Paris Court of Appeal, No. 11/23333 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 11 June 2013, No. 11/23333

EMAC

Vs.

RUDIS S.A

X, acting as leader of a consortium of companies made up of seven companies under Slovenian law and one company under German law, signed three contracts with the Algerian public law company SONIPEC relating to the turnkey construction of three factories of shoe manufacture in Algeria, including Frenda and KL on 9 August 1981 and Bou Saada on 14 December 1983.

Following the restructuring of Algerian public companies, the Algerian public law company A, created by decree of 4 December 1982, acquired the rights of the SONIPEC company with regard to the three contracts mentioned.

Then, following a new restructuring, the entire capital of A, itself transformed into a joint stock company, was allocated to the company H INDUSTRIEL DU CUIR, IJ created on 10 August 1999.

Difficulties having arisen within the framework of the performance of the construction contracts of the factories, X and A agreed by a memorandum of understanding dated 8 August 1989 of the appointment of an expert-conciliator, Mr. EF, who rendered a report dated 17 May 1991.

After further discussions, a new memorandum of understanding was signed between X and A on 27 May 1992, under which A undertook to pay X a sum of US$ 11,700,000 as part of a financial agreement between the parties.

Company A was dissolved in 2001.

Failing to have been able to obtain the execution of the protocol, X seized the Court of Sdi M’Hamed, commercial department, on 15 December 2007, of a request for payment of the sum of 11,700,000 US dollars, plus default interest and compensation for the damage suffered.

This request was dismissed on the grounds of the lack of jurisdiction of the court, under the arbitration clause stipulated in the memorandum of understanding of 27 May 1992.

This decision, confirmed on 17 March 2009 by the Court of Appeal of Algiers, became irrevocable in the state of rejection on 8 September 2011 by the Algerian Court of Cassation of the appeal filed by A.

The Slovenian company X SA seized the International Court of Arbitration of the ICC on 8 April 2010 with a request for arbitration against A and the Algerian companies GH INDUSTRIEL DU CUIR IJ and G SOCIÉTÉ DE GESTION ET PARTICIPATION on the basis of the arbitration clause stipulated in article 7 of the memorandum of understanding concluded on 27 May 1992.

Under the terms of reference, the arbitration was subject to Algerian law.

By an award rendered in Paris on 9 December 2011, the Arbitral Tribunal composed of Mr. CD sole arbitrator, exonerated the company GESTION, declared it had jurisdiction with regard to A and GH, stated that the request of X SA was admissible and jointly ordered A and G to pay the sum of 17,000,000 US dollars plus interest.

By declaration of December 30, 2011, companies A and GH filed an action for annulment against the said arbitration award.

In view of the submissions notified on 2 August 2012 by A and GH according to which the Court is requested to annul the arbitration award rendered on 9 December 2011 in the ICC case No. 17048 and to order company X to pay the full costs of first instance and appeal.

In view of the statements filed by X on 6 June 2012 to have the action declared inadmissible, for lack of quotation from GESTION and, at the merits, to reject this action, to grant enforcement to the challenged arbitral award and to order the claimants to pay a sum of 200,000 euros as damages for dilatory proceedings and a sum of 20,000 euros under article 700  of the Code of Civil Procedure.

UPON WHICH :

On the ground of inadmissibility raised by X against A and G H based on the inadmissibility of the appeal for not summoning the company G GESTION. Defendant No. 3 to arbitration proceedings

X argues that the claimants voluntarily refrained from bringing into the proceedings all the parties to the arbitration, the appeal must be declared inadmissible ‘in the form’.

Whereas, however, that no legal provision requires the party seeking the annulment of an arbitration award to conduct, under penalty of inadmissibility, its action against all the parties present at the arbitral proceedings in so that the ground can only be ruled out.

On the ground of annulment based on the violation of the provisions of article 1520-1 of the Code of Civil Procedure :

The claimants maintain that the arbitral tribunal wrongly declared that it had jurisdiction:

by confusing X SA and association X bringing together the seven member companies of the group, an entity without legal personality, X SA in fact acting under the guise of association X, without justifying a special mandate which would have been given to it by the other seven members of the group,

by granting sums which were not due to X SA but could only be, if applicable, to the association X

by extending the effect of the arbitration clause to GH,

ruling on requests affected by the prescription,

by declaring with regard to A, company in liquidation.

