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Agreement is merely recognizing the facts that (i) the Centre may refuse registration of a request for arbitration under Article 36(3) of the Convention and ICSID Institution Rule 6(1)(b); and (ii) an ICSID tribunal can make a finding of absence of jurisdiction under Article 40(1) of the ICSID Convention and ICSID Arbitration Rule 41.
266. In conclusion, the Tribunal reiterates its findings that Clause 40.3(a) of the Facility Agreement is a valid arbitration clause by which the parties to the Facility Agreement provide advance consent to ICSID arbitration of qualifying disputes. The consent in that Clause is not, as argued by the Respondents, conditional “upon the Centre determining its competence as to jurisdiction” or “upon determination of the issue of jurisdiction by the Tribunal.”205 Thus, BSS consented to ICSID arbitration when it executed the Facility Agreement.
267. The Tribunal rejects any notion that the ICSID and LCIA options are alternative options. The Tribunal equally rejects any contention that the consent to ICSID arbitration under Clause 40.3(a) of the Facility Agreement is limited in scope to a determination on jurisdiction as the Respondents would appear to suggest.
(ii) Approval of Consent to Arbitration
268. Having thus found that the Second Respondent consented in writing to submit the present dispute to ICSID arbitration, the Tribunal must now determine whether such consent of the Second Respondent was approved by the Government in the event that the State not notified ICSID that no such approval is required, as required under Article 25(3) of the ICSID Convention which provides:
Consent by a constituent subdivision or agency of a Contracting State shall require the approval of that State unless that State notifies the Centre that no such approval is required.
269. For purposes of Article 25(3) of the ICSID Convention, therefore, there must be a showing of approval by the State of the consent which BSS has been found to have provided in Clause 40.3(a) of the Facility Agreement. It is not in dispute that there has been no
205 Resp. C-Mem., paras. 54-55. ↩
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notification to the Centre of approval by the State of the consent to ICSID arbitration provided by BSS in Clause 40.3(a) of the Facility Agreement. It is also not in dispute that South Sudan has not notified the Centre that approval of consent provided by BSS is not required. The Tribunal must therefore determine whether there has been such approval of consent in this case in the absence of any direct notification of approval or communication of waiver of its requirement.
270. The Tribunal accepts that the requirement of the approval of consent serves a gate keeping function by ensuring that the State maintains control over which of its constituent subdivisions or agencies are permitted to have access to ICSID arbitration.206
271. The Tribunal also recognizes that approval is a unilateral act of the State which, although advisable, need not be communicated to be valid.207 The Convention does not specify any particular form for the approval of consent, thus, approval could exist even when not specifically expressed—and can be inferred from actions of the State. For example, in Noble Energy v. Ecuador, the tribunal found that consent to ICSID arbitration was “satisfactorily approved by the State” when the concession contract in issue was signed by the then President of Ecuador as witness of honour (“Testigo de honor”).208
272. In the present case, the Tribunal finds that both the Government and BSS provided consent to ICSID arbitration when they executed the Facility Agreement. By providing consent to ICSID arbitration in Clause 40.3 alongside BSS, the Government also approved the consent that BSS provided in that clause. The Tribunal finds it difficult to contemplate that in a situation such as the present, the Government could be taken as not having approved the consent provided by BSS.
206 See C. Schreuer, S. Schill and A. Sinclair, “Article 25,” in The ICSID Convention: A Commentary (Cambridge University Press, 2022), para. 1451; see also CL-0006, Niko v. Bangladesh, para. 324. ↩
207 See C. Schreuer, S. Schill and A. Sinclair, “Article 25,” in The ICSID Convention: A Commentary (Cambridge University Press, 2022), para. 1457. ↩
208 CL-0007, Noble Energy v. Ecuador, paras. 179-182. ↩
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273. [Redacted]209
a. [Redacted]210
b. [Redacted]211
c. [Redacted]212 and
d. [Redacted]213
274. In these acts of approval of the Facility Agreement, there was no reservation relating to the consent to ICSID arbitration provided by the Bank of South Sudan in Clause 40.3(a). There is, thus, no basis on which to conclude that the Government was in any way opposed to the provision of that consent. Beyond that, it can only be concluded that the Government by approving the Facility Agreement, [Redacted], naturally approved every provision in it, including the clause in which the Second Respondent consented to ICSID arbitration.
