Paris Court of Appeal upholds arbitral award that neutralised effects of corruption

The ruling (division 5, chamber 16, no. 23/16145) relates to a dispute involving Averda Gabon, a local subsidiary of a waste management company headquartered in Dubai that was contracted in 2014 by Gabon’s government to provide waste management and street cleaning services in the Gabonese capital, Libreville. Part of the service was later subcontracted to Clean Africa, another Gabonese company

In 2019, Averda suspended its services due to alleged payment delays and initiated arbitral proceedings against the government under the ICC Rules, seeking recovery of approximately $34 million in unpaid invoices. In August 2023, the tribunal found evidence of corruption but declined to retroactively annul the contracts. Instead, it issued an award ordering the Gabonese government and municipalities to pay Averda $34 million, reduced by 35% to neutralise the effects of the corruption.

The Gabonese entities sought annulment under article 1520(5) of the French Code of Civil Procedures (CPC), arguing that the recognition of the award would violate French international public policy by giving effect to contracts tainted by corruption by Gabonese public officials.

The Court of Appeal refused to set aside the ICC award, stating that the tribunal neutralised the effects of the corruption, which in this case included overbilling, bribe of a public Gabonese official, the concealment of accounting and other financial information related to the services provided under the contracts. This corruption did not affect the conclusion of the contracts but instead tainted their enforcement, so the contracts, and the award, could be allowed to stand.

In its reasoning, the Court of Appeal confirmed that the tribunal successfully avoided any breach of international public policy as it applied a strict methodology to exclude benefits derived from the corruption, resulting in a 35% reduction in the final award of the total amounts Averda claimed in the arbitration, as proposed by the Gabonese government’s own expert. The court also noted that only the services performed were considered in calculating the amounts due and finally ordered the government and two Gabonese municipalities to pay €100,000 to Averda Gabon in legal costs.

Commenting on the decision, William Brillat-Capello, international commercial arbitration expert at Pinsent Masons, said: “Contrary to the usual situation before the court, the existence of corruption was not disputed by either party. The debate focused instead on its consequences and on whether the arbitral tribunal could render an award despite such corruption.”

The court also took the opportunity to confirm that its role was “not to adjudicate the underlying contract but to ensure that recognition and enforcement in France do not violate French international public policy, which includes the prohibition of corruption,” added Brillat-Capello. “It examined the tribunal’s reasoning and noted that the corruption that was alleged did not concern the conclusion of the contract, but its performance. The court accepted that the tribunal had neutralised the effects of the corrupt acts when determining the amount of compensation awarded to Averda Gabon. Accordingly, the court held that the award did not give effect to acts of corruption, as the tribunal had taken those facts into account to eliminate their impact.”

The court’s approach in this case is consistent with its established position that the prohibition of corruption is a matter of international public policy and that judicial review aims to prevent enforcement of awards that allow a party to benefit from criminal conduct.