On 23 November 1973, the Claimant indicated to the Tribunal that it sought
a hearing in order to apply to the Tribunal for a re-opening or continuation of the first stage of the proceedings on the ground of partial invalidity of the Award by reason of substantive and procedural errors (including the failure of the Tribunal to accord the Claimant a fair hearing on all questions considered by the Tribunal in its Award) affecting, in essential respects, the refusal by the Tribunal of the Claimant's requests for Declarations Nos. 2 and 6.
In response, the Sole Arbitrator stated, by a letter dated 19 December 1973:
I have carefully studied your letter and would kindly ask you to indicate and substantiate in writing (i) the authorities (including statutes, cases and literature) which would permit the Tribunal to decide on 'a re-opening or continuation of the first stage of the proceedings', (ii) the alleged 'substantive and procedural errors', and (iii) how and to what extent such errors affect the conclusions of the Award.
Pending receipt of your answer, which I expect to obtain as soon as possible, no date can be set for the requested hearing.
While, as will appear from Part IV below, the issue presently before the Tribunal is narrowly defined, the broad indication given by the Claimant in the February Memorandum of the grounds upon which it would rely when making an application for a re-opening of the first stage of the proceedings may be indicated by the following quotations:
4. In a sentence, the Claimant's contention is that in relation to requested Declarations Nos. 2— 6 the Tribunal has erred in law and in procedure to such a degree that the Tribunal's conclusions on those Declarations are null and void; accordingly, it is necessary for the Tribunal to re-open and continue the first stage of the proceedings in this arbitration in order to deal with the requests made by the Claimant for Declarations Nos. 2—6 and thereby complete its Award.
5. A summary indication of the Claimant's position must start from the recollection that in the first stage of the present proceedings the Claimant sought from the Tribunal seven declarations of right. The first was that the Libyan Government had by the enactment and implementation of its Nationalization Law of 7 December 1971 broken its agreement with the Claimant. The remainder were all related to the consequences of this breach. Of these six requests only the last, to the effect that the Claimant is entitled to damages for the Respondent's breach of contract, was granted. The other five requests were refused. The present application arises out of the circumstances and manner in which this refusal took place.
6. The Claimant contends that in refusing these requests the Tribunal made a fundamental error of law. This error is so substantial that it amounts to a failure by the Tribunal to apply the law; and for that reason, in the first place, the relevant part of the Award is invalid.
7. What is this error? The Tribunal has held, in relation to requested declaration No. 2 that 'the BP Nationalization Law was effective to terminate the BP Concession, except in the sense that the BP Concession forms the basis of the jurisdiction of the Tribunal and of the right of the Claimant to claim damages from the Respondent before the Tribunal'. As will presently be indicated, the Claimant sees this conclusion as affected by more than one error. But the feature which the Claimant submits is the most erroneous in law and the most significant in its consequences is the proposition, implicit in the conclusion, that a party to a contract can by its own breach put an end to the contract; or, to put the point in different but more specific terms, that a Government may, by breaking a concession governed by a law other than its own, put an end to its legal commitment. This conclusion runs contrary to every legal system connected with the Concession, whether the principles of Libyan law, the principles of international law or general principles of law.
8. This error of substance is not the only basis on which the Claimant is obliged to challenge the validity of the Award. The manner in which the Tribunal reached its conclusions on Requested Declarations Nos. 2-6 is such as to render the relevant part of the Award procedurally defective and, for that reason, void. This procedural defect lies in the failure of the Tribunal to apply a fundamental principle of natural justice—the principle of ensuring that each party to proceedings knows, and is given an adequate opportunity to answer, the case which it has to meet.
9. In the present arbitration the Respondent has at all material times known the case against it. It has had the opportunity to reply. It has voluntarily chosen not to use it. The same is not true of the Claimant. The Tribunal has clearly stated that 'the conclusions in the Award. are based on a broader consideration of the issues than that permitted by the format of the Claimant's argument in support of its claims'.