275. Indeed, it would be illogical to conclude, in the circumstances, that a government that provided consent jointly with its agency did not approve of that consent provided by the agency. Not only is there no text in the instrument itself to support such a conclusion, but there is also no indication in any of the instruments by which the Facility Agreement was approved by [Redacted]
209 Included among the nine “Authorising documentation” listed in Schedule 2 to the Facility Agreement as “Conditions Precedent” are approving Resolutions of the National Assembly and of the Council of Ministers. ↩
210 See Cl. Reply, fn. 350, referring to C-0052, [Redacted] ↩
211 See Cl. Reply, fn. 348, referring to C-0053, [Redacted] ↩
212 See Cl. Reply, fn. 349, referring to C-0054, [Redacted], see C-0051, [Redacted] ↩
213 See Cl. Reply, fn. 347, referring to C-0055, [Redacted]; C-0056, [Redacted] ↩
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[Redacted] to suggest that there was any intention for the approval of the Facility Agreement to exclude the consent to arbitration in Clause 40.3. To conclude differently would make the relevant provisions in the Facility Agreement meaningless, while calling into question the good faith of the Government in concluding the Facility Agreement.
276. The need for agreements such as the Facility Agreement to be approved by different arms of Government at very senior levels, highlight the importance that the Government ascribes to such an agreement, and safeguards against the Government assuming obligations that were not intended. The Tribunal must therefore ascribe to the fact of those approvals the seriousness that they imply. Indeed, if any of those approvals had contained a reservation or carveout on any of the provisions in the Facility Agreement, the Tribunal would have no option but to take that into consideration in interpreting the Facility Agreement.
d. Conclusion
277. From the foregoing, the Tribunal makes the following conclusions with respect to the second objection to jurisdiction.
a. South Sudan, through the act of entering into the Facility Agreement which contains consent to ICSID arbitration, alongside the Bank of South Sudan, identified the Bank of South Sudan as eligible to be a party to arbitration under the ICSID Convention. Such act, for this Tribunal, constitutes designation for purposes of Article 25(1) of the ICSID Convention.
b. As recognized by other tribunals, the designation is no less valid for not having been expressly communicated by the Government to the Centre. ICSID in its published list of designated entities recognizes that there may be designations that may not have been communicated to the Centre by the State. The designation in this case was properly communicated to the Centre by the Claimant, pursuant to ICSID Institutional Rule 2.
c. The Bank of South Sudan provided consent in writing to ICSID arbitration under Clause 40.3(a) of the Facility Agreement. The consent to LCIA arbitration in
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Clause 40.3(b) does not in any way invalidate the consent provided in Clause 40.3(a). Rather, it confirms that the contracting parties have agreed to first take disputes under the Facility Agreement to ICSID.
d. South Sudan, through the actions of executing the Facility Agreement without reservation, approved the consent to ICSID arbitration provided by the Bank of South Sudan in Clause 40.3(a). This is buttressed by the fact that Facility Agreement also went through several governmental approvals, without reservations on the ICSID arbitration clause.
278. These conclusions are drawn from the Tribunal’s interpretation of Clauses 40.3(a) and (b) of the Facility Agreement in the light of the object and purpose of the Agreement.
279. The Tribunal, therefore, finds that the Second Respondent is subject to the jurisdiction of ICSID and of this Tribunal and rejects the second objection to jurisdiction.
280. [Redacted]214 [Redacted]215
214 C-0001, Facility Agreement, Clause 6(a). ↩
215 Cl. Reply, paras. 196-200. ↩
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281. [Redacted]216
282. [Redacted]217
283. [Redacted]218
216 Cl. Reply, para. 202. ↩
217 Cl. Mem., para. 118; Cl. Reply, para. 205. ↩
218 Cl. Reply, paras. 206-209. ↩
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[Redacted]
284. [Redacted]219
285. [Redacted]220
286. [Redacted]221
287. [Redacted]222
219 Cl. Reply, para. 214. ↩
220 Cl. Reply, paras. 215 et seq. ↩
221 Cl. Reply WR, para. 13. ↩
222 Cl. Reply WR, paras. 13-14, referring to, inter alia, CL-0106, International Finance Corporation v. Punj Lloyd Limited and Punj Lloyd Upstream Limited, England and Wales High Court (Queen’s Bench Division, Commercial Court), Judgment, 6 May 2016 (“International Finance Corporation v. Punj Lloyd Limited”), paras. 3, 12. ↩
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[Redacted]
288. [Redacted]223 [Redacted]224 [Redacted]225 [Redacted]226
289. [Redacted]227 [Redacted]228
223 Cl. Reply WR, paras. 16-18. ↩
224 Cl. Reply WR, para. 19. ↩
225 Cl. Reply WR, paras. 20-22. ↩
226 Cl. Reply WR, para. 24, citing CL-0114, [Redacted] ↩
227 Resp. C-Mem., paras. 109 et seq. ↩
228 Resp. C-Mem., para. 109. ↩
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[Redacted]
290. [Redacted]229 [Redacted]230 [Redacted]231 [Redacted]232
229 Resp. C-Mem., paras. 110-115, [Redacted] ↩
230 Resp. C-Mem., para. 118. ↩
231 Resp. C-Mem., paras. 120-122. ↩
232 Resp. C-Mem., para. 123. ↩
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[Redacted]
291. [Redacted]233 [Redacted]234
292. [Redacted]235 [Redacted]236 [Redacted]237
293. [Redacted]238
233 See Tr. Day 2, 41:2-16 (Testimony of [Redacted]); Tr. Day 3, 78:6-79:9 (Respondents’ Closing Statement). ↩
234 Letter from the Tribunal to the Parties, 20 January 2023. ↩
235 Resp. WR, paras. 1.1.-1.2. By this statement, the Respondents will appear to accept that there was indeed a breach of the Facility Agreement, which in earlier submissions they had denied. ↩
236 Resp. WR, para. 1.2. ↩
237 Resp. WR, para. 1.3. ↩
238 Resp. WR, para. 1.7. ↩
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294. [Redacted]239
295. [Redacted]240
296. South Sudan’s repayment obligations under the Facility Agreement are stated in the Amended Repayment Schedule as follows: [Redacted]241 In Clause 17.1 of the Facility Agreement, the Second Respondent “irrevocably and unconditionally” guarantees punctual performance by South Sudan of its obligations under the Agreement; and undertakes immediately on demand to pay any amount that is due under the Agreement and not paid by the Government.
