Paris Court of Appeal, No. 10/24125

Paris Court of Appeal, First Pole, First Chamber, 7 February 2012, No. 10/24125

S.A.R.L. FRANCO ITALIENNE DE TRADING ‘FIT’ vs. FG Company

In July 2008, the company FG undertook to sell to the Franco-Italian Trading Company (FIT) 1,400 tonnes of scrap metal to be shipped from the port of Bejaïa in Algiers (Algeria) to the port of Bilbao (Spain). The purchase confirmation letter sent by FIT to FG on 18 July 2008 contains an arbitration clause. As the sale did not take place and each party denied their own liability, FG filed a Request for Arbitration with the ICC International Court of Arbitration on 21 September 2009.

In an award rendered in Paris on November 24, 2010, the arbitral tribunal composed of a sole arbitrator, Ms. D E, stated that the contract for the sale of goods concluded between the parties on July 18, 2008 was subject to the application of the Vienna Convention for matters falling within the scope of that Convention. In addition, the tribunal said that FG had standing to act and interest to act in the present proceedings. It then held that FIT had failed to fulfil its obligations under the contract of sale of goods, ordering it to pay damages to FG in the amount of €168,163 plus interest, USD 20,000 in arbitration costs and €12,000 in defence costs, all with provisional execution.

FIT brought an action for annulment against this award.

Following the submissions of 5 January 2012, SCP BC, acting as director of FIT and Lawyer Z A, acting as the company’s legal representative, who voluntarily intervened in the proceedings alongside FIT, request that they be declared admissible in their voluntary intervention and request, together with the claimant, the annulment of the award and the allocation of a sum of 5,000 euros under Article 700 of the Code of Civil Procedure.

They argue, concerning Article 1520 of the Code of Civil Procedure, firstly that the sole arbitrator ruled without complying with his mission, and secondly that the award disregards international public order.

In its submissions of 8 November 2011, FG requested that the appeal be dismissed, that the award be granted enforcement (in French Exequatur) or that the award be confirmed, and that FIT be ordered to pay him €5,000 pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On voluntary interventions

Considering that SCP B C, acting as a director of the Société Franco Italienne de Trading (FIT) and Maître Z A, acting as a judicial representative of FIT, must be admitted in their voluntary intervention in the proceedings alongside this company;

On the first ground: the arbitral tribunal ruled without complying with its mission (Article 1502-3, which became Article 1520-3 of the Code of Civil Procedure):

The claimant complains that the arbitral tribunal firstly ruled on the merits of the case without having first decided at the admissibility stage the crucial question of the ownership of the goods by placing the burden of proof on the claimant and secondly that it had attached provisional enforcement to the award, which was not part of its mission.

Considering on the first branch of the ground, and contrary to the claimant’s contention, the sole arbitrator ruled (§§ 92 to 95) on FG’s standing and interest in the proceedings. He held that, as a party to the contract of sale, it had the necessary standing to institute arbitral proceedings based on that contract, but also that the interest appeared to be established for the purposes of the preliminary examination of the admissibility of the action. He added that ‘the question of whether FG was actually the owner of the goods, and therefore whether its claim for compensation was well founded, would be dealt with on the merits of the dispute’. FIT merely criticised the reasoning followed by the sole arbitrator who had referred the question of ownership of the goods to the merits of the case and referred to the reversal of the burden of proof. The claimant thus intends to review the merits of the award, which is prohibited for the annulment judge to review;

Considering on the second part of the ground, that by including the provisional enforcement in its award, the sole arbitrator merely granted FG’s request, which was included in the Terms of Reference of 19 February 2010

That the ground taken in its two parts for the sole arbitrator’s failure to comply with his mission is rejected;

On the second ground based on the violation of international public order (Article 1502-5, which became 1520-5 of the Code of Civil Procedure)

The claimant submits that by failing to ensure that FG was the owner of the property allegedly sold to FIT and that it provided the effective evidence which is essential before any discussion on the merits, the only arbitrator disregarded international public order relating to property rights.

Considering that the claimant resumes under this second ground its arguments relating to the ownership of the goods and the burden of proof;

Considering that, as has been said, the sole arbitrator ruled on the ownership of FG’s goods, considering that FIT did not prove that the goods were not the property of that company; that therefore the claimant cannot be followed when it invokes the arbitrator’s infringement of the right of ownership. Thus, under the pretext of a violation of international public order which it does not establish, the claimant merely criticises the reasoning followed by the sole arbitrator and invokes the error of law which he allegedly committed, thus tending to review the merits of the award which the annulment judge is prohibited from reviewing;

That the ground of violation of international public order cannot, therefore, be upheld;

Whereas it follows from the foregoing that the action for annulment is dismissed whereas such dismissal necessarily confers exequatur on the award;

On applications under Article 700 of the Code of Civil Procedure;

Considering that the unsuccessful claimant is dismissed on this basis and is ordered to pay FG the sum of 5,000 €

FOR THESE REASONS:

Receives SCP BC and Maître Z A acting respectively as director and judicial representative of FIT, in their voluntary intervention alongside this company

Dismisses the appeal

Dismisses FIT, SCP BC ès-qualités and lawyer Z A ès-qualités from their application under Article 700 of the Code of Civil Procedure;

Orders them to pay to the company FG the sum of 5,000 euros are under Article 700 of the Code of Civil Procedure.

Orders FIT, SCP B C ès-qualités and Maître Z A ès-qualités to pay the costs.