Procedural Background and Admissibility

This Final Award, rendered by Sole Arbitrator Bassam Mirza in ICC Case No. 26290/AYZ/ELU, resolves a dispute between Cardno ME Limited (Claimant) and the Central Bank of Iraq (Respondent) concerning a consultancy agreement for the construction of the Respondent's new headquarters in Baghdad. The Respondent did not participate in the proceedings until after they were declared closed, at which point its application to introduce new submissions on alleged fraud was rejected as inadmissible.

A key preliminary issue was the admissibility of the claims due to the Claimant's non-compliance with a multi-tiered dispute resolution clause requiring mediation as a pre-arbitral step. The tribunal, applying French law as the law of the seat of arbitration (Paris), characterized the issue as one of admissibility rather than jurisdiction. The tribunal held that the claims were admissible, finding that the futility exception applied. It reasoned that the Respondent's complete failure to engage with the Claimant's attempts at amicable resolution, culminating in the arrest and imprisonment of the Claimant's employees at the Respondent's instigation during a settlement meeting, destroyed any reasonable prospect of a successful mediation and excused the Claimant from exhausting this step.

Tribunal's Findings on the Merits

On the merits, the tribunal found that the Respondent breached its payment obligations under the Consultancy Agreement, which was governed by Iraqi law. The tribunal determined that the Respondent failed to pay seven outstanding invoices (Nos. 33-39) totaling USD 5,847,530 without providing a valid contestation within the contractually stipulated timeframe. The tribunal rejected the Respondent's eventual justification that it could not process soft-copy invoices, applying the principles of good faith and estoppel under Iraqi law, as the Respondent had previously accepted and paid numerous invoices submitted electronically without objection.

The tribunal concluded that the Respondent's persistent non-payment constituted a fundamental breach that justified the Claimant's suspension of services and subsequent demobilization. Consequently, the Claimant was wrongfully deprived of the remaining value of the agreement. The tribunal also found that the Respondent's call on the performance bond (a bank guarantee issued by the Trade Bank of Iraq) was wrongful, as the Claimant had not breached its contractual obligations.

Relief, Damages, and Costs

The tribunal ordered the Respondent to pay the Claimant the full amount of the outstanding invoices (USD 5,847,530). For the deprivation of the remaining value of the contract, the tribunal awarded damages of USD 4,342,924.15, calculated pursuant to Article 169 of the Iraqi Civil Code. This figure represented the expected revenue for the remainder of the contract term, less the costs the Claimant saved by not having to complete the work.

Regarding the performance bond, the tribunal ordered the Respondent to take all necessary steps to release the bank guarantee. It also awarded the Claimant USD 14,506 for the legal costs incurred in successfully obtaining an attachment order in the Dubai courts to block the wrongful call on the guarantee. The tribunal awarded simple interest at 5% per annum on all monetary sums from specified dates until full payment.

Applying the principle that costs follow the event, and in light of the Respondent's non-participation and the Claimant's success on all claims, the tribunal ordered the Respondent to bear 100% of the ICC arbitration costs and to reimburse the Claimant for 100% of its legal and other costs incurred in the arbitration, amounting to USD 947,763.56.