297. The Claimant alleges a breach of the Facility Agreement through, particularly, the non-repayment of the Loan by the Respondents on the agreed schedule. The Respondents
239 Resp. WR, paras. 1.4-1.6; CL-0102, Lombard North Central plc v. European Skyjets Ltd (in liquidation) and others, England and Wales High Court (Queen’s Bench Division), Judgment, 30 March 2022 (“Lombard v. European Skyjets”). ↩
240 Resp. WR, paras. 1.8-1.13. ↩
241 C-0004-R, Addendum No. 1 to the Facility Agreement, 30 November 2018. ↩
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do not deny that the Loan had not been repaid.242 However, they offer reasons for the non-repayment and, for most of the proceeding, maintained that the Facility Agreement had not been breached. The Claimant also alleges breaches of Clause 11.1 for non-payment of the Management Fee, and of Clause 20.7 for not maintaining a certain balance in the Proceeds Account.243 This is not disputed nor specifically argued by the Respondents.
298. Another point of contention, albeit belatedly raised,244 is whether by having received, and or continuing to receive, partial payment after invoking the Acceleration Clause, the Claimant retained its right to full immediate payment under that Clause. In other words, whether the Claimant waived its right to immediate full repayment of the outstanding loan amount when, after its demand for such, it did not oppose the coming into effect of the Off-take Arrangement, and in fact proceeded to accept repayments by instalments from the proceeds of the Off-take Agreement, which was provided for in the Facility Agreement.
299. In their post-Hearing submissions elaborating on the Claimant’s alleged loss of its rights under the Acceleration Clause, the Respondents state that “[t]he question [...] is whether at the time the letter notifying the Respondents of the activation of the acceleration clause, there was an ongoing event of default in accordance with Clause 21 of the Facility Agreement. It is the Respondents’ contention that this is not in dispute. What we dispute is whether the conduct of the [Claimant] was consistent with a cancellation of the [A]greement and an acceleration of repayment obligations.”245
300. Having not been presented in the alternative, this argument could be considered to constitute a late-in-the-day withdrawal of the Respondents’ initial position that the Facility Agreement had not been breached. Nevertheless, given that the Respondents had not clearly withdrawn or retracted that initial defence and its supporting arguments, the
242 See Tr. Day 1, 161:3-163:5 (Testimony of [Redacted]). ↩
243 As explained by the Claimant, “[t]o facilitate the repayment of the amounts owing under the Facility Agreement, clause 20.7 contains provisions on the accounts to be maintained with QNB by BSS on behalf of South Sudan. These are a ‘Consolidated Fund Account’ [...] and a ‘Proceeds Account:” see Cl. Mem., para. 63. ↩
244 See Resp. WR, para. 6; Cl. Reply WR, para. 10. ↩
245 Resp. WR, paras. 1.1.-1.2. ↩
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Tribunal considers it necessary to still determine whether the Facility Agreement has been breached.
301. Generally, therefore, the issues to be determined by the Tribunal are, first, whether there has been a breach of the Facility Agreement. If a breach is found to have occurred, the Tribunal must determine whether the entire outstanding amount of the loan is immediately payable in full, by virtue of the application of the Acceleration Clause and the subsequent entering into force of the Off-take Agreement.
(1) Breach of Contract
302. Among the different events or circumstances set out in Clause 21 of the Facility Agreement to be an “Event of Default” is “Non-payment” which is described as follows:
An Obligor does not pay on the due date any amount payable pursuant to a Finance Document in the manner and place and in the currency in which it is expressed to be payable, unless:
(a) its failure to pay is caused by:
(i) administrative or technical error; or
(ii) a Disruption Event; and
(b) payment is made within three Business Days of its due date.246
303. The effect of that Clause is that a breach of the Facility Agreement occurs if due payment is not made when and how provided for in the Agreement, unless such failure is caused either by administrative or technical error or by a Disruption Event. Those reasons can only delay payment for three business days, in any event.
