Paris Court of Appeal, No. 12/01461 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 25 June 2013, No. 12/01461

S.A.S. SIREC vs. METALMONDE STEEL TRADING LTD

SIREC, a company incorporated under French law, which is part of the GDF SUEZ Group, specialises in collecting scrap steel for resale to buyers or intermediaries who directly recycle this steel or resell it to companies specialising in recycling.

Between 2006 and 2008, it sold large amounts of steel scrap to X STEEL. These sales contracts, which were subject to Swiss law and included an arbitration clause, provided for the settlement of making the goods by credits documentary issued on the instructions of the English company METALMONDE STEEL TRADING (MST), whose object is the trade-in steel on the world market.

Disputes between the parties have arisen relating to two contracts signed on 28 February and 5 November 2008 between SIREC and X STEEL relating to the sale of steel scrap. X STEEL and MST initiated arbitration proceedings against SIREC before the ICC Court of International Arbitration on 14 May 2009.

By an award rendered in Geneva on April 13, 2011, the Arbitral Tribunal composed of Messrs. E F and Jean-Louis DELVOLVE, arbitrators, and Mr. G H, Chairman, ordered the rectification of the said designation and declared Claimant I to be Mr. C X, after having taken note of the imprecise designation of Claimant 1 in the Request for Arbitration and the Terms of Reference. The arbitral tribunal also declared that it had jurisdiction to rule on the claims submitted by the claimants and ordered SIREC to pay Mr. X and MST the sum of USD 1,143,975, plus interest and the costs of the arbitration. The tribunal further specified that any amount paid by SIREC to defendant I will be validly paid into the account of claimant 1’s trustee in bankruptcy. It also dismissed any objections by SIREC on jurisdictional, procedural and substantive grounds.

On 25 January 2012, SIREC appealed against the enforcement order (in French Ordonnance d’exequatur) issued on 16 December 2011 by the delegate of the President of Paris Tribunal of Grande Instance.

Following the submissions of 15 May 2013, SIREC requested the Court “to set aside the enforcement order (in French Ordonnance d’exequatur) and the subsequent arbitral award' and, in the alternative, to refer a preliminary question to the Court of Justice of the European Union for a preliminary ruling, worded as follows”: “A company fictitiously incorporated in Great Britain, in a State of the Union, managed by trustees domiciled in low tax and non-cooperative countries, acting through a bank account located in a State of the Union, in this case Malta, not practising the exchange of information and not paying any tax anywhere and not registered for VAT, is it subject for its activities to the provisions of European Directive N°2005/60/CE of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering”, and to order MST to pay it a sum of 70. 000 under Article 700 of the Code of Civil Procedure.

By submissions of 7 May 2013, MST requested the Court, under Articles 1520 and 1525 of the Code of Civil Procedure and Article 41(5) of the Law of 29 July 1881 on the freedom of the press, to annul the proceedings because of the claimant’s defamatory allegations that it had filed a ‘complaint with a civil claim for defrauding the court and money laundering by organised gangs’, i.e. the entire Part 1. 5 of the claimant’s submissions of 10 April 2013. MST also requested the Court to uphold the enforcement order (in French Ordonnance d’exequatur) issued and to order SIREC to pay him €50,000 under Article 700 of the Code of Civil Procedure, in addition to €1 under Article 41(5) of the Law of 29 July 1881;

UPON WHICH:

On the request for the abolition of the procedure of the entire part 1.5 of the claimant’s submissions

MST alleges the defamatory nature of the allegations made by SIREC, who claims without justification to have lodged a complaint with a civil claim for defrauding the court and laundering in an organised gang, activities in which it is allegedly involved.

