Paris Court of Appeal, No. 11/14298 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 29 January 2013, No. 11/14298

Judicial Chronology:

Paris Court of Appeal, 2 April 2013, No. 13/02952

Paris Court of Appeal, 24 September 2013, No. 13/12176

MAMBO COMMODITIES

Vs.

COMPAGNIE MALIENNE POUR LE DEVELOPPEMENT DES TEXTILES

The Compagnie Malienne pour le Developpement des Textiles, a semi-public company for textiles development (CMDT), with majority capital held by the Malian state and whose mission is to manage the local cotton production sector, made, for the sale of each future annual harvest, calls for tenders issued for a provisional amount.

One of its regular clients, S.A.S Mambo Commodities (hereafter referred to as Mambo), a trading company based in Paris, which regularly bid for large quantities of the annual production marketed, has concluded 13 delivery contracts with the for the campaign from January 2008 to June 2008, for a total of 17,000 tons of raw cotton to be shipped from January to June 2009.

After giving instructions on 21 January 2009 for 300 tons and on 28 January 2009 for 300 tons, subsequently increased to 500 tons, in accordance with contractual stipulations, merchandise that had to be shipped and paid for, Mambo was faced with difficulties in fulfilling its commitments due to changes in the price of raw materials and the exchange rate of the dollar against the euro.

Talks between the parties to find an agreement on the adjustment of the Mambo commitments have not been successful. Thus CMDT, claiming that Mambo failed to fulfil its contractual obligations because it did not ship the goods on time, issued a counter-invoice at the market price for a total amount of 5,372,332 euros for the 13 contracts, after sending formal notices for each of the contracts, containing notification of its decision to apply the provisions of articles 105 and following of the European Cotton Rules (ECR) governing their relations in the event of failure to ship the goods within 15 days,

After reselling the unshipped merchandise by calls for tenders at a price higher than the market price, CMDT reduced the amount of the counter-invoicing to 4,654,774 euros, for which it requested payment plus interest at the legal rate from 16 April 2009, the date of the first formal notices.

On 26 June 2009, CMDT implemented the arbitration clause stipulated in the contract and submitted a request for arbitration to the French Cotton Association (AFCOT).

The arbitral tribunal composed of Mr B C, Mr Z A and Mr X, arbitrators, rendered an award in Le Havre on June 30, 2011, under the terms of which, ruling in amiable composition, it ordered Mambo to pay the sum of 1,952 to Y. 000 euros with interest calculated at the French legal rate from the date of the award, dismissed the parties' other claims, stated that each of them would retain the costs it had incurred in its defence and stated that the arbitration costs and fees liquidated at 82,650 euros would be pay in half by each of the parties.

By declaration of 28 July 2011, Mambo filed an action for annulment against this award.

In its submissions filed on 19 November 2012, Mambo requested the court to set aside the award and to order CMDT to pay Mambo the sum of 50,000 euros pursuant to Article 700 of the Code of Civil Procedure.

In its submissions filed on 8 November 2012, CMDT requested the dismissal of Mambo and the order to pay the sum of 25,000 euros pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH,

On the ground of annulment based on the violation of due process (in French Principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure) :

Mambo complains that the arbitrators, in order to reject the argument that CMDT failed to fulfil its obligation to provide the quantities and qualities of cotton provided for in the contract, considered that it did not provide proof of this under the conditions stipulated in Article 113-B-2 of the GTR. Mambo criticised the arbitrators for considering that it did not demonstrate that it gave formal notice to CMDT to fulfil its obligations, whereas the provisions of Article 113-B-2 of the GTR were not invoked or debated. Only the conditions of implementation by the latter of the procedure of counter-invoicing which was open to it, by article 113-B-1 of the aforementioned RGE is questioned and in particular the individualisation by the Y, by the allotment of the bales and by the packing lists, of the cottons made available to Mambo.

Considering that due process (in French Principe de la contradiction) requires that each party be put in a position to debate the facts of the case in an adversarial manner and that nothing that forms the basis of the arbitrator’s judgement escapes the adversarial debate of the parties;

Considering that it results from the Terms of Reference signed by the parties on 5 February 2011 that the subject matter of the dispute included, on the one hand, the failure of Mambo to collect the goods at the port of shipment at the contractual deadlines, the non-performance by CMDT of its obligation to arrange and individualise the quantities and qualities of cotton covered by the contracts and, finally, the faulty and discriminatory attitude of CMDT towards Mambo in the performance of the contracts.

