Etrak İnşaat Taahut ve Ticaret Anonim Sirketi v. Libya

The issue was whether the tribunal had temporal jurisdiction (ratione temporae) over a claim to money brought to enforce a settlement agreement. The claims underlying the settlement agreement arose before the BIT came into force, whereas the settlement agreement was entered into after the BIT came into force. 

The arbitral tribunal found it had jurisdiction. The Paris Court of Appeal agreed, and recognised the award. The Court of Cassation held that this was an error, since claims to money are only covered investments if they are "related to" an investment, and thus the dispute to enforce the settlement agreement was not independent of the underlying dispute.

In 2021, the Higher Regional Court of Munich similarly refused to recognise and enforce the award based on the lack of temporal jurisdiction. In contrast, the Swiss Federal Supreme Court, the court at the seat, dismissed a set-aside application in 2020, and the US District Court of the District of Columbia confirmed the award in 2025.

Original decision: Cour de cassation

Other relevant decisions:

• Arbitral award dated 22 July 2019 (available from Jus Mundi)
• Swiss Federal Supreme Court's decision dated 2 November 2020 (original German, English translation filed before the US District Court for the District of Columbia available from Jus Mundi)
• Higher Regional Court of Munich’s decision dated 10 April 2021 (original German and English translation filed with the US District Court for the District of Columbia, available from NewYorkConvention.org)  
• Paris Court of Appeal’s decision dated 14 March 2023 (original French)
• Memorandum Opinion of the US District Court of the District of Columbia dated 4 February 2025 

9 October 2024
French Court of Cassation
Appeal no. 23-14.368

First Civil Chamber - Section panel

ECLI:FR:CCASS:2024:C100363

Text of the decision

Heading

CIV. 1
 

MY1
 

FRENCH COURT OF CASSATION
______________________
 

Public hearing of 9 October 2024
 

Judgment quashed
 

Ms CHAMPALAUNE, presiding judge
 

Judgment no. 363 FS-B
 

Appeal no. T 23-14.368
 

F R E N C H R E P U B L I C
 

_________________________
 

IN THE NAME OF THE FRENCH PEOPLE
_________________________
 

JUDGMENT OF THE COURT OF CASSATION, FIRST CIVIL CHAMBER, 9 OCTOBER 2024
 

The State of Libya, whose official address is at [Address 2] ("Libya"), represented by its Director of the Disputes Department of the Supreme Judicial Council, filed appeal No. T 23-14.368 against the judgment rendered on 14 March 2023 by the Paris Court of Appeal (International Commercial Division, Division 5, Chamber 16), in the dispute between it and Etrak Insaat Taahhüt Ve Ticaret Anonim Sirketi, a company incorporated under Turkish law, whose registered address is at [Address 1] (Turkey), the respondent to this appeal.
 

The appellant raises two grounds of appeal.
 

The file has been provided to the principal public prosecutor.
 

Based on the report of Mr. Ancel, judge, the submissions of SARL Delvolvé and Trichet, lawyer for the State of Libya, and the submissions of Mr Poirret, first advocate general, after oral argument at the public hearing on 9 July 2024 at which Ms Champalaune, presiding judge, Mr Ancel, judge rapporteur, Ms Guihal, senior judge, Mr Bruyère, Mr Ancel, Ms Peyregne-Wable, Ms Tréard and Ms Corneloup, judges, Ms Kloda and Ms Robin-Raschel, consulting judges (conseillers référendaires), Mr Poirret, first advocate general, and Ms Vignes, chamber clerk, were present,
 

the first civil chamber of the Court of Cassation, composed, pursuant to Article R. 431-5 of the Courts Organisation Code, by the presiding judge and judges referred to above, after having deliberated as provided for by law, rendered this judgment.

 

Summary of the dispute

Facts and procedural history
 

1. According to the judgment under appeal (Paris, 14 March 2023), on 25 November 2009, the Great Socialist People's Libyan Arab Jamahiriya ("Libya") and the Republic of Turkey concluded a bilateral treaty for the encouragement and reciprocal protection of investments ("BIT"), which entered into force on 22 April 2011.
 

2. On 29 August 2016, the Turkish company Etrak Insaat Taahhüt Ve Ticaret Anonim Sirketi ("Etrak") brought a claim for compensation before an arbitral tribunal pursuant to this treaty based on Libya's failure to abide by a settlement agreement entered into on 9 December 2013 for the execution of a judgment of 29 October 2012, subsequently set aside on appeal on 1 February 2018, by which the El Beida court of first instance had ordered Libya to pay it various sums in a dispute relating to the settlement of invoices issued under public works contracts concluded with Libyan entities in the 1980s.
 

3. By an award of 22 July 2019, rendered in Geneva in an arbitration administered by the International Chamber of Commerce ("ICC"), the arbitral tribunal upheld its jurisdiction over all of Etrak's claims, declared that Libya had breached Article 2(2) of the BIT by failing to accord fair and equitable treatment to Etrak's investment and ordered Libya to pay various sums.
 

