Refineries of Homs and Banias (Syria) v. International Chamber of Commerce, Mealey’s Int’l Arb. Rep. 502 (1986)

Facts

  • Refineries of Homs and Banias (Refineries), a Syrian party, entered into a contract with a Yugoslav counterparty.
  • The contract contained an arbitration agreement providing for arbitration under the International Chamber of Commerce (ICC) arbitration rules.
  • A dispute arose and ICC arbitration proceedings were commenced.
  • During the proceedings, Refineries appointed an arbitrator through the appointment process contemplated by the ICC rules.
  • The ICC Court of Arbitration removed the Refineries-appointed arbitrator pursuant to its powers under the ICC rules.
  • Refineries filed an action in the Paris Judicial Court seeking: (1) annulment of the ICC Court’s decision removing the arbitrator, and (2) a finding that the ICC committed a tort against Refineries by removing the arbitrator.
  • The Paris Judicial Court dismissed the claims, reasoning that the parties’ express selection of ICC rules reflected a shared intent to give the ICC authority to decide matters connected to arbitrator appointment and to apply the ICC’s rules.
  • Refineries did not argue that the ICC Court violated the ICC rules; instead, it argued that the removal was improper even if carried out in conformity with those rules.
  • Refineries appealed to the Paris Court of Appeal.

Issues

  1. Whether the parties’ agreement to arbitrate under the ICC rules showed their shared intent to confer on the ICC Court authority to decide questions related to the appointment and removal of arbitrators, limiting court intervention where the ICC acted under those rules.
  2. Whether the ICC can be held liable in tort to a party for removing that party’s appointed arbitrator when the removal was taken under the ICC rules chosen by the parties and no breach of those rules is alleged.

Decision

  • The Paris Court of Appeal affirmed the dismissal of Refineries’ claims.
  • The court treated the arbitration clause’s express reference to ICC rules as showing the parties’ shared intent to entrust the ICC with decision-making authority on matters linked to the constitution of the arbitral tribunal, including removal of arbitrators, within the ICC framework.
  • Because the arbitrator was removed pursuant to the ICC rules selected by the parties—and Refineries did not claim that the ICC failed to follow those rules—the court found no basis to annul the ICC Court’s decision.
  • The court rejected the tort claim, concluding that the ICC’s exercise of its rule-based powers, without a shown rules violation, did not constitute actionable fault.

Legal Principles

  • When parties provide for arbitration under institutional rules, their agreement is treated as consent to the institution’s rule-defined administrative role, including decisions concerning the appointment and removal of arbitrators.
  • Courts generally will not set aside an arbitral institution’s internal decision on tribunal composition where the decision was taken under the rules chosen by the parties and the complaining party does not show a violation of those rules.
  • Absent a demonstrated breach of the applicable rules or other fault, an arbitral institution’s administration of a case within the authority granted by the parties’ agreement does not, by itself, support tort liability.

Conclusion

Refineries of Homs and Banias (Syria) v. International Chamber of Commerce holds that, by agreeing to ICC arbitration under ICC rules, the parties accepted the ICC Court’s authority over questions concerning tribunal composition, including removal of arbitrators; where the ICC acted under those rules and no rules violation was alleged, the Paris Court of Appeal refused to annul the ICC’s decision and rejected tort liability against the ICC.