Paris Court of Appeal, No. 12/01903 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 8 January 2013, No. 12/01903

INVERSIONES ENERGETICAS
Vs. PRODUZIONE SPA

COMISSION B C D E LEMPA (CEL) is a public institution in charge of the electricity production and distribution in El Salvador. In 1998, in order to implement a law privatising the energy sector, it transferred its production activity to the company LaGeo and in 2006 it transferred all its shares in LaGeo to INVERSIONES ENERGETICAS (Inversiones), a public limited company under Salvadorian law.

On 4 June 2002, CEL entered into a “Shareholders’ Agreement” with the Italian company Z A POWER SPA, which was absorbed in 2005 by the Italian company PRODUZIONE SPA, which split its renewable energy assets once again in 2008 in a company called ZA POWER (Produzione or the Produzione companies). The Shareholders' Agreement set out the terms of a technical and capital partnership between CEL and Produzione for the development of LaGeo’s activities. In particular, it provided with the financing by Produzione of investments decided by LaGeo in return for the allocation of LaGeo shares.

The performance of this contract gives place to disputes between the parties, Produzione filed a request for arbitration under the arbitration clause on 15 October 2008.

By an award rendered in Paris on 30 May 2011 under the supervision of the International Chamber of Commerce, the arbitral tribunal composed of Mr. Jaramillo and Mr. Rozas, arbitrators, and Mr. X, chairman, decided the various points in dispute.

On 27 July 2011, Inversiones and CEL appealed against this award (RG n° 11/14143).

On 21 December 2011, the arbitral tribunal issued an addendum making various rectifications. An appeal against this decision was also lodged by Inversiones and CEL on 1 February 2012 (RG n° 12/01903).

In their submissions of 24 July 2012, Inversiones and CEL requested the annulment of the award of 30 May 2011 and, consequently, the annulment of the addendum of 21 December 2011, the rejection of the opposing claims and the condemnation of Produzione companies to pay the sum of 90,000 euros pursuant to article 700 of the Code of Civil Procedure. They claim that due process (in French Principe de la contradiction) has been violated.

In their submissions of 19 October 2012, the Produzione companies request the junction of the cases relating to the main sentence and the addendum, the rejection of the opposing claims and the condemnation of the appellants to pay the sums of 1,000,000 euros as damages for abusive proceedings and 500,000 euros pursuant to article 700 of the code of civil procedure.

UPON WHICH

Considering that it is in the interest of the proper administration of justice to join the files registered under the numbers RG 11/14143 and 12/01903; On the sole ground for annulment arising from the violation of due process (in French Principe de la contradiction) (article 1520-4 of the code of civil procedure):

Inversiones and CEL argue that in order to assess the value of the LaGeo shares that should have been allocated to the Produzione companies as consideration for their contributions, the arbitral tribunal did not rely, as they suggested, on the additional megawatts provided by the investments, nor on the nominal value of the shares, as proposed by the Produzione companies, but on the real asset value of the LaGeo company, a method which had not been discussed by the parties.

Considering, first, that due process (in French Principe de la contradiction) requires that the parties should have had the opportunity to make known their claims in fact and in law and to discuss those of their adversary so that nothing that served as a basis for the arbitrators' decision escaped their adversarial debate;

Considering, secondly, that the arbitrators have no obligation to submit their reasons in advance to an adversarial discussion between the parties;

Whereas, according to their terms of reference, the arbitrators were to decide, inter alia, on the application of Article 6 of the Shareholders' Agreement, according to which the investments decided by LaGeo in the normal course of its business could be financed by Produzione by means of contributions leading to an increase in its shareholding in LaGeo; whereas the tribunal was asked, in particularly, to determine the value of the shares to be allocated to the investor in the absence of a mechanism provided by the agreement;

Considering that Produzione argued that the nominal value should be used, while Inversiones requested the application of a capitalisation formula based on the effective contribution in megawatts;

However, considering that the arbitrators were not obliged to adhere to any of the terms of this option; that they could have recourse, as they did, to an appreciation of the shares according to their real value without disregarding due process (in French Principe de la contradiction), since Inversiones put this solution into the debate by criticising, on this basis, the use of the nominal value, and that it is constant that the appreciation thus made of LaGeo’s shares was carried out on the basis of the accounting records of this company regularly produced for the case;

Considering that Inversiones, who expressly relied on the method finally adopted by the court, cannot complain that it did not develop and criticise this argument further; that the ground based on Article 1520-4 of the Code of Civil Procedure can therefore only be rejected;

Considering that the action against the main award, as well as the action against the addendum, which does not put forward its own grounds of annulment, should therefore be dismissed;

On the claim for damages for abusive proceedings:

Considering that the Produzione companies do not demonstrate that the right of recourse has, in this case, degenerated into abuse, they will be dismissed.

On Article 700 of the Code of Civil Procedure:

Considering that CEL and Inversiones, who have not been successful, cannot benefit from these provisions;

that they will be ordered in solidum on this basis to pay the total sum of 100,000 euros to the Produzione companies;

FOR THESE REASONS

Orders the joining of files registered under RG 11/14143 and 12/01903.

Dismissed the actions for annulment of the award rendered between the parties on 30 May 2011 and the addendum of 21 December 2011.

Dismisses the claims of PRODUZIONE SPA and ZA POWER SPA for damages based on abusive proceedings.

Orders in solidum the company INVERSIONES ENERGETICAS SA and COMISION B C D E LEMPA to pay the costs.

Orders in solidum the company INVERSIONES ENERGETICAS SA and COMISION B C D E LEMPA to pay the companies Z PRODUZIONE SPA and Z A POWER SPA the global sum of 100,000 euros in application of article 700 of the Code of Civil Procedure.

Dismisses the company INVERSIONES ENERGETICAS SA and COMISION B C D E LEMPA’s claim based on Article 700 of the Code of Civil Procedure.