Paris Court of Appeal, No. 08/20998 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 1st Pole, First Chamber, 18 March 2010, No. 08/20998

FEDERAL STATE UNITARY RUSSIAN SATELLITE COMMUNICATIONS COMPANY (Z)

vs.

ORION SATELLITE COMMUNICATION INC (Y)

Under a contract dated 4 October 2001, the Russian company Régie Publique Fédérale KOSMITCHESKAYA SVIAZ (hereinafter Z) sold to the British Virgin Islands company ORION SATELLITE COMMUNICATION INC (hereinafter Y) 20 million shares in EUTELSAT SA, in which the seller was a shareholder. Y complaining about the non-performance of the transfer contract, initiated pursuant to the arbitration clause inserted in Article 10 of the transfer contract an arbitration proceeding.

According to the award of 3 December 2004 handed down in Moscow, Mr. F, sole arbitrator:

ordered Régie Publique Fédérale KOSMITCHESKAYA SVIAZ to transfer to Y, within 30 days from the date of receipt of the award, 20 million shares of EUTELSAT, and to pay within the same period a sum of €2,820,000,
ordered Y to pay to the Régie Publique Fédérale KOSMITCHESKAYA SVIAZ the sum of 23 million euros within 48 hours of obtaining the shares,
in the event of failure by the Régie Publique Fédérale KOSMITCHESKAYA SVIAZ to fulfil the obligation provided for in paragraph 1 of this part of the award, ordered the Régie Publique Fédérale KOSMITCHESKAYA SVIAZ, within 30 days from the expiry of the time limit set out in paragraph 1, to pay to Y a sum of €42,820,000 with interest at the libor rate, starting from the expiry of the time limit set out in this paragraph of the decisive part of the award, until the date of actual payment.

Pursuant to an order of 14 March 2008, the President of the Tribunal de Grande Instance of Paris has declared the award enforceable.

Z appealed against the enforcement order (in French Ordonnance d’exequatur), seeking its reversal on the grounds that the recognition and enforcement of the arbitral award is contrary to international public policy and that the award was made in violation of the due process (in French Principe de la contradiction). Z requests that Y be ordered to pay the sum of €50,000 pursuant to Article 700 of the Code of Civil Procedure.

Y concluded that the appeal should be inadmissible and dismissed, and requested that Z be ordered to pay the sum of €90,000 under Article 700 of the Code of Civil Procedure.

UPON WHICH,

Considering that the transfer contract of 4 October 2001 containing the arbitration clause was signed between Y and the Régie Publique Fédérale KOSMITCHESKAYA SVIAZ, whose name in English is, in accordance with its terms of incorporation, Federal State Unitary, Russian Satellite Communications Company, shortened RSCC (hereinafter Z);

Considering that Y claims in vain that the appeal of the enforcement order (in French Ordonnance exequatur) is inadmissible because Z gave its consent to the award, whereas the French law, subjecting the reception into the French legal order of awards made abroad subject to a control with regard to the grounds enumerated in article 1502 of the civil code, it is up to the Court of Appeal to verify whether it can give effect to the award;

On the two grounds for annulation: the recognition or enforcement of the award is contrary to international public policy (Article 1502-5 of the Code of Civil Procedure) and the sole arbitrator did not respect due process (in French Principe de la contradiction) (Article 1502-4 of the Code of Civil Procedure) :

Z stipulates that in accordance with paragraph 1 of Article 2 of the Russian Federal Law No. 161-FZ, it does not have free disposal of the assets forming part of its patrimony, the legal powers, in particular with regard to the ownership of the assets is under the administrative supervision of the J AGENCY FOR KPROPERTY MANAGEMENT. This latter may exercise or be the addressee of legal actions concerning the ownership of the assets. That the J AGENCY FOR K PROPERTY MANAGEMENT should have been summoned to arbitration and that the award rendered against a legal entity which is neither regularly a party nor regularly represented was made in disregard of due process (in French Principe de la contradiction) and is contrary to the fundamental principles of international public policy in that it disregards the French constitutional protection of the right of property.

Considering that the consultation of M. Gennadievich, a specialist in Russian law, demonstrates, on the one hand, that Z is a “unitary company” under Russian law and that the Russian Federation remains the owner of the assets transferred in the company governed by the Russian Civil Code and the Federal Law of 11 October 2002, and, on the other hand, that Z has a real right to all the assets making up its patrimony, in particular the shares which, as in the present case, form part of the company’s assets, which has the capacity to acquire and exercise rights and obligations, and to sue and be sued.There is no express rule in Russian law restricting its ability to freely dispose of movable property and that there are numerous examples in Russian case law where the creditor of a unitary company could usefully sue its debtor without the need to sue the owner of the assets; that Z is in fact merely invoking an infringement of Russian public policy, which is contradicted by the consultation of M. Gennadievich, without demonstrating how the solution adopted by the arbitral award violates French international public policy and without establishing a violation of due process (in French Principe de la contradiction) by the sole arbitrator; that the grounds are therefore unfounded and that, consequently, the enforcement order should be upheld;

On Article 700 of the Code of Civil Procedure

Considering that Z should be ordered to pay Y the sum of 50,000€ under Article 700 of the Code of Civil Procedure;

FOR THESE REASONS :

Upholds the exequatur order of the arbitral award rendered in Moscow on 3 December 2004,

Orders RSCC (Z) to pay to the company ORION SATELLITE COMMUNICATION INC the sum of 50,000€ under Article 700 of the Code of Civil Procedure,

Orders the company RSCC (Z) to pay the costs and admits the SCP DUBOSCQ&PELLERIN, avowed, to the benefit of article 699 of the code of civil procedure.

THE CLERK, THE PRESIDENT