Paris Court of Appeal, No. 09/19456 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, First Pole, First Chamber, 7 October 2010, No. 09/19456

ROCCO GIUSEPPE E FIGLI SPA

Vs.

AGRALYS

Company AGRALYS, under French law, sold to Company ROCCO GUISEPPE E FIGLI Spa, under Italian law (hereinafter RGF), 6000 MT of durum wheat at the price of 462€ MT base April 2008 in the general terms and conditions Incograin n°13.

Company B, having considered that it was in the impossibility of executing the contract in view of the difficulties of the Italian market, proposed its termination.

Company AGRALYS refused, resold to the company Granit Trades the 6,000 MT of wheat, after a call for tenders, at the price of MT 300€ and claimed from the defaulting company B the difference between this resale price and the price of sale provided for in the contract.

As Company B did not comply, ARGRALYS referred the matter to the Arbitration Chamber of Paris in application of the arbitration clause provided for in the conditions Incograin n°13.

By award made in Paris on 1 September 2009, the arbitral tribunal, meeting at second degree, composed of H I, N O P, T-U V, D E and F X:

said that the production of exhibits n°39 and 40 by AGRALYS was late and kept them out of the debate,
declared admissible exhibits Nos. 37 and 38 of AGRALYS and admitted them to the debates,
ordered company B to pay company AGRALYS 972,000 with interest at the French legal rate from the date of the request for arbitration, in addition to 25.000€ under Article 700 of the CPC and to reimburse 96,281.30€ of arbitration costs of 1st and 2nd degree as well as the execution costs.

Company RGF filed an action for annulment against this award. It puts forward four grounds: the arbitral tribunal was improperly composed (Article 1502-2 of the CPC), the arbitrators ruled without complying with the mission conferred upon him (Article 1502-3 of the CPC), the principle of contradiction has not been respected (Article 1502-4 of the CPC) and the recognition or enforcement of the award is contrary to international public policy (Article 1502-5 of the CPC).

In its submissions of 2 September 2010, it therefore requests the Court to set aside the Award and the order of enforcement and to condemn the company RGF to pay 150,000€ by application of Article 700 of the CPC.

In its submissions of 30 August 2010, AGRALYS requests the court to declare RGF inadmissible in its applications, alternatively, ill-founded, and to order him to pay 50.000€ under Article 700 of the CPC.

UPON WHICH,

On the first and third grounds for annulment combined: the arbitral tribunal was improperly composed (article 1502-2 of the Code of Civil Procedure) and the principle of the contradiction (in french principe de la contradiction) has not been respected (article 1502-4 of the Code of Civil Procedure):

Company RGF claims that the Paris Chamber of Arbitration has refused to allow the identification of the arbitrators by the indication of their employers -information that the lists of arbitrators of the Arbitration Chamber of Paris do not include- and that it appeared that there were conflicts of interest that might call into question their independence and impartiality, which have been concealed. It argues primarily that the arbitrators Messrs. E, X and V are employed respectively by the companies Champagne Céréales, Nutrixo and Grands Moulins de Strasbourg which are part of groups of companies that are shareholders of the company France Farine, and that company AGRALYS itself is part of one of these groups.

It argued that it was up to the Paris Chamber of Arbitration, the arbitrators and AGRALYS to spontaneously denounce these conflicts of interest. It added that the witness Mr. Z was the hierarchical superior of the arbitrator Mr. X.

It concludes that the arbitral tribunal was improperly composed in violation of the requirements of Article 6.1 of the ECHR, and did not respect the principle of contradiction which includes the obligation of disclosure whose failure has deprived it of its right of challenge.

