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Salini Construttori S.P.A. v. Kingdom of Morocco [II], ICC Case No. 16550/ND (ICC)

Why it matters

This ICC award is notable for its detailed treatment of tax reimbursement obligations in state contracts, particularly the state's commitment to reimburse duties and taxes. It also illustrates the interplay between contractual termination clauses and the calculation of damages in large infrastructure projects. The award was subsequently enforced in U.S. federal court under the New York Convention, demonstrating the cross-border enforceability of ICC awards against sovereign states.

Summary

Salini Costruttori S.p.A., an Italian construction company, entered into a contract with the Kingdom of Morocco in 2004 to build a section of the Mediterranean Ring Road. The project faced numerous difficulties, including site access issues, soil problems, design changes, and administrative delays. After several extensions, the contract was terminated. Salini initiated ICC arbitration in Paris under the ICC Rules, seeking payment for work done, tax reimbursements, and damages. Morocco counterclaimed for delay damages and costs. The tribunal, chaired by Francois Knoepfler, found that Salini's termination was invalid but Morocco's termination was valid. It awarded Salini over €15 million for works, tax reimbursements, and quantity changes, plus interest, while ordering Salini to pay Morocco €500,000 in delay damages and €20,000 in procedural costs. The award was based on Moroccan law and the contract terms. Salini later successfully petitioned a U.S. federal court to enforce the award under the New York Convention, which was granted because no grounds for refusal existed.

The detail

Parties: Salini Construttori S.P.A. v. Kingdom of Morocco [II], ICC Case No. 16550/ND

Case number: italaw/cases/5176

Outcome: Salini partially won; Morocco ordered to pay €8,158,518.87 for works, €5,212,183.39 for tax reimbursement, €2,140,600.16 for quantity changes, plus interest; Salini ordered to pay Morocco €500,000 delay damages and €20,000 procedural indemnity.

Quantum: €15,511,302.42 plus interest and VAT

Applicable law: ICC Rules; Moroccan law; Agreement AH03/2004

Issues in play: The tribunal applied Moroccan law to interpret the contract, including provisions on termination, tax reimbursement, and delay damages. The key collision was between the contractor's right to terminate for convenience and the state's right to terminate for cause.

Read the full decision at italaw ↗

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