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Greek Court of Appeal rejects injunction and lawsuit to set aside ICC Award despite Arbitral Tribunal finding of corruption

Tuesday, September 10, 2019

i. The ICC Arbitration

In the context of thirteen Civil Works subcontracts, Claimant, a construction company, had requested from the ICC Arbitral Tribunal payment of remainder of contractual payment (return of good performance guarantee) based on delivery and acceptance of the works. Respondent, a renewable energy company, had refused payment and submitted counterclaim for damages claiming that the signature of the subcontracts had been influenced by Claimant’s bribery of Respondent’s executive/head of procurement department. Damages by Respondent/Plaintiff were brought under two (2) separate heads: (a) compensation due to alleged “overpricing” of the subcontracts and (b) moral damages due to act of corruption/bribery. At the ICC Arbitration, Respondent had expressly accepted the subcontracts, and only brought the corruption/bribery allegations in support of its damages claim..

The ICC Arbitral Tribunal: (a) allowed Claimant’s claim for the return of the good performance guarantee in its entirety, (b) rejected Respondent’s counterclaim based on the allegation of “overpricing” in its entirety, (c) made a finding that an act of bribery had taken place, which, however, had not been proven to have influenced the signature of the subcontracts, and (d) allowed part of Respondent’s moral damages claim due to the act of corruption.

Claimant commenced enforcement proceedings of the ICC Arbitral Award in Greece. Respondent filed an annulment lawsuit before the Athens Court of Appeal, requesting the annulment of the Award and in interlocutory proceedings before the same ACoA requested an injunction to stay enforcement until a ruling on the annulment lawsuit had been handed down.

ii. The Injunction Proceedings to stay enforcement of the Award

The grounds of the request for suspension were that the Award and its enforcement in Greece were contrary to international public order.

The legal issue for the Court of Appeal in the interlocutory proceedings was whether on the preponderance of evidence/balance of probabilities, Plaintiff’s annulment petition would be allowed on its merits in the main annulment petition trial. If ACoA would so find, then it would have to suspend the enforcement procedure in Greece.

In particular, the basic question faced by the ACoA was whether the relevant subcontracts were ipso iure null and void due to the finding of corruption by the ICC Arbitral Tribunal

In a clear and concise judgment, ACoA handed down Decision 669/2019 (Injunctive Proceedings) rejecting the suspension petition on the following grounds: (a) the ICC Arbitral Tribunal had not made a finding that the signature of the subcontracts/consent of Respondent had been influenced by the act of bribery; (b) the act of corruption itself was given the legal characterization by the Court of Appeal of “investment” bribery- not a criminal act under Greek law; (c) the subcontracts themselves did not provide for corruption and were bona fide contracts; (d) Respondent had claimed corruption before the ICC Arbitral Tribunal  only to support its counter- claim for damages and  had chosen to accept the subcontracts and did not request the annulment thereof; (e) thus, Respondent could not raise nullity claims for the first time before ACoA; (f) the claim of ipso iure nullity of the above subcontracts was contrary to the plain wording of Law 2957/2001, whereby Greece ratified the Civil Law Convention on Corruption, in effect it was contrary to the Convention itself.

iii. the Set-Aside Main Proceedings.

The ACoA , in a separate decision No. 3248/2019, ruled on the Respondent’s set aside motion which too was based on the arguments of a) absolute nullity of the subcontracts due to the act of corruption and b) a violation of the principle of equal treatment related to a matter of evidence.

The ACoA reviewed the Award and did not find that the Award violated public order, nor that Respondent’s procedural rights had been violated. With regard to the alleged invalidity of the subcontracts, the ACoA rejected the allegation that the Award had violated public order on the grounds that the Award had found that the act of corruption was not the subject matter of the subcontracts and that the subcontracts themselves had been entered into by the parties independent of any act of corruption. As such the Award had found that the act of corruption was a tort (and indeed had awarded “moral” damages against Claimant) but did not affect the contractual relations between the parties and by refusing to annul the subcontracts had not violated public order. The ACoA was careful not to re-judge the Tribunal’s findings and correctly limited its review to whether, in view of the Tribunal’s findings and irrespective of whether these were factually or legally correct, the Award itself was contrary to public order.

Gregory Pelecanos, (Senior Partner) and Panayiotes Yiannakis, (Senior Associate) on behalf of Ballas, Pelecanos & Associates LPC, argued for Claimant.