Paris Court of Appeal, No. 70/00868

Paris Court of Appeal, 26 November 2009, No.70/00868

Ms A D Z Vs. Mr G H I

Mr. G H I, who is a Lebanese lawyer, was the counsel, the agent and the depositary of the goods, securities and documents of Mr. D Z, a Saudi businessman. Upon his death, Mr. D Z left his widow and his four children as his heirs, who asked Mr. G H I I for a statement of the rights and property of the deceased in his possession.

Mr. G H I, Y and A D Z, children of D Z, have signed an agreement, on 1 June 2003, stipulating that any dispute between the parties would be settled amicably or, if not, by arbitration.

Mr G H I filed a request for arbitration with the International Court of Arbitration of the ICC in Paris under the arbitration clause inserted in the said agreement in order to recognise as binding and enforceable an agreement. This agreement is a second agreement signed on 20 June 2003 between Mr G HI, on the one hand, and on the other hand Y Z and AD Z, which challenges the validity and content of the agreement. This agreement grants Mr G H I a general and full discharge from his management of the interests of D Z, sets out the rights accruing to the two children of D Z in the possession of Mr G H I, and stipulates a waiver on the part of the consorts Z of all rights and actions with regard to Mr G H I.

On 9 July 2004, Mr. Y Z signed an agreement with Mr. G H I, in which he confirms the validity of the agreement of 20 June 2003, executes it and confirms his withdrawal from all proceedings against Mr. G H I. This withdrawal was recorded in the partial arbitral award dated 15 February 2006.

In an award handed down in Paris on 6 May 2008, the sole arbitrator, Mr. B C, stated essentially that the agreements of 1 June and 20 June 2003 are valid, that the latter will produce all its effects, in particular of discharge with regard to Mr. G H I. The sole arbitrator also stated that Mrs. A D Z is only entitled to the rights and amounts listed in Annex 1 of the Convention of 20 June 2003 and ordered Ms A D Z to not bring any further civil proceedings against Mr G H I contrary to the said Convention and to withdraw those already initiated. Furthermore, the sole arbitrator noted that Mr G H I owes the sum of USD 873,929.85 to Ms A Z in accordance with Annex 1.

Ms. A D Z brought an action for annulment of this award. Her main request is for a stay of proceedings pending the decisions of the Single Criminal Judge in Beirut and the Examining Magistrate in Geneva, and alternatively for the annulment of the award on the grounds that it violates substantive and procedural public policy, that the arbitral tribunal failed to respect due process (in French Principe de la contradiction) and equality of arms (Article 1502-4 and 1502-5 of the Code of Civil Procedure). She also requested the Court to order Mr G H I to pay her the sum of EUR 50,000 under Article 700 of the Code of Civil Procedure.

Mr. G H I claims that the requested for stay of proceedings and annulment of the arbitral award are inadmissible and unfounded and requested the condemnation of Ms A D Z to pay him the sums of EUR 75,000 in damages for abusive proceedings and EUR 50,000 on the basis of Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the application for a stay of proceedings

Ms A D Z requests a stay of proceedings pending the decisions of the examining magistrate of Beirut, to which she brought a complaint with a civil claim for breach of trust, fraud, forgery and use of forgery against Mr J-K and any person revealed by the investigation, and of the examining magistrate of Geneva, criminal proceedings initiated by her. Her request is based on the grounds that those decisions are to such as to demonstrate the misleading nature of the statement of accountability contained in the agreement and to call into question the conclusions of the award, in particular with regard to such accountability. She argues that there is a close link between the fate of the criminal proceedings and the case before the court and invokes the order issued by the investigating judge on 13 November 2007 of Beirut against Mr. J-K, indicted on the charge of breach of trust, who signed with Mr. G H I the agreement of 20 June 2003 on behalf of Mrs A D Z without her consent.