Whereas the arbitration procedure was initiated under the arbitration clause stipulated in point 7 of the Memorandum of Understanding signed on 27 May 1992 between A and company X-Realisation of projects its headquarters in Trbovlje (Slovenia) whereby the first agrees to pay to the second sum of 11,700,000 US dollars, plus interest, over a period of five years with two years of non-producing deferred interest, running from 1 st January 1992. The payment should be made ‘through a financial agreement’ involving the C.PA, bank of A and the LJUBLJANSKA BANKA DD to Y, bank of X;

Whereas if the purpose of this protocol was to settle the dispute arising during the performance of the turnkey construction contracts of the three shoe manufacturing factories signed by X acting as leader of a consortium of companies composed of seven companies under Slovenian law and one company under German law, with the Algerian company under public law SONIPEC. On 9 August 1981 and 14 December 1983, it follows from the very terms of this agreement that it was concluded with X, a company incorporated under Slovenian law and not as supported by A, nor with a group of companies called X, without legal personality, nor even with SA X acting ‘by virtue of a special coordination mandate;

Whereas the member companies with X of the group which participated in the construction of the factories ordered by SONIPEC, for lack of having been parties to the protocol, did not have to be summoned to the arbitration proceedings which X was qualified to be the sole beneficiary the agreement. Thus, only X could implement this agreement to settle the dispute arising from its non-performance, without having to justify a special mandate given by the other member companies of the group, third party to said agreement;

that in this regard, the fact that the recourse to arbitration was preceded by a meeting of the group of companies, the minutes of which dated 28 January 2010 were included in the debates, a meeting during which its members expressed their will to continue to recover the sums due in application of the settlement agreement of 27 May 1992 and to empower X to act to this end and have also agreed to distribute in proportion to their respective market participation the burden of procedural costs, cannot be usefully opposed by A and GH to X who derives from the memorandum of understanding, in the absence of a restrictive provision, the power to act alone, by virtue of the arbitration clause therein stipulated, being observed that in any event, only the mandators would confronted the authorised representative with exceeding the limits of its mandate;

Whereas, in addition that the totality of the capital of A, after having been transformed into joint stock company was allocated to the company H INDUSTRIEL DU CUIR, IJ created on 10 August 1999;

Whereas, since G H was therefore bound by the rights and obligations of A, whose liabilities were thus vested in it, the arbitral tribunal rightly retained its jurisdiction by indicating that it had not been a signatory to the protocol. The effect of the arbitration clause, which is inserted in an agreement whose purpose is to settle the dispute arising from the performance of an international contract, has a validity and effectiveness of its own which commands its application to the parties directly involved in the dispute. It follows from the minutes of the meeting of 18 July 2001 that SPC intervened in this capacity in the amicable negotiations undertaken in order to achieve the execution of the protocol of 27 May 1992 and gave its express agreement to the release of the bank guarantees subscribed to within the framework of the contracts signed on 9 August 1981 and 14 December 1983;

Whereas on the other hand that, under the guise of the objection made to the arbitral tribunal for having rejected the limitation period set against X’s request, the claimants in fact invite the annulment judge, to review the merits of the award which is forbidden to it;

Whereas, finally that the claimant unnecessarily maintain that the arbitral tribunal wrongly recognised its jurisdiction over A, a company in liquidation following the decision of its shareholders to pronounce its early dissolution as soon as the personality of the latter in out-of-court liquidation survives for the purposes of its liquidation; that, moreover, its liquidator represented it at the conciliation meetings of 18 July 2001 and 16 October 2002 and during the arbitration procedure, without ever opposing the claims made against it, a plea of inadmissibility based on its legal situation, which in any event entails, in application of article 1466 of the Code of Civil Procedure, the presumption of waiver of the plea based on this alleged irregularity.

On the grounds of annulment gathered from the violation of the provisions of Article 1520-2, 1520-3, and 1520-4 of the Code of Civil Procedure :

The claimants consider that, due to the absence of the other member companies of the group during the arbitration proceedings:

the tribunal was irregularly constituted,

the arbitrator did not comply with his mission, the seven companies having neither participated in the constitution of the arbitral tribunal nor in the terms of reference and therefore seized the tribunal of any request. So that the latter by allocating certain amounts held beyond his mission,

the arbitrator did not respect the adversarial principle for the other companies making up the consortium which did not participate in the proceedings.