It is in fact manifest from a perusal of the Award that the Tribunal has developed a whole line of argument against the Claimant's request for Declarations Nos. 2-6 of which the Claimant was totally unaware and to which it was given no opportunity to reply. The elaboration by the Tribunal of this line of argument, and the manner of its doing so, goes far beyond the permissible limits of any such maxim as jura novit curia. This procedural error is exacerbated by the fact that it has come about notwithstanding the repeated invitation by the Claimant to the Tribunal to raise with the Claimant any points relating to the Claimant's argument about which the Tribunal might feel any doubt.
Part IV, Summary and Conclusions, of the February Memorandum read as follows:
69. The contents of the present Memorandum may be summarised as follows:
(i) The Claimant contends that the Award rendered on 10 October 1973 is incomplete and that, in consequence, the proceedings must be re-opened and continued in order to enable the Sole Arbitrator to complete his Award.
(ii) The incompleteness of the Award arises from the fact that it is partially void in that the Tribunal's conclusions upon requested Declarations Nos. 2-6 are invalid.
(iii) This invalidity is the consequence of
(a) certain substantive and fundamental errors of law affecting the above-mentioned parts of the Award; and
(b) certain grave defects in the procedure followed by the Sole Arbitrator in connection with those parts of the Award.
(iv) As to (a), the fundamental errors of law were: first, the treatment of the requests for Declarations Nos. 2 and 4 as if they were the equivalent of a request for an order of specific performance; second, the holding that a party violating its obligations under a contract may by its breach bring the contract to an end; and third, the refusal to deny legal effects to a measure rightly held to amount to a violation of international law.
(v) As to (b), the grave defects in procedure were: first, the treatment of the Claimant's requests for Declarations 2 and 4 as if they were an application for an order of specific performance; and, second, the failure of the Sole Arbitrator to adhere to the principles of natural justice in the hearing of the case by reason of his consideration, to the detriment of the Claimant, of a whole line of argument and of authorities of which the Claimant was not informed and to which the Claimant was given no opportunity to reply.
(vi) The duties and powers of the Sole Arbitrator in relation to a request for the reopening and continuation of the proceedings in the present case are governed by Danish Law—the law to which the Sole Arbitrator, by his choice of Copenhagen as the seat of the arbitration, expressly subjected the arbitral proceedings.
(vii) The position in Danish law is set out in the annexed opinion of Professor Foighel and Professor Philip. This Opinion makes it clear that in Danish law
(a) an award suffering from the substantive errors and procedural faults of the present Award would be regarded as partially void;
(b) the dissatisfied party should, in the first place, turn to the arbitrator to seek a reopening of the proceedings and the completion of the award; and
(c) it would be the duty of the arbitrator, in the circumstances of the present case, to grant the application for a re-opening and continuation of the proceedings and to complete the Award by eliminating the causes of its partial invalidity.
In the Award (Merits), the Tribunal pronounced (p. 16) that it considered that the procedural law of the arbitration was Danish law. It stated further:
The Tribunal is not competent to establish conclusively the nationality of its Award, for this can only be decided by the courts of Denmark and of other jurisdictions in which enforcement of the Award may be sought. However, the Tribunal deems this Award to be Danish, and the proceedings have been conducted in a manner designed to be consistent with this view and intent.
The grounds invoked by the Claimant in support of its arguments set forth in the February Memorandum are referred to in Part III above. At the Copenhagen Meeting, in response to a question of the Tribunal, the Claimant submitted that all the various grounds so cited by the Claimant fell within Section 7 of the Danish Arbitration Act of 1972 ("1972 Act") (Verbatim Transcript, p. 42). That Section, in an English translation submitted by the Claimant at the Copenhagen Meeting, reads:
An arbitral award is void, wholly or in part, when
1) the arbitration agreement is void,
2) the composition of the arbitration tribunal or its hearing of the case has not safeguarded the parties or one of the parties, or has not been in accordance with the rules prescribed for the arbitration tribunal and the deviation therefrom may have had a major bearing upon the decision,
3) the arbitration tribunal has acted ultra vires, or
4) the award violates fixed principles of law.