Considering that under the terms of Article 4 of the Code of Criminal Procedure, the initiation of public proceedings does not require the suspension of other actions brought before the civil court, of whatever nature, even if the decision to intervene in criminal proceedings is likely to exert, directly or indirectly, an influence on the outcome of the civil proceedings;

Considering that the examining magistrate of Beirut, after hearing Mr G H I on 7 March 2007, following an order of 13 September 2007, stated that the elements of existence of the offence of forgery were not identified and, as it stood, did not bring any charge against Mr G H I. It added that if the alleged breach of confidence by J-K was identified, it would have no impact on the agreement of 20 June 2003 concluded by G H I. Moreover, the claimant, who merely points out the existence of criminal proceedings in Switzerland “of which the arbitrator has been informed”, does not provide any information on these proceedings, about which the arbitral tribunal has already noted that she was unable to give any precise details; that in these circumstances, while the French judge is under no obligation to comply with the outcome of criminal proceedings initiated abroad, as the court has already stated in its judgment of 18 September 2008, the request for a stay of proceedings of Mrs A D Z is rejected;

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

Ms. A D Z argues that the award, in holding that the discharge given to Mr. G H I was valid and granting his request when he refused to proceed with the complete rendering of accounts of the estate of D Z, is vitiated by fraud insofar as the discharge given to Mr. G H I in the agreement of 20 June 2003 was obtained fraudulently with the complicity of Mr. J-K who signed it as Ms. A D Z’s representative when he did not have the power to do so; that this suspicious agreement gives general discharge to Mr G H I of his management of the interests of D Z, fixes the rights in possession of Mr G H I belonging to A and Y Z, stipulates a waiver by the latter of all rights and actions with regard to Mr G H I and gives discharge to the RIESLING Foundation established in Lichtenstein; that Mr G H I took the initiative of the arbitration proceedings in order to avoid being sued and to evade his obligation of accountability and limited himself to alleging the apparent regularity of the agreement by concealing the circumstances in which it was obtained and signed, whereas the criminal proceedings instituted in Lebanon against Mr J-K enable the false nature of the declaration of surrender to be established, the Single Criminal Court in Beirut having decided to wait for Mr G H I to be heard as a witness before referring the case to the public prosecutor’s office for prosecution, and there being a serious likelihood that Mr G H I will be indicted in the Swiss criminal proceedings, in particular for breach of trust on the ground of failure to render accounts.

Considering that Ms A D Z challenged the validity and binding force of the agreement of 20 June 2003 and argued that it was false. This issue was, from the outset, in the debates during the arbitration proceedings. The parties exchanged four written submissions on this issue, which they debated at length before the sole arbitrator. This sole arbitrator explained this in his award by questioning the lawfulness of the agreement after having investigated whether there were fraudulent concerted acts or fraudulent behaviour attributable to Mr G H I, and admitted, in the terms of a relevant demonstration, that the agreement was valid and drew the legal consequences on the lawfulness of the discharge given to Mr G H I. Moreover, the fraud imputed to Mr G H I was based on the making of a false backdated document to conceal the fact that the agreement of 20 June 2003 was concluded after the revocation of Mr J-K’s mandate, whereas the partial award of 24 May 2006 stated that the agreement was signed before the revocation of the power of Ms A D Z’s counsel, who was aware of the existence of the agreement at the time of the revocation, the court having, by judgment of 18 September 2008, dismissed the action for annulment of that award. Mrs A D Z reiterates her allegations of fraud which she had already developed before the arbitral tribunal, whereas the court is not the judge of the proceedings but of the award, without demonstrating the existence of a flagrant, effective and concrete violation of international public policy within the meaning of Article 1502-5 of the Code of Civil Procedure. The first ground of annulment is therefore rejected;

On the second ground for annulment: the arbitral tribunal did not respect due process (in French Principe de la contradiction) and equality of arms (Articles 1502-4 and 1502-5 of the Code of Civil Procedure):

