Paris Court of Appeal, No. 12/05143

Paris Court of Appeal, 15 October 2013, No. 12/05143

PLAISIR SELECTION GmbH

Vs.

ORGANISATION INTRA-GROUPE DES ACHATS

PLAISIR SELECTION JAPAN

Pursuant to an agreement dated 23 June 2005, X G O, a German company specializing in the export of wines, spirits and food products, acquired from AUCHAN HYPER 100% of the shares of a subsidiary company under Japanese law named AUCHAN L Inc.

Following this acquisition, AUCHAN L Inc. changed its corporate name to X G L.

On 1 July 2005, X G L entered into a commercial agreement with Organisation intra-groupe des achats (A), a general partnership under French law, for a period of three years ending 1 August 2008 for the purchase of goods for resale in Japan.

On 1 August 2008, a new commercial agreement was entered into, this time between Company A and Company X G O for a period of two years.

In August 2010, as the contract was coming to an end and the parties were unable to agree on the terms of its renewal, Company A terminated its business relationship with X G O and served formal notice on the latter to pay the sum of 1,883,632.11 euros in respect of unpaid invoices.

Complaining against A of various breaches of its contractual obligations, X G O had it summoned by bailiff’s act on 20 September 2010 before the Commercial Court of Roubaix-Tourcoing for compensation for the loss suffered.

For its part, on 12 November 2010, company A, pursuant to the arbitration clause stipulated in the contract, initiated arbitration proceedings and then requested the Commercial Court of Roubaix-Tourcoing to stay the proceedings pending the decision of the arbitral tribunal.

On 9 May 2011, X G L filed a suit against A before the Commercial Court of Roubaix-Tourcoing seeking compensation for the loss suffered as a result of the abrupt termination of the commercial relations and requested the joinder of this proceeding with the one previously initiated by X G O.

The arbitral tribunal was composed of Mr. H I, designated by A, Mr. D E designated by the supporting judge because of X G O’s refusal to participate in the constitution of the arbitral tribunal and Mr. P-Q R, chairman designated by the two arbitrators.

X G O and X G L filed an action for the recusal of the chairman of the arbitral tribunal, the president of the Paris Trial Court, in an order issued in summary proceedings on 27 October 2011, dismissed this action as being out of time.

X G L having intended to intervene in the arbitration proceedings to obtain compensation for the loss resulting from the abrupt termination of the business relations established within the meaning of article L. 442-6 of the French Commercial Code, and X G O having formulated counterclaims for damages against A based on contractual breaches and on the provisions of article L. 442-6 of the French Commercial Code, the parties have, under the terms of the Terms of Reference they signed, asked the arbitrators to rule in a partial award, on the one hand, on the admissibility of the voluntary intervention of X G L, and, on the other hand, on the admissibility of the counterclaims made by X G O against A.

In a partial award rendered in Paris on 21 February 2012, the arbitral tribunal declared itself incompetent to hear both the claims formulated by X G L and the counterclaims formulated by X G O.

By declaration dated 20 March 2012, X G O and X G L filed an action for annulment against this arbitral award.

Given the submissions of the companies X G GbmH and X G L served by Z, on 11 September 2013, to set aside the partial award of 21 February 2012 and to order A to pay the sum of 7,000 euros to each under article 700 of the Code of Civil Procedure.

Given the submissions of company A served by company Z on 16 August 2012 under the terms of which the court is requested to dismiss the companies X G O and X G L from their action for annulment, to confirm the criticized arbitral award and, as a counterclaim, to jointly and severally order the two appellant companies to pay the sum of EUR 50,000 as damages for abusive proceedings and the sum of EUR 15,000 under Article 700 of the Code of Civil Procedure.

By way of submissions served on 13 September 2013, Company A requested the outright rejection of the documents and pleadings served by X G O and X G L on 11 September 2013, the day before the Closing Order, which was opposed by X G GbmH and X G L, served by Z on 18 September 2013.

UPON WHICH,

On the motion to dismiss the last served entries and the exhibit communicated on 11 September 2013 by the appellants.

Considering that A requests, on the grounds of the infringement of the principle of contradiction, the rejection of the submissions served and of the document communicated by the appellants on 11 September 2013, on the eve of the closing order.

