Paris Court of Appeal, No. 10/14948

Paris Court of Appeal, 1 Pole, First Chamber, 17 November 2011, No. 10/14948

S.A. REDES ENERGETICAS NACIONAIS SGPS vs.
AMORIM ENERGIA B.V.

On 29 December 2005, a shareholders’ agreement was mainly signed between the Dutch company AMORIM ENERGIA B.V. (AMORIM ENERGIA), which had just acquired shares in the share capital of the Portuguese company B D SGPS S.A. (B), and the Portuguese company REDES ENERGETICAS NACIONAIS SGPS S.A. (RENS), which also holds shares in the share capital of this company. Pursuant to this agreement, RENS granted AMORIM ENERGIA an option to buy on its shares in the share capital of B while AMORIM ENERGIA granted a put option on all of the shares held by RENS in the share capital of B. Article 27 of this shareholders’ agreement contained an arbitration clause pursuant to which “all disputes arising out of or in connection with this shareholders’ agreement” would be finally settled by arbitration under the arbitration rules of the International Chamber of Commerce in Paris and the Portuguese law applicable to the merits of the dispute.

On 30 June 2006, as the sale had not yet taken place, RENS received the distribution of ordinary dividends for the 2005 fiscal year in the total amount of 40,669,767.82 euros.

On 12 September 2006, AMORIM ENERGIA exercised its option to buy and signed the share sale agreement with RENS.

On the same day, due to the existence of a disagreement, the parties signed the Lisbon compromise providing the possibility to initiate arbitration in order to resolve the only “controversial question” (point 1 and recital D) so that the arbitral Tribunal constituted and governed by the rules of the arbitration centre of the Portuguese Chamber of Commerce and Industry could decide whether the sum of 40,669,767.82 euros corresponding to the dividends received by RENS should be deducted from the overall purchase price of the shares. An additional agreement reached on the same date provided, inter alia, that the non-implementation of the arbitration proceedings intended for in point 1 of the arbitration commitment would prohibit a party from submitting the controversial matter to arbitration and that it would be conclusively admitted that the controversial sum is due to RENS as part of the global price, while AMORIM ENERGIA would no longer be entitled to claim anything from RENS for this reason.

On 15 June 2007, the Lisbon arbitral tribunal rejected AMORIM ENERGIA’s claim for repayment of the disputed amount. By order of 22 July 2008, the President of the Tribunal of Grande Instance granted enforcement (in French Exequatur) to this award.

On 18 December 2007, AMORIM ENERGIA filed a request for arbitration with the ICC under article 27 of the shareholders’ agreement, alleging a breach by RENS of its pre-contractual and contractual obligations and an abuse of rights on its part.

On 3 June 2008, the terms of reference were signed by the ICC Court and the parties.

On the 2nd of March 2010, the arbitral tribunal, formed of Antonio Mendes Cordeiro and XXX, arbitrators, and JFA, President, constituted under the supervision of the ICC, issued an award in majority in Paris, declaring that it had jurisdiction to rule on the dispute and that the claims presented by AMORIM ENERGIA were admissible, considered that RENS incurred liability “in violation of the pre-contractual duty to facilitate the claimant’s information in relation to the shareholders’ agreement” and by not respecting the duty of diligence contracted in this agreement, ordered RENS to pay the sum of 20.334,883.91euros to the company AMORIM ENERGIA as compensation of non-performance, thus to pay commercial default interest at the current legal rate in Portugal from 20 December 2007 until full payment and decided that the arbitration costs would be shared equally between the parties.

RENS filed an action for annulment against this award and its Addendum of 8 July 2010.

In its submissions dated 14 June 2011, the claimant seeks the annulment of the award and the condemnation of AMORIM ENERGIA to pay the sum of 110,000 euros based on article 700 of the Civil Procedure Code. It claims, principally, that the arbitrators did not have jurisdiction to settle the dispute (article 1520-1 of the Civil Procedure Code), and, subsidiarily, that they exceeded their mission (article 1520-3 of the Civil Procedure Code) and, secondly, that their award is contrary to international public policy (article 1520-5 of the Civil Procedure Code).

