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10 April 2014
The interplay between arbitration and immunities is a hot topic in international arbitration that has caused rivers of ink to flow in the doctrine and jurisprudence of both Western and Middle Eastern countries. The issue of immunity – particularly the immunity from jurisdiction and subsequent execution granted as a privilege to international organisations and state bodies – is often raised in legal proceedings. This issue takes on particular relevance after the final award has been rendered in arbitral proceedings, with some international organisations pleading immunity from execution of awards rendered against them.
In Lebanon, the debate surrounding the immunity from execution granted to international organisations and state bodies recently gained further prominence following a landmark decision of the president of the Lebanese Execution Bureau.(1) In this decision, which related to a dispute arising from a lease agreement between a Lebanese religious entity and a UN international organisation, the bureau confirmed the arbitration-friendly stance of the Lebanese courts by ruling that an international organisation – which would ordinarily enjoy immunity from execution – could not avail of this privilege, since under the terms of the disputed contract, it was acting in its capacity as a private party to a private transaction unrelated to public service. The international organisation in question was therefore held not to be immune from the eventual execution of the arbitral award rendered against it.
The arbitral tribunal issued a partial award rejecting the international organisation's objection to jurisdiction on the grounds of immunity,(2) followed by a final award in favour of the Lebanese entity. According to the final award, the international organisation was, liable for outstanding rental dues according to the terms of the lease agreement between the two parties. An exequatur was granted and the international organisation was notified(3) of the execution order granted by the bureau.(4) Following the international organisation's continued non-payment of its obligations under the arbitral award, the bureau issued a seizure order for a sum of money kept by a third party (in this case, the Lebanese Ministry of Finance), which was due to be transferred to the international organisation.
The international organisation issued its response after the legal time limit had expired and by way of correspondence sent through the Ministry of Justice and Ministry of Foreign Affairs. The response outlined its position and requested the Ministry of Foreign Affairs to represent it during the court proceedings. The response also raised the argument of immunity from execution(5) as a defence for the non-payment of its obligations.
The bureau dismissed the international organisation's contentions on the grounds of form and substance. The bureau found that the procedure followed by the international organisation in presenting its defence was invalid, as it violated the applicable procedural laws in that the defence was not presented before the competent authority, but rather through the Ministry of Foreign Affairs on its behalf. In its reasoning to dismiss the action, the bureau noted the need to meet three pre-conditions (capacity, interest and valid representation) before filing a valid legal action, and stressed the independence of the judicial body and the principle of separation of powers which precludes any authority from intervening in the manner in which justice is served or dispensed by the judicial body.
Regarding the dismissal of the international organisation's response on the grounds of substance, the bureau explored the extent to which an international organisation can avail of immunity from execution. The bureau referred to the 1946 Convention on the Privileges and Immunities of the United Nations and Article 860 of the Code of Civil Procedure in its validation of the execution of the final award against the international organisation. The bureau's decision also referred to French legal doctrine(6) and French Court of Cassation decisions,(7) as well as received Lebanese legal doctrine,(8) which considers that an international organisation's agreement to resolve its disputes through arbitration equates to the waiver of its rights to jurisdictional or executional immunity, since it signals a valid submission to arbitral jurisdiction, thus reflecting the binding nature of the arbitration agreement and that organisation's agreement to the execution of the subsequent arbitral award, even if that award is not in the organisation's favour.
Given that the dispute had arisen out of an agreement to lease a property for a limited period in exchange for rent – and that the agreement was therefore a transaction between a lessor and a lessee – the bureau held that the dispute and ensuing arbitration were governed by private law. As such, pursuant to Article 860 of the Code of Civil Procedure, the international organisation was precluded from enjoying the immunity from execution that would have been available to it had it been acting in a public service capacity. The bureau further held that the sum awarded against the international organisation would in no way negatively affect the proper performance of its public services(9) or obstruct the performance of its diplomatic work. The award in question therefore related to a civil relationship governed by private law, thereby precluding the international organisation from pleading immunity from execution when acting in a commercial capacity.
The Executive Bureau's decision is a welcome one, reflecting the positive, arbitration-friendly stance found not only in Lebanese legal doctrine, but also in the rulings of the country's judiciary.
For further information on this topic please contact Zeina Obeid at Obeid Law Firm by telephone (+961 1 39 39 06), fax (+961 1 39 39 06 Ext 5) or email (email@example.com). The Obeid Law Firm can be accessed at www.obeidlawfirm.com.
(1) Lebanese Execution Bureau decision dated July 18 2013.
(2) The arbitral tribunal rejected the objection to jurisdiction on the basis of, among other things, Article 2(2) of the 1946 Convention on the Privileges and Immunities of the United Nations, considering that the conclusion of an arbitration agreement by an international organisation implies a waiver of its right to immunity from jurisdiction. See also Sami Mansour, "Arbitration in rental agreement concluded with an international organization", Lebanese Arab and International Arbitration Review 34, p 19; Nasri Diab, "Immunité de jurisdiction, droit fondamental d'accès à la justice et arbitrage", Lebanese judicial gazette 2005, p 170; Fouchard Gaillard and Goldman, Traité de l'Arbitrage, Litec and Delta 1996, p 404, no 641; Craig, Oark and Paulsson, International Chamber of Commerce Arbitration, Oceana Publications 2000, p 122.
(3) The international organisation was notified of the execution order on March 23 2010.
(4) Lebanese Execution Bureau decision dated March 2 2010.
(5) Correspondence dated May 28 2013 and June 5 2013.
(6) Revue critique de droit international privé 2006, p 123.
(7) Court of Cassation, First Civil Division, January 25 2005, République Démocratique du Congo v Syndicat des propriétaires de l'immeuble Résidence Antony Chatenay, D 2005, p 616, concl J Sainte-Rose.
(8) Marwan Karkabi, "Immunity and arbitration", Journal of Arab International Arbitration vol 16, 2012, p 174.
(9) Paris Court of Appeal, August 10 2000, Fédération de Russie v la société NOGA, which held that in light of the principle of permanence of public service, the money could not be seized where it relates to the proper performance of the public service.
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