Court of Cassation, No. 11-27.770 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 28 March 2013, No. 11-27.770

Pirelli & C. SPA

Vs.

Licensing Projects SL

On the third and fourth parts of the second ground:

Considering article 1520-5 of the Code of Civil Procedure together with article 455 of the Code of Civil Procedure;

Whereas, according to the judgment under appeal, by contract of 18 December 2001, PIRELLI, a company with its headquarters in Italy, granted LICENSING PROJECTS, a company with its headquarters in Spain, an exclusive trademark licence agreement. Whereas a dispute has arisen between them, in particular as regards the licence for the PZERO trademark, LICENSING PROJECTS notified the immediate suspension of its obligations on 30 March 2007, and then, on 13 April 2007, PIRELLI terminated the agreement. On 11 July 2007, the Commercial Court of Barcelona initiated insolvency proceedings for LICENSING PROJECTS, and then on 26 January 2009 placed it in judicial liquidation. On 8 November 2007, PIRELLI implemented the arbitration clause stipulated in article 34 of the contract, under the supervision of the International Chamber of Commerce (ICC), and requested the arbitral tribunal to state that the contract had been properly terminated and to order LICENSING PROJECTS to pay various sums. In a first partial award, which was not appealed, the arbitral tribunal established it had jurisdiction on the grounds that, under Spanish bankruptcy law, the opening of insolvency proceedings did not render the arbitration clause ineffective where international arbitration was involved. LICENSING PROJECTS filed counterclaims for payment of sums in damages, the ICC International Court of Arbitration informed the arbitral tribunal and the parties on 25 August 2009 that these counterclaims were considered withdrawn in application of Article 30, 4 of the ICC Rules of Arbitration for failure by LICENSING PROJECTS to pay the advance on costs, without prejudice to the possibility that they might be resubmitted in another proceeding. In an award rendered in Paris on 19 October 2009, the arbitral tribunal found that the termination of the licence on the initiative of PIRELLI was lawful, essentially ordering LICENSING PROJECTS to cease all use of the licensed trademarks and condemned it to pay a sum of 2,992,000 euros in unpaid royalties;

Whereas, in order to annul the award for breach of the right of access to justice and of the principle of equality between the parties, the decision first holds that the decision to consider the counterclaims as withdrawn due to the lack of payment of the advance on costs, while LICENSING PROJECTS, placed in judicial liquidation, argued that it was not in a position to pay them, constitutes an excessive measure which had the effect of depriving it of the possibility of having its claims decided as the possibility for a company in liquidation to subsequently present these same claims in another arbitration instance is of a purely theoretical nature. Secondly, the fact that the grounds for LICENSING PROJECTS' counterclaims should be exclusively construed as defences to its own claims and to which the arbitral tribunal would have answered while examining the main claims, a fact which has not been demonstrated, is not such as to remedy the imbalance between the parties;

That in ruling as such, while the refusal by the arbitral tribunal to examine the counterclaims may entail a breach of the right of access to justice and the principle of equality between the parties on the condition that they are indissociable from the main claims, the court of appeal, which did not search, as it was requested to do, whether this was the case in the present case, did not give legal basis to its decision;

FOR THESE REASONS, without having to rule on the other grievances:

REVERSE AND ANNUL, in its entirety, the judgment handed down on 17 November 2011, between the parties, by the Paris Court of Appeal; return, consequently, the proceedings and the parties to their status quo ante and, for the proceedings to be determined in accordance with the law, transmit them to the Versailles Court of Appeal;

Orders LICENSING PROJECTS to pay the costs;

In regard to Article 700 of the Code of Civil Procedure, rejects the claim;

Holds that on the diligence of the Public Prosecutor at the Court of Cassation, the present decision will be transmitted to be transcribed in the margin or following the reversed decision;

Thus made and judged by the Court of Cassation, first civil chamber, and pronounced by the president in its public hearing of the twenty-eighth of March two thousand and thirteen.