Paris Court of Appeal, No. 07/17049 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 15 October 2009, No. 07/17049

O.A.O.NPO SATURN

Vs.

ASC AVIATION

UNIMPEX ENTREPRISES LTD

On 5 February 1996, the company UNIMPEX ENTERPRISES LTD. sold to the Russian company Rybinske Motory, which owns the rights to OAO NPO SATURN, an airplane, thirteen engines and spare parts. It was stipulated that the price of USD 2,036,000 would be paid for the overhaul by Rybinske of seven engines. As only five engines had been overhauled, an amendment n°8/2R was signed on 28 November 1996 providing for the transfer to UNIMPEX of 45430 shares of Rybinske.

Following difficulties concerning the transfer of the shares, the company UNIMPEX referred the matter to the arbitral tribunal in accordance with the arbitration clause contained in the contract of 5 February 1996.

By award rendered in Prague on 30 August 2002, the arbitral tribunal, composed of Mr. Z A, Mr. B C and Mr. Bohuslav Klein under the aegis of the arbitral tribunal of the Economic Chamber of the Czech Republic and the Agricultural Chamber of the Czech Republic, ordered the company OAO NPO SATURN to pay UNIMPEX a penalty of USD 21,530,003 within 15 days from the date upon which the arbitral award has acquired the force of res judicata and within the same period of time, USD 181,549 corresponding to the arbitration fee and administrative costs and 21,948.26CZK in translation costs.

By order dated 4 July 2007, the President of the Paris Trial Court granted exequatur to this award.

The company OAO NPO SATURN, appellant of the order, argues that the arbitrators ruled without an arbitration agreement and that the award is contrary to international public policy (Article 1502 1° and 5° of the Code of civil procedure).

It requests the court, under the 1958 New York Convention and article 1502 of the Code of civil procedure, to overturn the order, to refuse exequatur and to order UNIMPEX to pay 5,000€ by application of article 700 of the Code of civil procedure.

It had the company ASC AVIATION SERVICE CENTER cited in forced intervention as assignee of the claim of the company UNIMPEX.

The company UNIMPEX pleaded that the order was confirmed, and that the appellant should be ordered to pay 8,000€ in accordance with article 700 of the Code of civil procedure.

UPON WHICH,

Considering that the company ASC AVIATION SERVICE CENTER has been summoned in Saint Y and the Grenadines in the forms of article 660 of the Code of civil procedure provided for the French overseas territories, whereas the summons should have been delivered to it according to the forms of articles 683 and following, as it is a company in foreign territory; that consequently, since this company did not brief a solicitor, the court is not validly seized with respect to it;

On the first ground for setting aside taken from its three branches: the arbitral tribunal ruled without an arbitration agreement or on the basis of a null or expired agreement (article 1502-1 of the Code of civil procedure).

The company OAO NPO SATURN states that only the contract of 5 February 1996 is subject to the arbitration agreement and that the amendment n° 8/2R of 28 November 1996 is excluded from it.
According to it, the dispute relating to the execution of this amendment cannot be submitted to arbitration pursuant to article V.2 of the 1958 New York Convention, according to which the recognition and enforcement of an arbitral award may be refused if the competent authority of the country where recognition and enforcement is sought finds that under the law of that country the subject matter of the dispute is not capable of settlement by arbitration, which is the case since article 248 of the Russian Code of Arbitration Procedure stipulates that cases concerning disputes involving foreign persons and relating to the invalidation of entries in public registers made by the public authority responsible for such registers, such as the transfer of shares of joint-stock companies, fall under the exclusive jurisdiction of the Russian arbitral courts.
Finally, the company OAO NPO SATURN argues that both the contract dated 5 February 1996 and the amendment No. 8/2R dated 28 November 1996 are void because they violate Russian law and that consequently the arbitration clause is also void.

But considering that to be admissible before the judge of annulment, the grievance lodged against an arbitral award must, whenever possible, be raised before the arbitral tribunal itself; that in this case the company OAO NPO SATURN has never contested the validity of the arbitration clause and its application to the amendment of 28 November 1996 before the arbitral tribunal;

Moreover, it is in vain that the appellant invokes article V.2 of the New York Convention of 1958, whereas it is common ground that under the French law of the country where recognition and enforcement is required, the dispute is likely to have been settled by arbitration, which is not disputed with regard to the arbitration of penalties claimed in the context of a transfer of shares of a joint-stock company, as well as the provisions of the Russian Code of Arbitration Procedure, as international public order prohibits it from using the restrictive provisions of its national law to avoid the agreed arbitration subsequently;

Finally, the alleged nullity of the contract of 5 February 1996 - a substantive issue on which it is not for the annulment court to decide - does not affect the validity of the arbitration clause by virtue of the principle of autonomy of the arbitration agreement;

Considering that, consequently, the first ground is dismissed;

On the second ground of annulment: the recognition or enforcement of the arbitral award is contrary to international public policy (article 1502-5 of the Code of civil procedure).

The company OAO NPO SATURN claims that the award is contrary to international public policy considering that the amendment No. 8/2R is void since it is contrary to the provisions of article 2 of the Russian law on joint stock companies according to which the shares belong to the shareholders which, incidentally, is in line with French law, so that Rybinske, who was not the owner of the shares, could not transfer them.

But considering that it does not identify in what way the sentences to payment pronounced by the arbitral tribunal, because of the very failure to transfer the shares that it finds, would flagrantly, effectively and concretely violate international public policy; that in reality the company OAO NPO SATURN is seeking a revision on the merits of the award which is prohobited to the judge of the annulment ;

That the second ground is dismissed and therefore the exequatur order is confirmed;

On the requests under article 700 of the Code of civil procedure:

Considering that equity dictates that the appellant company, which is not successful, and whose application on this ground is dismissed, be condemned to pay the company UNIMPEX 8.000€;

FOR THESE REASONS:

NOTES that it is not seized with regard to the company ASC AVIATION SERVICE CENTER;

CONFIRMS the order of exequatur;

CONDEMNS the company OAO NPO SATURN to pay the company UNIMPEX ENTERPRISES LTD 8.000€ under article 700 of the Code of civil procedure;

DISMISSES any other request;

CONDEMNS the company OAO NPO SATURN to pay the costs and admits the company SCP Fisselier-Chiloux-Boulay, solicitor, for the benefit of article 699 of the Code of civil procedure.