Wednesday, September 11, 2019
In 2003 the Hellenic Republic awarded the procurement of a C4I Security System for the purposes of the “Athens 2004” Olympic Games to Leidos Inc (formerly “Science Applications International Corporation”). Subsequently, the Hellenic Republic and Leidos Inc amended the procurement contract in 2007 to redevelop the C4I System. At the time of delivery in 2008, a major subcontractor was accused of multiple instances of corruption, including the C4I System. The Hellenic Republic refused to accept the C4I System on grounds of breach of contract/ deficient subsystems and terminated the contract, drawing down on Letters of Guarantee. Leidos Inc/ SAIC initiated ICC arbitration proceedings in 2009, (Case ICC 16394/GZ/MHM). After nearly four years of proceedings, (during which the Hellenic Republic unsuccessfully sought to suspend proceedings pending criminal investigations into the alleged corruption by the subcontractor) and then arguing nullity of contract on the basis of corruption, the Tribunal handed down its Award in 2013 finding no evidence of corruption and awarding approximately €39.000.000 in damages to Leidos Inc.
The Hellenic Republic launched a challenge to set the Award aside arguing that, given the alleged corruption, the Award was contrary to public order and that its procedural rights had been violated by the Tribunal’s refusal to suspend the arbitration proceedings pending the criminal investigation into the alleged corruption.
Initially the Hellenic Republic was successful. The Athens Court of Appeals (ACoA), ruling only on the ground to annul for corruption, handed down decision 3690/2014 annulling the Award on grounds that it indeed was contrary to public order in that, given the evidence and its own findings, the Tribunal should have found that corruption had occurred and hence enforcement of the Award would be contrary to public order. Leidos Inc appealed to the Supreme Court of Greece (SCoG) which eventually handed down decision no. 517/2016 accepting Leidos’ appeal and annulling the ACoA decision on grounds that the ACoA had retried the case. The ACoA then issued decision 3567/2017 adhering to the SCoG decision, unanimously rejecting the Hellenic Republic’s ground to annul for corruption and, by a 2:1 majority, the ground of violation of procedural rights due to refusal to suspend the proceedings pending the criminal investigation.
The Hellenic Republic appealed to the SCoG again arguing that the ACoA should have annulled the Award on grounds of corruption and, based on the minority opinion, that the Tribunal had violated the arbitration agreement and the principle of equality when it refused to suspend the proceedings. The SCoG handed down decision 716/2019 rejecting both grounds ruling on the one hand that the Hellenic Republic was once again, inadmissibly, urging for a re-trial and on the other hand the Hellenic Republic had fully participated in the arbitration proceedings, had submitted all its evidence of alleged corruption and repeatedly requested suspension, which requests had been repeatedly reviewed in conjunction with the evidence submitted and rejected by the Tribunal, which had lawful discretion to do so. Since the Hellenic Republic had had the opportunity to present its arguments, submit evidence and argue its case, the Hellenic Republic’s procedural rights had not been violated nor had Leidos Inc obtained any unfair advantage due to the Tribunal’s rejection of the motion to suspend.
The SCoG ruling definitively resolved the dispute between Leidos and the Hellenic Republic. The total due amount in capital, interest and costs now exceeds € 53.000.000. Enforcement proceedings in Greece, the UK, Luxemburg, the USA and the Netherlands have commenced and the Hellenic Republic has committed to payment.
In the Greek proceedings Leidos was represented by Gregory Pelecanos, Senior Partner, Ballas, Pelecanos & Associates, and by Ioannis Filiotis, Partner, Lambadarios Law Firm.