Paris Court of Appeal, No. 10-06.682 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal – 1st Pole – 1st Chamber - 24 June 2010, No.10-06.682

INFORAD LIMITED vs. TES ELECTRONIC SOLUTIONS S.A.S.

The company FOUR J’S, in the rights of which succeeded INFORAD, is incorporated under Irish law, and specialises in the design and production of devices for geolocation by satellite for automobiles issued on 4 March 2004 an invitation to tender. ELECTRONIC SOLUTIONS S.A.S. (ELECTRONIC SOLUTIONS), a company incorporated under French law, sent a commercial proposition to FOUR J’S, which was accepted on 25 March 2004 by INFORAD, which placed an order for 100,000 units for delivery on 15 June 2004.

ELECTRONIC SOLUTIONS, complaining of INFORAD’s breach of its contractual obligations and requesting payment of the contractual indemnity clause, referred the matter to the ICC International Court of Arbitration pursuant to the arbitration clause inserted in the general terms and conditions.

According to the preliminary award of 10 December 2007 rendered in Paris, the arbitral tribunal composed of Mrs. LECUYER-THIEFFRY, chairman, Mr. E and Mr. Y, arbitrators:

declared it had jurisdiction under the arbitration clause included in the general terms and conditions,
invited the parties to file any further requests concerning in particular the performance of the contractual guarantee in accordance with Article 19 of the ICC Rules of Arbitration,
decided, for the settlement of the dispute, to apply the United Nations Convention on the International Sale of Goods of 11 April 1980, and for matters not covered by the Convention, French law, being specified that, in accordance with Article 17 of the ICC Rules of Arbitration, in all cases it will take account of the provisions of the contract and the relevant trade usages.

INFORAD filed an action for annulment of the preliminary award and requests the joinder of the actions for annulment of the preliminary award and the final award and claims that ELECTRONIC SOLUTIONS should be ordered to pay it the sum of € 7,500 pursuant to Article 700 of the Code of Civil Procedure. It claims that the preliminary award should be set aside on the ground that the arbitrators ruled without complying with their mission (Article 1502-3 of the Code of Civil Procedure). This exceeding of their mandate led the arbitral tribunal to make an award whose recognition and enforcement is a flagrant, effective, concrete violation of international public policy. Moreover, “the decision to apply the Vienna Convention to the dispute led the arbitral tribunal to violate international public policy according to the claims raised by INFORAD in the context of the pending proceedings and registered under RG 09/08657”.

ELECTRONIC SOLUTIONS requested the Court of Appeal to reject the action for annulment and requests that INFORAD be ordered to pay the sums of € 10,000 in damages for abusive proceedings and €15,000 pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the joinder of proceedings:

Whereas, since the court is seized of two separate actions for annulment concerning two different awards, the proper administration of justice does not justify joining the two proceedings; whereas the application to join the proceedings should therefore be dismissed;

On the sole ground for annulment: the arbitral tribunal ruled without complying with its mission (Article 1502-3 of the Code of Civil Procedure):

INFORAD claims that the application by the arbitrators of the Vienna Convention on the International Sale of Goods of 10 April 1980 constitutes an exceeding of their mandate since the parties have excluded taking that Convention into account.

Whereas the mandate of the arbitrator, as defined by the arbitration agreement, is mainly delimited by the subject matter of the dispute, as determined by the claims of the parties;

That under the terms of point 3 of the Terms of Reference of 2 August 2007, the parties submitted to the Arbitral Tribunal the following question:

‘Is the United Nations Convention on Contracts for the International Sale of Goods of 10 April 1980 ratified by France applicable?”;

That invited by the arbitral tribunal to submit their observations on the question of the applicability of the Convention, the parties replied in two letters dated 26 and 27 September 2007, respectively, indicating their legal position with regard to their interpretation of the said Convention; although ELECTRONIC SOLUTIONS explained that the Vienna Convention was not intended to apply to a dispute involving a company governed by Irish law and INFORAD argued that the Convention was not ratified by Ireland and was not intended to apply, but when the arbitral tribunal invited them to supplement their observations by drawing their attention to the fact that the contract fell within the scope of the Vienna Convention once France had ratified it. INFORAD replied by letter dated 15 October 2007, that the contractual relationship cannot be analysed as a simple contract of sale but as a contract of enterprise and that the Vienna Convention does not govern contractual relations. On the contrary, ELECTRONIC SOLUTIONS noted in a letter of 15 October 2007 that “it appears that the Convention applies when the rules of private international law lead to the application of the law of a contracting State even though the two States in question are not contracting States”, noting that the parties did not formally exclude the application of the said Convention. Consequently, since the Terms of Reference had not been modified by implicit or express agreement of the parties, the arbitral tribunal, in applying the Vienna Convention to the dispute, did not fail to carry out the mission entrusted to it;

Whereas the claimant stated in its observations that “the decision to apply the Vienna Convention to the dispute led the arbitral tribunal to violate international public policy according to the claims raised by INFORAD in the pending proceedings … and registered under No. RG 09/08657”, the ground of violation of international public policy is not upheld in the context of this action for annulment of the preliminary award registered under No. RG 10/06682;

That the sole ground for annulment being unfounded, the action for annulment of the preliminary award is dismissed;

On other requests

Whereas ELECTRONIC SOLUTIONS does not establish any particular circumstances which have caused INFORAD’s right to bring an action for annulment to degenerate into an abuse; therefore, ELECTRONIC SOLUTIONS’s claim for damages for abusive proceedings should be dismissed; That INFORAD bears the costs and her application under Article 700 of the Code of Civil Procedure is dismissed and as such she should be ordered to pay to ELECTRONIC SOLUTIONS the sum of € 5,000;

FOR THESE REASONS:

Dismisses the application for joinder of the actions for annulment,

Dismisses the action for annulment of the preliminary award of 10 December 2007,

Dismisses ELECTRONIC SOLUTIONS’s claim for damages for abuse of process,

Orders INFORAD to pay to ELECTRONIC SOLUTIONS the sum of € 5,000 under Article 700 of the Code of Civil Procedure,

Orders INFORAD to pay the costs and admits Me TEYTAUD, counsel, for the benefit of Article 699 of the Code of Civil Procedure

THE CLERK, THE PRESIDENT