Whereas for the reasons previously developed, the arbitral tribunal was regularly seized by X by virtue of the arbitration clause stipulated in the memorandum of understanding of 27 May 1992 to which X was a party and not a representative. Thus, contrary to what the claimants maintain, the arbitral tribunal was regularly constituted;

Whereas, the mission of the arbitrators, defined by the arbitration agreement, is delimited mainly by the object of the dispute, as determined by the claims of the parties;

In the present case, it results from the deed of engagement signed by X and A on December 14, 2010 that the arbitral tribunal had to “settle the following questions:

A. Is there an arbitration clause applicable to this dispute?

C. In which document does it appear?”

E. XXX and 3 can be considered as parties to the arbitration?

d. Have the Parties waived arbitration by referral to state courts?

e. In the absence of agreement by all Parties on the application of the Algerian law, which law is applicable to the dispute?

f. Does Company X have standing to act and in what extent?

g. Is Company X entitled to and against whom?

to the payment of the sum of 11.700.000 US dollars’.
default interest '
to damages'.

h. Who shall bear the fees and costs of the arbitration?”

Whereas the arbitral tribunal which, in consideration of the arguments put forward by the defendants, ruled only on the requests referred to it by X, exactly complied with its mission.

Whereas finally the arbitral tribunal stated that it ruled on the claims of company X, after having collected the observations of all the parties to the arbitral proceedings, who filed statements setting out their grounds and claims. So that the arbitral tribunal did not disregard due process (in French Principe de contradiction) which applies only to the parties to the proceedings;

Considering that the grounds for annulment raised must be rejected.

On the grounds of annulment based on the violation of the provisions of article 1520-5 of the Code of Civil Procedure :

The claimants argue that recognition and enforcement of the award would be contrary to international public order if:

this award gives rise to convictions in favour of third parties without the claimant in the proceedings justifying having been entrusted with a special mandate for this purpose,

the arbitral tribunal does not allow A to assert its rights, by refraining from dealing separately with the question of jurisdiction, of the merits,

the absence of SCHON calls into question the economy of the structure of the association and the rights deriving therefrom, whereas the sums awarded by the award have not been broken down.

Considering that, for the reasons previously developed, company X had the right to resort to arbitration without the filing of its action being subject to the proof of a special mandate as soon as it was not acting in the name of third parties but in its own name in order to obtain the performance of a memorandum of understanding to which it was the sole party;

that, moreover, the award does not condemn the third parties to the arbitration proceedings, which renders ineffective the grounds relating both to the disruption of the structure of the association due to the disappearance of one or more of its members and to the absence of any guarantee of repayment by X of their share to each of the members of the groupement;

lastly, contrary to what the appellants maintain, the arbitrator who ruled, in a single award on jurisdiction and on the merits, gathered the arguments of the parties, as shown by the reasons for the award expressly stating that A discussed X’s claims. Moreover, the defendants submitted counterclaims for damages such that the rights of defence have not been infringed; that consequently, since no explanation has been given for the fact that the award would contain provisions which disregard both international procedural and substantive public policies, would prevent its recognition and enforcement in France, the plea and the appeal must be rejected.

On the request for enforcement (in French Exequatur):

Whereas, X requests the enforcement of the award rendered on 9 December 2011.

Whereas, in application of article 1527 of the Code of Civil Procedure, the rejection of the appeal for annulment grants enforcement (in French Exequatur) to the arbitration award;

On the claim for damages :

Whereas, nothing allows to consider in this case that A and GH have degenerated into abuse the exercise of their right of action. Thus X must be dismissed of its claim for damages for abusive and dilatory action.

On the request for compensation under article 700 of the Code of Civil Procedure:

Whereas, the claimants cannot claim the allocation of compensation on the basis of article 700 of the Code of Civil Procedure and must be order on this same basis to pay a sum of 20,000 euros.

FOR THESE REASONS :

Declares admissible the action for annulment brought by company A and company H INDUSTRIEL DU CUIR, I J.

Dismisses the action for annulment filed against the award rendered in Paris on 9 December 2011 under the supervision of the International Chamber of Commerce (case n ° 17048 / ND).

Holds therefore that the said award is enforceable in accordance with the provisions of the of article 1527 of the Code of Civil Procedure.

The Slovenian company X rejects its claim for damages.

Company A and company H INDUSTRIEL DU CUIR, IJ dismiss their claim for compensation in application of article 700  of the Code of Civil Procedure.

Orders company A and company H INDUSTRIEL DU CUIR, IJ to pay the costs and payment of a sum of 20,000 euros in application of article 700  of the Code of Civil Procedure.