Court of Cassation, No. 11-12.112 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 29 February 2012, No. 11-12.112

Judicial chronology:

ICC Award 9 September 2009 (Paris)

Paris Court of Appeal, Pole 1, First Chamber, 6 January 2011, No. 09/22247

S.A. GROUP CANAL PLUS

vs.

S.A. PARABOLE REUNION

On the single ground, taken in its two parts:

Whereas, according to the judgment under appeal (Paris, 6 January 2011), an arbitral tribunal, ruling in application of an arbitration clause included in the contract binding Group Canal Plus and Parabole Reunion, by an award handed down in Paris on 9 September 2009, stated in particular that the former (Group Canal Plus) committed a fault towards the latter (Parabole Réunion) with regard to the commitment made to the latter regarding the potential broadcasting of the Canal Plus Maurice Le Bouquet offer in self-distribution by Parabole Maurice and ordered it, as damages, to pay it the sum of EUR 1,500,000; Canal Plus Group filed an appeal for annulment;

Whereas the judgment is criticised for having rejected this appeal, then, according to the ground:

1°/ that the arbitrator, seised by one of the parties with claims seeking exclusively the forced performance of a contractual undertaking and the award of damages for late payment to compensate for the delay in its implementation, finds that the other party committed a breach of contract by entering into an undertaking which it knew it was unable to fulfil, by reason of a tort, and consequently orders it to pay compensatory damages, disregards the limits of its mission; With regard to the contractual commitment it undertook to “make its best efforts” to enable Parabole Réunion to distribute the “Canal Plus Maurice Le Bouquet” offer, Canal Plus Group pointed out that the only claims before the arbitrators tended for the forced performance of this commitment, subject to a penalty payment. The claims also aimed at the compensation for the loss resulting from the delay in its performance, claimed successively in the form of an indemnity of 15,000 euros per month since 1 September 2008 Parabole Réunion’s statement of claim, pp. 22-23), then in the form of a global sum of 4,069,250 euros (see Parabole Réunion’s reply statement of claim, p. 18).

In support of its action for annulment, Canal Plus Group argued that the arbitral tribunal had disregarded the limits of its mission. In particular, Group Canal Plus argued that the terms of the 9 September 2009 award indicated that the arbitral tribunal classified the disputed contractual commitment as a mere due diligence obligation and noted that “Group Canal Plus proves that it has fulfilled its due diligence obligation” (Award, p. 12, paragraph 4). However, the arbitral tribunal found that Group Canal Plus committed “a fault by entering into an obligation that it could not have entered into without breaching the shareholders' agreement between it and its Mauritian co-contractor, as well as the commitments made to the Mauritian government” (Award, p. 14, paragraph 2) and ordered it to pay Parabole Réunion compensation for loss of opportunity. In dismissing this action for annulment, the Court of Appeal stated that the arbitral tribunal merely “sanctioned the non-performance of an obligation that the Canal Plus group knew it could not fulfil” and therefore did not disregard the limits of its mission. In so ruling, despite that it appeared from the clear and precise terms of their award that the arbitrators, who expressly ruled out any failure in the actual performance of the commitment, relied exclusively on a fault in the mere signing of the contract. This is a fault of a tortious nature which they sanctioned by compensatory damages separate from the compensatory damages claimed, and thereby exceeded the limits of their mission, the Court of Appeal distorted the abovementioned award, violating Article 1134 of the Civil Code;

2°/ that, moreover, the arbitrators do not have the power to rule on questions related or incidental to those submitted to them by the parties (2nd Civ. 3 July 1996, Bull. II, No. 191). In the present case, it was apparent from the challenged arbitral award and from the statements of case exchanged that the arbitral tribunal, which only was seized of requests for the forced performance of a contractual commitment and for the award of damages to compensate for the delay in its implementation, rejected these and ordered the defendant in the arbitration proceedings, in respect of his pre-contractual liability, to pay damages for having misled his co-contractor at the stage of the formation of the contract. By this decision, the arbitral tribunal disregarded the limits of his mission. By refusing nevertheless to set aside this award, the Court of Appeal violated articles 1502-3 and 1504 of the Code of Civil Procedure ;

Whereas however, the judgment under appeal notes, on the one hand, that Parabole Réunion filed a claim for damages before the arbitral tribunal for compensation for Group Canal Plus' failure to comply with the commitment to provide the Canal Plus Maurice Le Bouquet offer, firstly in the form of a monthly penalty payment of EUR 15,000 from 1 September 2008 until resumption of the signal, and secondly in the amount of EUR 4,069,250. On the other hand, the judgment under appeal notes that in its statement of reply, Parabole Réunion argued that Group Canal Plus breached its contractual obligation. Finally, the judgment under appeal finds that the arbitral tribunal underlined the inconsistency between the wording of the due diligence obligaton undertaken by Group Canal Plus and how it implemented it. Such wording disregarded both the shareholders' agreement binding it to its Mauritian competitor, and the commitments made to the Mauritian government. In holding that the award thus sanctioned Group Canal Plus' failure to comply with its due diligence obligation, the Court of Appeal ruled, without any distortion, that the arbitral tribunal did not disregard its mission; hence the grounds of appeal are unfounded;

FOR THESE REASONS:

DISMISSES the appeal;

Orders the company Group Canal Plus to pay the costs;

Having regard to Article 700 of the Code of Civil Procedure, rejects the a claim of the Group Canal Plus and orders it to pay the Parabole Réunion the sum of EUR 3,000;

Thus ordered and judged by the Court of Cassation, First Civil Division, and pronounced by the President at the public hearing of the twenty-ninth of February two thousand and twelve.