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International Arbitration Forum

Société Armamenti e Aerospzio SpA v. Government of the Republic of Iraq Ministry of Justice

Case summary

At a glance

Parties
Société Armamenti e Aerospzio SpA (Italy, in liquidation), applicant for set-aside, v. Government of the Republic of Iraq, Ministry of Justice
Case no.
Cour d'appel de Paris, RG No. 19/22977 (formerly RG 17/08324); judgment No. 15/2022
Court
Cour d'appel de Paris, International Commercial Chamber (Pôle 5 – Chambre 16)
Underlying award(s)
ICC partial award rendered in Paris on 30 November 2016 (jurisdiction and admissibility); ICC final award of 7 June 2018
Forum and rules
Set-aside action under Articles 1520(5) and 1527 of the French Code of Civil Procedure; ICC arbitration seated in Paris
Treaty
Contract arbitration clause (Article 17 of the supply contract of 12 November 1983, governed by French law)
Court
François Ancel (President), Laure Aldebert, Marie-Catherine Gaffinel
Sector
Defence; military helicopters
Outcome
Set-aside action admissible but rejected on the merits (1 February 2022).
Amount
Armamenti ordered to pay Iraq EUR 50,000 under Article 700 CPC, plus costs (each side had sought EUR 75,000). For context: the Milan Court of Appeal had awarded EUR 62,255,645.35 against Iraq. The final award dismissed Iraq's claim for more than EUR 62 million.

The dispute

On 12 November 1983 the Iraqi Ministry of Defence (MOD) contracted with Costruzioni Aeronautiche Giovanni Agusta S.p.A. (later Agusta S.p.A.) for five AB 212 naval helicopters. Italy suspended the export licence on 14 November 1986, and after Iraq invaded Kuwait in 1990 the UN imposed an embargo (Resolutions 661 and 687). The EEC implemented it through Regulation No. 3541/92. In Italian proceedings brought by Agusta, the Milan Court of Appeal (3 July 2012) held the dispute non-arbitrable because of the embargo, found the MOD responsible for the termination and awarded damages. The Italian Court of Cassation confirmed that judgment. Iraq then started an ICC arbitration in 2013 against Armamenti, which had succeeded to Agusta's rights, seeking repayment of the advances it had paid. The partial award of 30 November 2016 upheld jurisdiction and admissibility. Armamenti sought to set the partial award aside for breach of international public policy. It argued that the award was irreconcilable with the Milan judgment and with the ICC 7698 (Fincantieri) award, and that the award disregarded the embargo.

Key holdings

  1. Admissibility. A ground based on substantive international public policy can be raised before the set-aside judge even if it was not argued before the arbitrators, so Article 1466 CPC does not bar it. Iraq's estoppel objection failed because Armamenti had not misled Iraq about its intentions: it had relied on the Milan judgment and the embargo before the tribunal. ¶¶ 40–45
  2. No conflict with the Milan judgment. The two decisions reach opposite conclusions on arbitrability and on the embargo. However, the Milan judgment had not received exequatur in France. Because it ruled on arbitrability before reaching the merits, it falls within the arbitration exclusion in Article 1(2)(d) of the Brussels I Regulation, read with the CJEU's Rich and Van Uden judgments and Recital 12 of Brussels I bis. It therefore enjoys no automatic recognition and cannot bar the award on public-policy grounds. ¶¶ 56–66
  3. No conflict with the ICC 7698 (Fincantieri) award, which has exequatur in France. That award held Iraq's claims inadmissible because of the embargo, while the partial award admitted Iraq's claims. A mere difference in legal assessment of admissibility does not produce mutually exclusive legal consequences, especially as the partial award did not decide the consequences of admissibility; the final award did. ¶¶ 72–76
  4. UN Security Council sanctions adopted under Chapter VII form part of French international public policy. ¶¶ 87–88
  5. The embargo was not breached. Neither the UN resolutions nor Regulation 3541/92 prevent a court or tribunal from examining a claim linked to a contract that the embargo may have affected, or from declaring the claim admissible, so long as it has not ruled on the merits. The partial award only declared Iraq's claim admissible, so it does not violate international public policy. ¶¶ 95–99
  6. Costs. The set-aside action was rejected. Armamenti, as the losing party, pays Iraq EUR 50,000 under Article 700 CPC and bears the costs. ¶¶ 100–101; operative part

Procedural history

  1. 12 November 1983The Iraqi MOD and Agusta conclude the supply contract for five AB 212 naval helicopters.
  2. 14 November 1986Italy suspends the export licence issued on 30 October 1984.
  3. 3 July 2012The Milan Court of Appeal finds the dispute non-arbitrable because of the embargo, holds the MOD liable and awards EUR 62,255,645.35. The Italian Court of Cassation confirms on 22 September 2015.
  4. 13 June 2013Iraq files an ICC arbitration against Armamenti.
  5. 30 November 2016ICC partial award: Finmeccanica is excluded from the arbitration; the dispute is arbitrable; Iraq's claim is admissible.
  6. 20 April 2017Armamenti files an action to set aside the partial award (RG 17/08324). The case is removed from the docket on 14 March 2019 and reinstated as RG 19/22977 on 11 December 2019.
  7. 7 June 2018ICC final award: the contract lapsed for lack of an export licence; no restitution is due; Iraq's claim for more than EUR 62 million is dismissed. Iraq seeks to set it aside on 13 December 2018 (RG 18/27765).
  8. 1 February 2022The Paris Court of Appeal rejects Armamenti's set-aside action against the partial award.

Tribunal, counsel and experts

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Summary generated with AI from the published documents — refer to the award for the authoritative text.

Case ID
Cour d'appel de Paris (Court of Appeal of Paris), No. 19/22977
Country
Claimant
Société Armamenti e Aerospzio SpA
Respondent
Government of the Republic of Iraq Ministry of Justice
Section

Court: France, Cour d'appel de Paris (Court of Appeal of Paris)
Date of decision: 01 February 2022
Case number: 19/22977
New York Convention provisions: II | II(3)
Source: New York Convention case law case database.