Ms A D Z claims that the arbitrator, by refusing, despite her repeated requests, to order Mr G H I, the agent depositary of D Z’s property and rights, to communicate the documents relating to the latter’s estate, disregarded due process (in French Principe de la contradiction) and equality of arms. She argues that, in support of her request for communication of exhibits, there are conclusive facts capable of demonstrating the relevance and importance of those documents in the outcome of the dispute and that the arbitral tribunal disregarded due process (in French Principe de la contradiction) and equality of arms by enclosing her request for communication of exhibits by Mr G H I in the merits. MS A D Z also considers that the sole arbitrator disregarded due process (in French Principe de la contradiction) and equality of arms by rejecting that request as irrelevant to the question of the validity of the agreement of 20 June 2003, even though the communication of exhibits constituted a necessary precondition for the establishment of the truth and the refusal to communicate exhibits necessary to discuss the proper performance by Mr G H I of his mission of rendering accounts deprived her of any possibility of defending her rights. She explains that her counsel, in a letter dated 9 February 2007, requested the sole arbitrator to order Mr G H I to communicate various documents, in particular the inventory of the elements of D Z’s estate, the list of assets handed over to the heirs and the transactions and releases signed with them, and the declarations to the tax and customs authorities, the transactions carried out on the assets of the deceased five years before his death and after his death, copies of the articles of association and agreements relating to legal entities in which D Z had an interest, his bank accounts, copies of the accounts rendered by Mr G H I to the deceased in the five years prior to his death.

Whereas Ms. A D Z filed her request for the communication of exhibits on 9 February 2007, the parties exchanged views on this point, in particular in their briefs of 11 June and 10 July 2007 and pleaded it at the hearing of 22 January 2008. The award (§93) notes that the request for the communication of documents was made a few days after the French examining magistrate had refused to grant a request for the communication of exhibits. The award also states that “the arbitral tribunal must therefore first verify that the obligation to render accounts of Mr. G H I is not extinguished, which is one of the challenges on the merits and does not in any way require the documents whose communication is requested. The fate of the request for the communication of exhibits can therefore only be determined after this examination on the merits”. The award also states (§171) that “by failing to demonstrate the nullity or unenforceability of this Convention, Ms A D Z, who recognises its transactional nature, is bound by its terms. For the same reason, the court dismissed the application for disclosure of documents as unnecessary to the question of the validity of the agreement of 20 June 2003 and contrary to its effects”. The simultaneous examination by the arbitral tribunal of the request for disclosure of documents and the request on the merits did not breach the principle of equality of arms since, as it had the power to do and in compliance with the provisions of the ICC Rules of Arbitration, the sole arbitrator limited himself to assessing the case, by a fully reasoned decision, after an adversarial debate between the parties and in respect of their rights, the appropriateness of this measure of communication of documents whose relevance and usefulness did not appear to him. It should be noted that it is not the role of the court of annulment to assess the correctness of the decision. Moreover, by rejecting as irrelevant to the question of the validity of the agreement of 20 June 2003 the request for communication of documents after the parties had discussed it, which was the basis for the decision of the arbitral tribunal, did not escape the adversarial debate of the parties; that this ground of aims at reviewing the merits of the award, which is prohibited to the annulment judge; that the second ground and therefore the action for annulment are rejected;

On the claim for damages for abusive proceedings

Considering that Mr. G H I does not establish any particular circumstances that degenerated the action brought by Ms. A D Z into abuse; that his claim for damages is therefore dismissed;

On Article 700 of the Code of Civil Procedure and costs

Whereas Ms A D Z is ordered to pay the costs and her claim under Article 700 of the Code of Civil Procedure is dismissed, whereas she should be ordered to pay the sum of EUR 50,000 to Maître G H I;

FOR THESE REASONS

Rejects the application for a stay of proceedings,

Dismisses the action for annulment of the award rendered in Paris on 6 May 2008 by Mr. B C,

Dismisses Mr. G H I’s claim for damages for abusive proceedings,

Orders Ms A D Z to pay Mr G H I the sum of EUR 50,000 pursuant to Article 700 of the Code of Civil Procedure,

Orders Ms. A D Z to pay the costs and admits SCP MONIN D’AURIAC DE BRONS, avowedly, to the benefit of Article 699 of the Code of Civil Procedure.