Considering that the relations of the parties were governed by the ECR to which the parties expressly referred in support of their respective claims and that the arbitrators had to rule on the validity of the right to counter-invoicing claimed by CMDT and contested by Mambo, the provisions of Article 113 of Section II of the said Rules relating to the failure or delay in loading and the conditions for opening the seller’s right to counter-invoicing were necessarily part of the debate;

Considering that, consequently, the Arbitral Tribunal, after rejecting CMDT’s appeal to the strict application of the counter-invoicing for lack of demonstration in its formal notices, indicated in accordance with the requirements of Article 113 B-1 of the ECR that the cotton was already individualized, set apart and identified as the cotton subject of the contract. Moreover, it considered that Mambo, who denied CMDT any right to a counter-invoicing that the latter did not provide evidence in the conditions required by Article 113 B- 2 of the same ECR of CMDT’s inability to fulfil its obligations, the arbitral tribunal, which did not have to invite the parties to explain the application of a disputed text, did not disregard due process (in French Principe de la contradiction).

Considering that the ground must, consequently, be dismissed.

On the ground based on the arbitrators' non-compliance with their mission and the violation of due process (in French Principe de la contradiction) (Article 1520-3 and 1520-4 of the Code of Civil Procedure):

Mambo objected to the arbitral tribunal which, by modifying the subject matter of the dispute in question, granted CMDT compensation never claimed and without justifying the amount it determined, while CMDT only requested payment of an exclusively monetary obligation consisting of the amount of the counter-invoicing on the basis of the ECR. The arbitral tribunal, after rejecting this request, substituted it, when it exhausted its jurisdiction and without this ever being discussed by the parties, “the awarding of compensation for the failure of negotiations between the parties, assessed based on all the circumstances surrounding the termination of the contracts”.

Considering that the mission of the arbitrators is essentially delimited by the subject matter of the dispute as determined by the respective claims of the parties;

Considering that, in accordance with the Terms of Reference signed by the parties on 5 February 2011, it was for the Arbitral Tribunal, which was requested to rule in amicable composition, to rule on the right to payment of counterclaims invoked by Y.

After considering in its search for solution in equity that CMDT could not claim strict application of the EBR, the arbitral tribunal considered the respective behaviour of the parties in the pre-arbitral negotiation phase, which was to fail. On the one hand, the tribunal found that CMDT, while legitimately defending its interests and taking advantage of its position of strength, showed excessive rigidity in the search for an amicable solution, which was abnormally prejudicial to its operator, thus going back on previous practices of flexibility in the performance of contracts. Moreover, the arbitral tribunal found that Mambo refused itself to carry out even partial loading from February 2009;

Considering that the arbitral tribunal was careful to note that if CMDT had accepted Mambo’s latest proposals for deferred loading and deferred payment, this would have resulted, to its detriment, in a differential of approximately EUR 160,000 with respect to the contractual prices.The arbitral tribunal made use of its power of amicable composition, without disregarding its mission by limiting the amount of compensation claimed by CMDT to 190,000 euros;

Considering that Mambo vainly complained to the arbitral tribunal that, in disregard of the scope of its referral, it substituted the request for counter-invoicing with compensation ‘compensating for the failure of the negotiations between the parties, assessed on the basis of all the circumstances surrounding the end of the contracts’. Once it was seized of a fixed penalty provided for by agreement in the event of non-performance and not of a request for payment of the price stipulated by the contract, the arbitral tribunal had the option, after having noted Mambo’s failure to meet its obligations, which gave CMDT the right to compensation and which it ruled on in equity, to moderate this fixed penalty to take into account the liability of each of the parties in the breach of the contractual relations.

Considering that the ground and the action must, consequently, be dismissed.

Considering that Mambo who succumbs cannot claim compensation pursuant to Article 700 of the Code of Civil Procedure and must be ordered to pay of a sum of 25,000 euros pursuant to Article 700 of the Code of Civil Procedure.

FOR THESE REASONS;

Rejects the action for annulment brought by S.A.S Mambo Commodities against the award rendered in Le Havre on June 30, 2011 by the arbitral tribunal composed of Mr. B C, Mr. Z A and Mr. X, arbitrators, in the proceedings opposing it to the Compagnie Malienne pour le Développement des Textiles.

Orders S.A.S Mambo Commodities to pay the costs to be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure and to pay a sum of 25,000 euros pursuant to Article 700 of the Code of Civil Procedure.