Whereas the case was pleaded before the arbitral tribunal of second degree on 9 July 2009, and deliberated onthe same day, the debates were closed and the award was rendered on the following 1 September ;

That by letter of 28 August 2009, the board of company RGF, stating that the company had ‘heard rumors’ that there were conflicts of interest between the arbitrators or the companies to which they belonged and the parties or their counsel, asked the President of the Paris Chamber of Arbitration to have declarations of independence drawn up, observing furthermore that although this was an international arbitration, all the arbitrators were French;

That a correspondence ensued between the Board of RGF and the President of the Paris Chamber of Arbitration, which noted that the allegations of RGF were in no way substantiated and refused to act on them;

Whereas the claim, in order to be admissible, must be raised, whenever possible, in front of the arbitral tribunal itself;

That from the initiation of the arbitration procedure of the second degree, RGF had had the opportunity to observe that the five arbitrators, all appointed by the Paris Chamber of Arbitration, were French and that the list of the arbitrators did not specify the employer of each one of them;

That, however, during the arbitration proceedings, RGF was careful not to make the slightest objection or ask the slightest question, even though the rules of the Paris Chamber of Arbitration, to which it had necessarily adhered by accepting its arbitration, provide for a challenge period of 15 days after notification of the appointment of the arbitrator, and that, in the case of corporate arbitration, it could not ignore the fact that the arbitrators or some of them may have professional ties;

However, five days before the award was rendered, it confined itself to citing “rumors”;

That by belatedly raising grievances, of which it did not establish that it did not have or could not have had prior knowledge, it breached the obligation of procedural fairness, which is recalled above;

That thus the first and third grounds are inadmissible;

On the second ground for annulment: the arbitral tribunal ruled without complying with the mission conferred upon it (article 1502-3 of the Code of Civil Procedure)

Company RGF claims that ‘by accepting a late and irregular communication, within the meaning of Article 24 of the Regulation, which is a fraudulent certification, openly reporting materially inaccurate facts’ and ‘by motivating, by means of simple assertions, a conviction for which the amount is based on a fictitious call for tenders and a resale at an abnormally low price’ the arbitral tribunal did not comply with its mission.

But whereas the arbitral tribunal held (page 6), to admit exhibits 37 and 38 (exhibit 37 being the ‘fraudulent certificate’ according to the appellant), that they were filed on 29 May 2009 in response to the 22 May 2009 brief of RGF, which was able to take note of it and respond to it in a submission of 2 June 2009 ;

That by contesting before the court the admission of exhibit n°37 to the debates, RGF tries to obtain a review on the merits of the award which is prohibited to the judge of the annulment;

That the same applies when RGF contests the content of this exhibit which it qualifies, without dismantling it, as fraudulent and materially inaccurate, the fact that it emanates from Mr. Z being irrelevant in this respect;

Moreover, it was for it to discuss its contents, such as the call for tenders of which it had a perfect knowledge since it was the recipient, and the subsequent resale, before the arbitrators according to the principle already recalled which obliges the parties to raise the grievance whenever possible before the arbitral tribunal itself;

That it is still in vain that it reproaches to the award a lack of reasoning as to the amount of the conviction, since a reading of this decision should convince it of the contrary, regardless of whether the motivation seems to be insufficient or wrong; that here again the grievance tends to a review on the merits which is prohibited;

That the second ground is thus dismissed;

On the fourth ground for annulment: the recognition or enforcement are contrary to international public policy (article 1502-5 of the Code of Civil Procedure):

RGF says, on the one hand, that since the call for tenders was fictitious, being a staging between companies of the same group, since Granit Négoce, the buyer, is a sub-subsidiary of AGRALYS, and that it is constant that ‘materially inaccurate statements of fact’ are used, the resale to the company Granit Négoce is fraudulent, on the other hand, that the refusal of clarification by AGRALYS and the Paris Chamber of Arbitration violates the obligation of disclosure, contrary to international public order;

But whereas it has been previously answered to grievances relating to the duty of disclosure and the alleged fraud;

That Company RGF does not otherwise establish in any way that the award flagrantly, effectively and efficiently violates the international public policy, the last ground which is missing is in fact dismissed, as is the appeal;

On applications pursuant to Article 700 of the Code of Civil Procedure:

Whereas the company RGF which is not successful and whose application is rejected pays AGRALYS 50.000€;

FOR THESE REASONS

DISMISSES the action for annulment;

CONDEMNS ROCCO GUISEPPE E FIGLI Spa to pay AGRALYS 50.000€ under article 700 of the CPC;

CONDEMNS ROCCO GUISEPPE E FIGLI Spa to the costs and admits CPS Naboudet-Hatet, avowed, to the benefit of article 699 of the CPC.