Court of Cassation, No. 89-14.382 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 5 February 1991, No. 89-14.382

Challenged decision: Paris Court of Appeal, 16 February 1989

ALMIRA FILMS

Vs.

EMA FILMS

Whereas, according to the judgment under appeal, the French company EMA FILMS gave, on 6 May 1986, to the Swiss company ALMIRA FILMS an exclusive mandate for the worldwide distribution of the film La Dernière Image; whereas EMA FILMS, raising the arbitration clause inserted in this contract, presented, on 7 August 1986, to the Professional Cinematographic Association for Conciliation and Arbitration (Association Cinématographique Professionnelle de Conciliation et d’Arbitrage), in Paris, a request for annulment and, in the alternative, for termination of the contract; that the arbitration rules of this body stipulate, in article 7, that the award must be made within 6 months from the first appearance of the parties and, in article 8, that the Tribunal is not bound to observe either the rules of procedure or the time limits prescribed by the Code of Civil Procedure and rules as amiable compositeur ; that the first appearance of the parties before the arbitrators took place on 16 March 1987 and that the minutes of such appearance show that ALMIRA presented counterclaims for damages; that after the opening of the simplified receivership procedure on 18 June 1987, the judicial liquidation of EMA was ordered on 6 July 1987; that the proceedings were resumed on 6 October 1987 by the liquidator Pierrel; that, by award of 19 October 1987, the arbitrators terminated the 1986 agreement for failure by each of the parties to fulfil their respective obligations; that the judgment under appeal (Paris, 16 February 1989) dismissed the action for annulment against this award;

On the first ground, taken in its three parts:

Whereas the company ALMIRA objects to this judgment which thus ruled. According to the ground, the Court of Appeal validated an award made on an expired arbitration agreement and violated Article 48 of the Act of 25 January 1985 and Article 1502-1 of the new Code of Civil Procedure by approving the arbitrators for declaring, in breach of the arbitration rules, the time limit within which they had to rule, not simply suspended until the declaration of claims by ALMIRA on 2nd July 1987, but interrupted and to have opened a new period of 6 months from the date of the resumption of proceedings by the liquidator, after the expiry of the initial period. On the other hand, the Court of Appeal distorted the award by approving the arbitrators, who in fact gave precedence to the French rules of procedure relating to the interruption of proceedings over the provisions of the arbitration rules, to free themselves from these rules by using their powers as amiable composers; then, finally, by not examining whether international public policy or respect for the rights of the defence actually required the arbitrators to declare the time limit not only suspended but also interrupted, the Court of Appeal did not give a legal basis for its decision under Articles 1502 and 1504 of the new Code of Civil Procedure;

But whereas the principles of the cessation of individual proceedings of creditors, of withdrawal of the debtor and of interruption of the proceedings in case of bankruptcy are both of internal and international public order; that they are mandatory even in the case where arbitration taking place in France is not subject to French law. In the present case, the arbitrators had to consider, in order to determine the expiry date of their mission, firstly, the fact that the creditors of EMA, whose simplified receivership proceedings had been opened, were required to declare their claims and to challenge their representative and, secondly, that the liquidation proceedings had been ordered, since the EMA proceedings had to be taken over by the liquidator. The superior principle of due process (in French Principe de la contradiction), which is essential to the conduct of a fair trial, therefore required the arbitrators to determine to what extent the impossibility to act, where one of the parties had temporarily been, had stopped the six-month period prescribed by Article 7 of the arbitration rules; that the Court of Appeal rightly held that the arbitrators, in the performance of their mission and having regard to the elements of the case, were entitled to consider that, in order to usefully defend the interests entrusted to them, the liquidator should have a period of time equal to that which had initially been allowed, which led to the 6-month period running in full again;

Therefore it follows that apart from any other overabundant grounds, the Court of Appeal legally justified its decision and the ground of appeal cannot be accepted in any of its parts;

On the second ground: (irrelevant);

FOR THESE REASONS:

DISMISSES the appeal