In a highly unusual decision, the Cour Commune de Justice et d'Arbitrage (CCJA), the court created by the Organisation pour l'Harmonisation en Afrique du Droit des Affaires (the Organisation for the Harmonisation of Commercial Law in Africa or OHADA) Treaty, signed by 17 African States*, has ruled that an award should be set aside on the grounds that the arbitrators had entered into a separate fee agreement with the parties to the arbitration. The CCJA held that, in so doing, the Tribunal had exceeded its mandate and deliberately excluded the mandatory provisions of OHADA arbitration rules providing that the parties are bound by the fees set by the CCJA. In response to the CCJA's decision, the three arbitrators in question have taken the equally unusual step of writing an open letter to the arbitration community and the CCJA, publicly criticising the decision and calling for their colleagues' support. The CCJA's decision has the potential to have important and far-reaching consequences for arbitration in the OHADA region and the willingness of international arbitrators to sit as arbitrators in arbitrations governed by the CCJA rules in future. The decision and its implications are discussed further below.
In 2011, French company Getma International commenced arbitration proceedings against the Guinean State for wrongful termination of a port and railway concession contract. The proceedings were held under the arbitral rules of the CCJA with a Tribunal comprised of three arbitrators: Professor Ibrahim Fadlallah, Eric Teynier Esq and Juan Antonio Cremades Esq.
Getma International also commenced parallel investment treaty proceedings against Guinea for alleged breach of Guinean foreign investment law. These proceedings are on-going.
The question of the arbitrators' fees
The OHADA arbitration rules provide that the costs of the arbitration, including the arbitrators' fees, are to be set by the CCJA. In 2011, the CCJA ruled that the fees of the arbitrators were to be limited to 40 million CFA francs (approximately €60,000) with the CCJA's own administrative fees set at €90,000. The Tribunal subsequently requested that the CCJA increase the amount of the arbitrator fees. These requests were denied on two occasions by the CCJA, in August and October 2013.
According to the arbitrators, before accepting the role of presiding arbitrator, Professor Fadlallah wrote to Mr Acka, the CCJA case manager, stating that the arbitrator fees set by the CCJA were inadequate, and that they would need to be increased in order for the Tribunal to properly complete its mandate. The tribunal claim that Mr Acka gave Professor Fadlallah assurances that the fees would be readjusted at a later stage. The CCJA Secretariat also allegedly later encouraged the Tribunal, in April 2013, to raise the question of fees with the parties.
The arbitrators maintain that, as a consequence of this discussion the arbitrators sought the parties' agreement to enter into a separate, private fee agreement to set the arbitrators' total fees at €450,000.
In April 2014, the Tribunal ruled in favour of Getma, ordering Guinea to pay over €38 million in damages plus interest. Getma commenced proceedings to enforce the award in the US courts.
During this time, Guinea applied to set-aside the award before the CCJA on the grounds, amongst others, that the tribunal had not fulfilled its mandate and had breached CCJA provisions by entering into the private fee agreement with the parties.
The annulment of the Getma award
In a judgment on 19 November 2015, the CCJA ruled that the award should be set aside on the grounds that the arbitrators had indeed breached their mandate by negotiating directly with the parties over their fees, in breach of a 2011 court order which limited their fees to 40 million CFA francs (approximately €60,000).
The CCJA found that, in entering into this separate fee agreement, the Tribunal had exceeded its mandate and deliberately excluded the mandatory provisions of OHADA arbitration rules providing that the parties are bound by the fees set by the CCJA. Article 23.2 of the OHADA rules on the resolution of CCJA Arbitrations grants the CCJA the authority to fix the tribunal fees, in accordance with a schedule established by the CCJA Assembly and approved by the OHADA Council of Ministers. The schedule is intended to provide parties with a degree of foreseeability as to arbitrator costs, and to ensure that the costs are proportional to the sums in dispute. However, it is worth noting that Article 24.3 of the OHADA Rules also grants the CCJA the authority to set arbitrator fees at a higher or lower rate than those set out in the schedule in 'exceptional' and 'necessary' circumstances.
The reaction of the Tribunal
On 16 December 2015, Professor Fadlallah, on behalf of the three arbitrators, wrote an open letter to his colleagues in the arbitral community, criticising the CCJA for its decision, which it called a "judicial heresy", and calling for their colleagues' support.
Getma's claim was for approximately €50 million. The case cost the parties approximately €3 million in legal fees. Whilst the CCJA allocated €90,000 for its own administrative fees, it limited the fees for the three arbitrators to €60,000. The arbitrators, who are reported to have spent a total of approximately 1,000 hours working on the case, argue that such low fees were "not remuneration, but charity".
