Customs and Tax Consultancy LLC v. Democratic Republic of Congo

Case summary

At a glance

Parties: Customs and Tax Consultancy LLC (CTC) (United States, Delaware) v. Democratic Republic of the Congo (DRC)
Case no.: ICC Case No. 19515/MCP/DDA; U.S. District Court for the District of Columbia, Civil Action No. 18-1408 (RJL)
Forum and rules: ICC International Court of Arbitration, ICC Rules of Arbitration 2012; seat Paris; language French
Treaty: None. Contract claim under Article 24 (arbitration clause) of the Technical Assistance Contract of 5 June 2008, governed by French law (Article 23)
Tribunal: Ibrahim Fadlallah (President), Bernard Hanotiau, Catherine Kessedjian
Court: U.S. District Court for the District of Columbia (confirmation under the New York Convention)
Underlying award(s): Partial Award of 22 July 2015; Addendum of 19 November 2015; Final Award of 22 February 2016
Sector: Customs administration reform; consultancy services
Outcome: The Tribunal held the contract valid, found the DRC in breach and the termination justified, and ordered the DRC to pay unpaid invoices and a demobilisation indemnity. CTC later withdrew its lost-profit claims. The U.S. court confirmed the awards by default judgment in September 2019.
Amount: Claimed: at least USD 184,978,547 in unpaid invoices, plus a USD 3,750,000 demobilisation indemnity and lost profits. Awarded: USD 91,696,347 for invoices (raised by USD 853,751 in the Addendum) and USD 3,750,000, each with interest at 1.5% per month. Costs: the DRC pays USD 162,500 of the ICC costs (USD 650,000) and EUR 200,000 towards CTC's legal fees, with 5% interest a year. The DRC's counterclaim (USD 28,567,181.28, or in the alternative USD 2,171,339.41) was rejected.

The dispute

On 5 June 2008 the DRC, acting through its Ministers of Finance, Budget and Portfolio, hired CTC, a Delaware company formed in January 2008 for the purpose, under a Technical Assistance Contract. CTC was to restructure the customs and excise office (OFIDA) and increase customs revenue. In return it was owed a USD 7,500,000 mobilisation payment, a fixed monthly fee of USD 500,000 plus USD 32,000 for each expert deployed, and variable fees linked to revenue above a threshold equal to USD 45,000,000 a month. The DRC paid only part of the invoices, and OFIDA resisted CTC's work. CTC gave notice of termination on 13 May 2009, which took full effect on 15 January 2010, and claimed the unpaid invoices, a demobilisation indemnity and lost profits. The DRC argued that the contract was void: it had been awarded by direct agreement without public tender, contrary to transnational public policy, French law and Congolese procurement law, and CTC had obtained it by fraud over the revenue threshold. In the alternative it sought revision of the contract for fraud or gross imbalance (lésion), alleged that CTC had not performed, and asked for the interest rate to be reduced.

Key holdings

The contract is not void for breach of public policy. Even if transparency and competitive tendering form part of transnational public policy, they matter only as tools against corruption. The DRC stated that it alleged no corruption or attempted corruption, so its position would amount to presuming fraud. Partial Award ¶¶ 112–113
The choice of French law did not bring in French public procurement rules (held by majority). Congolese procurement law allowed a direct award where competition was blocked by the state of the market. Only Crown Agents and CTC had the required experience, so there was in effect competition between them. In any case, the DRC could not contradict itself at the expense of CTC after the contract had been approved by the highest State authorities. Partial Award ¶¶ 109, 114–118
No fraud by silence or by deception. The State had full advice through OFIDA, the WCO, the IMF and its Finance Ministry, which received monthly revenue figures. The DRC did not prove that CTC knew the threshold had already been passed. Any relative nullity would in any event have been cured when the State chose to keep receiving performance. Revision of the contract is also refused, because French law allows no revision for fraud or lésion on these facts. Partial Award ¶¶ 120–129, 133–139
The DRC breached its payment obligations, its duty to set up a standing payment order, and its Article 14 duty to use its authority to overcome OFIDA's hostility. The breaches alleged against CTC (experts' language, Customs Code work, revenue results, other failings) were not proven. Termination under Article 8.2 was justified, and the DRC could not rely on the defence of non-performance. Partial Award ¶¶ 152–163, 178, 182–184
Fixed fees were due every month from September 2008, once the 25% increase had been reached. Variable fees are calculated in US dollars, the money of account, against a threshold of USD 56,250,000, which gives USD 39,540,439. The total due on invoices is USD 91,696,347, plus a demobilisation indemnity of USD 3,750,000, which was not shown to be manifestly excessive. Partial Award ¶¶ 193, 203–209
The contractual interest of 1.5% per month applies to all late payments. Article L.441-3 of the French Commercial Code does not apply (held by majority). No reduction is available under Articles 1152 and 1231 of the Civil Code or the usury rules. Capitalisation of interest is refused. Partial Award ¶¶ 214–230, 239
Costs are not divided by percentage of success. By majority, CTC bears one quarter of the ICC costs of USD 650,000, so the DRC pays it USD 162,500, and the DRC contributes EUR 200,000 to CTC's legal fees. Both sums carry 5% interest a year, not the contractual rate. Final Award ¶¶ 44–48
The DRC never appeared, and the District Court granted default judgment confirming the awards. The FSIA arbitration exception applied, the awards fall under the New York Convention, and service and personal jurisdiction were proper. No Article V ground applied. The EUR 200,000 was converted to USD 227,540. Memorandum Opinion, pp. 6–15

Procedural history

5 June 2008The Technical Assistance Contract and its Financial Conditions are signed.
15 January 2010CTC confirms that its termination, notified on 13 May 2009, has taken full effect. The letter also serves as notice of a dispute under Article 24.
31 May 2013CTC files its Request for Arbitration with the ICC.
23 January 2014The ICC Court confirms the two co-arbitrators and appoints Ibrahim Fadlallah as President. Terms of Reference follow on 5 March 2014.
21 March 2014Procedural Order No. 4 bifurcates the proceedings: lost profits and loss of chance are deferred to a second phase, while the invoices are decided in the first.
27–28 October 2014Hearing of witnesses and oral argument at the ICC Hearing Centre in Paris.
22 July 2015Partial Award: the contract is valid and the DRC is liable. It is ordered to pay USD 91,696,347 and USD 3,750,000 with interest.
19 November 2015Addendum to the Partial Award corrects a calculation error and awards an extra USD 853,751.
22 February 2016Final Award: records CTC's withdrawal of its lost-profit claims and allocates costs.
14 June 2018CTC files a petition in the U.S. District Court for the District of Columbia to confirm the awards.
September 2019The District Court grants default judgment and confirms the Partial Award, the Addendum and the Final Award.

Tribunal, counsel and experts

Decided by: Ibrahim Fadlallah President — appointed by the institution
Bernard Hanotiau Co-arbitrator — appointed by the claimant
Catherine Kessedjian Co-arbitrator — appointed by the respondent (CTC objected to her confirmation on procedural grounds; the ICC Court confirmed her)
For the claimant: Dentons
For the respondent: Liedekerke, Wolters, Waelbroeck, Kirkpatrick
Experts: Mathias Audit (respondent)