PHILIPSBURG--The Dutch Supreme Court has rejected TelEm’s appeal against MER, a local subsidiary of the Israeli MER Group, upholding a US $3.7 million arbitral award. TelEm’s appeal aimed to overturn a January 20, 2022, ruling by an international tribunal, but the Supreme Court has reinforced the original decision and the obligations it imposed on TelEm.
The Supreme Court’s verdict, delivered on June 21, was published on August 8. This ruling imposes a significant financial liability on TelEm and underscores the binding nature of international arbitration awards, emphasizing the difficulty of overturning such decisions in court without solid grounds.
For MER, the decision is a clear victory, allowing the company to proceed with enforcing the award and securing the US $3,746,738.71 payment ordered by the tribunal.
The dispute originated from a 2017 contract between TelEm and MER for installing a Fiber-To-The-Home network in St. Maarten, a project valued at over NAf 28 million, pre-financed by the European Investment Bank EIB. The project concerned the rollout of a fiber access network on the Dutch side in order to provide high speed fixed broadband telecom services to residential and business users. Provision of triple play (voice, internet, TV) services to around 14 500 homes was planned.
“We are currently rolling out Fiber to the Home (FTTH), replacing our copper (DSL) network, ensuring a reliable, high-speed and future-proof internet connection for everyone. Neither Hurricane Irma in 2017 nor the Covid-19 pandemic in 2019/2020 have slowed our ambitions. Indeed, they have only accelerated it,” TelEm stated to its clients in 2021, inviting them to sign up to FTTH. “Operating in a hurricane zone strengthens our resolve to put our high-speed infrastructure underground so that service recovery time after any storm is minimal. The increased demand for high-speed internet at home has also resulted in stepped up efforts to roll out FTTH even faster. With fiber, we now offer a more reliable connection, with more upload and download speed for an affordable price, which is what our customers have demanded from us in these trying economic times.”
Previously, TelEm’s CEO Kendall Durpersoy had announced that completion of the project was slated for the second quarter of 2020. “The fiber-to-the-home project will connect 20 to 25 thousand homes directly to the TelEm Group network with fiber,” he told Business View Caribbean magazine. “I came into the company in Feb. 2017,” says Dupersoy, “and the infrastructure was very old at the time and needed to be upgraded. This project had started just prior to my arrival. So, we signed off with an international company to provide us with a fiber-to-the-home network and it’s rolling along right now. Of course, we took a major hit when the storm [Hurricane Irma,] came, and that delayed the project quite a bit, but it’s ramping up.” However, disagreements during the project led to TelEm terminating the contract in October 2019, prompting MER to initiate arbitration.
On January 20, 2022, the arbitral tribunal, under the Rules of Arbitration of the International Chamber of Commerce (ICC), ruled in favour of MER, finding that TelEm had wrongfully terminated the contract and improperly exercised the associated bank guarantee. As a result, TelEm was ordered to pay MER $3,746,738.71, excluding interest, covering work costs, arbitration fees, and legal expenses. The tribunal also dismissed all of TelEm’s counterclaims.
On December 8, 2022, the court ruled in favor of MER, allowing enforcement of the arbitral award. In its subsequent appeal, TelEm argued that MER’s claim for work in progress was unsubstantiated and that MER had not met its burden of proof. TelEm asserted that the arbitral tribunal should not have granted this claim in full, and criticized the tribunal’s decision as flawed.
However, the Supreme Court dismissed these complaints, stating that they amounted to a “veiled appeal” and emphasized that neither an annulment procedure nor an enforcement procedure is intended for such complaints. The Court concluded that the complaints about the substantiation of claims did not belong in this procedure.
TelEm also argued that MER had not provided any information about its financial standing, accusing MER of being a shell company with plans to divert funds abroad, thereby making recourse for any future claims illusory. TelEm contended that the Court of Appeal failed in its role by agreeing with the lower court’s decision without providing further reasoning, particularly regarding the rejection of TelEm's request for security.
However, the Supreme Court ruled that the claims in TelEm’s appeal did not introduce any new arguments that had not already been addressed and rejected in the first instance. The Court also found that MER had adequately demonstrated that it had sufficient income and assets, aligning with the judgment of the lower court.
Additionally, the Supreme Court ruled that TelEm did not substantiate that its business operations were threatened by the enforcement of the arbitral award. As a result, this aspect did not require further discussion, as TelEm’s claims related to its business operations were unsubstantiated. Regarding TelEm’s concerns about the absence of recourse against MER, the Court concluded that these arguments merely reiterated points already raised and rejected.
On appeal, MER countered TelEm’s statements, arguing that TelEm could indeed make payments to MER’s creditors up to the amount of the claims for which seizures had been made against MER. According to MER’s pleadings, TelEm simply did not want to do this.
MER emphasized that the claims against it were significantly lower than its claim against TelEm, and after TelEm paid MER’s creditors, the remainder should be paid to MER. MER also dismissed TelEm’s concerns about assets being removed from St. Maarten as speculative and irrelevant, and argued that even in the unlikely event of partial annulment of the award, it would not automatically result in TelEm’s rejected counterclaims being awarded.
TelEm argued that the Court neglected its duty as an appellate court, In response, the Supreme Court stated: “It is a fundamental principle of proper judicial procedure that every judicial decision must be motivated in such a way that it provides sufficient insight into the underlying reasoning to make the decision controllable and acceptable for both the parties and third parties. How far this duty of reasoning extends depends on the circumstances of the case, including particularly the nature of the procedure and the debate between the parties.”
The appellate process in the Caribbean parts of our Kingdom does not differ on this point from the appellate process as it applies in the Netherlands, the Supreme Court stated. “If the appellate court does not interpret the grounds of appeal as raising any new arguments or defences beyond those already presented and rejected in the first instance, the appellate court may suffice by adopting the decision of the lower court and the reasoning underlying it. If the grounds of appeal contain new points, the appellate court is obliged to provide further reasoning. Insofar as the appellate court has aligned itself with the reasoning of the lower court and adopted it as its own, the cassation complaints can be directed against those reasoning, forming the subject of cassation complaints review.”
The arbitral proceedings were conducted under the UNCITRAL Model Law on International Commercial Arbitration, which limits court intervention in arbitral awards. The Supreme Court’s decision reinforces the autonomy of arbitral tribunals and their broad discretion in interpreting contract terms and resolving disputes.