In its submissions dated 12 September 2011, AMORIM ENERGIA requests the Court to declare RENS’s action for annulment inoperative and unfounded, to dismiss it, to order RENS to pay it the sum of 1 euro for abusive proceedings and the sum of 99,567.44 euros pursuant to article 700 of the Civil Procedure Code.

UPON WHICH:

On the first ground of annulment taken from the absence of arbitration agreement (article 1520-1 of the Civil Procedure Code):

RENS argues that, based on Lisbon Compromise, knowledge of the dispute pursuant to article 27 of the shareholders' agreement concerning the fate of the controversial sum had been withdrawn by the parties to the arbitral tribunal sitting in Paris and assigned to the arbitral tribunal sitting in Lisbon, so that the arbitrators could not declare they had jurisdiction to rule on the dispute submitted by AMORIM ENERGIA.

RENS submits in this regard that it does not object to the tribunal’s decision concerning the admissibility of the claims brought before it, in particular regarding the res judicata effects of the Lisbon Award, but the existence of an arbitration agreement regarding AMORIM ENERGIA’s claims for an award of the amount corresponding to the ordinary dividends paid to RENS in its capacity as shareholder of B in light of the parties' intention to exclude such claims from the field of application of the arbitration clause of the shareholders' agreement. It considers that the parties waived the arbitration clause inserted in article 27 of the shareholders’ agreement in order to have the Lisbon Court decide promptly and definitively on the question of who was entitled to the controversial amount, regardless of the legal basis invoked.

Whereas the judge of appeal reviews the decision of the arbitral tribunal on its jurisdiction by seeking all elements of law or fact allowing to assess the existence of the arbitration agreement;

Whereas based on the terms of the shareholders' agreement between AMORIM ENERGIA and RENS in their capacity as shareholders of B, RENS granted AMORIM ENERGIA an option to buy on its shares in the share capital of B, while AMORIM ENERGIA granted a put option relating to all the shares held by RENS in the share capital of B, the application of these options depending on the date of conclusion of the Unbundling process or the expiration of a certain period of time, the parties agreeing to make their efforts to complete this process as soon as possible during 2006;

Whereas according to article 27 of the shareholders’ agreement: “All disputes arising out of or in connection with this shareholders’ agreement shall be finally settled under the rules of arbitration of the International Chamber of Commerce by three arbitrators designated in accordance with these rules”;

Whereas, according to the terms of reference signed by the parties and the arbitrators sitting in Paris, AMORIM ENERGIA requests the pre-contractual liability of RENS (§26 in particular) who did not communicated important information to it during the negotiations leading to the acquisition of B’s shares. Moreover, AMORIM ENERGIA Requests the pre-contractual liability of RENS because the latter refrained from informing it that it thought that the separation would not be completed during the first half of 2006 and that, consequently, the shares would be transferred only after the distribution of dividends by B. AMORIM ENERGIA thus mentions the breach of the obligation of information, protection and loyalty that lies on RENS; that AMORIM ENERGIA also alleges the abuse of rights constituted with regard in particular to the balance of the contract, the good faith for the collection of dividends without deducting them from the sale price of the shares and the breach of the shareholders' agreement;

Whereas pursuant to the Lisbon arbitration agreement concluded between AMORIM ENERGIA and RENS, either party may submit the “controversial issue” to the decision of an arbitral tribunal governed by the rules of the arbitration centre of the Portuguese Chamber of Commerce and Industry for the latter to decide whether the sum corresponding to the dividends received by RENS should be deducted from the global price;

Whereas the “controversial issue” submitted to the arbitral tribunal sitting in Lisbon concerns “whether the shareholders’ agreement in establishing the consideration due by AMORIM ENERGIA to RENS for the shares… calculated in accordance with the terms of annex VI of the same shareholders' agreement, implies or not that the sum of €40,669,767.82 (the “controversial amount”) corresponding to the dividends paid to RENS by B regarding B’s profits for the financial year 2005 (…) shall be deducted from global purchase price of the shares (…)”,

