Arab Organization for Industrialization v Westland Helicopters Ltd

JurisdictionSuiza
CourtFederal Supreme Court (Switzerland)
Switzerland, Court of Justice of Geneva.
Federal Supreme Court (First Civil Court).

(Raschein J., Chairman; Leu and Bourgknecht JJ.)

Arab Organization for Industrialization, Arab British Helicopter Company and Arab Rapublic of Egypt
and
Westland Helicopters Ltd, United Arab Emirates, Kingdom of Saudi Arabia and State of Qatar1

International organizations Personality Concept of international legal personality Organization's legal status not dependent upon law of State in which it has its seat Limited nature of personality Whether member States of organization liable for obligations incurred by organization Constituent instruments of organization Inference to be drawn from silence of constituent instruments regarding liability of members Arbitration clause in contract concluded by organization Whether binding upon member States

State immunity Jurisdictional immunity Arbitration proceedings Proceedings instituted against member State in respect of obligations of international organization Whether State immune Whether constitution of organization amounting to waiver of immunity The law of Switzerland

Summary: The facts:In 1980 Westland Helicopters Ltd filed a Request for Arbitration with the International Chamber of Commerce. The respondents were the Arab Organization for Industrialization (AOI), the United Arab Emirates, the Kingdom of Saudi Arabia, the State of Qatar, the Arab Republic of Egypt (ARE) and the Arab British Helicopter Company (ABH). The facts are set out at p. 596 above. The Court of Arbitration of the International Chamber of Commerce appointed an Arbitral Tribunal, which met in Geneva. By an Order dated 8 June 1982,2 signed by the Chairman of the Arbitral Tribunal, the Tribunal decided that the first respondent was the AOI in Riyadh and that the Egyptian AOI with its office in Cairo (EAOI) was not a party to the proceedings. On 5 March 1984 the Arbitral Tribunal rendered an interim award3 in which it decided that it had jurisdiction in respect of all six respondents. ARE and ABH sought the annulment of the interim award of 5 March 1984.

Previous Proceedings before the Swiss Courts

In December 1980 ARE had filed a petition with the Court of Justice of Geneva for the annulment of the arbitration proceedings. This petition was rejected by the Court of Justice on 26 November 19824 and, on appeal, by the Federal Tribunal on 16 May 1983.5 The Federal Supreme Court held that there was a prima facie agreement to arbitrate.

On 12 October 1984 the Court of Justice of Geneva annulled the Order of 8 June 1982 on the ground that it was a partial award which did not state the grounds on which it had been made and which had not been signed by all the arbitrators. The Court referred the matter back to the Arbitral Tribunal. A public law recourse against this decision was rejected by the Federal Supreme Court on 8 January 1985. On 25 July 1985 the Tribunal issued a fresh interim award confirming the substance of the Order of 8 June 1982.6

ARE, EAOI and ABH then applied to the Swiss courts for the removal of the arbitrators. On 10 September 1985 the Federal Supreme Court held that, under Article 3 of the Intercantonal Arbitration Concordat, the Court had jurisdiction to decide on challenges directed against arbitrators.7 In a judgment of 6 February 1986, the Court of Justice of Geneva held that the applications for removal of the arbitrators were well-founded. On the same date the Court of Justice annulled the interim award of 5 March 1984 on account of the removal of the arbitrators. However, both decisions were reversed by the Federal Supreme Court in judgments of 24 September 19868

and 19 December 1986 on grounds based upon the provisions of the Concordat
The Present Proceedings

In the present proceedings, the ARE, ABH and the AOI sought the annulment of the interim award of 5 March 1984 in which the Tribunal had held that it had jurisdiction in respect of all the respondents. The United Arab Emirates, the Kingdom of Saudi Arabia and the State of Qatar were summoned but did not appear in the proceedings.

Held (by the Court of Justice of Geneva):(1) The appeals submitted by the AOI and ABH were without foundation (pp. 6401).

(2) The interim award of 5 March 1984 was annulled in so far as the Arbitral Tribunal had declared itself competent in respect of the ARE. The Tribunal's decision that the arbitration clause in the Shareholders' Agreement was binding upon the four States, because AOI was substantially indistinguishable from them, was wrong. The AOI had legal personality in public international law and should not have been assimilated to a general partnership under municipal law. The Arbitral Tribunal did not have jurisdiction over the States unless the States had given their agreement to that jurisdiction. The arbitration clause concluded by AOI with Westland did not amount to such agreement and was not a waiver of immunity on the part of the States (pp. 6418).

