Salini Costruttori S.P.A. v. Kingdom of Morocco

233 F.Supp.3d 190

SALINI COSTRUTTORI S.P.A., Petitioner,

v.KINGDOM OF MOROCCO, Respondent.

Civil Action No. 14–cv–2036 (TSC)

United States District Court, District of Columbia.

Signed February 10, 2017

Ana Vermal, Proskauer Rose LLP, Pro Hac Vice, Paris, France, Peter J.W. Sherwin, Proskauer Rose, LLP, New York, NY, Scott Michael Abeles, Proskauer Rose LLP, Washington, DC, for Petitioner.

Daniel E. Jones, Evan Mark Tager, Mayer Brown LLP, Washington, DC, for Respondent.

MEMORANDUM OPINION

TANYA S. CHUTKAN, United States District Judge

Petitioner, Salini Costruttori S.p.A. ("Salini"), brings this action against the Kingdom of Morocco ("Morocco"), to enforce a 2011 arbitration award issued by the International Chamber of Commerce ("ICC") International Court of Arbitration in Paris, France. The two parties executed an agreement for a construction project in Morocco, but several disputes arose out of the agreement, after which Salini filed a Request for Arbitration against Morocco with the ICC. The ICC decision ordered Morocco to pay Salini several sums of money, including interest and reimbursement for various duties and taxes paid by Salini throughout the construction process. Salini then filed a petition in Morocco's courts seeking recognition and enforcement of the arbitration award. The Administrative Court of Rabat entered judgment in the case, ordering the enforcement of all of the parts of the award except for those requiring Morocco to repay Salini for various taxes it had levied against Salini, finding that aspect of the award to be outside the jurisdiction of the international arbitration court. Salini appealed the portion of the judgment involving the repayment of taxes, and the Administrative Court of Appeal of Rabat affirmed the lower court's decision. Salini then appealed to the Moroccan Court of Cassation, the country's highest civil court; that appeal remains pending. Morocco paid Salini the amount of the award that the Administrative Court upheld: 167,695,954.30 MAD (Moroccan dirham).

Salini filed this Petition to Recognize, Confirm, and Enforce the arbitral award pursuant to the Federal Arbitration Act (FAA) in order to address the difference between the amount Morocco has already fulfilled and the total amount of the ICC award, plus accrued interest. Chapter two of the FAA codifies the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 ("the New York Convention"). 9 U.S.C. §§ 201, et seq . Also before the court is Morocco's motion to dismiss the Petition under Federal Rules of Civil Procedure 12(b)(1) —for lack of jurisdiction, and 12(b)(6)—for failure to state a claim pursuant to Section 207 of the FAA.¹ The FAA requires that the court not confirm the award if it "finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the [New York] Convention," and Article V(1)(e) of the Convention describes as possible grounds for denial of confirmation that "[t]he award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made." 9 U.S.C. § 207 ; New York Convention art. V(1)(e), June 10, 1958, 330 U.N.T.S. 38.

For the reasons below, Salini's Petition to Recognize, Confirm, and Enforce a Final, Binding Arbitral Award will be GRANTED and Morocco's Motion to Dismiss the Petition will be DENIED.

I. BACKGROUND

On May 21, 2004, Salini entered into Agreement AH03/2004 ("Construction Agreement") with Morocco, specifically the Ministry of Equipment and Transportation, to construct a road between two Moroccan cities. (Pet. ¶¶ 5–6). The Construction Agreement contains an arbitration clause, which allows either party to submit a dispute to either Morocco or to an arbitral award. (Pet. ¶ 9). In 2008, disputes arose between the parties related to, in part, "(i) the reimbursement by Morocco of direct and indirect taxes paid by Salini to its suppliers; (ii) the termination of the Agreement and the timing thereof; and (iii) the financial consequences of the partial execution of the Agreement and its termination." (Pet. ¶ 12). The parties were unable to settle their dispute amicably, and Salini filed its Request for Arbitration against Morocco with the ICC on August 13, 2009. (Pet. at ¶ 13). The Arbitration took place in Paris, France (Pet. Ex. D at 103), and on December 5, 2011, the Arbitral tribunal rendered its Final Award. (Pet. at ¶ 17).

In the Final Award, the Arbitral tribunal decided that:

1. It had proper jurisdiction to rule on the dispute.

2. Salini's attempt at terminating the agreement as of January 10, 2008, was invalid.

3. Morocco's August 1, 2008, termination of the agreement was the proper termination date.

4. The date of final taking over of the project was April 7, 2009.

5. Morocco was to pay Salini, by way of the works carried out, an amount of € 8,158,518.87 plus [Value Added Tax ("VAT") ] at a rate of 20% for the part not financed by the European Union.

