arbitral institutions have their own rules regarding arbitrator fees and the power for determining those fees usually rests with the institution. Institutions such as the ICC place a cap on arbitrator fees based on the value in dispute, but contain a margin for adjustment of the fees if the scope of the dispute evolves. Other institutions allow for payment of the Tribunal members on an hourly rate, setting a maximum hourly rate that may, exceptionally, be increased at the outset depending on the arbitrator and the complexity of the case.
If a Tribunal requests an increase in fees from an institution in circumstances where it deems it necessary (whether because of low fees initially set by the institution or because of the expanding scope of an arbitration) and the institution refuses, is it then open for a Tribunal to seek to approach the parties directly to vary the terms of its remuneration? And, in the event that they were to do so and the parties agreed, what should the effect be? On one hand, this can be viewed as an arrogation by the tribunal of powers clearly allocated to the institution by the institutional rules. Parties choose institutional arbitration for the predictability the rules offer, but also, in the case of fees, a degree of protection from being forced to agree to fee increases for fear that to do otherwise could affect their prospects of success. On the other hand, arbitration is a construct of contract, shaped by party agreement. Should parties not remain free to depart from, and amend, non-mandatory elements of a set of institutional rules (including, arguably, the fee structure for paying their arbitrators)?
Irrespective of one's views on whether the CCJA's annulment decision was fully justified, a harsh outcome for the parties who were not responsible for the tribunal's conduct, or a decision that goes against the principle of party autonomy in arbitration, the message of the CCJA to arbitrators is clear: if you are not prepared to accept the CCJA's determination on arbitrator fees, do not accept an appointment. In this present case, in this author's view, the CCJA's annulment decision will have negatively impacted at least two parties:
- The first is Getma. In an arbitration where both parties already incurred over €3 million in fighting the case, Getma has had a sizeable award in its favour annulled purely on the basis that the Tribunal exceeded its mandate by negotiating increased fees.
- The second is the CCJA itself. In light of the CCJA annulment, future parties to CCJA arbitrations will likely avoid increasing arbitrator fees without the CCJA's consent. If this is the case, then the tribunal fees will remain as fixed by the CCJA. This poses a very real question as to whether the CCJA will be able to attract high quality international arbitrators to hear its cases going forward. For a further analysis of the potential implications of the CCJA strictly enforcing its low tribunal fees, please see the author's previous Kluwer blog post.