Paris Court of Appeal, No. 11/23234 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 2 July 2013, No. 11/23234

LA VALAISANNE HOLDING

Vs.

The Mauritian company F G

Mr. D C

The Mauritian company F G (hereafter referred to as F), whose business is to acquire shares in the capital of companies, has, in accordance with the Memorandum of Understanding of 31 October 2007, transferred to the Swiss company Fairplus Holding (hereafter referred to as Fairplus), whose business is to acquire shares in companies in the food sector, the 23,997 shares held by itself and by third parties for which it has vouched, in the capital of the Malagasy company Aquaculture des Mascareignes (hereafter referred to as Aquamas), which operates a shrimp farm.

The sale price, set at three million euros, was payable partly (one million euros) on the date of sale and partly at term, with a variability clause based on the value of Aquamas' stocks and work in progress.

On the same day, i.e. 31 October 2007, a “Non-competition protocol” was signed concerning both seller F and Mr. D C, Managing Director of the sold company, with Fairplus undertaking to pay Mr. D C, in return for the commitments entered into, an indemnity of EUR 2,512,877 payable over a period of four years in monthly instalments with interest at 4% per annum.

In execution of the price variability mechanism stipulated in the Memorandum of Understanding of 31 October 2007, an “Agreement on the valuation of stocks and work-in-progress” was signed between the parties on 13 March 2008, in order to carry out a contradictory valuation in accordance with a mutually agreed method.

In the context of these agreements and simultaneously, La Valaisanne Holding (hereinafter referred to as Y), a company incorporated under Swiss law, the parent company of Fairplus Holding, granted a payment guarantee on first demand, on the one hand to F, on 31 October 2007 and 7 March 2008, and on the other hand to Mr. C on 31 October 2007.

A dispute having arisen between the parties due to the non-payment by Fairplus of the agreed sums, F and Mr. D C called the first demand guarantees subscribed in their favor by Y.

It is under these conditions that, in accordance with the arbitration clauses stipulated in the guarantee agreements, Y initiated arbitration proceedings with the ICC against F and Mr. C on 19 February 2010.

By an award issued in Paris on 5 December 2011, the arbitral tribunal composed of Mr. X and Mr. de la Cotardière, arbitrators, and Mr. Keutgen, Chairman, after having rejected the request for a stay of proceedings on the application for payment of the first demand guarantee issued in relation to the non-competition protocol of 31 October 2007, and having stated that the first demand guarantees issued in relation to the various agreements (agreement protocol, non-competition protocol and agreement for the evaluation of stocks and work-in-progress), are autonomous guarantees within the meaning of Malagasy law, rejected the applications of nullity for fraud and ordered Y to pay F and Mr. C various sums with default interest.

By declaration dated 29 December 2011, Y brought an action for annulment against this award.

By order of 5 April 2012, exequatur was granted to the award of 5 December 2011.

By submissions notified on 10 April 2013, Y asked to the court to:

declare its action for annulment admissible and well-founded;
dismiss all of F G and M. D C’s claims;
annul the arbitral award of 5 December 2011 issued in ICC arbitration no. 16954/16955;
order the provisional enforcement of the decision to be taken;
order F G and M. D C to pay the sum of EUR 20,000 pursuant to Article 700 of the Code of Civil Procedure.

For their part, F and Mr. C claimed, on 18 January 2013, that Y’s application for the nullity of the award issued on 5 December 2011 by the arbitral tribunal constituted under the aegis of the ICC International Court of Arbitration (ICC 16954 (C- 16955)) should be dismissed, and given the abusive and dilatory nature of Y’s recourse, that the latter be ordered to pay each of them the sum of 100,000 euros in damages, in addition to the sum of EUR 80,000 pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH,

On the sole ground for annulment based on the fact that the arbitral tribunal was irregularly constituted (Article 1520-2 of the Code of Civil Procedure).

The appellant claims that one of the arbitrators, Mr. de la Cotardière, does not meet the necessary requirements of independence and impartiality since, on the one hand, the law firm of which he is a partner is a counsel to the Casino Group, an entity involved in the dispute insofar as it is involved in numerous proceedings against the A family, a shareholder of Y, and that, on the other hand, this arbitrator, by omitting to indicate all of these links, failed to comply with the obligation of disclosure to which he was bound.

Whereas, in the first place, Y claims to justify the necessary independence of the arbitrators with regard to the Casino group by the fact that, according to it, the case submitted to arbitration was ‘orchestrated by the Casino group and particularly through the intermediary of one of its agents, Mr. Hervé SEVENO, President of I2F, a company of economic intelligence’ (submissions page 14 § 55) with the aim of ‘reaching the A family through … the Swiss subsidiaries of Y in which the A family is a shareholder through the intermediary of the Belgian company BAUDINTER’ (submissions page 15 § 56), which holds 95% of the capital of Y;

Whereas however although the dispute between the A family and the Casino group, which stems from an acute conflict between shareholders, is constant in that it has given rise to various judicial and arbitral proceedings, Y claims to derive Casino’s involvement in the investment operation it carried out through its subsidiary Fairplus when it bought Aquamas, from the content of the investigation reports drawn up by an economic intelligence consultancy firm commissioned by Casino;

