Paris Court of Appeal, No. 08/11757

Paris Court of Appeal, 10 September 2009, No. 08/11757

Judicial chronology:

Court of Cassation, First Civil Chamber, 12 February 2014, No. 10-17.076

CEHR, 9 June 2015

M SCHNEIDER SCHALTGERATEBAU UND

vs.

CPL INDUSTRIES LIMITED (CPL)

M SCHNEIDER SCHALTGERATEBAU UND (hereinafter M SCHNEIDER), a company incorporated under Austrian law and specialising in the manufacture and installation of electrical equipment, decided to expand its activities in Nigeria. Therefore, on 16 February 2005, it concluded an agreement for the promotion of exclusive projects (PEP agreement) and a joint venture agreement with CPL INDUSTRIES LIMITED (hereafter CPL), then represented by Z, A and B. Under the terms of these agreements, CPL had to provide M SCHNEIDER with all the necessary assistance for the negotiation and performance of public contracts with the federal government and thirty-six member states of the Federation.

The relations between the parties to the contracts deteriorated, and CPL implemented the arbitration clauses inserted in Articles 9.2 and 14 of these two contracts and filed a request for arbitration before the International Commerce Chamber (ICC).

By a partial award of 5 October 2007, the arbitral tribunal ruled that M SCHNEIDER did not demonstrate that the contracts were concluded in violation of Nigerian public order. The arbitral tribunal considered it had no jurisdiction with regard to the claims filed by CPL against A, and declared it had jurisdiction rgarding the claims filed by CPL against M SCHNEIDER and B. Thereafter, CPL withdrew its claims against B who accepted the withdrawal.

Following the award of 8 May 2008, the sole arbitrator, Mr Stuart C, ordered M SCHNEIDER to pay to CPL 50,963,592 Nairas with interest as of 3 October 2006 at a rate of 10%, its legal and other costs amounting to 205,589 USD and 10,500 euros and the arbitration costs at USD 220,000. He dismissed M SCHNEIDER’s counterclaim and stated that it will bear its own legal and other costs as well as the arbitration costs set at USD 220,000, and that it will reimburse CPL, in the amount of 165,333USD, for the share of the advances on costs that it paid to the ICC.

An addendum to the award was rendered on 29 June 2008 by the arbitral tribunal before which two amendment requests were brought respectively by M SCHNEIDER and CPL.

M SCHNEIDER indicates that only its condemnation to pay D to CPL was ruled out.

M SCHNEIDER filed a claim for the annulment of the award of 8 May 2008 on the grounds that its recognition would violate the international public order, that the arbitral tribunal disregarded the fraus omnia corrumpit principle and the res judicata authority of the partial award of 5 October 2007 and did not respect the principle of due process (in French Principe de la contradiction). It requests that the Court set aside the award and order CPL to pay to it the sum of €40,000 under Article 700 of the Code of Civil Procedure.

CPL submitted the dismissal of the appeal and requested that M SCHNEIDER be ordered to pay to it the sum of €120,000 under Article 700 of the Code of Civil Procedure.

It states that the grounds of appeal are unfounded and that the appeal must be dismissed.

UPON WHICH

Whereas, for the proper administration of justice, the joining of the files registered under numbers 08/11757 and 08/12062 should be ordered.

Whereas CPL seeks the dismissal from the discussions of M SCHNEIDER’s submissions filed on the closing date of 18 June 2009, on the grounds that it did not have time to respond to these new arguments. However, the grounds contained therein which were already developed in M SCHNEIDER’s submissions were intended to respond to CPL’s last submissions of 28 May 2009. Therefore, the latter should be dismissed of its claim for the dismissal of the submissions filed by M SCHNEIDER on 18 June 2009.

On the first ground for annulment taken in its three parts: the recognition of the award is contrary to the international public order (Article 1502-5 of the Code of Civil Procedure)

1° M SCHNEIDER states that the final award disregarded the principle of res judicata, and thus violated a principle of public order. It states that the arbitral tribunal declared that it had no jurisdiction to rule on M SCHNEIDER’s counterclaim, whereas in the interim award of 10 October 2007, the tribunal declared it had jurisdiction to rule on this claim.

2° M SCHNEIDER contends that the arbitral tribunal disregarded the fraus omnia corrumpit principle. It explains that the sole arbitrator, by ruling that Z sought to oust M SCHNEIDER from the Nigerian project company, defined deceptive practices aiming to prejudice M SCHNEIDER’s rights and constituting fraud, but did not draw the consequences of its finding of such fraud, since it ordered M SCHNEIDER to pay damages corresponding to the costs invested in the Nigerian project company to CPL.