Considering, however, that the violation of the principle of contradiction and of the fairness of the debates is likely to be characterized only as long as the writings and the new documents adversely affect the opposing party;

that, in the present case, A does not specify how these submissions, which do not articulate any new ground or raise any new claim, required an answer;

that it does not further specify in what way Exhibit n°47 ‘Impression of the program of a EUROMED MANAGEMENT conference-debate’ was worthy of discussion;

that consequently, if A cannot show that the rights of its defense have been infringed in this way, the request cannot be admitted;

On the first ground for annulment, based both on the irregularity of the composition of the arbitral tribunal and on the violation of international public policy (Article 1520-2 and 1520-5 of the Code of Civil Procedure)

The appellants point out the lack of independence of Mr. P-Q R, chairman of the arbitral tribunal, due to the business relationship between STC Partners, a law firm of which he is a managing partner, and KPMG International, the statutory auditor of the AUCHAN Group, to which A belongs. They argue that the mere disclosure of this link by the chairman of the arbitral tribunal is insufficient, especially since, according to them, it was incomplete, since the discovery of subsequent elements demonstrates the real nature and extent of these links.

Considering that at the time of his appointment, the president of the arbitral tribunal informed the parties, which is recorded in the mission statement they signed, that he is Managing Partner of STC SELARL, a law firm registered at the Paris Bar. This firm has signed on 9 June 2011 a sub-license agreement with KPMG International concerning the tax activity. Under the terms of this agreement, STC SELARL remains independent and cannot be considered a member of the KPMG network. Maître P-Q R reminds however that KPMG France is the Statutory Auditor of the Auchan' Group;

Considering that the appealing companies, which expressed reservations in the terms of reference ‘on the independence of Maître P-Q R, given the links of his firm, STC SELARL with KPMG International as recalled above’, have submitted to the President of the Paris Trial Court a request to challenge the president of the arbitral tribunal for lack of independence and impartiality because of his links with KPMG, statutory auditor of the AUCHAN Group;

that by order dated 27 October 2011, the Chairman of the Paris Trial Court declared this request inadmissible as being out of time;

Considering that this decision, which ruled on the request for challenge of the chairman of the arbitral tribunal, renders inadmissible before the judge of the annulment, the reiteration of the ground alleging lack of impartiality and independence of the arbitrator because of his links with KMPG International, which was for XGO and XGL to assert in due course;

that the appellants do not justify any new fact that occurred after the decision of the support judge;

that indeed, the statement written in English ‘STC Partners is a French Law Firm Sublicensee of KPMG International in Tax’ appearing on the professional paper of the law firm STC Partners (Exhibit No. 32) as well as the one appearing on the website of STC Partners, ‘STC Partners is an independent law firm affiliated with the KPMG International network’, or the existence of a hypertext link to the KPMG International website, which is public information that the appellants do not demonstrate that it would have been accessible to them only after the decision of the judge in support of their appeal, are only an illustration of the situation revealed by the links resulting from the tax sub-license granted by KPMG International to the law firm STC Partners;

moreover, since the nature of the contractual links between KPMG International and the law firm STC Partners was made known to the appellants in due time, the appellants are not entitled to invoke that the law firm STC Partners could have been led, in the context of this sub-license agreement, to perform services on behalf of A or on behalf of other companies of the Auchan group, it being noted that no justification for such an occurrence is provided;

finally, the circumstance that one of A’s employees, Mrs. Y, who signed the Terms of Reference on behalf of the latter and represented it at the arbitral tribunal hearings, would have previously held a position as Director of Audit at KPMG International and spoke at a conference alongside a representative of KPMG France, is inoperative in that it is foreign to the relations of the law firm STC Partners with KMPG;

that it follows that the ground for annulment alleging irregularity in the composition of the arbitral tribunal and the consequent violation of international public policy is inadmissible;

On the second ground for annulment based on the fact that the arbitral tribunal, by wrongly declaring itself incompetent, did not comply with its mission (article 1520-3 of the Code of Civil Procedure)

The appellants argue that the arbitration agreement stipulated in the contract of 1 August 2008 between X G O and A was to be extended to the company X G L, insofar as the latter, which is a subsidiary of its parent company signatory to the contract and which has the same legal representative, directly participated in the execution of the commercial agreement of 1 August 2008 signed between X G O and A and has knowledge of its exact terms.

