Paris Court of Appeal, No. 11/13246 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 5 March 2013, No. 11/13246

Me B. PASCUAL EX-OFFICIO REPRESENTATIVE (Ms. A J)

vs.

EIFFAGE INTERNATIONAL (EF)

During the year 2000, Société Electricité de France (EDF) entrusted the company Y, now SAEI, to which the company EF is now entitled, with the construction of two thermal power stations in Egypt, one in Port Said and the other in Suez.Y entrusted S.A.R.L. X, through a subcontract dated 8 September 2000, with the construction of metal ducts for smoke extraction, before equipping the chimneys of the power stations, consisting of drums of concrete, for a global sum and flat-rate, neither revisable nor updatable of 4,335,000 francs.

On 3 October 2000, an advance invoice of 200,000 francs (excl. VAT) corresponding to 80% of the ‘Studies’ service was paid to X, who received in December 2000, a sum of 190,000 francs (excl. VAT) corresponding to the forming of 50% of the materials of the first chimney. On 24 January 2001, X requested from Y the communication of the CERFA document justifying the VAT exemption of the services, object of the contract and in the absence of any reply, X sent Y on 16 February 2001 a new invoice for the regularisation of VAT for an amount of FRF 113,680.

Relations between the parties continued to deteriorate. Y complained to X about his failure to perform his services. X criticised Y for not having paid its invoices, for not having provided it with the project owner’s agreement on the qualifications of the welding procedures and for showing disloyalty by exploiting without authorisation the know-how communicated in the context of the performance of the contract.

By letter of 4 May 2001, X relied on the ground of the exceptio non adimpleti contractus, while on 7 May 2001, Y notified X that it was aware of its failure and would take all steps to replace it.

On declaration by X on the same day of its situation of cessation of payments with effect from 4 May 2001, the Rouen Commercial Court ordered the opening of judicial reorganisation proceedings, which were subsequently converted into judicial liquidation.

After an unsuccessful formal notice served to X and the judicial representative, Mrs. A J to return ‘all the indaten, stainless steel and other materials of which she was depositary’, Y declared as liabilities an amount of 1,635,761.76 francs corresponding to the costs that she would have been forced to incur as a result of the debtor’s default.

Following a challenge by X and the court-appointed receiver to the declared claim, the bankruptcy judge declared that he had no jurisdiction with regard to the arbitration clause stipulated in the contract binding the parties by order of 21 November 2002.

On September 7, 2009, Mrs A J, acting as liquidator in the compulsory liquidation of X, filed a request for arbitration with the ICC International Court of Arbitration.

It is in these circumstances that Mr C D, appointed as sole arbitrator, rendered an award in Paris on June 10, 2011, pursuant to which he :

stated that the action was not time-barred and that he had jurisdiction to rule on the dispute as a whole,

dismissed all of the Claimant’s claims,

stated that there was no need to rule on the counterclaim in dispute of a claim and set-off opposed in an infinitely subsidiary manner by the Respondent,

stated that the Claimant shall bear the costs of the ICC arbitration and the reasonable costs of defence incurred by the Respondent,

ordered the Claimant to pay an amount of US$ 37,500 as costs of the ICC arbitration,

ordered the claimant to pay the respondent the sum of 53,750 euros as reasonable defence costs.

By statement of 13 July 2011, Ms. A J, acting as liquidator in the compulsory liquidation of X filed, an action for annulment of this award.

By submissions notified to Ms. A J on 3 February 2012;

By submissions notified to Ms. A J on 21 September 2012 by EF on the same subject;

UPON WHICH :

On the ground of annulment based as a principal claim on Article 1484-6 of the Code of Civil Procedure and, as a subsidiary claim, if the arbitration were to be recognised under Articles 1502 and 1504 of the Code of Civil Procedure in their wording prior to the decree of January 13, 2011.

The claimant submits that the award was not in accordance with French public policy, on the one hand, by implied retention, whereas, by the declaratory effect of the arbitral award, the termination of the parties' agreement did not take effect until the date of the award. On the other hand, the parties were still in the contractual links by excluding any fault of E in the use of the Qualifications of the Welding Operating Procedures (QMOS) whereas the protection of these qualifications rightfully results from a ministerial decree of 24 March 1978 and that E could not, taking into account the right of use of which X was the sole holder, sent by a qualification individually awarded, make free use of the QMOS that it had designed and written and of the Welding Book associated with it.