304. The phrase “administrative or technical error” is self-explanatory and “Disruption Event” is defined in Clause 1.1 as:
(a) a material disruption to the payment or communications systems or to the financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for
246 C-0001, Facility Agreement, Clause 21.2. ↩
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transactions contemplated by the Finance Documents to be carried out), provided that the disruption is not caused by, and is beyond the control of, any of the Parties; or
(b) the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:
(i) from performing its payment obligations under the Finance Documents; or
(ii) from communicating with other Parties in accordance with the terms of the Finance Documents,
and which (in either case) is not caused by, and is beyond the control of, the Party whose operations are disrupted.247
305. The Respondents failed to pay the first and subsequent instalments due from 31 March 2019, pursuant to the Amended Repayment Schedule. The Claimant, by a series of letters initially to the Government and later to BSS, starting from 26 July 2019, declared a default under Clause 21.16 of the Facility Agreement and requested immediate repayment of the entire outstanding amount due under the Agreement.248
306. The Respondents, while not denying that they had defaulted in payment,249 did not initially accept that they breached the Facility Agreement, citing as reasons for non-repayment, the fact that the funds had been utilized for their intended purpose, and not misappropriated;250 economic hardship resulting from natural disasters and political instability;251 and that
247 C-0001, Facility Agreement, Clause 1.1. ↩
248 C-0007, Letter from QNB to the Ministry of Finance and Planning (with BSS in copy), 16 July 2019; C-0008, Letter from QNB to the Ministry of Finance and Planning, 10 September 2019; C-0009, Letter from QNB to the Ministry of Finance and Planning (with BSS in copy), 9 October 2019; C-0010, Letter from QNB to BSS (with the Ministry of Finance and the Ministry of Justice in copy), 26 January 2020; C-0011, Letter from QNB to the Ministry of Finance and Planning and BSS (with the Ministry of Justice in copy), 13 May 2020. ↩
249 See Resp. C-Mem., para. 117, noting the First Respondent’s “delay in payment of the installment” and the “lack of prompt payment.” ↩
250 Resp. C-Mem., para. 109. ↩
251 According to the Respondents, the reports and news releases cited are among “numerous reports” that depict the economic affairs of the First Respondent: see Resp. C-Mem., paras. 111-116 and the citations therein. ↩
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repayment has started, by operation of the Off-take arrangement, even if not on the agreed schedule.252
307. The Tribunal notes that the reasons advanced by the Respondents for non-payment as scheduled relate only to the First Respondent. No arguments were advanced to explain why the Second Respondent did not make the payment. The Tribunal further notes that the reasons provided are not said to constitute an “administrative or technical error” or a “Disruption Event” as defined in Clause 21, or that they in any way fall under the exclusion clause of the Agreement. The Respondents have equally not argued that the reasons excuse non-performance under English law, nor do they claim that those reasons caused “a material disruption to the payment or communications systems or to the financial markets” which need to be in operation for payments under the Agreement to be made. Neither do they claim that there was a disruption (of a technical or systems-related nature) to the treasury or payments operations of a party that resulted in the non-payment.
308. Under English law, a breach of contract occurs where, without lawful excuse, a party either: (i) fails or refuses to perform a performance obligation imposed upon it under the terms of the contract; or (ii) performs that obligation defectively, in the sense of failing to meet the required standard of performance.253 Thus, a breach of an agreement occurs when a party fails to comply with material obligations therein and the failure is not excused either by provisions of the agreement or operation of the law. Further, the Tribunal notes that under English law, generally, “the performance obligation is strict, so that the contractual obligation must be completely and precisely performed. There is no defence for failure to meet this strict obligation, other than an enforceable exemption clause, […], or if the deviation is ‘microscopic’ (the de minimis rule).”254
252 Resp. C-Mem., para. 126(c). In their post-Hearing submission, the Respondents argue that the fact that the Facility Agreement had been breached is not disputed. Rather, the issue is “whether the conduct of the [Claimant] was consistent with a cancellation of the [A]greement and acceleration of repayment obligations:” see Resp. WR, paras. 1.1-1.2. ↩
253 See, generally, Albert Hochster v. Edgar Frederick De La Tour, England and Wales High Court (Queen’s Bench), Judgment, 25 June 1853 (available at: https://law.justia.com/cases/foreign/united-kingdom/2-ellis-bi-678-1853.html); Photo Production Ltd v. Securicor Transport Ltd, United Kingdom House of Lords, Judgment, 14 February 1980 (available at: https://www.casemine.com/judgement/uk/5a8ff8da60d03e7f57ece80a). ↩
254 CL-0077, R. Merkin and S. Saintier, “13.2: Discharge by performance or agreement,” in Poole’s Textbook on Contract Law (Oxford University Press, 2021) (excerpt), p. 495. ↩
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309. In the present case, it is not disputed that there was failure to make payment as provided under the Facility Agreement. The Respondents have not argued that their non-payment is excused under the Agreement or under the law.
