Paris Court of Appeal, No. 10/08152 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, First Chamber, 5 May 2011, No. 10/08152

Judicial chronology:

Paris Tribunal of Grande Instance, 17 May 2010

Paris Court of Appeal, Pole 1, First Chamber, 5 May 2011

Court of Cassation, First Civil Chamber, 6 November 2013, No. 11-17.736

S.A. BIOALLIANCE PHARMA

vs.

SPEPHARM HOLDING B.V.

SPEBIO B.V.

BIOALLIANCE PHARMA SA (BIOALLIANCE) is a company governed by French law that develops and markets pharmaceutical specialties. On 7 March 2007, it entered into a contract (“Governing Agreement”) with the Dutch company SPEPHARM HOLDING (SPEPHARM) for the marketing in Europe, excluding France, of a drug named Loramyc. This agreement and its annexes provided for the creation of a joint venture to which BIOALLIANCE would grant an exclusive right to use the marketing authorisations in Europe, as well as exclusive licenses to use the patent, pharmaceutical know-how and trademark. This joint venture was incorporated as a company under Dutch law, SPEBIO. On 31 May 2007, BIOALLIANCE, SPEPHARM and SPEBIO entered into the shareholders’ agreement, the deed of incorporation of SPEBIO, as well as the license, supply, service agreements as well as a purchase and sale agreement.

Disputes arose between the parties, and BIOALLIANCE, on 24 March 2009, filed a request for arbitration with the International Chamber of Commerce against SPEPHARM and SPEBIO on the basis of the arbitration clause stipulated in the Governing Agreement.

On 30 April 2010, BIOALLIANCE filed an action for annulment against this award.

By submissions of 16 March 2011, it sought the annulment of the award, the dismissal of the claims of SPEPHARM and SPEBIO and the condemnation in solidum of the latter to pay the sum of 100. 000 euros pursuant to Article 700 of the Code of Civil Procedure.

It alleges that arbitrators did not comply with their mission (Article 1502-3 of the Code of Civil Procedure), failed to comply with due process (in French Principe de la contradiction) (Article 1502-4 of the Code of Civil Procedure) and breached international public policy (Article 1502-5 of the Code of Civil Procedure).

By submissions dated 9 March 2011, SPEPHARM and SPEBIO request the Court to dismiss the action, order BIOALLIANCE to pay 100,000 euros in damages for improper use of legal remedies and 75,000 euros each pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the first ground of annulment taken from the failure of arbitrators to comply with their mission (Article 1502-3 of the Code of Civil Procedure):

Firstly, BIOALLIANCE argues that the purpose of the Governing Agreement is a single economic operation, the marketing of Loramyc through SPEBIO; that the latter, a joint venture deprived of any independence, is not a third contractual partner, but the instrument of the partnership between SPEPHARM and itself; that the “Governing agreement” is the framework agreement which governs all the contractual relationships, that it contains both, in its appendices, the substance of the application contracts, and in its body, the stipulations essential to the understanding and implementation of the application contracts and has not exhausted its effects at the latter’s signing; that it is apparent both from the terms of the arbitration clause provided for in the framework contract and from the general scheme of the operation and the conduct of the parties during the pre-contractual negotiations and the performance of the contract, that the common intention of SPEPHARM and itself [BIOALLIANCE], interpreted in the light of the principles set out in articles 1156 and 1161 of the Civil Code, was to give effect to this clause with regard to the contractual whole, especially when the dispute, as in the present case, relates to the very existence of the partnership; that the effects of the arbitration clause of the Governing agreement were to be extended to SPEBIO by virtue of the theory of corporate groups, groups of contracts and indivisible obligations; finally, the summons issued to SPEBIO before the Paris commercial court cannot be analysed as an unequivocal waiver in favour of the arbitration clause, since this summons was issued only at the initiative of SPEBIO.

Second, BIOALLIANCE argues that, contrary to the assignment entrusted to it, the arbitral tribunal did not rule on the law but on the amicable composition of the parties.

Third, Z claims that the arbitral tribunal, by determining in its operative part the points on which it does not consider that it has jurisdiction without specifying those of the claims of the parties over which it finds that it has jurisdiction, did not fulfil its mission.

Fourthly, the arbitral tribunal did not examine the grounds for rejecting the pleas of lack of jurisdiction.

Finally, the arbitral tribunal ruled ultra petita on the burden and amount of the defence costs which, according to the terms of reference, should only be examined in the award on the merits.

On the ground taken in its first part:

Considering that the annulment court reviews the decision of the arbitral tribunal on its jurisdiction, whether it has declared itself to have jurisdiction or not, by seeking all elements of law or fact enabling it to assess the scope of the arbitration agreement and to deduce the consequences for the respect of the mission entrusted to the arbitrators;

Considering that for the marketing in Europe of the Loramyc drug, whose patent and brand name belong to BIOALLIANCE, the latter entered into a joint venture contract with SPEPHARM on 7 March 2007, as joint partners;

Considering that this contract, entitled “Governing agreement”, provides for a dispute settlement clause which states:

“13. 9 Applicable Law and Jurisdiction

This Agreement shall be governed by and interpreted in accordance with the laws of France.

