Paris Court of Appeal, No. 08/15208 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 17 December 2009, No. 08/15208

GOTHAER FINANZHOLDING AG
vs.
S.A. COMPAGNIE INTERNATIONALE DE CAUTION POUR LE DEVELOPPEMENT

The company GOTHAER RÜCKVERSICHERUNG guaranteed, pursuant to reinsurance treaties, the COMPAGNIE INTERNATIONALE DE CAUTION POUR LE DÉVELOPPEMENT (CICD) for its bonding activity for which it had obtained the approval of the Minister of the Economy.

The withdrawal of this approval by the Insurance Control Commission led to its judicial liquidation and the designation of Mr. Y as authorised liquidator.

Difficulties having arisen in connection with the reinsurance accounts, CICD, represented by its liquidator, introduced arbitration proceedings for each treaty, all of which included an arbitration clause.

In an award in Paris on 29 April 2008, the arbitral tribunal composed of D E, President, and B C and F G, arbitrators, ruling as conciliators, drew up the accounts and determined (tables on pages 11 and 12 of the award) for the disputed treaties the amount to be paid by the reinsurer in respect of the claims definitively or provisionally admitted and the costs incurred for the judicial liquidation.

On 28 July 2008, GOTHAER FINANZHOLDING AG filed an action for annulment of this award on the grounds that its recognition or enforcement is contrary to international public policy (article 1502-5 of the Code of Civil Procedure) and that the arbitrators failed to comply with the terms of the award (article 1502-3 of the Code of Civil Procedure). Lastly, it claimed the partiality of an arbitrator leading to the irregularity of the composition of the arbitral tribunal.

GOTHAER FINANZHOLDING AG, which voluntarily takes over the rights of ARÜCKVERSICHERUNG (hereinafter GOTHAER), therefore requests the court to set aside the award for breach of international public order for lack of evidence of the facts alleged by CICD, and alternatively to set aside the condemnations on the costs also for lack of evidence. It also requests the annulment of the award for failure of the arbitrators to fulfil their mission because of the joinder of the arbitrations, subsidiarily for having ruled in equity contrary to the powers they held under the arbitration clauses, and very subsidiarily to annul the condemnations concerning the 20025 and 20086 treaties for having confused them. In addition, it seeks the annulment of all the arbitral proceedings conducted by CICD against the successful party because of the irregular composition of the arbitral tribunal. Finally, it requests that CICD’s claims be dismissed and that Me Y, as judicial representative in judicial liquidation, be ordered to pay it €30,000 pursuant to Article 700 of the Code of Civil Procedure.

SCPY & H-Y taken in the person of Me Y, as judicial representative in judicial liquidation of CICD, and CICD request the court to reject the action for annulment based on the violation of international public policy, to declare inadmissible under the rule of estoppel the ground alleging non-compliance with the mission because of the joinder of the proceedings. They also request in the alternative to reject the ground, and as a consequence to reject the action for annulment and to order GOTHAER to pay them € 100,000 in damages for abusive procedure and 15.000€ by pursuant to article 700 of the Code of Civil Procedure.

UPON WHICH,

On the ground of annulment based on the partiality of one of the arbitrators leading to an irregular composition of the arbitral tribunal (article 1502-2 of the Code of Civil Procedure):

GOTHAER invokes the conditions under which the correction of award was issued on 15 September 2009 in an arbitration concerning the dispute between CICD and another reinsurer, GLOBALE RE, in which the secrecy of the deliberations was not respected by the arbitrator chosen by CICD who communicated to CICD the content of the decision before it was issued, which demonstrates his partiality and should lead to the annulment of all the awards issued by the arbitral tribunal in favour of CICD.

But whereas GOTHAER cannot usefully raise this ground of annulment in the context of the award that is the subject of the present action, which is not concerned by these grounds that relate to another arbitral award to which it is not a party; that, moreover, it does not explain how these grounds, which are more than one year later than the award examined here, would contaminate it;

That the ground is dismissed;

On the ground of annulment taken from the violation by the arbitral tribunal of international public policy (article 1502-5 of the Code of Civil Procedure):

GOTHAER considers that the award breaches international public policy since it condemned it in violation of article 9 of the Code of Civil Procedure despite the total absence of evidence of certain elements necessary for the success of CICD’s claims. It argues that the arbitral tribunal found that CICD did not provide “documents necessary for evidence” but did not draw the mandatory consequences of this finding, in particular with regard to the amount to be allocated to the reinsurance accounts for each treaty as a bonus, claims paid or payable and recoveries to be made.