Whereas although the reports produced on 21 April 2006, 7 February 2007 and 23 August 2007 contain negative assessments of the managers of Y and Fairplus, they do not mention AQUAMAS, with only the report dated 2 April 2009, two years after its acquisition, referring to it for the first time;

Whereas the latter report, in which are recounted the statements made by an individual who wanted to approach the Casino group in order to monetize certain information allegedly held on the A family, statements which the author notes are marked by strong vindictive resentment, which should have led him to recommend that all communication with this person be ceased, does not contain any evidence or even indication that the Casino group could have been involved in any way whatsoever in the investment operation carried out by Y and Fairplus;

Whereas the mere mention by the ICC in a document dated 25 June 2010 entitled ‘Information on the case’ (Exhibit No. 15), of Groupe Casino as being potentially concerned by the dispute, even though it is not a party to the arbitration, which only serves the purpose of preventing, through this information brought to the attention of the arbitrators, any new application for challenge on the grounds that Y claims they may have links with this group, cannot serve as proof of Groupe Casino’s actual involvement in the dispute submitted for arbitration;

Whereas Groupe Casino’s only link with the dispute in this case can only result, remotely, from the interest taken in the transaction by the A family, it being noted that this interest is itself very indirect, since it stems from the participation of the Baudinter company, of which it is a shareholder, in the capital of Y, itself the parent company of Fairplus, which is established by the capital distribution table certified by Y’s legal representative.

Whereas it is a matter of principle that the arbitrator must disclose to the parties any circumstance likely to affect his judgment and cause the parties to have reasonable doubt as to his qualities of impartiality and independence, which are the very essence of the arbitral function;

Whereas the duty to inform that is incumbent on the arbitrator must be assessed in light of the notoriety of the situation under criticism, its link with the dispute and its impact on the arbitrator’s judgment;

Whereas in this case that, on the one hand, Groupe Casino’s relationship with the dispute submitted to arbitration is, for the above reasons, extremely tenuous, and that, on the other hand, Mr. de la Cotardière made it known in his declaration of acceptance of 30 June 2010 that ‘certain partners of his firm work with Groupe Casino on corporate law matters’, taking care to indicate, which is not refuted by the appellant, that he ‘has never represented this group in any proceedings whatsoever';

Whereas furthermore that Mr. de la Cotardière, on 8 September 2010, in response to a request for recusal based on the discovery that the law firm of which he is a partner had ‘as its main client, MERCIALYS, a 66.1% subsidiary of Casino’ and that ‘a multidisciplinary team of this law firm would have very recently advised MERCIALYS in the context of a large-scale real estate transaction’, specified that the real estate asset disposal transaction handled by the Paris office was definitively closed on 31 March 2010, and that this transaction represented 0,5% of the fees invoiced during the financial year in question, and that the Paris office was no longer handling any files for this group, and that ‘on a global level, some of our foreign offices continue to work for this group (essentially in corporate, banking and tax matters)’, it cannot be deduced from this that this arbitrator, who, in order to meet the appellant’s objections, loyally extended his investigations into a possible conflict of interest to the foreign offices of his firm, tried to avoid the obligation of spontaneous disclosure imposed on him and thus failed in his duty of transparency;

Whereas, furthermore, that the proximity of an arbitrator to a party or third party interested in the arbitration, which a party may reasonably fear, may affect his impartiality and independence, must be assessed in the light of the nature and extent of the relations maintained by the law firm with these parties, when it is exclusively stated that they are part of the clientele of the law firm of which the arbitrator is a partner and that it is accepted that the arbitrator has never advised, represented or assisted them in any proceedings;

Whereas in this case, the cases handled and completed on the date of acceptance by the arbitrator of his mission, on behalf of MERCIALYS, a subsidiary of the Casino Group, by the law firm Linklaters, an international law firm with foreign offices, of which Mr. de la Cotardière is a partner, represent, by the appellant’s own confession, 0.1% of the firm’s consolidated annual turnover, so that in this case, no “business relationship”, which is characterized by its size and recurrence, and a proximity such as to give rise in the mind of the appellant to reasonable doubt as to the arbitrator’s independence and impartiality, can be held.

Whereas the ground for annulment must be dismissed and the action for annulment rejected.

On the claim for damages.

Whereas there is no reason to consider that, by making use of the means of appeal available by law, Y has abused its right to take legal action, so that F and Mr. C must be dismissed from their claim for damages for abusive and dilatory proceedings.

On the claims made pursuant to Article 700 of the Code of Civil Procedure.

Whereas Y, who cannot claim the benefit of the provisions of article 700 of the Code of Civil Procedure, must be condemned on this same basis to pay each of the defendants the sum of EUR 35,000.

FOR THESE REASONS:

DISMISSES the action for annulment.

DISMISSES the Mauritian company F G and Mr. D C’s claim for damages.

ORDERS the Swiss company La Valaisanne Holding to pay the costs, which will be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure.

ORDERS the Swiss company La Valaisanne Holding to pay the Mauritian company F G and Mr. D C the sum of EUR 35,000 each in accordance with Article 700 of the Code of Civil Procedure.