An editorial change was made in Section 7 during the travaux préparatoires which was explained as follows by Retsplejeradet:
The Section corresponds to Section 5, first and second paragraphs, of the committee draft.
The division suggested in the committee draft of the rules on invalidity into two paragraphs seems to imply that an arbitral award in the circumstances referred to in the first paragraph is a nullity while, in the circumstances referred to in the second paragraph, the award may be set aside only upon request. Such a distinction however, is not appropriate. An arbitral award ought to be set aside only upon request. In accordance herewith, the rules on invalidity have been brought together in one paragraph in Râdet's draft.
(Quoted from Hjejle, op. cit. pp. 306-307.)
The Department of Justice made the following comment on the statement by Retsplejeradet just quoted:
Retsplejeradet states in its comments on this provision that the courts ought to set aside an award only upon request. This no doubt will be the principal rule, but there are cases in which the courts may of their own motion, without request, set aside an award, e.g. if the award contravenes mandatory principles of law or concerns a dispute which because of its nature may not be subject to arbitration. The rule in Section 7 does not exclude a setting aside of the award in such circumstances.
The provision under 2 on the invalidity of an award based on the composition of the arbitration tribunal or the manner in which the proceedings have been conducted may, depending on the circumstances, be applied in cases of evident and serious errors with respect to the basis for the decision. Thus, e.g., an arbitral award may be set aside as invalid in the event that the arbitration tribunal decides the dispute on a legal basis other than that agreed between the parties.
(Quoted from Hjejle, op. cit., p. 311.)
Section 423 RPL reads:
Upon petition, the Supreme Court may, in exceptional cases, permit that a case adjudged by the Court be reviewed by it again provided that it appears very greatly probable that, through no fault of the petitioner, the judgment has been based on incorrect information, and provided that information is now available which will lead to a substantially different result, and provided that all circumstances favourably support granting the petition including a demonstration beyond doubt that the petitioner only in this way will be able to avoid or make good a loss which is serious to him.
In the same circumstances, the Supreme Court may allow the appeal of a judgment rendered by a court of appeal or a court of first instance which otherwise cannot be appealed.
The right to take advantage of the remedies dealt with in this Section cannot be waived.
The Claimant, by a letter dated 10 June 1974, replied as follows:
With reference to your letter of 21st May the Claimant wishes to submit that it did not invoke Section 423 of the Danish Code of Procedure as the basis for a re-opening of the arbitration but only in order to show that the principle of a re-hearing is known and accepted in Danish procedural law.
The legislative Commission which drafted the Section made the following pronouncement on its scope and applicability:
As is apparent from the terms used in Section 271, this review by the Supreme Court is considered to be something altogether extraordinary, something that the Supreme Court ought not to permit without compelling reasons, and something of which use will therefore perhaps not be made at all, or only on singular occasions over a long period of time. On the other hand, for the very reason that the remedy provided for in this Section is meant to be a kind of ultimate rescue device for justice in exceptional instances, it has been necessary to give it a general form instead of enumerating a number of distinct occasions, as was done in the earlier draft.
(Bemaerkinger til det of den ved allerhojeste Reskript av llte Maj 1892 nedsatte Proceskomission udarbejdede Udkast til Lov om den borgerlige Retspleje, Copenhagen, 1899, p. 115.)
Dr. Hjejle has suggested that Section 423 RPL might be applied by way of analogy with respect to arbitral awards:
As regards institutional arbitration, a rehearing in my opinion ought to be possible in the exceptional circumstances referred to in Section 423 [RPL]. An application by analogy of the provision of [RPL] is close in hand in this case. In principle, the same is true with regard to ad hoc arbitration, but in such proceedings it is hardly practical to claim that the other party is obligated to assist in appointing a new arbitration tribunal (Chapter 46 RPL). A claim for declaration of invalidity would appear more natural in such arbitration proceedings, cf. pp. 129—130.
(Hjejle, op. cit., p. 132.)