Any dispute, controversy or action arising out of or in connection with this Agreement, including any dispute, controversy or action relating to the interpretation, performance, breach, termination or invalidity of this Agreement, shall be finally settled in accordance with the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed pursuant to these Rules. The seat of the Arbitral Tribunal shall be in Paris and the proceedings shall be conducted in the English language”;

That Article 13.5 provides that “the present contract, together with all the documents referred to herein, constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior drafts, agreements and undertakings, whether oral or written, relating to such subject matter”;

That the Governing Agreement contains in annex twelve “term sheets” (lists of the essential terms of the agreement) which, in the form of tables, reflect the essence of the agreements that the parties had to formalise in detail in several separate agreements; that annexes 1a, 1b and 4 relating respectively to the purchase option agreement, the call option agreement and the agreement relating to the participation in the capital of SPEBIO provide for the application of Dutch law and for arbitration under the conditions provided for in the Shareholders’ agreement; that annex 3 to the Shareholders' Agreement provides for the application of Dutch law and arbitration in Amsterdam in accordance with the Arbitration Rules of the Netherlands Arbitration Institute; that Annexes 6 and 7 relating to the patent and trademark license and marketing authorisation agreement provide for the application of French law and the jurisdiction of the Paris Commercial Court. Annex 11 relating to the service agreement between SPEPHARM and SPEBIO provides for the application of Dutch law and the jurisdiction of Dutch courts and Annex 12 relating to the service agreement of BIOALLIANCE provides for the application of French law and the jurisdiction of the Paris Commercial Court;

That the detailed contracts provided for in the annexes were signed on 31 May 2007; that the detailed contracts set out in the appendices were signed on May 31, 2007; that only the deed of incorporation of X, the patent licence agreement and the trademark licence agreement do not contain any specific dispute resolution clause. All the other contracts incorporate the dispute resolution provisions contained in the terms heets and provide for ‘completeness clauses’ whereby each of these contracts constitutes the entire agreement between the parties with respect to its subject matter and supersedes all prior drafts, agreements, undertakings, representations, warranties and covenants of any kind, whether oral or written with respect to its subject matter;

Considering, on the one hand, that if the clauses of the agreements are interpreted by each other, giving each one the meaning resulting from the entire act, this principle cannot, in this case, have the effect of giving precedence to the arbitration clause of the Governing Agreement over the dispute settlement clauses contained in most subsequent contracts, since the latter provide that they replace all previous commitments and expressly exclude that their provisions may be interpreted in the light of stipulations contained in other deeds;

Considering, on the other hand, although the common intention of the parties should be sought in the agreements, rather than stopping at the literal meaning of the terms, it does not follow, in the present case, from the information provided by the parties during the arbitration proceedings on the conditions of negotiation and performance of the contracts, that this intention was to give precedence to the arbitration clause of the Governing Agreement over the provisions for the settlement of disputes provided for in the other contracts; on the contrary, it appears that the different choice of forum clauses corresponded to the will of the parties to treat the different aspects of their contractual relations in a differentiated way, for reasons of geographical proximity or the adequacy of the substantive rules to the subject matter; finally, that the delivery by BIOALLIANCE of a writ of summons to SPEBIO before the Paris commercial court, even though it was not filed, shows that BIOALLIANCE shared this analysis of the compartmentalisation of litigation;

Considering, therefore, and without it being necessary, in the presence of explicit stipulations, to refer to the theory of groups of contracts or groups of companies, that it was without disregarding their mission that the arbitrators decided that they had no jurisdiction with regard to any contract other than the “Governing agreement”;

On the ground taken in its second part:

Considering that, contrary to what BIOALLIANCE claims, the arbitrators did not rule in equity but, after analysing the contractual stipulations, determined themselves in light of the principles governing the interpretation of contracts in French law, the law applicable to the merits of the dispute, it being of little importance that they did not expressly refer to articles of the Civil Code; that the ground is therefore lacking in its facts;

On the ground taken in its third part:

Considering that under the terms of the Terms of Reference (§ 70 to 72) the arbitral tribunal had to decide three questions in order to assess the scope of its referral:

“Does the arbitral tribunal have jurisdiction over SPEPHARM”;
“Does the arbitral tribunal have jurisdiction with respect to SPEBIO”
“Does the arbitral tribunal have jurisdiction with respect to contracts other than the Governing Agreement”

That in deciding, by an interim award, that it had jurisdiction only with respect to the Governing Agreement, to the exclusion of the other contracts listed therein, and that as a result it had no jurisdiction with respect to SPEBIO, the arbitral tribunal has determined the scope of its jurisdiction without incurring the ground of failure to comply with its mission;

On the ground taken in its fourth part:

Considering that, in accepting the pleas of lack of jurisdiction, the arbitral tribunal has necessarily answered to the pleas of lack of jurisdiction;

On the ground in its fifth part:

Considering that the Rules of Arbitration of the International Chamber of Commerce, under the supervision of the parties, provide that “at any stage of the proceedings, the arbitral tribunal may make decisions on costs other than those fixed by the Court”; that it follows that by deciding on defence costs at the stage of the interim award, the arbitrators have not disregarded their mission;

Considering that the first ground cannot be accepted in any of its parts;

On the second ground of annulment taken from the breach of due process (in French Principe de la contradiction) (article 1502-4 of the code of civil procedure):

BIOALLIANCE maintains that the arbitral tribunal had telephone communications with the other parties without its knowledge, that it relied on a document that was not produced to the arbitral tribunal, and that it condemned the arbitral tribunal to pay the defense costs of SPEPHARM and SPEBIO without organizing a contradictory debate on this point.