4. Libya appealed the order recognising the arbitral award and requested that the Court of Appeal recognise a judgment rendered on 2 May 2019 by the Tripoli North Court setting aside the settlement agreement dated 9 December 2013.

 

Grounds of appeal

First ground, fifth part
 

Description of the ground
 

5. Libya submits that the Court of Appeal erred in upholding the recognition order issued on 21 January 2020 declaring the ICC arbitral award no. 22236/ZF/AYZ issued in Geneva on 22 July 2019 to be enforceable, even though "under Article 10 of the bilateral investment treaty concluded between Turkey and Libya on 25 November 2009, the offer to arbitrate provided for in the treaty only applies to disputes arising after the treaty enters into force; under international law, a dispute is understood to be a disagreement on a point of law or fact, a divergence, or a conflict in legal positions or interests between two persons; the scope of a dispute must be determined with regard to the interests that the parties ultimately seek to protect, regardless of the assertions they have formally advanced; the Court of Appeal erred in failing to apply the applicable legal effects to its findings, in breach of Article 1520(1) of the Civil Procedure Code, as well as Article 1525, by finding, in order to establish that the arbitral tribunal had jurisdiction ratione temporis, that the dispute before it was independent from the dispute that had been ongoing between the parties since the 1990s relating to payment for construction work, and which gave rise to the judgment of 29 October 2012, when the judgment found that the claims before the arbitral tribunal concerned the validity and performance of the agreement, the purpose of which is "to put in place the conditions for performance [of this] court decision ordering Libya to pay sums of money corresponding to unpaid invoices relating to construction work carried out in Libya before 1991 as well as damages" (para. 48).

 

Reasons

The Court's analysis
 

Having regard to Articles 1520(1) and 1525 of the Civil Procedure Code:
 

6. It follows from these provisions that the Court hearing the set-aside application must review the arbitral tribunal's decision regarding its jurisdiction, whether or not the tribunal has found that it has jurisdiction, by considering all legal and factual elements relevant to assessing the scope of the arbitration agreement. This review must not extend to the merits of the award.
 

7. In transnational investment protection matters, the State's consent to arbitration arises from the standing offer to arbitrate set out in a treaty, which is made to a category of investors described in the treaty, for the settlement of disputes relating to investments defined in the treaty.
 

8. The Court of Appeal noted that the BIT entered into force on 22 April 2011 and that Article 10 thereof provided that it did not apply to disputes arising before that date. In deciding that the arbitral tribunal had jurisdiction, it held that the dispute concerned the failure to perform the settlement agreement concluded on 9 December 2013. On the one hand, this agreement gave rise to a claim to money within the meaning of Article 1(2)(b) of the BIT. On the other hand, it did not merely provide for the pure and simple execution of a previous court decision, but rather included reciprocal concessions and included damages. Thus, even if the claims so established related to previous investments made in the territory of Libya, the failure to performance this agreement gave rise to a new dispute, as did Libya's challenge to the validity of the agreement.
 

9. The Court of Appeal failed to apply the applicable legal effects to its own findings, and thus erred in ruling as it did, in breach of the provisions referred to above. On the one hand, the Court found that, under Article 1(2)(b) of the BIT, claims to money such as those resulting from the settlement agreement of 9 December 2013 fell within the definition of “investment” only to the extent that they were themselves related to an investment, which in this case consisted of the works carried out in the 1980s. Yet it found that, on the other hand, under Article 8.4, only disputes arising directly out of investment activities fell within the scope of procedural protection. Thus, if the dispute arising from the failure to perform the settlement agreement had been independent from the dispute arising from Libya’s initial refusal to pay for the works, such that it fell within the temporal scope of the treaty, it would have fallen outside the BIT’s substantive scope of application, since it did not relate directly to the investment.
 

Scope and consequences of quashing the judgment
 

10. Pursuant to Article 624 of the Civil Procedure Code, quashing the operative provision of the judgment upholding the recognition order issued 21 January 2020 has the effect of quashing the operative provision dismissing the application for recognition of the Tripoli-North Court of First Instance's judgment dated 2 May 2019, with which it is necessarily tied.

 

Operative provision

FOR THESE REASONS, and without there being any need to rule on the other complaints, the Court:
 

QUASHES AND SETS ASIDE, in its entirety, the Paris Court of Appeal's judgment rendered on 14 March 2023 between the parties;
 

Restores the case and the parties to the state they were in before this judgment and refers them back to the Paris Court of Appeal, differently composed;
 

Orders Etrak Insaat Taahhüt Ve Ticaret Anonim Sirketi to pay costs;
 

Pursuant to Article 700 of the Civil Procedure Code, orders Etrak Insaat Taahhüt Ve Ticaret Anonim Sirketi to pay Libya the amount of EUR 3,000;
 

Declares that, at the instance of the Court of Cassation's principal public prosecutor, this judgment shall be conveyed to be recorded in the margin or at the end of the judgment that has been quashed;
 

Thus rendered and decided by the Court of Cassation, First Civil Chamber, and delivered by the presiding judge at the Court's public hearing of October ninth, two thousand and twenty-four.