"18.1 INTERNATIONAL ARBITRATION
In the event of any dispute, controversy, claim or disagreement(each a "Dispute") arising from or in connection with this AGREEMENT, the affected PARTY will communicate it in writing to the other PARTY. The PARTIES will attempt to resolve the Dispute amicably. If within one (1) month after the notice of a Dispute, it has not been resolved, at the request of any PARTY, the Dispute, regardless of its nature, will be referred to arbitration and finally resolved pursuant to the arbitration rules of the International Chamber of Commerce valid in Paris, France (the "ICC Rules").
18.2 The arbitration proceedings will be conducted in Paris, France.
18.3 The right of the PARTIES to request a resolution of a Dispute or a determination in a proceeding according to this AGREEMENT will not be affected by the fact that either one of the PARTIES received partial compensation on a conditional or absolute basis from any third party (be it an individual, a state, a government agency or an international organization) for any loss or damage subject to the dispute.
18.4 Any arbitral tribunal constituted pursuant to this AGREEMENT must apply the Laws of the Dominican Republic and the generally accepted principles of International Law.
18.5 Any arbitration under this Article will be conducted by a group made up of three arbitrators. No arbitrator will be admitted if he had any links or labor relations with either one of the PARTIES. The arbitration will be conducted in Spanish. The decision of the Arbitral Tribunal will be final and binding for the PARTIES. Each PARTY will be entitled to choose one arbitrator, and the third will be designated according to the Rules of the International Chamber of Commerce in Paris, France (ICC).
18.6 The PARTIES will go to court and agree to submit to jurisdiction for arbitration or litigation, if necessary, to impose any arbitration award issued by the group of arbitrators under this Article. This choice of jurisdiction, which the PARTIES accept, will apply to any arbitration proceeding as well as to the decision or arbitration award rendered by the group of arbitrators.
18.7 The PARTIES agree that any arbitration or lawsuit may be paid with any property or assets of the PARTIES located anywhere.
18.8 The PARTIES will be liable only under this AGREEMENT. No shareholder, investor, employee, director, officer or representative of THE STATE or of THE SELLER will be personally liable or individually subject to liability of
any kind with respect to this AGREEMENT even if this is allowed by the laws that govern the domiciles of the PARTIES."
"18.9 Any decision reached must rule on the arrangements necessary for the solution of the Dispute or the termination of this AGREEMENT; it must have the vote of at least two of the arbitrators, and it will not be subject to appeal by the PARTIES. The cost of this arbitration must be allocated among the PARTIES, as specified in the Administrative Rules of the International Chamber of Commerce in Paris, France, at fifty percent (50%) for each PARTY."
a) "THE CORPORATION and THE STATE each unconditionally and irrevocably: agree that the signing, delivery and compliance by the respective party with this AGREEMENT constitute private and commercial acts, rather than public or government acts;
b) They agree that, if any proceeding is filed against THE STATE or its assets in any jurisdiction in connection with this AGREEMENT, it may not claim any sovereign or other immunity from such proceeding by or in the name of the party in connection with its assets;
c) They waive any sovereign immunity right or other immunity they may have or any held by any of their assets now or in the future in any jurisdiction; and
d) Generally agree with the imposition of any arbitration award or sentence against them in any proceeding or jurisdiction, and the granting of any relief in connection with such proceeding (including, without limitation, the establishment, imposition or execution against or in connection with property, regardless of its use or intended use)."
1. "That Article 18 of the Agreement be declared null and void, in that it provides for disputes to be settled by arbitrators, which is contrary to Article 48 of the Constitution of the Dominican Republic, Article 1004 of the Code of Civil Procedure and Article 6 of the Civil Code.
2. The ICC’s International Court of Arbitration lacks jurisdiction because this is contrary to Law 50-00 of July 12, 2000, in fulfillment of Articles 2 and 3 of Law 834-78 of July 15, 1978, which attribute jurisdiction to hear any dispute that may arise from agreements between the respondent and the claimant to the Civil and Commercial Chamber of the Court of the First Instance in the National District."
1. Article 18 of the Agreement that provides for disputes to be settled by an Arbitral Tribunal is null and void because, "it violates Article 1004 of the Code of Civil Procedure of the Dominican Republic";
2. The Arbitral Tribunal lacks jurisdiction to hear disputes derived from the Agreement because "only the courts of the Dominican Republic may be empowered; only they have jurisdiction, because these agreements are governed by the laws of the Dominican Republic."
In a brief dated July 4, 2003, the Respondents add that Dominican Law has allowed the Dominican State to go to arbitration proceedings only when they are carried out "in Commercial and Business Chambers under the aegis of the Dominican Republic pursuant to Law 50-87 of June 4, 1987." (Article 15, Paragraph 1).
"Because the provisions of Article 1 (3) of Appendix III of the ICC’s Arbitration Rules establish that ‘after the Terms of Reference have been signed or approved by the Court and the provisional timetable has been established, the Arbitral Tribunal will, in accordance with Article 30(4) of the Rules, proceed only with respect to those claims or counterclaims in regard to which the whole of the advance on costs has been paid.’ Given the reluctance of the Respondents to comply with payment of its portion of the costs related to these proceedings, the Claimant deemed itself forced to cover said costs, for purposes of making it possible to continue the case at bar
pursuant to the aforementioned provision in the rules."
