Court of Cassation, No. 10-27.474 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 19 December 2012, No. 10-27.474

Challenged decision: Paris Court of Appeal, First Chamber, 7 October 2010, No. 0919456

ROCCO GUISEPPE E FIGLI SPA

vs.

AGRALYS

THE COURT OF CASSATION, FIRST CIVIL CHAMBER, delivered the following judgment:

On the single ground of appeal, taken in its first two branches:

Whereas, according to the judgment under appeal (Paris, 7 October 2010), ROCCO GUISEPPE E FIGLI SPA, a company incorporated under Italian law and specialising in cereals trade, ordered 6,000 tonnes of durum wheat, by an agreement dated 14 December 2007 concluded with AGRALYS company. The agreement was not performed by ROCCO GIUSEPPE E FIGLI SPA. Therefore, AGRALYS claimed compensation for its prejudice from the latter, and then raised the matter to the Arbitration Chamber of Paris, pursuant to the arbitration clause provided for in the terms and conditions of the Incograin No. 13. By a decision rendered in first instance on 27 February 2009, an arbitral tribunal dismissed AGRALYS' claims. AGRALYS requested a second degree examination of the case, in accordance with the Rules of the Arbitration Chamber of Paris. During the deliberations on 28 August 2009, ROCCO GUISEPPE E FIGLI SPA indicated that it “heard rumours of bonds nterest between arbitrators or the companies to which they belong and the parties or their counsels” and requested for statements of independence to be established. By an award of 1 September 2009, the arbitral tribunal ordered ROCCO GUISEPPE E FIGLI SPA to pay to AGRALYS a certain amount. ROCCO GUISEPPE E FIGLI SPA filed an action for annulment against the award on the grounds that the tribunal were irregularly composed and that due process (in French Principe de la contradiction) was violated, under Articles 1502-2 and 1502-4 of the Code of Civil Procedure.

Whereas, ROCCO GUISEPPE E FIGLI SPA opposes to the judgment which rejected its action for annulment of the award, although, according to the ground:

1°/ the arbitrator is bound by a duty to reveal to the parties any circumstance which would be likely to provoke reasonable doubts about his impartiality and independence in the minds of the parties. This obligation binds the arbitrator, and not the parties, and applies to any arbitration, including those known as corporate arbitrations. In the present case, the Court of Appeal held that, since it was a corporate arbitration, ROCCO GUISEPPE E FIGLI SPA must necessarily suspect the existence of such bonds and that it was therefore incumbent on it to raise this challenge at the outset of the arbitration proceedings. The Court of Appeal’s analysis was aimed at declaring inadmissible the challenge brought by ROCCO GUISEPPE E FIGLI SPA, accusing the arbitrators of not revealing the of subordination between them and various companies of the group to which AGRALYS belonged, as well as one of the witnesses. By so ruling, and consequently in holding that in corporate arbitration, it is not up to the arbitrators to disclose the aforementioned ties, but up to the parties to challenge them from the outset of the arbitration proceedings, the Court of Appeal violated articles 1502-2 and 1502-4 of the Code of Civil Procedure;

2°/ Procedural fairness requires, in matters of arbitration, that the parties raise the causes of irregularity of the arbitral proceedings as soon as they have knowledge thereof. The burden of proof of belatedness, which presupposes evidence of prior knowledge of the cause of irregularity by the parties, is borne by the party who contends that the parties having become aware of the irregularity only raised it belatedly. In the present case, in order to dismiss the claims of ROCCO GUISEPPE E FIGLI SPA, the Court of Appeal held that the latter did not establish that it did not or could not have been previously aware of the facts that it formulated. By ruling in this manner, while it was not ROCCO GUISEPPE E FIGLI SPA’s responsibility to establish its ignorance, but, on the contrary, it was AGRALYS’ responsibility to establish the prior knowledge of ROCCO GUISEPPE E FIGLI SPA, the Court of Appeal reversed the burden of proof, in violation of Articles 1315 of the Civil Code.

But, whereas, firstly, the court of appeal held that from the outset of the second-degree arbitration proceedings, Rocco Guiseppe E Figli Spa had the opportunity to note that all the arbitrators were French and that the list of arbitrators of the Arbitration Chamber of Paris did not specify for each of them their employers. Secondly, the court of appeal noted that in the case of a corporate arbitration, Rocco Guiseppe E Figli Spa could not ignore the fact that the arbitrators, or some of them, might have professional ties, and that it refrained from seeking their challenge even though the arbitration rules of the arbitration centre to which it had adhered provided for it. Thus, it limited itself five days before the sentence to pronounce to exhorting rumours. Therefore, the Court of Appeal deduced exactly from this, without reversing the burden of proof, that Rocco Guiseppe E Figli Spa, by belatedly alleging grounds of which it did not establish that it had not or could not have had prior knowledge, breached its duty of procedural fairness. So, it was inadmissible to challenge the award for a breach of the arbitrators' duty of disclosure; that the ground is unfounded.

FOR THESE REASONS:

DISMISSES the appeal;

Orders Rocco Giuseppe E Figli Spa to the costs;

Having regard to Article 700 of the Code of Civil Procedure, dismisses the claim made by ROCCO GIUSEPPE E FIGLI SPA and orders it to pay to AGRALYS the sum of 3,000 euros;

Thus done and ruled by the Court of Cassation, First Civil Chamber, and delivered by the President in his public hearing of the nineteenth of December two thousand twelve.