(3) However, in the absence of an appeal by the United Arab Emirates, the Kingdom of Saudi Arabia and the State of Qatar, the award had to be regarded as valid as against those States (p. 647).

In a decision given on the same day the Court of Justice rejected appeals against the validity of the award of 25 July 1985.9

Westland appealed to the Federal Supreme Court against the decision in respect of ARE. AOI and ABH appealed against the dismissal of their appeals by the Court of Justice.

Held (by the Federal Supreme Court):The appeals were dismissed.

(1) The AOI was an international legal person distinct from its members and enjoying a considerable measure of independence. It followed that the four Member States were not bound by the arbitration clause in the contract concluded between AOI and Westland (pp. 65761).

(2) The other appeals were without foundation (pp. 6615).

The text of the judgment of the Federal Supreme Court commences on p. 652. The text of the judgment of the Court of Justice commences on the opposite page.10

Facts

A. On 29 April 1975, the President of the State of the United Arab Emirates, the King of Saudi Arabia, the Prince of the State of Qatar and the President of the Arab Republic of Egypt signed an Establishment Convention for the Arab Organization for Industrialization (AOI), an organization endowed with legal personality, exempt from the laws and institutions of the Member States, with its head office in Cairo and a capital of $1040m. This Convention provides that the Organization will be legally established on signature of its Basic Statute by the Higher Committee composed of the responsible ministers from the Member States.

This Statute, which was approved and promulgated on 17 August 1975, provides in particular as follows:

The original members of the Organization are the four signatory States to the Establishment Convention (Article 3);

The Organization has legal personality, legal capacity and the right to enter into contracts and take part in litigation (Article 5);

Its head office is in Cairo, with the possibility of offices being established either in the territory of the Member States or elsewhere (Article 6);

The Organization is exempt from the laws and internal systems of the Member States and its property may not be the subject of nationalization, confiscation, sequestration, requisition nor expropriation (Article 9);

The Organization has as an objective the establishment of an Arab industrial military base (Article 12);

The Organization's capital is contributed by the Member States in equal shares (Article 17);

Its principal organs are the Higher Committee, composed of the responsible ministers from each of the founding States, the Board of Directors and the Executive Organ (Articles 22, 23 ff., 29 ff., 39 ff.).

Article 54 reads as follows:

B. On 23 July 1977, the Higher Committee decided to give its agreement to the establishment in particular of a joint venture agreement for the manufacture of helicopters with the British company, Westland (Exhibit 6, WHL).

In this connection, a Memorandum of Understanding (MOU) was signed in Cairo between the Government of Great Britain and the Higher Committee of the AOI. This agreement was for the purpose of translating into concrete terms the British Government's assistance in ensuring the success of the projects of the four founding States making up the AOI, which States comprise the Arab Organization for Industrialization (Exhibit 8, Section 1, WHL). Under Section 9 of this document, the Government of the United Kingdom and the Governments of the Member States of the AOI undertook not to disclose to third parties information obtained in consequence of contracts signed with British suppliers.

On 27 February 1978 the AOI and the British company, Westland Helicopters Ltd (WHL), signed a Shareholders' Agreement which, in response to the AOI's wish to manufacture Lynx helicopters in Egypt, was to establish a Joint Company in Egypt between the Parties, for the manufacture, assembly and sale of the said helicopters.

Article 12 of this Agreement reads as follows:

On the same day, WHL concluded a contract with the Egyptian company, created the previous year, called the Arab British Helicopter Company (ABH). This document included an arbitration clause similar to the one quoted above.

C. On 14 May 1979, after the Arab Republic of Egypt (ARE) had signed an agreement with the State of Israel putting an end to the hostilities between these two countries, Saudi Arabia, the United Arab Emirates and the State of Qatar decided to terminate the existence of the AOI with effect from 1 July 1979 and to set up a committee of the four countries to liquidate the Organization. It does not seem however that this committee was established or has functioned.

In fact, regarding the unilateral decision to terminate the existence of the AOI as being without foundation or legal validity, the ARE on 18 May 1979 promulgated a Decree Law providing that the AOI remained in being, that it would continue its activities...

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