Court of Cassation, No. 06-15.320 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 4 June 2008, 06-15.320

SNF SAS (SNF)

Vs.

CYTEC INDUSTRIES BV (CYTEC)

THE COURT OF CASSATION, FIRST CIVIL CHAMBER, delivered the following judgment:

Whereas, the French company SNF SAS (SNF) entered into a contract in 1991 with the Dutch company Cytec industries BV (Cytec) for the supply of acrylamide monomer. Whereas, a new agreement comprising an arbitration clause was entered into in 1993. Whereas, SNF having terminated the contract, Cytec initiated arbitration proceedings in Brussels. In a first award of 5 November 2002, the arbitral tribunal held that the 1993 contract was void from the time of its creation pursuant to Article 81 of the EC Treaty and that the parties were jointly liable. By a second award of 28 July 2004, the tribunal ordered SNF to compensate Cytec and rejected the former’s claims. Enforcement of the awards was granted by orders of 5 September 2004, which SNF appealed.

On the first ground of appeal, taken in its two parts, hereafter annexed:

Whereas, SNF contests the judgment under appeal (Paris, 23 March 2006) for having rejected the claim for a stay of proceedings made on the basis of a complaint that includes the filing of a civil claim with the Saint-Etienne senior investigating magistrate (in French: Juge d’instruction);

Whereas, the judgment notes, that, first, the rule provided in Article 4 of the Code of Criminal Procedure is analyzed within the context of identical civil fault and criminal offence. Second, after having filed a claim before the arbitrators to void the contract for violation of Articles 81 and 82 of the EC Treaty, SNF endeavours to persuade the criminal judge that the arbitrability in view of Articles 81 and 82 may be called into question and that the arbitration was being used fraudulently to prevent the case from being brought before the judicial courts. Finally, the assessment by the arbitrators of the facts and their consequences will not be called into question as Article 1502 of the Code of Civil Procedure does not allow for such assessment, and the review of the award never deals with the misjudgement by the arbitrator or a possible misinterpretation of the law. Since the claim for a stay of proceedings on the basis of Article 4 of the Code of Criminal Procedure, in its wording prior to the law of 5 March 2007, can only be upheld if the facts challenged as being constitutive of the offence have a direct impact on the cause of the award’s annulment and if the criminal decision to be handed down may potentially influence the civil decision, the court of appeal has legally justified its decision.

On the second ground of appeal, taken in its three parts:

Whereas, SNF contests the judgment under appeal for having confirmed the enforcement of the awards dated 5 November 2002 and 28 July 2004, despite the fact that, according to the ground of appeal:

1°/ the court ruling on an appeal filed against an order for the enforcement of an arbitral award must verify the proper application by the arbitrator of the Community regulations on competition law. Therefore, by merely noting that the arbitral tribunal had applied Community law regarding competition, that the latter’s ability to understand issues of competition law was not discussed and that the arbitrator had justified the conformity of the 1993 contract with the requirements of Articles 81 and 82 of the EC Treaty, the Court of Appeal deprived its decision of legal basis under Article 1502-5 of the Code of Civil Procedure, together with Articles 81 and 82 of the EC Treaty;

2°/ in the alternative, under the principle of the concrete assessment of international public order, the control of the compliance of an arbitral award’s recognition in the legal order with public order must, in any case, pursuant to principle of concrete appreciation of international public order, must relate to the outcome resulting from the recognition of the award, which award must not validate or refuse to sanction a practice that violates international public order. Therefore, by merely noting that the arbitral tribunal applied Community law on competition and justified the conformity of the 1993 contract with the requirements of Articles 81 and 82 of the EC Treaty, without verifying whether the enforcement of the award leads to the endorsement of an anti-competitive practice that violates the international public order understood in concrete terms, the Court of Appeal deprived its decision of a legal basis in light of Article 1502-5 of the Code of Civil Procedure;

3°/ By ruling that the party did not establish a flagrant, effective and concrete violation of international public order, where it follows from its submissions in the appeal that the arbitral tribunal took note of all the elements of an abuse of dominant position but refused to draw the conclusions therefrom, and although the violation is immediately visible when reading the disputed awards and has a direct and immediate effect, the Court of Appeal did not respond to the operative submissions presented to it, in violation of Articles 455 and 1502-5 of the Code of Civil Procedure.

However, whereas, regarding the violation of international public order, only the recognition or enforcement of the award are examined by the court of appeal with regards to the compatibility of the award’s solution with such public order, the review of which is limited to the flagrant, effective and concrete nature of the alleged violation; that the judgment holds, first, that by voiding the 1993 supply contract for violation of Article 81 of the EC Treaty, and by deciding that in the absence of a dominant position, Cytec could not have been guilty of an abuse within the meaning of Article 82 of the Treaty, the arbitral tribunal has applied Community law on competition. Second, SNF did not establish any flagrant, effective and concrete violation of international public order. Finally, SNF having been able to claim compensation in accordance with the principle of the effectiveness of Community law and since such compensation does not fall within the scope of the review exercised under Article 1502-5 of the Code of Civil Procedure for the protection of fundamental principles, the conclusions of the arbitral tribunal in the award of 28 July 2004 did not have to be re-examined before the Court of Appeal. The Court of Appeal, which reviewed the awards with regard to the application of the Community regulations on competition - within the limits of its powers, i.e. without reviewing the merits of the arbitral award -, correctly stated that the recognition and enforcement thereof were not contrary to international public order. The ground of appeal is not founded in any of its parts;

FOR THESE REASONS:

DISMISSES the appeal;

Orders SNF to pay the costs;

Having regard to Article 700 of the Code of Civil Procedure, orders SNF to pay to Cytec industries BV the sum of 5,000 euros and dismisses the claim filed by SNF;

Thus done and ruled by the Court of Cassation, First Civil Chamber, and delivered by the President during his public hearing of the fourth of June two thousand and eight.