Considering that, according to Article 41(4) of the Law of 29 July 1881, no action for defamation, insult or insult may be brought in respect of writings before the courts, and that Article 41(5) provides that ‘the judges hearing the case and ruling on the merits may nevertheless order the abolition of injurious, insulting or defamatory speeches and order the person concerned to pay damages’;

Considering that SIREC, who in his last submissions (§ I.5 p 7) reports the complaint with a civil claim for fraud against the court and money laundering in an organised gang in which MST is allegedly involved, indicates the date on which the complaint was filed, the name of the examining magistrate to whom it was referred, its number and states that he paid the deposit;

Considering that since fraud is a cause for setting aside the award, the allegation of such facts does not exceed the freedom that a party must enjoy in the defence of its interests; that the request for abolition of the procedure of part 1.5 of the claimant’s submissions is rejected; that the same applies to the claim for damages on the basis of the above-mentioned article;

On the ground of nullity of the application for enforcement (in French Exequatur):

SIREC argued that because of the joint and not joint and several nature of the sentence pronounced against it by the arbitral tribunal, the application for enforcement (in French Exequatur) should have been presented by the two applicants, so that MST is inadmissible in its application for enforcement (in French Exequatur). The application for enforcement (in French Exequatur) that it presented is null and void for lack of quality as well as the order made for its sole benefit;

Considering that the award allocated various sums to MST and Mr. C X, the co-claimants in the arbitration, without specifying the distribution of these sums between them, both with regard to their common debtor and in their internal relations;

Considering that in order to obtain an enforceable title, a necessary prerequisite for the continuation of enforcement proceedings in France according to the law of that country, MST is entitled, as the beneficiary of the arbitral award, to apply alone for its enforcement (in French Exequatur), notwithstanding the fact that it is not the sole beneficiary;

That the exception of nullity is rejected;

On the grounds that the arbitral tribunal ruled without complying with its mission (article 1520-3 of the Code of Civil Procedure, which is in reality 1502-3), that it disregarded due process (in French Principe de la contradiction) (article 1520-4 of the Code of Civil Procedure, in reality 1502-4 with regard to the date of the award) and that it violated international public policy (article 1520-5 of the Code of Civil Procedure, in reality 1502-5):

SIREC claims that the arbitral tribunal wrongly:

first, ruled without complying with its mission by ordering ex officio the substitution of one claimant by another when the essential challenge during the arbitration concerned the capacity of the company X STEEL and when the rectification came from a document delivered directly to the tribunal without communication either to the ICC secretariat or to itself and constituted a violation of international public policy with regard to the substitution of a bankrupt company X STEEL by Mr C X, an undischarged bankrupt,
second, breached due process (in French Principe de la contradiction), the rights of the defence and its right to a fair trial by failing to comply with its obligation to render a preliminary award specifying the parties admitted to arbitration, which left it in the uncertainty of its adversaries. SIREC also considers that the tribunal breached due process by rendering its award in favour of Mr. C X, a non-signatory party to the arbitration and bankrupt in his personal capacity, whereas the request and the arbitration agreement were presented and supported before the arbitrators by the company X STEEL, which no longer existed since 17 July 1991,
third, violated international public order because of the laundering offense constituted by the interposition of persons between C X and MST and the impossibility of determining the economic beneficiary of MST.

Considering that X STEEL was clearly identified in the Request for Arbitration of 12 May 2009 submitted to the ICC and in the Terms of Reference of 21 December 2009 as a company duly registered in the Israeli Commercial Register of Companies in Tel Aviv; that in reality this company had been struck off the register since 1991, that the non-existence of this company was only discovered through the research carried out by SIREC and that it is furthermore proven that M. C X, who claimed to be the true owner of the shares, X STEEL being only the trade name under which he operated, was personally bankrupt; finally, that the payment mechanisms put in place made it possible to overcome the uncertainties regarding the identification of the true claimant in the arbitration;

That the substitution of persons in such circumstances, allegedly due to a material error, constitutes fraud;

That, therefore, the award must be set aside for violation of international public policy;

On article 700 of the code of civil procedure:

Considering that MST, who succumbs, cannot benefit from these provisions; that it must, on this basis, pay to SIREC the sum of 50,000 euros;

FOR THESE REASONS

Dismisses MST’s application to withdraw the entire part 1.5 of SIREC’s submissions as well as its claim for damages.

Rejects the ground of nullity of the application for enforcement (in French Exequatur);

Reverses the enforcement order (in French Ordonnance d’exequatur).

Dismisses MST’s claim under Article 700 of the Code of Civil Procedure.

Orders company MST to pay the costs and to pay company SIREC the sum of EUR 50,000 pursuant to Article 700 of the Code of Civil Procedure.

THE CLERK THE PRESIDENT