Paris Court of Appeal, No. 08/13030

Paris Court of Appeal, 22 October 2009, No. 08/13030

GLOBALE RÜCKVERSICHERUNGS AG (B I AG) vs. SCP Y & A-Y (authorised liquidator of the company ICD SA)

The company ICD-COMPAGNIE INTERNATIONALE DE CAUTION POUR LE DÉVELOPPEMENT, hereafter ICD, a company governed by the Code of Insurance, had as its main activity the issuance of guarantees. For this purpose, it received the necessary approvals from the Insurance Control Commission (in French Commission de contrôle des assurances). Following a decision of 7 November 2000, the Insurance Control Commission withdrew all ICD’s approvals, resulting in the termination of guarantees for all insurance contracts with effect as of 28 December 2000. The Paris Commercial Court, following a decision of 22 January 2001, declared ICD in compulsory liquidation, appointing SCP Y & A-Y as authorised liquidator.

Subsequently, the French Supreme Administrative Court (in French Conseil d’Etat), by decision of 10 March 2003, annulled the decision of the Insurance Control Commission.

Since SCP Y & A-Y, acting as authorised liquidator of ICD, protested about the reinsurer’s forbearance, the German company B I AG, hereafter BI, to honour its commitments towards it, implemented the arbitration procedure provided for in each reinsurance conract (in French Traités de reassurances), in particular in treaties No. 20064, 20092 and 20134 under the terms of which BI had provided its guarantee.

The SCP Y & A-Y acting for ICD, appointed Mr. D, B I, Z, and the two arbitrators chose Mr. F. to preside over the arbitration tribunal.

Following an award handed down in Paris on 29 April 2008, the arbitral tribunal, ruling as amiable compositeur, ordered BI to pay the sum of € 623,362.15 definitely and € 1,686,995 on a provisional basis.

The arbitral tribunal heard an application for failure to rule on a request for provisional enforcement. It dismissed it in accordance with the award of 20 November 2008.

Finally, on 15 September 2009, the arbitral tribunal, seized by SPC Y & A-Y with a request for rectification of a clerical error, issued an award in which it rectified its decision of 29 April 2008 by stating that the table on page 11 chapter 11 of the award should be replaced by the following:

“Treaty, sums in € pending decision

XXX

XXX”

On 2 July 2008, BI filed an action for annulment of the award of 29 April 2008.

BI requested the court to set aside this award, or, alternatively, to annul BI’s condemnations for the legal costs incurred by ICD, under the 20064 and 20092 treaties combined, and its ultra petita condemnation to pay a deposit to the liquidator under the 20134 treaty, and requested to “declare the award of 29 April 2008 and all the arbitration proceedings conducted by ICD SA against BI null and void” and to order SCP Y & A-Y to pay it the sum of € 50,000 under article 700 of the Code of Civil Procedure.

BI claims that the award violates international public policy (Article 1502-5 of the Code of Civil Procedure) for lack of any evidence of the facts necessary to the success of ICD’s claims, the fact that the arbitrators did not comply with their mission (Article 1502-3 of the Code of Civil Procedure) whom handed down one sole arbitral award in the framework of three separate arbitration proceedings. Finally, it claims an irregularity in the arbitral tribunal’s composition, the violation of the secrecy of the deliberations (in French secret du délibéré) and the lack of respect of due process (in French Principe du contradictoire).

SCP Y & A-Y, as authorised liquidator of ICD, considers that the action for annulment should be dismissed and that BI should be ordered to pay € 100,000 in damages for abusive proceedings and € 15,000 on the basis of Article 700 of the Code of Civil Procedure. It seeks the dismissal of the action for annulment based on the violation of international public policy, requests that the action for annulment based on the joinder of proceedings be declared inadmissible in application of the rule of estoppel and, in the alternative, that it be held that the application of the procedural rules by the arbitrators cannot constitute a breach by them of their mission, to declare that BI is not admissible to apply for the annulment of the award on the ground that the arbitral tribunal would have ruled ultra petita, alternatively to declare that the arbitrators who committed a clerical error of calculation rectified it by their award of 14 September 2009, and alternatively to rectify the arbitral award of 29 April 2008, and finally, alternatively, to declare the application for the annulment of the rectifying award inadmissible and alternatively unfounded.

UPON WHICH:

On the first ground for annulment based on the violation of international public policy (Article 1502-5 of the Code of Civil Procedure)

BI argues that the arbitral award is contrary to international public policy as it ordered it to make the payments requested by the agent of the judicial liquidation of ICD although the latter did not provide the documents necessary for evidence. The claimant explains that under the terms of Article 9 of the Code of Civil Procedure, it is incumbent on each party to prove, in accordance with the law, the facts necessary for the success of their claims. It also explains that the arbitrators should have drawn the consequences of the failure to communicate this evidence and dismissed the representative of the judicial liquidation of ICD in the total absence of evidence on certain necessary elements of its claims, namely the amount to be allocated to the reinsurance accounts for each of the treaties for premiums, claims paid or to be paid and recoveries made since the year 2000.

BI further states that its condemnation to a “lump-sum” contribution to the costs incurred in connection with the management of claims, without these costs being justified, constitutes a violation of international public policy. It explains that the only document communicated by the SCP Y & A-Y concerning these costs is a statement drawn up on plain paper containing a list of various invoices, the invoices themselves not having been communicated, and adds that the arbitral tribunal itself noted that “the expenses invoked by ICD are not justified either for the liquidation unit or for the legal costs”.