310. Against this backdrop, the Tribunal finds that failure to repay the loan, initially by the First Respondent, and later by the Second Respondent, on the due date and in the manner in which payment is expressed to be payable constitutes an Event of Default as described under Clause 21.2 of the Facility Agreement.
311. A breach of the Facility Agreement as stipulated in Clause 21.2, thus, occurred when the Respondents failed to pay “on the due date [the] amount payable pursuant to a Finance Document in the manner and place and in the currency in which it is expressed to be payable.” The Respondents have not argued nor proven that the reasons they provide for non-payment are covered under an exclusion clause in the Facility Agreement or otherwise under English law.
312. Based on the foregoing, the Tribunal finds that, as alleged by the Claimant, the Respondents did not comply with the terms of the Facility Agreement. The Respondents have not shown, and the Tribunal has not seen reason to be convinced, that liability for such non-compliance is excused either under provisions of the Facility Agreement or otherwise exculpated under English law.
313. The Tribunal, thus, finds that the Respondents are in breach of the Facility Agreement. By operation of the provisions of the Facility Agreement by which they have individually breached the payment obligations under the Agreement, the Respondents are jointly and severally liable for the breach.
(2) Acceleration Clause
314. Next, the Tribunal considers whether, the Facility Agreement having been breached and the Acceleration Clause of the Agreement invoked, the Claimant later lost its right to full and immediate payment by continuing to receive payments by instalments. Put differently, it remains to be determined whether the Acceleration Clause, having been activated, remained tenable and valid in the face of ensuing payments by the Respondents.
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315. The Facility Agreement in Clause 21.16 provides different options for the Claimant if an Event of Default is continuing. These include the option to accelerate repayment of the entire outstanding amount under the Agreement. The provision, which is what is referred to here as the “Acceleration Clause,” allows QNB by written notice to the Borrower, to
declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable[.]255
316. After the First Respondent failed to make payments due on 31 March 2019 and 30 June 2019, as provided for in the amended repayment schedule, the Claimant, by letter of 16 July 2019, to the First Respondent, with the Second Respondent in copy, activated the Acceleration Clause. The Claimant by that letter demanded immediate repayment of the entire loan amount plus accrued interest.256
317. The Respondents assert that there is no dispute whether the Acceleration Clause was properly invoked as there was an ongoing default at the time of the invocation.257 The Tribunal thus accepts that the Acceleration Clause was properly activated by the Claimant’s said letter of 16 July 2019.
318. The Respondents however argue that the dispute is “whether the conduct of the [Claimant] was consistent with a cancellation of the [A]greement and acceleration of the repayment obligations.”258 The conduct in question is the Claimant continuing to accept payment by instalment and not objecting to the execution of the Off-take Agreement.
319. The Tribunal will thus consider whether the right to full and immediate payment of the amount outstanding under the Agreement which arose when the Acceleration Clause was properly activated, was later lost, either by virtue of provisions of the Facility Agreement or otherwise by application of English law, owing to the subsequent actions of the Parties.
255 C-0001, Facility Agreement, Clause 21.16(b) ↩
256 C-0007, Letter from QNB to the Ministry of Finance and Planning (with BSS in copy), 16 July 2019. ↩
257 Resp. WR, paras. 1.1-1.2. ↩
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320. The Tribunal notes that in the letter of 10 September 2019 to the Ministry of Finance and Economic Planning, after the Acceleration Clause was invoked in the letter of 16 July 2019, the Claimant, although noting, inter alia, that “the current outstanding as at September 09, 2019 [was] [Redacted] (the ‘Total Due Amount’),” sought “repayment of [Redacted] on/before September 30, 2019.”259 The Tribunal does not consider this to affect the validity of the invoking of the Acceleration Clause. The Acceleration Clause, in the Tribunal’s view, provides the Claimant an additional option for repayment, which does not extinguish its existing right to receive repayment in part if it so wishes.