The statement by Dr. Hjejle is to be understood to mean, not that the Danish Supreme Court would entertain a petition to grant a re-opening of arbitration proceedings, and remand a case decided by an arbitral award to the original or a new arbitration tribunal, but in the sense that the arbitral tribunal itself might be competent to grant a re-hearing on the basis of an application by analogy of Section 423 RPL.
RPL distinguishes between court judgments classified as partial decisions delafg0relser) and such known as interim decisions (mellemaf0prelser). A judgment of the former kind is one rendered on a separate and identifiable claim among several presented in a case, and its effect is that of an ordinary judgment, i.e. it can be appealed and is enforceable as such (Section 294 RPL). A judgment of the latter kind constitutes a ruling on a preliminary issue; such a decision cannot be appealed until final judgment has been made and is not separately enforceable (Section 295 RPL).
A first question arising for consideration by the Tribunal must be that whether its decisions on Requested Declarations Nos. 2 through 6 were final pronouncements on those particular points, except to the extent that certain issues under Requested Declaration No. 5 were deliberately and expressly reserved for further argument and subsequent decision.
The Tribunal finds that the question whether and to what extent its decisions on Requested Declarations Nos. 2 through 6 are in the nature of a delafg0relse or a (mellemafg0relse, respectively, as those concepts are defined in and have been applied by Danish courts pursuant to RPL, is not of decisive relevance for purposes of determining the sole issue presently to be considered. In the context of arbitration proceedings, the conceptual framework ought to be phrased in terms which do not necessarily mirror in detail the technical construction of RPL.
However, in these proceedings, the Tribunal is in the unique position of being able to establish its own intentions as to the finality of the decisions made by it in the Award (Merits). As is clearly borne out by the text of the decisions, they were intended to be final, in accordance with their specific wording, with regard to Requested Declarations Nos. 2 through 6, except as provided in respect of certain issues under Requested Declaration No. 5. (The decisions on Requested Declarations Nos. 1 and 7 are not contested). While this decision by itself would be sufficient, the Tribunal also holds that its decisions on Requested Declarations Nos. 2 through 6 technically ought to be qualified as delafg0relser.
As stated above, the Claimant submits that all objections raised by it against the Award (Merits) in the February Memorandum, which are the sole grounds invoked by the Claimant in support of its contention that the Award (Merits) is partially invalid, fall within the scope of Section 7 of the 1972 Act. The Claimant does not dispute the fact that it may plead partial invalidity before a Danish court to which the issue may be presented. However, the Claimant refers to difficulties which might attend an attempt on its part to institute an action before a Danish court in which it seeks a declaratory judgment to the effect that the Award (Merits) is partially invalid, such as that of establishing jurisdiction of a Danish court over a foreign State, and that of overcoming a plea by the Respondent of sovereign immunity. The Claimant also states that it would wish if possible to avoid the publicity which might attend State court proceedings. However, these procedural aspects have not been fully argued by the Claimant for the reason that it contends that the relevant question is not whether alternative remedies are available to it, or desirable for it to obtain. In the Claimant's view, the sole important question is whether the powers granted to Danish courts under Section 7 of the 1972 Act are exclusive. The Claimant argues that they are not, as no express legislative provision so stipulates; hence, the Claimant concludes that the Tribunal is competent to grant a re-hearing.
In considering the issue whether under Danish law an arbitration tribunal is competent to grant a re-hearing in circumstances such as the present, the Tribunal attaches overriding importance to the fundamental principle which for centuries has been the law of the land and which found striking expression in the Danish Code of 1683 to the effect that an arbitral award, once rendered, stands:
Where the parties refer their case and dispute to the arbitration of men of trust, either with or without an Umpire, then what such arbitrators say and decide, to the extent that their mandate permits them to do so, shall stand and cannot be brought before any court for reversal, subject to the prerogatives of the King.