Considering that BI does not establish any violation of the public policy of procedure with its complaints concerning the failure of the SCP Y & A-Y in the production of evidence, whereas the arbitral tribunal, noting that “documents necessary for the evidence…” were not provided by the authorised liquidator of ICD, did not mention that this failure to provide evidence was total - a very large number of documents having been communicated by it - and considered that, with regard to the legal costs incurred by the judicial liquidation, in the light of a statement communicated under exhibit no. 16 by SCP Y & A-Y for that “the nature of the management, due to the liquidation and the more complex monitoring of the claims generated a significant fee burden from which the reinsurer benefited in part”, whereas it is not for the court to review the award to see whether this document could be received as evidence; that under the guise of the violation of international public policy, these grounds deal with the merits of which the annulment judge cannot hear; that the first ground for annulment is therefore rejected;

On the second ground for annulment: the arbitrators did not comply with their mission (Article 1502-3 of the Code of Civil Procedure):

BI explains that three arbitral proceedings were instituted under the three different treaties and that the joinder of these proceedings and the handing down of a single award were made in contravention of the will of the parties.

It also argues that the confusion of the awards for the 20064 and 20092 treaties is incompatible with the arbitrators' duties.

Finally, it submits that its order to establish a cash deposit for the 20134 treaty in the amount of € 1,255,288 while the authorised liquidator of ICD only requested € 941,288.18 constitutes an ultra petita decision that disregards the mission of the arbitral tribunal.

Considering that each treaty included an arbitration clause and that an arbitration procedure was implemented by SCP Y & A-Y in its capacity as authorised liquidator of ICD for each of the treaties; that in its statement of case of 6 February 2008 and then in that of 5 March 2008 referring to the three treaties at the top of the page, BI presented single defence documents, then, in the same “summary defence memorandum” dated 4 April 2008, reiterated its arguments relating to the three treaties without opposing the request made by ICD, in its summary memorandum of 31 March 2008, to combine the three proceedings for the proper administration of justice; by failing to establish that it protested against the joinder of the three proceedings before the arbitrators at the hearing of 9 April, BI can no longer, under the rule of estoppel, raise the ground alleging that the arbitrators were unaware of their mission in the context of the annulment proceedings;

Considering that by pronouncing a single judgment, under the 20064 and 20092 treaties, the arbitrators did not disregard their mission since they expressly requested ICD, at the last hearing on 9 April 2008, to break down the sums owed by BI in this respect. In execution of this request a note distinguishing the sums claimed was sent on 10 April by the authorised liquidator of ICD to the arbitral tribunal and to the counsel of BI, which allowed the arbitral tribunal to decide on the one hand, in the light of this note, on individualised claims on which BI could submit its observations, and on the other hand, to grant the full amount of the claims for each of the treaties; that, as a result, the second ground for annulment alleging disregard for the arbitrators' mission, in its first two parts, is unfounded;

Considering that, presented with a request by SCP Y & A-Y for rectification of a material error, the arbitral tribunal, by award rendered on 15 September 2009, corrected the amount charged to BI in respect of the claims to be deposited in cash under the 20134 treaty by setting it at € 941,288, a sum corresponding to the request initially made by ICD; that SCP Y & A-Y argues that the error was therefore corrected by an award of 15 September 2009 which has the force of res judicata, whereas BI argues that this corrective award is affected by various grounds of nullity and that the arbitrators could not rectify the award of 29 April 2008 as they were relieved of jurisdiction; that the authority of the rectifying award, which as it stands has not been appealed against , it is up to the court to assess its incidental recognition in the light of the arguments developed respectively by the parties; that the arbitrators have the right to make purely material corrections on condition that they do not change the meaning of their decision; that in the present case, by setting aside in the amending award the amount of the LVP claim under the 20134 treaty, whereas, in the award of 29 April 2008, in the light of the factual and legal elements of the case, they attributed it to the 20134 treaty, ordering BI to establish a cash deposit of € 1,255,288, the arbitrators changed the meaning of their initial decision even though they were relieved of jurisdiction; that, in these circumstances, the amending award cannot be recognised, and the arbitrators ruled ultra petita in the award of 29 April 2008, ordering BI to establish a cash deposit for the 20134 treaty in the amount of € 1,255,288; that, as a result, the award should be partially annulled;

On the third ground for annulment: “the rectifying award of 15 September 2009 was made in violation of due process (in French Principe du contradictoire) and of international public policy”.

BI states that the rectifying award of 15 September 2009 was pronounced in violation of due process (in French Principe du contradictoire) and of international public policy, the arbitrators were not perfectly impartial and did not respect the secrecy of the deliberations. BI states that the arbitral tribunal was composed irregularly, “which results in the annulment of all the arbitral proceedings that are the subject of the present appeal”.

But considering that BI is ill-founded to invoke these cases of annulment opened by Article 1502 of the Code of Civil Procedure in the context of its appeal against the award of 29 April 2008 which is not concerned by these grounds which relate to the rectifying award, and it does not explain how these grievances could have contaminated the award of 29 April 2008; that this third ground is rejected;

On the claim for damages and Article 700 of the Code of Civil Procedure

Considering that the SCP Y & A-Y as authorised liquidator of ICD does not establish any particular circumstances that caused BI’s action to degenerate into abuse, and considering the meaning of the judgment, the first of its claims for damages for abusive proceedings should be dismissed;

Considering that the appellant succumbing for the major part of its claims, is ordered to pay the costs; that equity does not require the application of the provisions of Article 700 of the Code of Civil Procedure;

FOR THESE REASONS:

Partially annuls the award of 29 April 2008 in that it ordered B I to establish a cash deposit for the 20134 treaty in the amount of € 1,255,288;

Rejects the action for annulment on the other counts of the award of 29 April 2008,

Rejects all other requests,

Orders BI to pay the costs and admits the SCP PETIT LESENECHAL, avowed, for the benefit of article 699 of the code of civil procedure.

THE CLERK, THE PRESIDENT