321. Turning first to the provisions of the Facility Agreement, the Tribunal accepts that under English law it is settled that the primary source for understanding what contracting parties mean in their agreement is “their language interpreted in accordance with conventional usage.”260 Further, the clearer the ordinary meaning of the language of a contract, “the more difficult it is to justify departing from it,”261 and flowing from that, “no term can be implied into a contract if it contradicts an express term.”262
322. By definition, an acceleration clause is a loan-agreement provision that requires the debtor to pay off the balance sooner than the due date if some specified event occurs, such as failure to pay an instalment.263 Clause 21.16 of the Facility Agreement states in relevant part that if an Event of Default is continuing, the Claimant may by notice to the First Respondent declare that all outstanding amounts be immediately due and payable, and the notice will take effect in accordance with its terms. The Tribunal finds this provision to be unambiguous and clear enough to not require an intent to be implied into it beyond the
259 C-0008, Letter from QNB to the Ministry of Finance and Planning, 10 September 2019. [Redacted] see C-0009, Letter from QNB to the Ministry of Finance and Planning, 9 October 2019; C-0010, Letter from QNB to BSS (with the Ministry of Finance and Planning and the Ministry of Justice in copy), 26 January 2020; C-0011, Letter from QNB to the Ministry of Finance and Planning and BSS (with the Ministry of Justice in copy), 13 May 2020. ↩
260 CL-0107, BCCI v. Ali, para. 39. ↩
261 Arnold v. Britton and others, United Kingdom Supreme Court, Judgment, 10 June 2015, para. 18 (available at: https://www.supremecourt.uk/cases/docs/uksc-2013-0193-judgment.pdf). ↩
262 CL-0111, Marks and Spencer plc v. BNP Paribas Securities Services Trust Company (Jersey) Limited and others, United Kingdom Supreme Court, Judgment, 2 December 2015, para. 28. ↩
263 “Acceleration Clause,” in B. Garner (ed.), Black’s Law Dictionary (West Group, 1999). ↩
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express provisions thereof. Nor does the Tribunal see anything in Clause 21.16 or other provisions of the Facility Agreement to support an interpretation that the invoking of the Acceleration Clause entails a cancellation of the Agreement and, as a result, loss of the right to continue receiving payment by instalments.
323. The Tribunal considers that Clause 21.16, while not requiring or implying that the Facility Agreement be cancelled, grants the lender a further option for receiving repayment under the Facility Agreement. In other words, the provision entitles the lender to demand and receive repayment in lump sum if it so wishes, in addition to the existing right to receive repayment as provided for in the Facility Agreement under the amended repayment schedule.
324. Further, the Tribunal finds nothing in Clause 21, nor in any other provision invoked by either Party, that mandates that repayment, if demanded in whole, must be accepted in whole. The Facility Agreement’s Acceleration Clause, in the Tribunal’s view, has the effect of granting to the lender the additional right or prerogative to demand and/or receive payment in full—if it so chooses. That right would qualify as cumulative, with the existing ones, as referred to in Clause 34 of the Facility Agreement, which provides in relevant part that “the rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law.”264
325. Having already found that it considers the relevant provisions of the Facility Agreement to be unambiguous in their meaning and intent, the Tribunal also notes that English law does not require a loan agreement to be terminated, or treated as terminated, as a condition for the activation of the Acceleration Clause in the Facility Agreement.265 The Tribunal further notes that in Lombard v. European Skyjets, which the Respondents rely on, the contract under consideration required the claimant to terminate the contract in order to accelerate payment of the outstanding amount.266 That is different from the case before the present
264 C-0001, Facility Agreement, Clause 34. ↩
265 See, for example, CL-0106, International Finance Corporation v. Punj Lloyd Limited. ↩
266 CL-0102, Lombard v. European Skyjets, para. 104. In that case, the Court understandably—given the facts of that case including the contractual provisions—held that “upon activation of the acceleration clause, the lender must conduct himself in a manner as to indicate that the contract has been cancelled and he is at that point entitled only to a repayment in full of the amounts due:” Resp. WR, para. 1.6. ↩
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Tribunal as the Facility Agreement contains no such provision, nor can it be implied as there is no ambiguity in the terms of the Facility Agreement.
326. Ultimately, it is the borrower’s obligation to repay the loan it has taken out and the lender has an interest in getting paid. Unless otherwise agreed by the parties, the borrower discharging its obligation in a manner that the lender has accepted cannot deprive the lender of rights that it has acquired under the contract. To ascribe a different interpretation to the situation would amount to the borrower benefiting from its own infraction—in this case, breach of contract.
327. In the Tribunal’s view, the Off-take arrangement exists as further assurance that the Claimant would receive repayment of the amounts due. The Tribunal therefore does not consider it necessary, as suggested by the Respondents, for QNB to object to the coming into effect of the Off-take arrangement, in order to preserve its right to receive payment immediately and in full by operation of the Acceleration Clause.
328. The Tribunal thus finds that, in the circumstance, the Claimant was entitled to exercise its right to invoke the Acceleration Clause of the Facility Agreement, as it did, and seek immediate payment of all the amounts due.