"Regardless of the foregoing, pursuant to the provisions of Article 30 (4) of the ICC’s Arbitration Rules related to Advances to Cover the Costs of the Arbitration, in the event that a request to pay the costs of the arbitration proceedings has not been complied with during the period set for these purposes, the relevant claims and counterclaims will be deemed withdrawn. Therefore, based on the aforementioned provision and the Respondents’ failure to cover its costs related to these proceedings, the defenses and counterclaims filed by the Respondents are deemed withdrawn, and must not be included in the Terms of Reference of these arbitration proceedings filed for review by the parties on February fifteenth (15th) of the year two thousand three (2003), with the understanding that the intention of the ICC rules is obvious, inasmuch as any party that does not meet its payment obligations related to arbitral jurisdiction does not have the right to file claims with the arbitral tribunal."
"CPB must repeat to this Tribunal that the payment of the costs of the proceedings payable by the Respondents was covered by CPB for the sole purpose that these proceedings could be concluded pursuant to the applicable Arbitration Rules, safeguarding the administrative fees and costs of the Arbitrators and the Tribunal related to the aforementioned proceedings, but never for the purpose of covering the Respondents’ failed payment obligation, especially when said respondents, having validly consented to an arbitration clause [a clause containing an agreement to submit to arbitration], denied this in order to evade their liability on the occasion of their breach of contract that is the subject of the claim."
- Whether the defense of lack of jurisdiction of the Arbitral Tribunal filed by the Respondents should be allowed, in spite of their failure to pay the provision set by the Secretary General pursuant to Article 30(1) of the ICC Rules.
- Whether the arbitration clause is valid, or whether it must allow the defense of lack of jurisdiction of the Arbitral Tribunal filed by the Respondents.
Moreover, neither Article 6 (2) nor any other provision of the Rules of Arbitration subordinates the admissibility of the objections of one party with respect to the validity of the arbitration agreement to payment by said party of its portion of the provision for the costs of arbitration.
In conclusion, the fact that CPB stood in for the Respondents in payment of the advance on costs does not deprive the Respondents of their right to be heard and to assert their defenses. Therefore, the defense of lack of jurisdiction is admissible.
It would seem advisable to examine below whether the defense of lack of jurisdiction is justified.
The law applicable to an arbitration agreement, like the law that governs a mutual agreement or a contract, in general, is determined in almost all legal systems by the principle of contractual freedom (Convention of Mexico of March 17, 1994, Convention of Rome of June 19, 1980, U.S. case law...) In other words, it is the very will of the parties that freely decides what Law will govern the contract.
For example, Article 7 of the Inter-American Convention on Law Applicable to International Contracts (Convention of Mexico or CIDIP V) of March 17, 1994, provides that "the contract shall be governed by the law chosen by the parties." The same rule on disputes appears in the Convention of Rome.
In the absence of an express agreement, it is customary to determine the applicable law based on contractual clauses and the conduct of the parties. In the event that such a determination is ineffective, the contract is localized in the legal system with which it has the closest ties.
Standards allowing such localization are diverse and numerous. They vary from one country to another, and in the same country, from one period to another. It is clear that the weight to be given to one element depends on the nature of the contract or the subject of the mutual agreement.
The seat of the arbitration appears in Article 18 of this Agreement, subsection 2, which was never challenged by the Respondents. Furthermore, it states an agreement of all Parties to the Agreement on a neutral location.
It is assumed that neither the Dominican Republic nor the Corporation would have agreed to sign the Agreement at that time [if it had indicated] a Tribunal located in the Cayman Islands. Neither would CPB have accepted the jurisdiction of a Dominican court. Therefore, it can be deduced that Paris was chosen as the seat of the arbitration because it was a neutral location.
Therefore, among the laws that could possibly be applied to the arbitration agreement, the Court would have to rule out both the Law of the Cayman Islands as well as that of the Dominican Republic. In principle, the law that governs an arbitration agreement may be different from the procedural law. In this case, there is no element that allows the Court to infer that the Parties had any intention of applying any other law than that in effect in the seat of the arbitration. As the parties unequivocally agreed that said location would be Paris, as a result, this Arbitral Tribunal has decided to apply French law to the arbitration agreement.
It is also worth noting that French Law, including procedural law, is close to that in effect in the Dominican Republic, which originated in the French legal tradition. For greater clarity, the Arbitral Tribunal states that it will not apply the law in effect for domestic arbitration in France, rather the law created by the French Court of Cassation for specific application to international arbitration. It will be stated further on that this is substantive international law unrelated to the laws of States.
Furthermore, in the event of jurisdictional appeal to vacate the decision to be made, the Court of Appeals of Paris will be the competent jurisdiction pursuant to Article 1505 of the New French Code of Civil Procedure that gives jurisdiction to the Court of Appeals in the territory where the decision was handed down.