Considering that the parties to an arbitration agreement have the right to waive its benefit; that such waiver may be implicit, provided that it is certain and unequivocal; that it may in particular be inferred from the referral to the state courts by one of the parties, provided that it concerns a claim on the merits which should have been submitted to arbitration;

Considering that the commercial agreement, concluded on 1 August 2008, between company A and company X G O for a period of two years stipulates in its article 14 entitled ‘Arbitration’ that ‘The parties commit, in case of disputes and questions arising from the present Contract, to do their best to resolve such disputes or questions amicably and, failing an amicable settlement, all disputes arising from the present Contract shall be settled as a last resort under the rules of the New Code of Civil Procedure (sic) by one or more arbitrators appointed in accordance with the said laws’.

Considering that by bailiff’s act of 20 September 2010, X G O has summoned A before the Commercial Court of Roubaix-Tourcoing in compensation for the damage suffered due to various breaches of its contractual obligations;

that the jurisdiction of this court has not been declined by A which concluded on the merits, without availing itself of the arbitration clause, not claimed by X G O;

that for its part, by an act dated 9 May 2011, i.e. after 12 November 2010, the date on which company A, by virtue of the arbitration clause stipulated in the contract, initiated arbitration proceedings, X G L in turn summoned the latter before the Commercial Court of Roubaix-Tourcoing with the aim of obtaining compensation for the loss suffered as a result of the abrupt termination of the commercial relations and requested the joining of these proceedings with those previously initiated by X G O ;

Considering that by seizing the state courts with claims on the merits that should have been submitted to arbitration, X G O unequivocally waived the benefit of the arbitration clause, being moreover noted that in writings filed before the support judge (Exhibit No. 8), it argued that the arbitration clause could not be opposed to it because it accepted it by affixing its initials at the bottom of the page containing it, and claimed that its opposition to arbitration was attested, in particular, by its referral to the commercial court;

that in the same way, X G L which, even though it expressly claims to be perfectly aware of the exact terms of this agreement in order to have, in its capacity as a subsidiary of its parent company signatory of the contract, directly participated in the execution of this commercial agreement, deliberately chose to bring its claims before the commercial court of ordinary law, is rightly opposed to its unequivocal renunciation to the benefit of the arbitration clause ;

that the ground for annulment can only be dismissed;

On the third ground for annulment alleging violation of the right of access to justice and the principle of equality between the parties (Article 1520-4 and 1520-5 of the Code of Civil Procedure)

X G O and X G L argue that the parties are not placed in a situation of equality and that the adversarial process is not respected, since one of the parties can only reply to the opposing claims, without being able to submit counterclaims.

In addition, X G O believes that the inadmissibility of its claims is linked to its failure to pay its share of the fees and that its right of access to the judge would have been violated.

Considering that the appealing companies that have decided to bring their claims before the state courts cannot invoke a breach of equality that results from their sole procedural choice ;

that they cannot claim either that their right of access to justice would be violated if the commercial court remains seized of their claims, it being further observed that, contrary to what is claimed, the arbitral tribunal’s decision to declare itself incompetent to rule on X G O’s counterclaims and on X G L’s claims is not based on the failure of the former to pay its share of additional arbitration costs;

finally, since X G O was in a position to oppose A’s claims by way of defence on the merits before the arbitral tribunal, the fact that it was unable to file counterclaims during the arbitral proceedings did not affect the principle of contradiction;

Considering that the ground and the appeal must be dismissed.

Considering that there is no reason to consider that X G O and X G L have turned it into an abuse, the exercise of their right of recourse so that A must be dismissed in its claim for damages for abusive proceedings;

Considering that the companies X G O and X G L which are not successful must be ordered to pay the costs and cannot claim compensation pursuant to Article 700 of the Code of Civil Procedure; that they must be ordered on this same basis to pay a sum of 10,000 euros.

FOR THESE REASONS,

HOLDS that there is no reason to exclude from the proceedings the submissions notified and the document communicated by X G O and X G L on 11 September 2013.

DISMISSES the action brought by X G O and X G L to annul the partial award rendered in Paris on 21 February 2012;

DISMISSES the French general partnership A (Organisation intra-groupe des achats) from its claim for damages for abusive procedure;

ORDERS X G O and X G L to pay the costs to be recovered in accordance with the provisions of Article 699 of the French Code of Civil Procedure and to pay the sum of 10,000 euros pursuant to Article 700 of the French Code of Civil Procedure.