329. The Tribunal finds that invoking the Acceleration Clause did not imply cancellation of the Facility Agreement; nor signify that from that point the Claimant was only entitled to repayment in full of the amounts due.
330. The Tribunal further finds that the Claimant did not waive its right to full and immediate payment under the Acceleration Clause, by not objecting to the execution of the Off-take Agreement or by continuing to accept repayment in instalments, whether through the operation of the Off-take Agreement or otherwise.
331. Indeed, concerning the alleged waiver, the Tribunal notes that Clause 34 of the Facility Agreement provides that:
No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under a Finance Document will operate as a waiver, nor will any single or partial exercise of
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any right or remedy prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in each Finance Document are cumulative and not exclusive of any rights or remedies provided by law and may be waived only in writing and specifically.267
332. Thus, the Tribunal considers this to mean that the Claimant does not waive its right to full and immediate payment of the total outstanding amount by not exercising it, or by exercising it partially by continuing to receive partial payment. In this regard, the Tribunal also notes the conclusion of the English High Court in JBR Capital v. JM Investments, that “the fact of earlier late payments accepted without protest could not amount to a relevant unequivocal representation (or agreement) precluding the [claimant’s] right to rely on arrears” to terminate the contract.268
333. There have also been defaults of other (non-payment) obligations defined in Clause 21.3 to be when “[a]n Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 21.2 (Non-payment).” These alleged breaches have not been challenged and are accepted by the Tribunal as proven.
334. Based on the foregoing, the Tribunal concludes that the Respondents are, and continue to be, liable to the Claimant for any outstanding amounts owed under the Facility Agreement. The Claimant, having properly invoked the Acceleration Clause, is entitled to immediate repayment in full of the outstanding sums under the Facility Agreement.
335. The Claimant seeks damages against both Respondents on a joint and several basis, in line with the common law compensatory principle governing damages, “which requires that the injured party is ‘so far as money can do it to be placed in the same situation with respect to
267 C-0001, Facility Agreement, Clause 34. ↩
268 CL-0113, JBR Capital Limited v. JM Investments/Trading Ltd and Mr. Karan Abbott, England and Wales High Court (King’s Bench Division: Commercial Court), Judgment, 3 February 2023, para. 32. ↩
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damages as if the contract had been performed’.”269 The Claimant asserts that, in accordance with the Facility Agreement, it is entitled to receive in compensation:
336. The Respondents have not disputed the Facility Agreement as basis for calculation of any compensation due.
337. The Claimant supports its claim with two expert reports by FTI. The Respondents also submitted an Expert Report by Kepler Associates. The Claimant’s experts calculated damages, first, as at 29 November 2021, the date of the Memorial, and second, as at 18 August 2022, the date of the Reply. FTI’s Second Expert Report was simply an update of the first, reflecting any changes that occurred in the intervening period.271
338. Although basing their respective reports on the Facility Agreement, the experts arrive at different results in their calculations. The differences between them were addressed in oral testimony by the experts—[Redacted] for the Claimant, and [Redacted] for the Respondents—which the Tribunal will now consider.
269 Cl. Mem., para. 129, citing CL-0056, Bunge SA v. Nidera BV, United Kingdom Supreme Court, Judgment, 1 July 2015 (“Bunge v. Nidera”), para. 14 (citing, in turn, Robinson v. Harman, English Court of Exchequer, Judgment, 18 January 1848). ↩
270 Cl. Reply, paras. 224-225. ↩
271 The Claimant’s expert, [Redacted], provided updated figures during the hearing: see Expert Presentation of [Redacted], slide 7, which states: “Interest has continued to accrue since 18 August 2022, and we understand no further payments have been made by the Respondents. If the Tribunal requires, we can extend our calculation to a more recent date (by way of example, as at 31 December 2022 the total outstanding amount was approximately $860 million).” ↩
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339. The Tribunal has found the Respondents to be in breach of the Facility Agreement and that the Acceleration Clause of the Agreement having been properly invoked has remained effective.
340. The consequence is that the Respondents are jointly and severally liable to compensate the Claimant for the damages due. Under English law, such damages shall be calculated such as to make the Claimant whole in accordance with the contract that has been breached.272 In this case, to make the Claimant whole, damages must be calculated in accordance with provisions of the Facility Agreement.273
341. The Tribunal notes that the differences between the Parties arise from the different ways in which they interpret and apply the relevant provisions of the Facility Agreement. Specifically, the experts have adopted different approaches with regard to their treatment of: (i) default interest penalty; (ii) number of days of accrued interest; and (iii) treatment of partial repayments.274
342. Under the Facility Agreement, repayment of the loan was to be at the rate of [Redacted] Interest accrued on the opening balance at the rate of LIBOR plus a margin of 6%. Where applicable, default interest applied at the rate of 2%. The closing balance for each period would be: opening balance + interest + default penalty (if any) LESS repayments. Pursuant to Clause 8.3, default interest, at 2%, is calculated on the overdue amount only.
