Court of Cassation, No. 96-16.746

Court of Cassation, First Civil Chamber, 5 January 1999, No.96-16.746

GALLAY PLC (French company)

Vs.

FABRICATED METALS INC. (American company)

The appellant raises, in support of its appeal, the three grounds of cassation annexed to the present judgment;

On the three grounds, gathered and taken in their various parts:

According to the domestic judges, the American company Fabricated Metals entered into a contract with the French company Gallay on 19 November 1981. The contract was scheduled to expire on 31 December 1985 and covers the manufacture and sale of the products of Fabricated Metals in certain European countries, in exchange for the payment of royalties. A dispute arose over the payment of these royalties, and an arbitrator, appointed in accordance with the arbitration clause stipulated in the contract, and based in Paris, ordered the company Gallay to make varying types of payments to the company Fabricated Metals, both in terms of royalties for the years 1982 to 1985, and in terms of recovery of undue payments and compensation for a commercial loss for the “post-1985” period.

Gallay objects to the judgment under appeal (Paris, 16 April 1996) for having rejected its action for annulment of the award. The French company considers the Court of Appeal failed in its decision to reprimand breaches of the arbitrator. On the one hand, the French company mentions a violation of due process (in French: principe de contradiction) by the arbitrator. On the other hand, a lack of knowledge of the rules of article 85 of the Treaty of Rome, arguing that these rules, which are of international public policy, should have led to the nullity of the contract. Finally, the French company also objects to the judgement for having failed to sanction the arbitrator’s exceeding of the limits of his mission.

However, first, the court of appeal noted that the arbitrator - to whom Fabricated Metals had sent two letters asking him to limit the disclosure of the contractual documents submitted to the debates - gave knowledge of this correspondence to the board of Gallay, thereby respecting due process (in French: principe de la contradiction).

Second, the court of appeal proceeded – within the limits of its powers, i.e. without reviewing the merits of the arbitral award – to review the award with regard to the application of the community competition rules, which were up to the arbitrator to implement. The Court thus held that the arbitrator decided that the contract did not entail the restrictions reported by the Gallay company and that no evidence was provided of a noticeable impact of the contract on the competition existing in the market of the relevant products, or of an effect on the trade of these products between Member States of the EEC.

Finally, the judgment under appeal held that the arbitrator, seeking the common intention of the parties, found that the contractual relations had been extended beyond the foreseen expiration date in the contract, thereby qualifying him to rule, by virtue of the arbitration clause stipulated in the contract, on the disputes arising from these relations and not resolved by the state court otherwise seized;

Therefore, none of the grounds are well-founded;

FOR THESE REASONS:

DISMISSES the appeal;

Orders the Gallay Company to pay the expenses;

Having regard to article 700 of the new Code of Civil Procedure, rejects the request of the company Fabricated Metals;

Thus ordered and judged by the Court of Cassation, First Civil Chamber, and pronounced by the President during his public hearing of five January nineteen hundred and ninety-nine.