The Tribunal heavily criticise the CCJA's approach and drastic response, both in the original proceedings and during the annulment proceedings, to the Tribunal's request to increase their fees. Further, the arbitrators call out the failure by the CCJA to take into account the reassurances it had provided them with regarding fees, in making its annulment decision.
The letter states that, because the parties agreed to increase the Tribunal fees, the CCJA should have estopped Guinea from bringing the set aside proceedings on this basis. The letter also highlights the difference between the question of arbitral mandate, which concerns the case which the tribunal is requested to adjudicate on, and of arbitrator remuneration, which is not in the remit of the award, and falls outside of the competence of the CCJA.
The letter heavily criticises the decision of the CCJA, which it describes as demonstrating an "incomprehensible hostility towards arbitrators". The arbitrators state that the role of an international arbitral institution is to protect arbitrators, and allow them to serenely complete their mission by remunerating them justly and protecting them against attacks. "Professional and organised arbitrators are the backbone of international arbitration across the world. When accepting a case, they decline others. By depriving arbitrators of a proper remuneration for the hundreds of hours they spend on a case, the Court undermines their financial situation, a fact which it cannot ignore." In reaching its decision, the CCJA refused to engage in direct communication with the Tribunal, which the letter describes as "regrettable".
The arbitrators express concern about the impact this decision will have on the fate of OHADA arbitration. They state that "the annulment will encourage the practices condemned by the award", with "dramatic" consequences for Africa. The CCJA is described as a "club of states, where companies are poorly represented", and the arbitrators claim that the CCJA acted in this case as both "judge and party", considering its own intervention during the proceedings regarding tribunal fees. They add that "one can legitimately question the ethical steps taken, or not taken, by the CCJA to prevent the interested State from partaking in decisions concerning them".
Implications for arbitrations held under the CCJA Rules
The CCJA annulment decision is, undoubtedly a controversial one, with potentially serious implications for the future of OHADA arbitrations.
Whilst arbitrator fees themselves have been the subject of intense scrutiny and debate in the past, the parties generally remain free to agree how to apportion those fees once a dispute has arisen. In the present case, the CCJA ruled that the Tribunal had exceeded its mandate by negotiating increased fees – this despite the fact that both parties had agreed to the increased fees. Whether or not such party agreement is possible under the CCJA rules, the consequence of the CCJA's decision is harsh, with the award in favour of Getma being annulled, and both parties having already incurred €3 million in fighting the case. It is unclear how this decision will affect the enforcement proceedings in the US courts, which were stayed pending the CCJA annulment proceedings. It will be interesting to see whether Getma will continue to pursue enforcement proceedings in light of these recent developments and, if so, how the US courts will approach the CCJA's decision. It is also too early to tell whether this decision will affect Getma's parallel ICSID proceedings against Guinea, being heard, amongst others, by Bernardo Cremades, Juan Antonio Cremades' brother. Guinea had previously attempted, but failed, in 2012 to remove Mr Cremades from the ICSID tribunal on the basis that his brother was involved in the parallel commercial proceedings.
It is undeniable that €60,000 for Tribunal fees would generally be considered extremely low across most of the main arbitral institutions. If it is correct that the arbitrators jointly spent 1,000 hours on the case, this would have amounted to a remuneration of €60 per hour. By way of contrast, the ICC cost calculator provides that the average fees for 3 arbitrators in a dispute worth $54 million (approximately the value of the above case) would be $528,850, while the administrative expenses of the Secretariat would be $95,915 (not dissimilar to those of the CCJA in the above case). In light of the present case, future parties to CCJA arbitrations will likely avoid increasing arbitrator fees without the CCJA consent. If this is the case, then the tribunal fees will remain as fixed by the CCJA. This poses a very real question as to whether the CCJA will be able to attract high quality arbitrators to hear its cases going forward if it continues to impose such low fees in the future.
The CCJA decision will also cause concern to investors in the OHADA member states, whose disputes are subject to the CCJA Rules. The potential impact this decision will have on the pool of arbitrators available, and on the parties' ability to nominate the arbitrators which they wish, will likely make the CCJA a less attractive arbitral institution and may raise questions about prospects for enforcement of arbitral awards in the OHADA region more generally. The allegations of state bias made by the Tribunal in this case have not been substantiated, but the mere hint of it may provide commercial parties with sufficient incentive to provide for their disputes to be resolved under alternative arbitral institution rules than the CCJA in their contracts and even to avoid the OHADA region when choosing a seat of arbitration.
* The OHADA states: Benin, Burkina Faso, Cameroun, Central African Republic, Chad, Comoros, Republic of the Congo, Democratic Republic of Congo, Equatorial Guinea, Gabon, Guinea, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, Togo.
For further information, please contact Paula Hodges QC, Partner, Chris Parker, Partner, Maguelonne de Brugiere, Associate or your usual Herbert Smith Freehills contact.