(1) Number of Days of Accrued Interest
343. On the number of days for which accrued interest would be calculated, the Tribunal accepts the explanation of the Respondents’ expert, [Redacted] in oral testimony that the calculation of interest period did not include the last day of the month since that is the day
272 Cl. Mem., para. 129, citing CL-0056, Bungev. Nidera, para. 14 (citing, in turn, Robinson v. Harman, English Court of Exchequer, Judgment, 18 January 1848). ↩
273 The Tribunal notes, in any event, that there is no dispute between the Parties as to the basis for calculation of damages, which is the Facility Agreement. Indeed, each side has done its calculation based on its interpretation of the Agreement. ↩
274 See, for example, Expert Presentation of [Redacted], slide 9. ↩
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on which it is assumed that payment would be made. The expert also accepted that the assumption would be wrong if indeed payment was not made on that day.275 Given that payments were indeed continuing to be made, albeit not on the agreed schedule nor in the anticipated sum of [Redacted] the Tribunal considers it reasonable to adopt the Respondents’ approach. This would ensure that the Respondents are not charged interest for more days than they are liable for, while at the same time not unduly prejudicing the Claimant’s entitlement to be made whole.
(2) Treatment of Partial Repayments
344. On the treatment of the four payments which had been received as at Hearing, with regard to calculation of interest, the Tribunal notes that the payments in question were typically made in the course of an interest period, and not at the end of such periods. The Claimant’s approach is to split the period into two─before and after payment. Interest for the second part is calculated on a lower amount that reflects the payment received rather than continuing to be assessed on the opening balance as the Respondents have done.
345. Since the Respondents are not liable for interest on sums already paid, the calculation ought to take into account the sums paid by the Respondents, even if in the middle of an interest period. The Tribunal therefore finds that the calculation method adopted by the Claimant in this regard is more in keeping with the Facility Agreement and should be used in calculating the liability of the Respondents under the Agreement.
(3) Default Interest
346. The most significant difference between the calculations of the two sides is simply from their respective interpretations of the Acceleration Clause and, thus, the application of default interest. From 16 July 2019, when the Acceleration Clause was triggered onward, the Claimant’s experts calculate default interest on the entire outstanding amount while the Respondents’ experts do their calculation on the basis that repayment had not been accelerated.276 The Tribunal notes that the letters of demand sent by QNB calculated
275 Tr. Day 2, 41:17–42:3, 83:11–84:6. ↩
276 In oral testimony, [Redacted] stated that since payments were being made under the Facility Agreement, they did not consider that “there was a complete default that has triggered the acceleration clause:” see Tr. Day 2, 41:8-16. ↩
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default interest only on the unpaid instalments and not on the entire sum. This was the reason for the difference between the figures in the Claimant’s letters and in the report of its experts.277
347. The Parties are in agreement that the Acceleration Clause was properly invoked on 16 July 2019 and the Tribunal has found that the Claimant’s rights arising therefrom were not affected, forfeited, nor waived by the Claimant’s subsequent acceptance of payment in instalments. Consequently, the Tribunal accepts the approach of the Claimant’s experts by which interest is calculated on the entire amount owed from the moment payment was accelerated by operation of the Acceleration Clause. The Tribunal finds this to be consistent with Clause 8.3 of the Facility Agreement, which provides that the default interest accrues on “any amount payable.”
348. The experts on both sides concede that it is not possible to predict, ad infinitum, the exact sum that the Respondents would be liable to pay at any given time in the future.278 Nevertheless, the Tribunal considers that, as with the calculations already done by the Parties in the course of the proceeding, such prediction would be more feasible in reference to specific dates. Also, the differences that existed between the Parties in their previous computations can be easily resolved by referring to the Tribunal’s findings above.
349. Presently, therefore, the Tribunal can go no further than finding that the Claimant shall be compensated in an amount calculated in accordance with the provisions of the Facility Agreement and providing target dates for updated calculations by the Parties. The resulting calculations will inform the Tribunal’s deliberations on the quantum of compensation to be reflected in any Award that will follow this Decision.
278 See, for example, Kepler ER, p. 8. This is mostly due to the changing rate of interest, and the fact that figures will have to be recalculated any time part payment is made. Repayment was ongoing at the time of the Hearing and set to continue, although the schedule was not certain nor advised. ↩
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350. For the reasons set forth above, the Tribunal decides as follows:
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Tribunal will thereafter determine if any additional submissions will be required.
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|
Signature Mr. Peter Rees KC Arbitrator Date: 5 January 2024 |
Signature Professor Hélène Ruiz Fabri Arbitrator Date: 5 January 2024 |
Signature
Dr. Ucheora Onwuamaegbu
President of the Tribunal
Date: 5 January 2024