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State of Libya v. Sorelec

Paris Court of Appeal, Judgement of 17 November 2020, N° 18/02568

Anna Cohen Zeller

Student at the Université Paris 1 Panthéon-Sorbonne

By a judgment of 17 November 2020, the Paris Court of Appeal set aside a consent award issued against the State of Libya. The Court found that the underlying settlement was tainted by corruption and thus violated international public policy. The judgment is part of a rich body of case law developed by the Paris Court of Appeal in recent years as a result of the proliferation of corruption cases, in which it has clarified the standard, burden and methods of proof.

Background of the case

In 1979, the French company Sorelec and a Libyan State entity entered into a contract to build education and housing units in Libya. In the mid-1980s, disputes arose over the performance of the contract, ultimately leading to the conclusion of several agreements, including one in 2003 confirming Sorelec’s claim against the Libyan State entity. A dispute then arose in relation to the enforcement of the 2003 agreement and Sorelec started ICC arbitration proceedings in 2013 based on the 2004 Franco-Libyan bilateral investment treaty.

During the arbitration proceedings, the State of Libya, represented by its Minister of Justice, and Sorelec came to a final settlement agreement and requested that the tribunal issue a consent award reflecting the settlement terms. Under the settlement agreement, the State of Libya undertook to pay Sorelec EUR 230 million within forty-five days of the notification of the award. The settlement agreement further provided that in the event of failure to pay within the given timeframe, the arbitral tribunal would issue a final award ordering Libya to pay EUR 452 million. By a partial award of 20 December 2017, the arbitral tribunal confirmed the terms of the settlement agreement. Upon Libya’s failure to pay the sum in the provided timeframe, the arbitral tribunal ultimately rendered a final award on 10 April 2018 ordering the defendant to pay EUR 452 million.

The awards were the subject of two actions for annulment brought by Libya. The Paris Court of Appeal annulled the partial award, concluding that it was contrary to international public policy. In a second decision issued on the same day, the Paris Court of Appeal determined that the annulment of the partial award necessarily implied the annulment of the final award.[1] The Paris Court of Appeal considered that there were “compelling indications” that the settlement agreement entered into by the Libyan State through its Minister of Justice was tainted by corruption, justifying the annulment of the award.

The Court’s “red flags” assessment of corruption

As a starting point, the Court of Appeal recalled its established standard of review of allegations of corruption in enforcement and annulment proceedings:

where it is alleged that an award gives effect to a contract obtained by corruption, it is for the annulment judge seized of an appeal based on Article 1520 5° of the Code of [French] Civil Procedure, to seek in law and in fact all the elements enabling it to rule on the alleged unlawfulness of the contract and to assess whether the recognition or enforcement of the award manifestly, effectively and concretely violates international public policy.”

The Court then considered “in all the facts submitted to it, evidence of such a nature as to characterize the unlawfulness of the settlement” by applying the so- called “red flags” method. Put differently, the Court looked for circumstantial evidence (“red flags”) from which one may infer corruption. The Court went on to consider four such red flags.

First, the Court focused on the political situation in Libya – a factor which it had already considered in its earlier Alstom decision.[2] The Court noted that the Libyan Audit Bureau itself recognized that the level of corruption of Libyan public officials was extremely high and that the civil war at the time of the conclusion of the settlement only reinforced the prevailing government instability and risks of corruption.

Second, the Court assessed the Minister of Justice’s failure to comply with the normal procedure for the conclusion of the settlement. The Minister of Justice should have requested an advisory opinion from Libya’s Litigation Department before signing the settlement. The Court also took note of an UNCITRAL award holding that the same Minister of Justice had engaged in corrupt practices.[3]

Third, the Court considered the very short period of time in which the settlement had been concluded as well as the absence of any evidence of the negotiations. The Court noted that the absence of details and documents relating to the alleged negotiations was not compatible with an earnest negotiation process and was thus further evidence of corruption. Importantly, the Court reversed the burden of proof: it noted that since Libya could not provide evidence to support its argument of absence of earnest negotiations, Sorelec was to provide evidence that there had been real and earnest negotiations, which Sorelec failed to do.

Finally, the Court examined the content of the settlement agreement and noted that it was entirely drafted in Sorelec’s favor and without Sorelec providing any consideration towards the State. The Court held that in light of Libya’s economic situation at the time of the conclusion of the settlement, the settlement was “manifestly damaging to the interests of the State” and could only have been caused through corruption by Sorelec.

No waiver of the public policy defense

Taken together, the four red flags indicated the existence of corruption with the effect that the awards were annulled based on a breach of international public policy.

Importantly, the Court found that Libya was not precluded from raising the breach of public policy. The Court found that “compliance with the French concept of international public policy implies that the annulment judge may assess the plea alleging a breach of international public policy even though it has not been invoked before the arbitrators”.

Furthermore, according to the Paris Court of Appeal, the fact that the parties had not referred the matter to a criminal court did not deprive the State of Libya of the right to seek annulment of the award, either. This demonstrates the weight accorded by the French judge to French international public policy.

The implications of the Sorelec decision

While the outcome of the decision marks a further step in the fight against corruption, the consequences of the annulment decision appear to be to some extent unsatisfactory. After all, the State of Libya obtained the annulment of an award that is unfavorable to it for a corrupt practice for which it is responsible.

The Paris Court of Appeal’s decision nevertheless constitutes a warning to tribunals that there is a very strong remedy against awards giving effect to contracts tainted by corruption if they do not sufficiently react to such practices, i.e. the annulment of the award.

The Paris Court of Appeal’s decision also reflects the paradigm shift of the way corruption is treated by tribunals and courts. As Professor E. Gaillard recalls, corruption used to be perceived as an inevitable evil in international trade and necessitated a high standard of proof to be established.[4] Today, French case law considers that the red flags method may be sufficient to prove an act of corruption and this method seems ever more appropriate when arbitral tribunals ignore unlawful activities.


[1] Paris Court of Appeal, 17 November 2020, n° 18/07347.

[2] Paris Court of Appeal, 28 May 2019, Alstom, n° 16/1118.

[3] Slim Ben Mokhtar Ghenia v. Libya, Decision overturning the Consent Award of 24 May 2019.

[4] E. Gaillard, Journal du droit international (Clunet) n° 4, October 2017, 20.


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