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International Arbitration Forum

Société Mohamed Abdel Moshen Al-Kharafi et Fils v. Société Libyan Investment Authority and Société Libyan Arab Foreign Investment Company

Case summary

At a glance

Parties
Société Mohamed Abdel Mohsen Al-Kharafi et Fils (Kuwait) v. Libyan Investment Authority (LIA) and Libyan Arab Foreign Investment Company (LAFICO) (Libya)
Case no.
Cour d'appel de Paris, Pôle 4 – Chambre 8, RG No. 18/17592
Court
Paris Court of Appeal, on appeal from the enforcement judge (juge de l'exécution) of the Paris Tribunal de grande instance, judgment of 10 July 2018 (RG No. 17/83915)
Underlying award(s)
Award of 22 March 2013 under the Unified Agreement for the Investment of Arab Capital in the Arab States (Cairo Regional Centre rules), against the Libyan State and Libyan ministries
Treaty
Unified Agreement for the Investment of Arab Capital in the Arab States of 26 November 1980; New York Convention, Article III
Court
Emmanuelle Lebée (presiding judge), Gilles Malfre, Anne de Lacaussade
Sector
Tourism; real estate development
Outcome
The Court reversed the first-instance judgment and refused to lift the attachments. LIA and LAFICO are emanations of the Libyan State, and the attached assets are not immune from enforcement.
Amount
Award: USD 936,940,000 plus 4% interest. Attached: USD 104,767,428.54 and EUR 1,352.52 (LIA) and USD 11,193.72 and EUR 145 (LAFICO) at BIA, and USD 151,554,067 at Société Générale, plus shares in Financière CER. Costs: LIA and LAFICO to pay EUR 30,000 under Article 700 of the Code of Civil Procedure, plus the costs of both instances.

The dispute

On 8 June 2006 Libya's Tourism Development Authority leased a 24-hectare plot in the Tripoli district to Al-Kharafi, a Kuwaiti company, for 90 years for a large tourism project. Article 29 of the contract referred disputes to arbitration under the 1980 Unified Agreement for the Investment of Arab Capital. On 22 March 2013 the tribunal ordered the Libyan State and several ministries to pay USD 936,940,000 plus interest. The award was declared enforceable in France, and that decision became final. Al-Kharafi then attached bank accounts, an EMTN product and shares in Financière CER held by the LIA and its wholly owned subsidiary LAFICO. The LIA and LAFICO asked the court to lift the attachments. They argued that they were separate entities and not emanations of the State, and that Libya had not waived its immunity from enforcement. Al-Kharafi argued that the award bound the LIA (res judicata), that the LIA and LAFICO were emanations of Libya, that Libya had waived immunity by agreeing to arbitrate, and that the assets were used commercially.

Key holdings

  1. The request for a stay of proceedings was inadmissible. A stay is a procedural objection and must be raised before any defence on the merits (Articles 73 and 74 of the Code of Civil Procedure), which the LIA and LAFICO had not done. p. 3
  2. The Sapin II provisions (Article L.111-1-1 et seq. of the Code of Civil Enforcement Procedures) did not apply to this dispute because it arose before the law of 9 December 2016. Following the Cour de cassation's ruling of 10 January 2018, the Court nonetheless applied them as guidance, because they reflect customary international law, together with the case law that preceded the ruling of 13 May 2015. p. 4
  3. Res judicata did not prevent the LIA from denying that it was an emanation of the State. The award only rejected the request to join the LIA to the arbitration; it did not decide whether the LIA was an emanation of the State. p. 5
  4. The LIA is an emanation of the Libyan State, and so is LAFICO as its wholly owned subsidiary. The LIA lacked organic independence: its Board of Trustees was made up of government officials, its staff were public employees, and it appeared first on the list of bodies under the Council of Ministers' supervision. It also had no assets of its own: its capital is 100% State-owned and set by the government, and its income serves the Public Treasury. pp. 6–7
  5. For assets not used for diplomatic missions, a waiver of immunity from enforcement need only be express, not express and specific as the first judge had held. But a State's undertaking to carry out an arbitral award immediately is not an express waiver, whether that undertaking comes from the arbitration clause, the Unified Agreement or Article 34.2 of the Cairo Centre rules. Good faith and the absence of any recourse against the award make no difference. The Court relied on Article 19 of the 2004 UN Convention on Jurisdictional Immunities of States. pp. 7–8
  6. The attached assets can be seized. They are linked to the entity against which the proceedings were brought, because the LIA and LAFICO are emanations of the State. They are not used for non-commercial public service purposes: they consist of a matured EMTN, freely tradeable shares in a company holding a Paris property, and deposits in commercial banks. The first-instance judgment was reversed, and the LIA and LAFICO were ordered to pay EUR 30,000 plus costs. pp. 9–10

Procedural history

  1. 8 June 2006Libya's Tourism Development Authority leases land in the Tripoli district to Al-Kharafi for 90 years.
  2. 22 March 2013Arbitral award orders the Libyan State and ministries to pay USD 936,940,000 plus 4% interest.
  3. 13 May 2013The President of the Paris Tribunal de grande instance declares the award enforceable in France.
  4. 5 July and 13 August 2013Al-Kharafi attaches funds at BIA and Société Générale (5 July) and the shares and securities of Financière CER (13 August).
  5. 11 October 2013The LIA and LAFICO challenge the attachments before the Paris enforcement judge.
  6. 12 June 2014The Arab Investment Court declares Libya's challenge to the award inadmissible.
  7. 28 October 2014The Paris Court of Appeal confirms the enforcement order. The ruling later becomes final when the Cour de cassation rejects the appeal against it.
  8. 10 July 2018The enforcement judge orders the attachments lifted.
  9. 28 May 2019The Paris Court of Appeal rejects the Central Bank of Libya's third-party opposition to the 28 October 2014 ruling.
  10. 5 September 2019The Paris Court of Appeal reverses the 10 July 2018 judgment and maintains the attachments.

Tribunal, counsel and experts

Decided by
For the claimant
Selasu Tisias
For the respondent
Gide Loyrette Nouel

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Keywords

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. 18/17592
Country
Claimant
Société Mohamed Abdel Moshen Al-Kharafi et Fils
Respondent
Société Libyan Investment Authority and Société Libyan Arab Foreign Investment Company
Section

Court: France, Cour d'appel de Paris (Court of Appeal of Paris)
Date of decision: 05 September 2019
Case number: 18/17592
New York Convention provisions: III
Source: New York Convention case law case database.