Paris Court of Appeal enforces award under ICSID Additional Facility Rules between Gold Reserve and Venezuela

Abstract: In République Bolivarienne du Venezuela c/ Société Gold Reserve INC, Cour d'appel de Paris, Pôle 1 – Chambre 1, RG N° 14/21103, a judge sitting in the Paris Court of Appeal considered opposing applications regarding an award issued under the ICSID Additional Facility Rules, with one side seeking enforcement of the award and the other seeking a stay of enforcement.

Speedread

A judge sitting in the Paris Court of Appeal has granted Gold Reserve’s application for enforcement of an award issued under the International Centre for Settlement of Investment Disputes (ICSID) Additional Facility Rules. In doing so, the judge rejected Venezuela’s application for a stay of enforcement.

This decision is another example of the French courts adopting a robust approach to the enforcement of arbitral awards. While every case will turn on its facts, the decision is a clear indication that, in the absence of convincing evidence of serious prejudice to a party's rights, a stay is unlikely to be granted – even if the sums involved are significant. (République Bolivarienne du Venezuela c/ Société Gold Reserve INC, Cour d'appel de Paris, Pôle 1 – Chambre 1, RG N° 14/21103.)

Background

In respect of arbitral awards rendered in international arbitration matters, the French Code of Civil Procedure (CPC) (as modified in January 2011) provides that:

• An award is to be recognised and enforced if the party relying on it establishes its existence and recognition or enforcement would not be manifestly contrary to international public policy (Article 1514).
• The existence of an award is established by producing the original award and the arbitration agreement (or duly authenticated copies) (Article 1515).
• An order refusing exequatur of an award must be reasoned (Article 1517).
• The first president or the judge assigned to the case (conseiller de la mise en état) may grant exequatur of the award (Article 1521).
• Neither an application to have an award set aside nor an appeal against an order granting exequatur of an award suspends its enforcement. However, the judge assigned to the case may stay enforcement or subject it to specific conditions if it could seriously harm the rights of one of the parties (Article 1526).

Facts

In October 2009, Gold Reserve Inc (Gold Reserve) filed a Request for Arbitration against Venezuela under the International Centre for Settlement of Investment Disputes (ICSID) Additional Facility Rules. The Request related to a dispute concerning mining rights and concessions in Venezuela.

On 22 September 2014, an arbitral tribunal issued an award declaring that Venezuela had failed to accord Gold Reserve's investment fair and equitable treatment, in breach of Article II (2°) of the Agreement between the Government of Canada and the Government of the Republic of Venezuela for the Promotion and Protection of Investments (BIT). It also ordered Venezuela to pay compensation of US$713,032,000 (plus interest), along with US$5 million in partial reimbursement of Gold Reserve's legal costs.

Venezuela applied to have the award set aside before the Paris Court of Appeal and, in response to Gold Reserve's application for exequatur (an order for enforcement) of the award, sought a stay of enforcement.

Gold Reserve resisted Venezuela's application for a stay, seeking enforcement of the award or, in the alternative, a form of adapted enforcement under which Venezuela would be authorised to deposit the Euro-equivalent of the sum awarded (plus interest) with the Caisse des Dépôts et Consignations. Venezuela again opposed Gold Reserve's application.

Decision

The applications were heard by the judge assigned to the case (conseiller de la mise en état), sitting in the Paris Court of Appeal. The judge granted Gold Reserve’s application for exequatur of the award and rejected Venezuela’s application for a stay of enforcement.

Gold Reserve's application for enforcement of the award

The judge rejected Venezuela's argument that the granting of exequatur would be a clear breach of basic principles of international public policy concerning comity and respect for sovereignty, noting that, pursuant to Article 1517 of the CPC, the judge need not give reasons if the application for an order granting exequatur is refused.

The judge recalled that Article 1514 of the CPC provides for the recognition and enforcement of arbitral awards if their existence is established and if recognition and enforcement would not be manifestly contrary to international public policy. Here, Gold Reserve had produced the original award (and its translation), as well as a certified copy of the BIT and a certified translation of extracts from the Request and two exhibits containing Gold Reserve and its subsidiaries' consent to arbitration. The criteria for establishing the existence of an international arbitral award under Article 1515 of the CPC, which requires the original award accompanied by the arbitration agreement (or duly authenticated copies), were therefore met. As such, exequatur of the award was granted.

Venezuela's application for a stay of enforcement

The judge observed that, under Article 1526 of the CPC, enforcement of an arbitral award is not suspended by an application to have the award set aside or an appeal against an order granting exequatur. However, enforcement may be stayed or subjected to conditions if it could seriously harm the rights of a party. In this instance, Venezuela had submitted that enforcement of the award should be stayed on the ground that, given the sum awarded, there was a risk of disproportion between the consequences of immediate enforcement of the award and the anticipated outcome of its application to have the award set aside. (Venezuela had not, however, sought to have enforcement of the award subjected to conditions.)

The judge rejected Venezuela's submission. The grounds invoked in the pending application to have the award set aside, which included a lack of jurisdiction, breach of international public policy and the existence of errors in calculation, and the fact that the tribunal had awarded over US$713 million were insufficient to demonstrate that immediate enforcement of the award would cause Venezuela serious prejudice within the meaning of Article 1526. Moreover, the admittedly significant sum awarded had to be assessed from the point of view of a state. The application for a stay of enforcement was therefore rejected.

Comment                                                         

This decision is another example of the French courts adopting a robust approach to the enforcement of arbitral awards. While every case will turn on its facts, the decision is a clear indication that, in the absence of convincing evidence of serious prejudice to a party's rights, a stay is unlikely to be granted – even if the sums involved are significant. It is also interesting to note that, prior to 2011, the rule was the opposite: enforcement of the award was suspended pending the outcome of annulment proceedings.

Case: République Bolivarienne du Venezuela c/ Société Gold Reserve INC, Cour d'appel de Paris, Pôle 1 – Chambre 1, RG N° 14/21103

A version of this article has previously been published on PLC Arbitration.

For further information, please contact Isabelle Michou, Partner, Emmanuelle Cabrol, Partner, Peter Archer, Associate, or your usual Herbert Smith Freehills contact.