Paris Court of Appeal, No. 07/07331 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, First Chamber, 22 May 2008, No. 07/07331

SOCIETE DE TRANSFORMATION DES CEREALES SARL (STCO)

vs.

CAM CEREALES

CAM CEREALES, a French company, sold several thousand tons of wheat to STCO, an Algerian company, both professionals in the international trade of agricultural products, under two contracts, VBM 2751 of 2 March 2004 and VBM 2794 of 14 September 2004, which refer respectively to INCOGRAIN formulas 12 and 13, which contain an arbitration clause.

A dispute has arisen between the parties concerning the performance of these contracts.

On 25 April 2007, STCO filed an action for the annulment of the arbitral award rendered on 26 January 2007 under the supervision of the Arbitration Chamber of Paris by Mr. CAEN, Chairman, Mr. Y, Z, A and I arbitrators, under the terms of which the arbitral tribunal:

ordered STCO to pay CAM CEREALES the amount of 186,500 US dollars with interest at the legal rate in France as of 16 September 2005 until full payment, the amount of 10,000 euros under Article 700 of the French Code of Civil Procedure, and the amount of 13,047.15 euros in arbitration costs.
foreclosed on STCO’s claims for payment of the sums of 357,596.61 US dollars (delay in loading) and 137,420.10 US dollars (milling correctors) dismissed its requests.

STCO requests the Court to stay the proceedings pending the decision of the criminal judge on the legal classification of forged invoices No. 04.08.020 of 9 August 2004 and No. 04.11.026 of 12 November 2004, pursuant to Article 4 of the code of civil procedure, to set aside the award by noting that the recognition or enforcement of the award are contrary to international public policy and to order CAM CEREALES to pay it the amount of 6 000 euros pursuant to article 700 of the code of civil procedure.

It argues that the arbitral tribunal considered the existence of these false invoices to condemn. The production of forged documents in the context of arbitral proceedings is not reconcilable with the French judicial order and that consequently the recognition or enforcement of the award are contrary to international public policy (article 1502-5 of the French Code of Civil Procedure).

CAM CEREALES concludes that the request for a stay of proceedings and the appeal for annulment are dismissed and requests the Court to order STCO to pay the sum of 500 000€ in damages because of the denigration to which it has subjected itself to its prejudice and that of 20 000€ under Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the request for a stay of proceedings

STCO requests the Court to stay its decision “pending the decision of the criminal judge on the classification of forgery and use of forged invoices No. 04. 08.020 of 9 August 2004 and No. 04.11.026 of 12 November 2004” for which it filed a complaint on 16 August 2007, pursuant to Article 85 of the Code of Penal Procedure, before the Public Prosecutor at Paris Tribunal of Grande Instance. It specifies that it reserves the right to file a complaint with the Dean of Investigating Judges as a civil party if its complaint remains without effect. It justifies its request for a stay of execution by the fact that the arbitral tribunal has retained these invoices to condemn it.

However, considering that it is not debated that the two sales contracts were terminated at the request of STCO, which was accepted by the company CAM CEREALES. The arbitral tribunal ordered STCO to compensate for the loss related to the termination of the VBM 2751 contract, retaining “the amount of USD 120,000 as being the low estimate of the range announced in this letter [of 24 May 2004] and well below the estimates of loss recognized by the parties”, and stated, about the cancellation of the contract VBM 2794, by answering the arguments of the company STCO which estimated the prejudice of the company CAM CEREALES at 3150 USD, that “the immediate resale of goods already in silo and therefore ready to be loaded cannot be compared to a market value for deferred shipment”. STCO was therefore not ordered to pay the invoices of 9 August 2004 and 12 November 2004 which it had contested before the arbitral tribunal as ‘backdated and established for the purposes of the case’ but to compensate the company CAM CEREALES for its prejudices. Consequently, the outcome of the complaint for forgery and falsification of documents is not likely to have any influence on the action for annulment of the award. Consequently, the application for a stay of proceedings is rejected.

On the sole ground of annulment taken from the violation of international public policy (Article 1502-5 of the French Civil Procedure Code):

STCO states that the production of forged documents in the context of arbitration proceeding is not reconcilable with the French legal system. It argues that the solution given by the arbitral tribunal is a matter of international public order since articles 441-1 and 441-12 of the penal code belong to this public order and that the arbitrators have granted to these invoices the nature of evidence of the requests formulated by CAM CEREALES by disregarding the arguments that it presented to argue that they were forged.

However, considering that, as already stated, the arbitral tribunal retained to condemn the company STCO the existence of the termination agreements, which were not contested by the company STCO, and not the invoices which are the subject of its criminal complaint. STCO does not establish how the solution adopted by the court is contrary to international public order. The ground and therefore the action for annulment are rejected.

On the claim for damages by the company CAM CEREALES:

Considering that CAM CEREALES claims that STCO did not limit itself to be an unfair partner after the termination agreements, but that it denigrated it in order to damage its reputation in the world trade of cereals with the public authorities, even though it has been well known for more than 88 years. These manoeuvres are concretised in a letter dated 23 May 2007 to the company FRANCE EXPORT CEREALES and to the French Embassy in Algiers where it is classified as an “indelicate supplier”, guilty of “forgery and forged use”, adding that it could ‘not work with gangsters’.

Considering that it is not discussed that the letter was addressed to FRANCE EXPORT CEREALES with a copy to the French Embassy in Algiers. STCO explains that it “has to… attack the delinquent supplier (CAM CEREALES) for forgery and use of forged documents” and closes its letter by stating that “we cannot work with gangsters”, which is still mentioned company CAM CEREALES since the complaints concern exclusively this company. The latter claims that “the defamation of STCO has reduced [its] turnover by 15%, which has led to a decrease in gross margin to €400,000 for one year only, while the consequences of the defamation action of STCO have not yet faded in 2008” but does not provide any material and accounting element to justify its prejudice of which only the moral aspects are established; that it is thus appropriate to order STCO to pay to CAM CEREALES the sum of 1€ as damages;

On the request made under article 700 of the Code of Civil Procedure:

That it is appropriate to reject the request made by STCO, which succumbs under article 700 of the Code of Civil Procedure, and to order it to pay to CAM CEREALES the sum of 20 000€ for irrecoverable costs.

FOR THESE REASONS

Rejects the request for a stay of proceedings filed by STCO,

Rejects the appeal for annulment of the sentence of 26 January 2007,

Orders STCO to pay CAM CEREALES the sum of 1€ in damages,

Orders STCO to pay to CAM CEREALES the sum of 20 000€ under the terms of article 700 of the code of civil procedure,

Orders STCO to the costs and admits the SCP NABOUDET-HATET, avowed, to the benefit of article 699 of the code of civil procedure.