3° M SCHNEIDER maintains that the award contributes to the endorsement of the acts of corruption. Indeed, the contracts were signed for B by Mrs E, which is a false identity behind which was hiding Mrs L-M, daughter of the President of Nigeria at the time and government commissioner of the state of Ogun, in order to bypass the anti-corruption rules. It also maintains that CPL and B were pursuing a fraudulent purpose, namely to corrupt Nigerian civil servants. M SCHNEIDER explains that it raised before the arbitrator the annulment of these contracts as they constitute a violation of the provisions of the Nigerian anti-corruption law. Indeed, the concealment of Mrs L-M’s true identity is revealing as to B and CPL’s intention to circumvent the Nigerian rules, noting that M SCHNEIDER was only belatedly informed thereof by an email of 1 June 2006 from Z without the latter indicating that the signature of the contracts by Mrs L-M could lead to their annulment. The latter intervened to facilitate the obtaining of public contracts through her links with the President of the Republic of Nigeria, which was incompatible with her status as a civil servant prohibiting her from participating in a company. Z offered her a car in violation of Article 8 of the Code of Conduct for Civil Servants. The claimant further states that the award ignored these acts of corruption and that its conviction to pay to CPL the reimbursement of its costs gives effect to an act tainted by corruption.

Whereas, with respect to the violation of the international public order, only the recognition or the enforcement of the award is reviewed by the judge ruling on annulment based on the compatibility of the solution of the award with such public order. This review is limited to the flagrant, effective and concrete nature of the alleged violation.

Whereas, according to the sworn translation of paragraph 156 of the award written in English, translated by J K and produced by M SCHNEIDER, the sole arbitrator states that “the tribunal dismisses the arguments brought forth by M SCHNEIDER. Under the terms of Article 4 of the JVA, the financial responsibility lies with M SCHNEIDER. The costs subject matter of the claim formulated by M SCHNEIDER preceded the facts on the basis of which M SCHNEIDER’s claim is based. Therefore, the costs cannot be a consequence of these facts, even if it is in the interest of M SCHNEIDER to declare that these facts had been committed in violation of the aforementioned provisions. The tribunal simply understands that, following M SCHNEIDER’s exclusion from the Company, it was deprived of all the proceeds of its investments within the said company” and concludes that “[A]ll the legal remedies that [M SCHNEIDER] may use on this basis are not included in the scope of the present procedure”. These statements, which were confirmed in the final part of the award “for the reasons set out above” [paragraph 170] “M SCHNEIDER’s counterclaim is dismissed”, infer that the arbitral tribunal did not reject its jurisdiction and that it did not demonstrate any contradiction of decisions between the partial award and the challenged award that would be incompatible with the procedural international public order.

Whereas M SCHNEIDER invokes a ground of fraud of which Z would be guilty in the context of the performance of the contract. However, it is not up to the court to judge an award in the context of an action for annulment, as wanted by the claimant who did not raised, before the arbitral tribunal, this ground relating to fraud on the basis of information already available to it.

Whereas M SCHNEIDER uses two new elements in the context of the action for annulment: an email from Z sent on 1 June 2006 and the functions performed by Mrs L-M, Ogun State official, who demonstrate breaches of the anti-corruption Nigerian law.

Whereas the arbitral tribunal stated that the use of an assumed name by Mrs L-M, her status as daughter of the President of the Republic and as government commissioner of the state of Ogun, of which M SCHNEIDER could not have been unaware due to the public nature of the function, as well as the email from Z, considered in paragraphs 21, 90, 113 and 115 of the award, did not establish the existence of acts of corruption. By using these allegedly new elements as evidence of corruption, whereas such arguments have been developed in the context of the procedure that led to the partial award and then reiterated and debated in the proceeding leading to the final award, the claimant seeks in reality a new investigation of the case on the merits, and not the control of the award. The arbitrator indeed examined the issue of corruption that was submitted by M F and drew the conclusion that there were no acts of corruption. M SCHNEIDER does not demonstrate that the solution adopted by the award violates the international public order by covering acts of corruption, it being noted that M SCHNEIDER could not be mistaken regarding the interventions of Mrs L-M and Z since the object of the PEP Agreement was, among other things, to “provide the extensive contacts of the eminent members of the board of directors of CPL Industries, A and B”. Therefore, the first ground is dismissed.