6. Morocco was to pay Salini by way of interest on the principal amount of € 8,158,518.87, calculated until June 30, 2010, an amount of €1,040,000.00.

7. Morocco was to pay Salini interest on this amount of €8,130,000.00, calculated from l July 2010 at the [European Central Bank ("ECB") ] rate plus 3.5 percentage points, until its complete payment.

8. The agreement contained a commitment by Morocco not to impose on Salini duties or taxes, and that in the event Morocco did impose any, it would be liable to reimburse Salini.

9. Morocco was to pay Salini, by way of reimbursement of the duties and taxes on cement, heating oil, and extractions, an amount of €5,212,183.39, plus interest at the ECB rate plus 3.5 percentage points, starting from 13 August 2009 until complete payment of the principal.

10. Morocco was to reimburse all other duties and taxes to Salini, plus interest at ECB rate plus 3.5 percentage points, starting from the day after payment by Salini of the said taxes and duties and until complete reimbursement

11. Morocco was to pay Salini €2,140,600.16 by way of changes in the quantity of certain items, plus VAT at a rate of 20%.

12. Morocco was to pay Salini interest on this amount of €2,140,600.16, calculated from 1 July 2010 at the ECB rate plus 3.5 percentage points, until complete payment.

13. Salini was to pay Morocco the amount of €500,000.00 for delay damages plus interest at the ECB rate plus 3.5 percentage points, starting from 18 November 2009, until complete payment of the principal.

14. Salini was to pay Morocco, for the necessity of drawing up a new contract with another company, €20,000.00.

15. Morocco was to return, within eight days, all of the bank guarantees issued on behalf of Salini, based on the contract, several of which were guaranteed by a fee of €10,000.00 per day, starting from the eighth day.

16. Morocco was to grant a release from the notice to a third party holder of June 7, 2010, for an amount of €3,379,776.30, and to reimburse to Salini the amount of 468,511.16 Moroccan Dirham, increased by interest at the rate set by the ECB plus 3.5 percentage points, starting from the payment date, until complete payment.

17. The amounts Morocco owed to Salini were to be offset by the amounts Salini owed to Morocco.

18. Each party was to bear its own costs, and to pay its own half of the ICC arbitration costs, which amount to $650,000.00. (Pet. Ex. D. at 101–03).

On April 18, 2012, Salini petitioned the Commercial Court of Morocco to enforce the arbitration award. ("Letter from Rachad Bouhalal, Ambassador of the Kingdom of Morocco," hereinafter "Letter," at 2, ECF No. 20). The Commercial Court of Morocco referred the case to the Administrative Court of Rabat, which issued its judgment on March 11, 2014. (Id. ). The court enforced the portion of the arbitration award dealing with unpaid project costs, but held that the portion dealing with taxes was contrary to Moroccan law and therefore invalid. (Id. ). Salini appealed, and on December 22, 2014, the Administrative Appellate Court in Rabat affirmed the Administrative Court's ruling. (Id. ). The appellate court cited Article V of the New York Convention, which, in the Ambassador's words, "permits a signatory of the Convention to refuse to enforce an arbitration award that is ‘not capable of settlement by arbitration under the law of that country’ or if ‘the recognition or enforcement of the award would be contrary to the public policy of that country’." (Id. (quoting New York Convention art. V(2)(a)-(b))). On April 24, 2015, Salini filed an appeal with the Morocco Court of Cassation, the country's highest civil court. (Mot. at 5, ECF No. 46). Salini's appeal was still pending as of June 26, 2015. (Mot. Ex. D). On May 5, 2015, the Administrative Court of Rabat ruled that the portion of its decision that did not deal with the tax obligations was final, and ordered Morocco to satisfy the judgment. (Id. ) Morocco complied and transferred 167,695,954.30 Moroccan Dirham to the court's account for Salini to withdraw.² (Id. at 5–6). On September 29, 2015, Salini was paid € 15,236,182.16. (Mot. Ex. F).³

On December 2, 2014, just before the three-year statute of limitations under 9 U.S.C. § 207 was to expire, Salini filed a Petition to Recognize, Confirm, and Enforce a Final, Binding Foreign Arbitral Award with this court. (Pet. at 1). Because service has been conceded, the court will not detail the extensive procedural history resulting ultimately in effective service, except to note one important matter: The Clerk of this court entered an entry of default against Morocco on April 23, 2015, based on Morocco's failure to timely answer the complaint that had not yet been properly served.⁴ (ECF No. 16 at 1). That default judgment, improperly entered, remains standing and must be vacated.

Morocco filed its motion to dismiss the petition on January 8, 2016, asserting primarily that the remaining unpaid part of the award...