Considering that BIOALLIANCE bases its claim, first of all, on paragraph 154 of the award, which states: “the tribunal has, on several occasions, both during telephone conferences and in writing in its procedural orders, shown a keen interest in obtaining more details of the discussions and negotiations surrounding the conclusion of the ‘Governing Agreement’ and the numerous subsequent contracts, all dated 31 May 2007. In particular, the tribunal would have been interested to see the drafts prior to the signing of these contracts which would show the extent to which dispute resolution clauses were suggested, discussed or modified, if such discussions took place”;

Considering, however, that it results from the reply of the president of the arbitral tribunal to the counsel of BIOALLIANCE on 11 May 2010 that the members of the tribunal wished to organise a conference call on the question of the discussions and negotiations that took place during the negotiation of the Governing Agreement; that, however, these conferences did not take place in the end; that, moreover, the award states in paragraph 155 that “almost nothing emerges from the debates on the history of the negotiations and no testimony on this subject made it possible to provide further details on this subject”; thus, BIOALLIANCE, who does not contest that it was invited to provide information and testimony on this issue, nor that it was been aware of the position of its opponents, vainly maintains that all the means and evidence that determined the decision of the arbitrators on the assessment of the common intention of the parties would not have been submitted to the adversarial debate;

Considering secondly that, contrary to what the appellant claims, the award, in so far as it refers to the prohibition made by a Dutch court to BIOALLIANCE to unilaterally terminate the shareholders' agreement, is not based on the summons before the Amsterdam court - not produced to the arbitral tribunal - but on the very terms of the judgment of this court, in its sworn French translation, which it is not disputed was regularly submitted to the debates before the arbitrators;

Considering, thirdly, that the arbitral tribunal was authorised by the rules of arbitration, as stated above, to rule on the costs incurred at the stage of the interim award; that as a result of the transcript of the proceedings (sections 201 to 205), the parties agreed on the submission of non-detailed statements of costs; that, contrary to what BIOALLIANCE alleges, it was not agreed that the president of the arbitral, to whom the statements were addressed, would communicate them to the parties; that, on the contrary, it follows from the sworn translation of the transcript (§ 205) that the following arrangement was made:

The president: “First, send it only to me. Once I have the statements of both parties, I give you the green light to send them to each other. This way, Me Paris will not know in advance what you have invoiced and vice versa. Do you agree?”
Me Soffer : “Agreed”
MeParis : “Yes agreed”;

Considering that it therefore appears that the transmission of statements of costs was explicitly provided for at the stage of the interim award. It had to be taken place directly between the parties and the parties were mutually exempted with the provision of detailed statements; that the ground alleging that Z was not put in a position to debate this point in an adversarial manner is in fact missing;

Considering that the second ground of annulment can only be rejected;

On the third ground of annulment taken from the violation of international public policy (Article 1502-5 of the Code of Civil Procedure):

BIOALLIANCE claims, in the first place, that the violation of international public policy results from the lack of independence and impartiality of the arbitrators, which is demonstrated by the fact that they had telephone exchanges with the parties on a question essential to the solution of the dispute, that they have taken note of the summons issued in the Dutch proceedings in a non-adversarial manner and that they have ruled on the costs of the defense without inviting the parties to explain themselves.

BIOALLIANCE argues, secondly, that the award is devoid of reasoning since the tribunal has ruled as amiable compositeur without referring to any rule of law.

Considering that, for the reasons stated above, the ground in its two parts is unfounded, both with regard to articles 1502-5, 1502-3 and 1502-4 of the Code of Civil Procedure;

Considering that it follows from all the foregoing that the action for annulment must be rejected;

On the claim for damages for abuse of process:

Considering that it is not demonstrated that the exercise of the right of recourse has degenerated into abuse; that the claim for damages of SPEPHARM and SPEBIO will be rejected;

On article 700 of the code of civil procedure:

Considering that BIOALLIANCE, who succumbs, cannot claim pursuant to article 700 of the code of civil procedure; that it will be ordered on this basis to pay the amount of 75,000 euros to each of the defendants;

FOR THESE REASONS:

Rejects the action.

Dismisses SPEPHARM and SPEBIO’s claims for damages

Dismisses BIOALLIANCE’s claim under Article 700 of the Code of Civil Procedure.

Orders BIOALLIANCE to pay under Article 700 of the Code of Civil Procedure 75,000 euros to SPEPHARM and 75,000 euros to SPEBIO.

Orders BIOALLIANCE to pay the costs and admits Me Teytaud, admitted, under article 699 of the Code of Civil Procedure.