In a decision dated April 10, 1957, in the case Myrtoon Steamship v. Agent Judiciaire du Trésor, the Court of Appeals in Paris decided that the State was bound by the clause, and it validated the decision for the following reasons:
"Whereas the Treasury’s Legal Representative bases the nullity of the Decision on the prohibition against the State executing arbitration clauses;
But whereas the prohibition is restricted to domestic contracts and is not applicable to contracts of an international nature;
and whereas, it is in fact derived from the same terms in Article 1004 in the Code of Civil Procedure, comparable to those in Article 83 in the same Code, and the prohibition against public institutions agreeing to arbitration clauses is solely based on protecting the State, in the French courts, for purposes of the involvement of the Attorney General’s office in cases that concern them;
Whereas, furthermore, the State may validly waive immunity it has in advance, accepting the jurisdiction of foreign courts and therefore abdicating the protection that may be afforded it by the involvement of the Attorney General’s office..."
Moreover, the signing by the Dominican Republic on March 20, 2000, of the Convention of Washington of March 18, 1965, on the settlement of differences related to investments among States and the citizens of other States shows that an advance waiver of immunity from jurisdiction within a system of mandatory arbitration has been interpreted as a situation in conformity with a national legal system.
Furthermore, it is a commercial contract because the State and the Corporation do not themselves consume the electricity they are buying but rather sell it to the public. The purchase and sale of power between persons that are not acting through a private interest is generally considered to be a commercial activity by its very nature. Therefore, the presence of an international element removes any question that the contract may be civil in nature. Since it is neither a consumer contract nor a civil contract, the contract executed between CPB and the Respondents is an international commercial contract. The parties themselves deemed it as such in stating in paragraph 19 (a) of the contract that "this AGREEMENT constitutes private, commercial acts." Arbitration clauses are common in contracts of this nature, under all circumstances in conformity with the customs and practices of international commerce.
The Court of Cassation held as follows:
"By virtue of a substantive rule in international arbitration law, the arbitration clause is legally independent of the main contract that contains the clause, directly or by reference, and, without prejudice to the mandatory rules of French Law and international public policy, its existence and effectiveness can be seen to be in keeping with a mutual agreement of the Parties, without any need to refer to a State law."
It is worth pointing out that in the substantive arbitration rule handed down by the Court of Cassation, this supreme court rules out the will stated by the Parties being corrected by a State law, whether contract law, or the law that governs the capacity of one party. Moreover, for a State, one cannot speak of "capacity" that would be governed by a national Constitution, just as the law that governs individuals is personal law, whether it be national or local law. To state the contrary would be to allow that the State could lack capacity and be under the protection of some form of guardianship. The principle of sovereignty of States is opposed to such an analysis. In international relations, States have the power to sign any commitments they wish to sign. It would be another matter to sanction an act carried out by a public authority contrary to the powers granted to it by the Constitution or the laws issued by the State. Such a sanction belongs to agencies established by the constitution. This Arbitral Tribunal must deem the act as valid.
Moreover, the Dominican State used several safeguards to confirm its authority to submit this dispute to arbitration and protect its consent to the validity of the Agreement:
The intercession of a public notary of the Dominican Republic, Georgina Thomas, who certified that the parties’ representatives appeared freely and voluntarily.
A letter of intent dated November 19, thus four months prior to the Agreement, written on the letterhead of the Corporación Dominicana de Electricidad, signed by both parties.
A special power of attorney from the President of the Republic to the Secretary of State, General Manager of the Corporación Dominicana de Electricidad, dated November 29, 1997.
The cover letter, dated December 1, 1997, of said special power of attorney to the Chief Executive Officer of the Corporation through the Chief Counsel to the Executive Branch. A special power of attorney dated March 17, 1998, from the President of the [Dominican] Republic to the Secretary of State, General Manager of the Corporación Dominicana de Electricidad, for him to execute the Power Purchase Agreement with the CPB.
A cover letter dated March 18 for said special power of attorney to the General Manager of the Corporation through the Assistant Chief Counsel to the Executive Branch.
In conclusion, the Arbitral Tribunal notes that, in addition to the precautions taken by the parties to assure that the State was in compliance with the administrative regulations in effect, in Article 12.1.3 of the Agreement, it is expressly acknowledged that the State "has the power, authority and full legal right" to act as it did.
"Whereas it is recognized in arbitration precedent that international public policy is strongly opposed to a government body being able to contract with foreigners, openly and knowingly executing an arbitration clause or wishing to do so and placing the contractor in a position of trust, then, whether during the arbitration proceedings or during the performance of the contract, availing itself of the nullity of its own word, whereby, in its capacity as a state company, it clearly defaults on its obligation to disclose Iranian legal requirements related to the execution of contracts by public entities." Its final decision was that the claimant was ‘in good faith’ when it agreed to the arbitration clause, and that the respondent’s lack of legal competency must be deemed without effect since it is contrary to international public policy, the application of which may not be excluded by Iranian Law."
that the defense of lack of jurisdiction submitted by the State and the Corporation is admissible;
that said defense of lack of jurisdiction is not legally justified.
Therefore, the Tribunal declares itself competent to decide on this dispute.
The Tribunal reserves its decision on costs until the final decision.
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