SPIE-EGC Ltd v FIFA [2003] VUCA 11; Civil Appeal Case 29 of 2002 (9 May 2003)

IN THE COURT OF APPEAL
OF THE REPUBLIC OF VANUATU
(Civil Jurisdiction)

Civil Appeal Case No. 29 of 2002

BETWEEN:

SPIE-EGC LTD
Appellant

AND:

FÉDÉRATION INTERNATIONALE DE FOOTBALL ASSOCIATION – FIFA
Respondent

Coram: Hon. Justice Robertson
Hon. Justice von Doussa
Hon. Justice Fatiaki
Hon. Justice Saksak
Hon. Justice Coventry

Counsels: Mr. Sugden for the Appellant
Mr. Hurley for the Respondent

Hearing Date: 7th and 9th May 2003.
Judgment Date: 9th May 2003.

JUDGMENT

La Fédération Internationale de Football Association (FIFA) operates the Goal Programme. This programme supports the Football Associations of member countries to develop football. By a letter dated 5^th November 2001 FIFA informed the Vanuatu Football Federation (VFF) that it would support Vanuatu’s project to build a football academy. A grant of US$400,000 was pledged.

An agreement dated 5^th February 2002 was signed by FIFA and SPIE Enterprise Generale de Construction, (SPIE). It was also signed on behalf of the VFF as Le Bénéficiaire and Glen Turner as FIFA’s development officer based in Auckland.

By an Originating Summons filed on 18^th September 2002 FIFA sought:-

1. A Declaration the contract was “void and of no effect as a result of SPIE-EGC Limited’s failure to obtain an approval certificate as required by the (Vanuatu) Foreign Investment Act No. 15 of 1998, as amended”.
   
2. “A further declaration that should the said contract be declared void and of no effect, arbitration of any alleged disputes is stayed, pending further order of this Honourable Court.”
   

3 – 9. Other relief.

On 16^th December 2002 the Chief Justice held that the contract was void and of no effect “as a result of SPIE-EGC Limited’s failure to obtain an approval certificate as required by the Foreign Investment Act No. 15 of 1998 as amended”. He found on the facts before him that SPIE was a foreign investor, it had no approval certificate and had, by its activities, invested in Vanuatu. (See sections 5 (1) and 5 (2) set out below).

The hearing proceeded on the factual basis set out in the affidavits of the parties. There was no oral evidence and no cross-examination. The affidavits were said to contain sufficient agreed evidence for the purpose of the hearing. It now appears that much of the evidence is in dispute.

On 17^th December 2002 a Notice of Appeal was lodged. Full grounds were set out upon receipt of the reasons for the decision. The grounds focused upon the assertion that SPIE had not invested in Vanuatu and in any event fell within two exceptions in that first, the agreement was an isolated transaction and second, the agreement was for the entry into and performance of a contract for the supply of goods or services (See section 1 definition of “invest” and “investment”, paragraphs (b) and (f) set out below).

The respondents replied that the affidavits clearly showed that SPIE was carrying on activities for gain in Vanuatu. Work was being done on-site, materials were being ordered and received, security fencing had been put up, payment was being made.

There was significant conflict between the parties over what went on before the signing of the agreement and in the weeks that followed. It would appear work had started on the proposed site and materials had been delivered weeks before the signing. Some of this work was paid for after the signing, some was not.

There is conflict over who ordered these works and materials and on what basis, and who was responsible for paying for them. It would appear that no lease had been taken of the land concerned when the works commenced. On 23^rd July 2002 a stop work notice was issued.

The Foreign Investment Act, as amended by Acts 1 of 1999 and 5 of 2001, states:-

Section 1 – Purpose of Act

The purposes of this Act are:

(a) To promote and facilitate investment in Vanuatu by foreign investors; and
(b) To provide an efficient, effective and transparent system for appraising and approving investment proposals by foreign investors; and
(c) To promote investments by foreign investors that will materially benefit Vanuatu and its people by:

• (i) contributing to sustainable economic growth; and
• (ii) creating employment; and
• (iii) utilizing natural resources and, in particular renewable resources; and
• (iv) increasing the volume and value of exports; and

(d) To facilitate and expedite investments through Ministries, Departments and other Government bodies.

Section 2 – Interpretation

“foreign investor” means:

(a) a person who is not a citizen of Vanuatu; or
(b) a body corporate:

• (i) that is not wholly controlled by persons who are citizens of Vanuatu; or
• (ii) that has any of its shares (voting or otherwise) beneficially owned or controlled by persons who are not citizens of Vanuatu ...

...