On the second ground alleging non-compliance by the arbitral tribunal with due process (in French Principe de la contradiction) (Article 1502-4 of the Code of Civil Procedure)

M SCHNEIDER argues that the arbitral tribunal violated this principle by failing to communicate to the parties the transcripts of the March 2008 hearings, although it ordered their registration and transcription for communication to the parties, and deprived M SCHNEIDER of verifying what was said at the time of the witness hearings. It thus prohibited the parties from discussing the elements of evidence that arose during the four days of hearings as well as arguments developed for the first time at these hearings. M SCHNEIDER adds that the arbitral tribunal’s haste to close the proceedings on 1 May 2008, together with the non-compliance by the arbitrator with the rules set in its Procedural Order No. 4, and the material impossibility to discuss new arguments, documents and testimonies since the registration of the main witness disappeared by lack of transcription, constitute a violation of the adversarial process.

The claimant also argues that the arbitral tribunal breached the equality between the parties by requesting, a few days before the hearings of March 2008, to CPL to specify the legal basis for its claim for the reimbursement of the investments, without inviting M SCHNEIDER to discuss nor to do the same as to its own counterclaim, while the sole arbitrator emphasises in the award the imprecise nature of such claims.

Whereas to be admissible, the invoked ground must have been raised, whenever possible, before the arbitral tribunal itself. In the present case, M SCHNEIDER contends that the transcripts of the discussions that occurred in the hearings held from 3 to 6 March 2008 were not sent spontaneously to the parties by the arbitral tribunal and that the latter hastily closed the proceedings without M SCHNEIDER being able to explain itself on new documents produced and arguments developed during the hearing. However, M SCHNEIDER could have argued these grounds before the arbitral tribunal, and it refrained from requesting the transcription of the hearings before their closure which occurred more than a month thereafter and even before the issuing of the award which also occurred one month thereafter. By not objecting before the arbitral tribunal to allow the latter to remedy the situation, M SCHNEIDER is no longer admissible to subsequently draw therefrom a cause for the annulment of the award.

The fact that the sole arbitrator made use of the provisions of French procedural law which is applicable to the arbitral proceedings, and invited CPL to clarify one of its arguments before the hearing, does not breach the equality between the parties. On one hand, the procedural law grants the tribunal the option to invite the parties to provide any explanations without having to apply this option in a distributive manner to each of the parties. On the other hand, the circumstance that M SCHNEIDER was dismissed of its counterclaim for reasons deriving from the application of Article 4 of the agreement, as previously stated, and that the arbitral tribunal did not use the option to incite new explanations from the appellants, do not showcase any breach of the parties’ equality.

On the third ground: the arbitral tribunal ruled without complying with its mission (Article 1502-3 of the Code of Civil Procedure)

M SCHNEIDER claims that the decision relating to the no jurisdiction of the arbitral tribunal and its counterclaim constitutes a breach by the arbitrator of its mission. It adds that the arbitrator ruled ultra petita by ordering it to pay 100% of the costs invested by CPL in the Nigerian company, whereas CPL only asked for a partial conviction up to 51%.

However, whereas, on one hand, as previously stated, the arbitral tribunal did not declare it had no jurisdiction to rule on M SCHNEIDER’s counterclaim. On the other hand, CPL, in its submission of 15 November 2007 regarding the claim for the payment of the sum of 112,288,345 Nairas, expressly stated that “all of the costs must be borne by the First Defendant [M SCHNEIDER]”. Therefore, the arbitral tribunal did not rule ultra petita. It is observed that the award actually ordered M SCHNEIDER to pay the sum of 50,693,591 Nairas. Therefore, this ground is inoperative.

Consequently, the last ground for annulment being unfounded, the action for the annulment of the award of 8 May 2008 should be dismissed.

On the claim on the basis of Article 700 of the Code of Civil Procedure

Whereas, M SCHNEIDER, who is unsuccessful, should be ordered to pay to CPL the sum of €50,000 under Article 700 of the Code of Civil Procedure.

FOR THESE REASONS

Dismisses CPL’s claim which aims to exclude the opposing submissions of 18 June 2009 from the discussions,

Orders the joining of the files registered under numbers 08/11757 and 08/12062,

Dismisses the action for annulment of the award of 8 May 2008,

Orders M SCHNEIDER G N O to pay to CPL INDUSTRIES LIMITED the sum of 50 000€ under Article 700 of the Code of Civil Procedure,

Orders M SCHNEIDER G N O to pay the costs and grants Maître TEYTAUD, solicitor, the benefit of Article 699 of the Code of Civil Procedure.