It is true that a rule expressed in such drastic brevity must be qualified in some respects. Thus, the award must have been intended to be final in character and not provisional or conditional; the Tribunal has already held that in the relevant aspects, its decisions in the Award (Merits) do partake of such finality in accordance with their terms. Further, the award may be invalid. A remedy is now provided in Section 7 of the 1972 Act based on precedents evolved over a long period of time by Danish courts which successively have developed doctrines under which courts in certain circumstances may set aside defective arbitral awards. So settled had these judicial doctrines become that at the time of the enactment of the 1972 Act, those responsible for its drafting thought it would be unnecessary in principle to include what later became Section 7. However, they did so for the sake of convenience in order to provide a statutory regulation of the assistance or intervention that might be sought from the courts in arbitration matters. The Committee stated:
If for these reasons it may be said to be not strictly necessary to legislate on the powers of the courts to set aside arbitral awards, it may nevertheless in the opinion of the Committee be appropriate to suggest a provision on the setting aside of arbitral awards in connection with the other proposed statutory rules which all concern the assistance of the courts to, or their control over, arbitration proceedings.
(Ibidem, p. 30.)
The Claimant has not adduced any authority that convincingly supports its case. At the Copenhagen Meeting, a pronouncement made in 1934 by Den faste Voldgiftsret (UfR 1934, pp. 924-925) was extensively discussed. However, as Professor Philip acknowledged (Verbatim Transcript, p. 97), that statement was an obiter dictum. The remark relied upon by the Claimant, which was made by a court having limited jurisdiction in the field of labour law (though possessing great authority) in a case decided 40 years ago, read:
And just as doubts may arise as to the interpretation and scope of an arbitral award, so there may be instances in which an arbitral award that has been rendered may be revised or changed, cf. in this context Sections 221 and 423 [RPL].
(UfR 1934, p. 925.)
It is significant that the sole principles which the court had in mind were the provisions on formal errors (such as miscalculations and typographical errors) dealt with in Section 221 RPL and the procedures under Section 423 RPL. In any event, even if the pronouncement supported the Claimant's case, which prima facie it does not, it cannot be given so extensive an interpretation as to form the basis of a rule of law having far-reaching significance in the whole field of arbitration.
The issue in the other case discussed by the Claimant (H.D. 20 May 1953, H.R.T. 1953, p. 253) did not concern the competence of an arbitral tribunal to grant a rehearing, and the Tribunal, after careful consideration, has found that that case does not offer any guideline in the present proceedings. No single instance of a Danish arbitration tribunal having permitted the re-opening of arbitration proceedings that have resulted in a final award in circumstances such as the present, or indeed in any circumstances, has been cited by the Claimant or otherwise been brought to the attention of the Tribunal.
The Tribunal concludes that to admit a competence on the part of arbitration tribunals to re-open proceedings which have been brought to an end by the rendering of an award conceived of as final in character would be tantamount to setting aside the fundamental rule which is at the very basis of Danish arbitration law. The argument of the Claimant that the competence conferred upon Danish courts in Section 7 of the 1972 Act is non-exclusive is not convincing. It has indeed never been suggested in the course of the travcux préparatoires that concurrent jurisdiction could be exercised by arbitration tribunals in regard to invalidity issues. It is prima facie unlikely that the Danish legislative authorities, if made aware of the question, would have considered an arbitral tribunal which allegedly had violated, e.g., basic procedural safeguard rules, to be a proper forum for passing judgment upon its own acts. As a general proposition, therefore, it would be impossible to hold that under Danish law, an arbitral tribunal is competent to re-open the proceedings in circumstances such as the present.
The Claimant submits that it has not invoked Section 423 as the basis for a reopening of the first stage of the proceedings. The Tribunal therefore is unable to consider whether an application for such a re-opening may be granted by analogous application of Section 423 RPL and cannot even enter into a discussion of the various principles and distinctions contained in that Section that, directly or indirectly, might have a bearing on the issue to be decided.
AND THE TRIBUNAL FURTHER DECIDES to order the Claimant to present a Memorial in fifteen copies setting forth its case with respect to its request for Declaration No. 5 except as decided in the Award (Merits) and to its claim for damages, accompanied by all supporting documents and other relevant materials, on or before 1 April 1975 or such other date as the Tribunal may later fix.