Whereas that arbitration law, whether domestic or international, determines in particular that of the legal remedies applicable to awards; that the characterisation of the arbitration, and consequently the determination of the legal remedies, the nature of which is imperative and cannot be modified by the consent of the parties, governed in this case by Articles 1484 (former) of the Code of Civil Procedure for domestic awards and 1504 (former) of the Code of Civil Procedure for international awards made in France, depend on the nature of the economic relations at the origin of the dispute;

Whereas according to the former article 1492 of the Code of Civil Procedure “Is international arbitration which involves the interests of international commerce”;

Whereas that the internationality of arbitration requires an economic definition according to which it is sufficient that the dispute submitted to the arbitrator relates to a transaction which is not economically settled in a single State, irrespective of the status or nationality of the parties, of the law applicable to the merits or to the arbitration, or of the seat of the arbitral tribunal;

Whereas the sub-contracting contract between the parties was to be performed in Egypt, where the service was to be provided, the metal sheets of the metal ducts for the extraction of the fumes to be fitted to the concrete drums of the power station chimneys, after having been rolled and formed by X in its workshops in France, being then transported from France to be delivered to each of the Egyptian sites concerned for implementation there either by French staff seconded to the site by S. It is also undisputed that the contracting authorities were companies incorporated under Egyptian law, EDF SUEZ GULF POWER SAE and EDF PORT SAID EST POWER SAE, set up for this purpose by EDF for the purpose of performing the contracts entered into with the Egyptian State;

Considering that it results from these elements that the dispute submitted to the arbitral tribunal relates to an operation that is not economically settled in a single State since it involves France and Egypt; that it is consequently an international arbitration;

Whereas the admissibility of the appeal must be assessed in the light of the grounds for initiating proceedings exhaustively enumerated in the former Article 1502 of the Code of Civil Procedure. Thus, it should not be possible in this respect to validly oppose to the liquidator of the LLC the lapse of its appeal pursuant to article 908 of the Code of Civil Procedure for having limited itself to referring in its initial submissions to former article 1484 of the Code of Civil Procedure. The claimant is entitled to modify the legal basis of her claim during the course of the proceedings.

Whereas in the present case, the claimant maintains that the recognition of the award would be contrary to international public policy on the ground that it “deliberately disregarded the application of a legal and public policy rule of protection without the slightest legal basis, while recognising in an equally unlawful manner an unreserved faculty of use of the QMOS in favour of SAEI E, a third party not holding the personal title to the said QMOS and which had been attributed solely to company X. The award undoubtedly and seriously violated a rule of public order while refraining from drawing the consequences of SAEI E’s deliberate violation of the Ministerial Order of 24 March 1978”;

Whereas under the guise of the violation of international public order, the claimant objects to the decision of the sole arbitrator who considered ‘against all expectations that no provisions of the contract organises the protection of the QMOS of X by prohibiting their communication to third parties or their exploitation by third parties or by the defendant itself’. The claimant also claims that the sole arbitrator wrongly refused to sanction ‘the deliberate plundering of Company X’s knowledge, of which SAEI deliberately appropriated theQMOS’. The claimant considers that the sole arbitrator misjudged the scope of the contractual obligations of the parties for having wrongly analysed that SAEI’s liability could only be incurred for violation of the principal obligations expressly provided for in the agreement and not of the ancillary obligations imposed by law, equity and usage. By these accusation, the claimant intends in reality to obtain a review of the merits of the award, which is prohibited to the judge of annulment ;

Finally, supposing that the arbitrator failed to appreciate the scope of the Ministerial Order of 24 March 1978 regulating the use of welding in the construction and repair of pressure vessels, the violation of this text, which merely lays down technical standards and defines for operators involved in fusion welding of steel parts in certain types of assemblies professional qualifications which manufacturers and repairers must justify prior to any intervention, cannot be regarded as contrary to the French concept of international public policy;

Whereas consequently that the ground and the appeal must be rejected; that this rejection necessarily confers the enforceability of the award;

Whereas Company E F, which does not establish that the liquidator in the compulsory liquidation of S. A.R.L. X degenerated the exercice its right of its action into abuse, must be rejected its claim for damages for abusive and dilatory proceedings.

Whereas the claimant, who is unsuccessful in her claims and must bear the costs, cannot claim an indemnity in application of article 700 of the Code of Civil Procedure and must be ordered on this same basis to pay an amount of 10,000 euros.

FOR THESE REASONS

Dismissed the action for annulment.

Observes that this dismissal necessarily confers enforcement of the award.

Dismisses Company EF’s claim for damages;

Condemns Mrs. A J acting in her capacity as liquidator in the judicial liquidation of the limited liability company X to the costs.

Dismisses Mrs. A J acting in her capacity as liquidator in the judicial liquidation of the limited liability company X of his application made pursuant to article 700 of the Code of Civil Procedure.

Orders it to pay to Company EF the sum of 10,000 euros in application of article 700 of the Code of civil procedure.