Whereas it follows from these elements that, contrary to what RENS claims, the indemnity claim presented by AMORIM ENERGIA after the Lisbon arbitral tribunal, seised under the Lisbon compromise, rejected the request for deduction of the ‘controversial sum’ of 40,669,767.82 € corresponding to the dividends received by RENS from the global purchase price of the shares, differs from the ‘controversial issue’ in that it tends to sanction the violation by RENS of its pre-contractual and contractual obligations;

Consequently, the dispute submitted to the arbitral tribunal sitting in Paris by AMORIM ENERGIA escaping from the Lisbon compromise, is indeed part of a dispute arising out of or in connection with the shareholders' agreement and falls within the scope of the arbitration clause of article 27 of the said agreement; that the ground based on the fact that the arbitrators would have ruled on this claim without an arbitration agreement cannot be upheld;

Whereas furthermore the duty to raise all arguments related to the same facts in a single proceeding (in French Principe de concentration des moyens), which requires the party bringing a claim before a court to consolidate its claims under the same contract in one and the same proceeding, is not a question of the existence of the arbitration agreement but a question of admissibility of the claims presented before the arbitrators seized secondly, which does not fall within the scope of article 1520-1 of the Civil Procedure Code;

On the second ground of annulment for the failure of the arbitral tribunal to comply with its mission (article 1520-3 of the Civil Procedure Code):

RENS claims that by ruling while the parties intended to withdraw the issues submitted from the scope of application of article 27 of the shareholders' agreement, the arbitrators exceeded their mission.

Whereas the mission of the arbitrators as defined by the arbitration agreement is mainly delimited by the subject matter of the dispute as determined by the parties' allegations;

Whereas, as explained above, AMORIM ENERGIA seeking the pre-contractual and contractual liability of RENS, the claim for compensation presented by AMORIM ENERGIA against RENS falls within the scope of the shareholders' agreement and its article 27; that, consequently, the arbitrators ruled within the scope of the mission conferred upon them;

On the third ground of annulment based on the violation of international public policy (article 1520-5 of the Civil Procedure Code):

RENS alleges that the award issued by the arbitral tribunal sitting in Lisbon, which has become res judicata, and its condemnation contained in the later contested award, which has also become res judicata in France, are irreconcilable.

RENS infers that the arbitrators disregarded international public policy in a flagrant, effective and concrete manner. In this respect, it argues that the ‘controversial sum’ is returned in part to AMORIM ENERGIA by the Paris award, under the guise of an award for damages, arguing that the arbitral tribunal disguisedly appropriated to itself the right to review the Lisbon award. RENS thus considers that this award breaches the fundamental principle of legal certainty of situations acquired by calling into question an award that is subject to enforcement (in French Exequatur).

Whereas it follows from the elements already set out that the first award relates to the “controversial issue” and thus to the question whether the sum of € 40,669,767.82 corresponding to the dividends paid to RENS by B as profits for the financial year 2005 should be deducted from the amount of the global purchase price of the shares, whereas the second award relates to the claim of AMORIM ENERGIA for compensation for the breach by RENS of its pre-contractual and contractual obligations;

Thus, these two awards are conciliable; that consequently, the alleged violation of public policy is not established; that the third ground cannot be upheld;

Whereas it follows from all the foregoing that the appeal is dismissed;

Concerning the claim for damages:

Whereas the abuse by RENS of its right to sue is not established in support of Y’s claim for damages;

Pursuant to article 700 of the Civil Procedure Code:

Whereas RENS who succumbs will have to compensate AMORIM ENERGIA for his costs of proceedings up to 90,000 euros;

FOR THESE REASONS:

Rejects the appeal;

Dismisses AMORIM ENERGIA’s claim for damages;

Orders RENS to pay AMORIM ENERGIA the sum of 90.000 euros based on article 700 of the Civil Procedure Code;

Orders RENS to pay the costs and admits Mr. Teytaud, an appellate lawyer, in favor of article 699 of the Civil Procedure Code.

THE REGISTRAR THE PRESIDENT