U.S. Court Declares Congo in Default Over Arbitration Award

U.S. Court Declares Congo in Default Over Arbitration Award

A U.S. court declared the Democratic Republic of Congo in default after the state didn’t defend itself against a lawsuit brought by a South African oil-exploration company.

DIG Oil Ltd. is seeking $619 million in compensation from Congo’s government to conclude a 13-year dispute over permits in the central African nation. The Johannesburg-based company is trying to enforce a 2018 award issued by an arbitration court in France that found Congo failed to honor two production-sharing agreements.

DIG filed its case with the District Court for the District of Columbia on April 30. The firm successfully requested an entry of default against Congo after President Felix Tshisekedi’s administration failed to respond to the petition within 60 days of being served a summons, according to a notice filed by the court clerk on Sept. 20. The court still has to issue a judgment detailing Congo’s liabilities to the company.

DIG Chief Executive Officer Andrea Brown declined to comment on the U.S. proceedings, but said the company has started out-of-court talks with Congo’s government and is working toward an “amicable” outcome.

Tshisekedi earlier this year ordered the Justice Ministry to “take all necessary steps” to better defend the Congolese state against cases such as DIG’s and a $57 million claim by Taiwan’s Export-Import Bank, if necessary through agreeing settlements, according to minutes of a May cabinet meeting.

A spokesman for Tshisekedi, Kasongo Mwema Yamba Yamba, confirmed negotiations are taking place between DIG and the government. Vice Minister of Justice Minister Bernard Takahishe didn’t respond to a message requesting comment.

Economic Losses

The Paris-based International Court of Arbitration decided in November 2018 that Congo “failed to execute its obligations” and should pay DIG Oil $617.4 million to cover future economic losses and already incurred expenditure. An appeal court in Paris dismissed Congo’s bid to overturn the award in January.

With additional costs, DIG says the full amount now owed is $619.3 million plus interest. The sum amounts to most of Congo’s foreign reserves, currently about $800 million.

The company is entitled to an order from the U.S. court confirming the 2018 decision under the so-called New York Convention, an international treaty that requires contracting states to recognize and enforce foreign arbitration awards, according to its filings.

Congo’s Oil Ministry granted DIG a contract for three blocks in the center of the country in December 2007, and another permit to a consortium including the company a month later, but former President Joseph Kabila never signed off on either deal. The arbitration court agreed with DIG that Congo violated the second agreement by reallocating the license in 2010 and failed to deliver presidential approval for the other “within a reasonable time.”

Congo argued unsuccessfully that it was within Kabila’s discretionary power not to certify the former agreement, while the latter was not in force when it was reassigned, according to the arbitration award.

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