It adds that there is also an absence of evidence and a violation of international public policy regarding to the legal costs incurred by the judicial liquidation since the arbitral tribunal again notes that “the expenses invoked by Z are not justified either for the liquidating entity or for the legal costs”. It emphasises that exhibit No. 16 submitted in the arbitration is not an evidence but a presentation of the claims.

But whereas in so doing GOTHAER does not demonstrate a flagrant, effective and concrete violation of the procedural public policy, while the arbitral tribunal whose mission was in particular to validate, evaluate or to seek the methodology leading to a fair determination of the balances of the reinsurance accounts, did not declare that the liquidator’s failure to provide evidence was total, but only noted that the accounts presented for the year 2000 were neither certified nor fully justified. The arbitral tribunal notes that there were errors and approximations in many areas and that it was necessary in accordance with its mission to reconstitute the balance of the treaties;

That, similarly, according to the legal costs incurred by the judicial liquidation, the arbitral tribunal estimating in view of the statement communicated by Mr. Y that “the nature of the management, because of the liquidation and the complex follow-up of the claims, generated a significant fee charge from which the reinsurer benefited in part” did not rule in the absence of any evidence;

That in reality GOTHAER invites the court to investigate whether the elements produced could be received as evidence and therefore to review the award on the merits, which is prohibited to the judge of the annulment;

That the ground is rejected;

On the last ground for annulment: the arbitral tribunal did not comply with its mission (article 1502-3 of the Code of Civil Procedure):

GOTHAER argues that a separate arbitration has been initiated by Z for each of the disputed reinsurance treaties and that it should be answered by separate awards. It states that it opposed to any joinder, in particular during the hearing of the pleadings as testified by its counsel, and that the rule of estoppel cannot therefore be opposed to it.

It also states that the arbitrators ruled for all the treaties as conciliator while for the 20113 treaty they did not have the power to do so.

Finally, it objects to the fact that the arbitrators pronounced a single condemnation for treaties No. 20025 and No. 20086.

But whereas GOTHAER spontaneously presented common submissions in defence to all the treaties and does not bring back the evidence that it would have protested against a joinder at the hearing of the pleadings;

That in regard to it is quite vain that GOTHAER mentions attestations of its councils as evidence ;

As Mr Y rightly opposes, it follows from the terms of article 199 of the Code of Civil Procedure that the testimonial evidence, in this case the certificate, must come from a third party, which is not the case of GOTHAER’s counsel who represented it during the arbitration proceedings by virtue of the ad litem mandate; that these certificates are rejected;

That thus, failing to establish that it protested, GOTHAER can no longer, by virtue of the rule of estoppel, raise in the context of the annulment proceedings the ground based on the arbitrators' non-compliance with their mission in that they proceeded to a joinder;

That this part of the ground is rejected;

Considering furthermore that by issuing a single award under treaties No. 20025 and No. 20086, the arbitrators did not disregard their mission since they expressly requested CICD to break down the sums due by GOTHAER and that in execution of this request a note was sent to them on 10 April 2008, as well as to GOTHAER’s counsel, which allowed them to rule on individualised claims on which GOTHAER could make all useful observations;

That this part of the ground is rejected;

Considering, on the other hand, that it results from the terms of the award that the arbitral tribunal ruled as conciliator not only for the treaties 20025, 20086, 20081 and 20135 as required by the arbitration clauses but also for the treaty 20113 whereas the arbitration clause it contains does not provide that it will be ruled in equity; that in so doing the arbitrators did not comply with their mission in accordance with this treaty and the award shall be set aside but only in so far as it ruled on it;

On the claim for damages for abuse of process:

Whereas Me Y does not establish that GOTHAER filed its claim, to which it is moreover partially granted, out of mischief, intention to harm or an equipollent error of fraud;

Whereas Me Y does not establish that GOTHAER filed its action, to which it is moreover partially upheld, out of mischief, intent to harm or an equipollent error in relation to the fraud

That its claim is dismissed;

Concerning claims under article 700 of the Code of Civil Procedure:

Whereas equity does not require that these requests should be granted;

FOR THESE REASONS:

SET ASIDE the award of 29 April 2008 in so far as it ruled on the 20113 reinsurance treaty;

REJECTS the action for annulment for the remainder;

REJECTS any other claim;

ORDERS the company GOTHAER FINANZHOLDING AG to pay the costs and admits the SCP Petit Lesénéchal, avowed, for the benefit of article 699 of the Code of Civil Procedure.