Cardno Middle East Limited v. Central Bank of Iraq
ICC · Investment (ICSID and treaty) · France · 26 Feb 2023
Why it matters
This award is significant for its detailed analysis of pre-arbitral mediation requirements under French law, particularly the 'futility exception' where mediation is impossible or useless. It also clarifies the application of Iraqi Civil Code articles on damages and interest in an ICC arbitration seated in Paris, providing guidance on the interaction between procedural and substantive laws in international commercial arbitration.
Summary
Cardno ME Limited (CME), a UAE consulting firm, entered into a consultancy agreement with the Central Bank of Iraq (CBI) to supervise the construction of CBI's new headquarters in Baghdad, designed by Zaha Hadid Architects. The agreement was based on the FIDIC Client/Consultant Model Services Agreement and governed by Iraqi law. Disputes arose when CBI stopped paying CME's invoices from September 2020 to March 2021, leading CME to demobilize and initiate ICC arbitration in Paris. The arbitration clause required mediation as a pre-arbitral step. CME did not attempt mediation, arguing it would be futile because CBI had already indicated it would not pay. The Tribunal, applying French law as the law of the seat, found that the mediation requirement was not a condition precedent to arbitration because it was impossible to mediate (CBI had refused to participate) and thus futile. On the merits, the Tribunal applied Iraqi law. It found that CBI breached the agreement by failing to pay invoices, and awarded CME USD 5,847,530 for unpaid invoices (invoices 33-39). For the remaining value of the contract, the Tribunal awarded USD 4,342,924.15 as compensation for loss of profit under Article 169 of the Iraqi Civil Code, rejecting CBI's argument that CME failed to mitigate damages. The Tribunal also ordered CBI to release the performance bond, finding its call on the bond wrongful. Interest at 5% per annum was awarded from the date of the Request for Arbitration. The Tribunal dismissed CBI's post-hearing application to reopen proceedings, finding it untimely and without merit. The award is a final award on jurisdiction, admissibility, and merits.
The detail
Parties: Cardno Middle East Limited v. Central Bank of Iraq
Case number: ICC Case No. 26290/AYZ/ELU
Outcome: Claimant won. The Tribunal ordered Respondent to pay USD 5,847,530 for unpaid invoices, USD 4,342,924.15 as compensation for lost profits, plus interest and costs, and to release the performance bond.
Quantum: USD 10,190,454.15 plus interest and costs
Applicable law: ICC Rules of Arbitration (2021); Iraqi Civil Code; FIDIC Client/Consultant Model Services Agreement 4th Ed. 2006
Issues in play: The case involved the interpretation of a multi-tiered dispute resolution clause requiring mediation before arbitration, and the application of Iraqi law on contractual damages and interest. The French Conseil d'Etat's annulment of Article 750-1 FCCP also affected the admissibility analysis.
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