“invest” and “investment” means to be engaged in an activity for the principal purpose of gain (pecuniary or otherwise) in conjunction with a business licence, but does not include.

...

(b) an isolated transaction, not being one of a number of similar transactions repeated from time to time or from which there will be derived a re-occurring or continuing benefits;

...

(f) entry into and performance of a contract for the supply of goods or services by a supplier who is not a resident of Vanuatu.

“investor” does not include a citizen of Vanuatu or an enterprise wholly owned and controlled by a citizen of Vanuatu.

Section 5 – Foreign Investment without Approval Certificate Prohibited

(1) A foreign investor must not invest in Vanuatu without first obtaining an approval certificate.
(2) Where a foreign investor invests in Vanuatu without an approval certificate or engages in an investment not authorized by an approval certificate then, every contract and every agreement entered into by that foreign investor and relating to that investment will be void and of no effect.

Section 6 – Application for Approval Certificate

(1) A foreign investor proposing to invest in Vanuatu or an enterprise that proposes to become a foreign investor must apply in the prescribed form to the Authority for an approval certificate.

Two points arose during the course of argument. These do not appear to have been argued before:-

1. “Article 10: Litiges” of the agreement reads “En cas de litige les parties s’engagent a désigner d’un common accord, la personne susceptible d’assurer l’arbitrage et la recherche d’une conciliation.
   

“A défaut, le litige sera porté devant juridiction compétente, soit the International Chamber of Commerce (ICC), à la diligence de l’une ou l’autre des parties”.

This appears to be an arbitration clause.

There is no dispute there has been no arbitration. The question whether or not the dispute should have been referred to arbitration before any relief was sought before a Court was not, apparently, argued before the Chief Justice.

2. Both parties accept the agreement between FIFA and SPIE was completed in Paris. It envisaged activities in Vanuatu to build the academy.
   

Any contracts between SPIE and local Vanuatu contractors to carry out works would be void if SPIE was subject to the Foreign Investment Act and did not obtain a certificate and the contracts did not come within one or more of the exceptions. However, the agreement between FIFA and SPIE itself did not involve SPIE or FIFA investing in Vanuatu.

Section 5(1) reads “A foreign investor must not invest in Vanuatu without first obtaining an approval certificate”, (underlining added). It was an agreement between two overseas parties made overseas. If and when SPIE came to make contracts to carry out the work envisaged in the agreement it would then have to ascertain if an approval certificate was needed and, if so, obtain one. Contractual difficulties with FIFA might follow if a certificate was required and SPIE was unable to obtain one.

Counsel were given the opportunity to consider these two points and address the Court.

We find there was a failure, before the Chief Justice, to distinguish between the FIFA-SPIE agreement and the contracts SPIE made with local Vanuatu companies. It might well be that contracts between SPIE and Vanuatu companies are caught by section 5 (2) of the Act and are void. That is a matter of evidence and for other actions which we are informed have been filed in the Court.

The agreement, between FIFA and SPIE does not come within the ambit of operation of the Foreign Investment Act. It was an agreement made overseas between two overseas parties. It therefore could not be declared void by a Vanuatu Court under section 5 (2) of the Foreign Investment Act.

In putting into effect its contractual obligations under that agreement SPIE would have to abide by the Laws of Vanuatu, and in particular the Foreign Investment Act, if applicable. This does not render the FIFA-SPIE agreement void per se. If SPIE required an approval certificate and failed to obtain one or was unable to obtain one then that would have contractual consequences as between FIFA and SPIE, it would not render the agreement itself void under the Act.

Accordingly we must set aside the Chief Justice’s Order of 16^th December 2002 and remit the matter to him for consideration of Article 10, “the arbitration clause’ and the other relief sought in the Originating Summons. FIFA will have to decide whether to continue with these proceedings or take some other course.

At the heart of this and the other proceedings there is one vital consideration. FIFA agreed, and we are informed still agrees, to fund the construction of a football academy in Vanuatu. An academy will be of enormous benefit to the sportsmen and sportswomen of Vanuatu and the public at large. Plans for academies in other Pacific nations were drawn up at the same time as the one for Vanuatu. Those nations now enjoy the benefits of their academies. It would be a sad loss if Vanuatu football was deprived of its own academy. All who are involved must find a speedy and expeditious solution to the mess which has been created. The past needs to be resolved so a future benefit for all citizens can be achieved.

Dated at Port Vila, this 9^th day of May 2003.

BY ORDER OF THE COURT

Hon. Bruce Robertson J.
Hon. John von Doussa J.
Hon. Daniel Fatiaki J.
Hon. Oliver A. Saksak
Hon. Roger Coventry J.