Court of Cassation, No. 10-17.076 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 12 February 2014, No. 10-17.076

SOCIETE M SCHNEIDER SCHALTGERÄTEBAU UND ELEKTROINSTALLATIONEN-GMBH

vs.

SOCIETE CPL INDUSTRIES LIMITED

Summary

The annulment judge is the judge of the award, to admit or refuse its inclusion in the French juridical order and is not the judge of the case for which the parties have concluded an arbitration agreement. An action for annulment must be dismissed when it tends, under cover of a ground of violation of international public policy, to a new investigation on the merits of the case on the alleged existence of acts of a nature to constitute fraud or corruption.

THE COURT OF CASSATION, FIRST CIVIL CHAMBER, rendered the following judgment:

On the sole ground of appeal, taken in its various branches:

Whereas, according to the judgment under appeal (Paris, 10 September 2009), the Austrian company M. Schneider concluded in 2005 with the Nigerian companies CPL, Falkony and Akiya an exclusive contract for the promotion of projects in the field of electrical energy to be entrusted by the Federal Government and the Federated States, as well as an agreement for the constitution of a joint venture with the main purpose of production and the distribution of electricity. The company CPL has, due to the deterioration of relations between the parties, initiated the arbitration proceedings in Paris. In a first award of 5 October 2007, the sole arbitrator ruled that the company M. Schneider did not show that the contracts had been concluded in breach of Nigerian public policy, declined jurisdiction over CPL’s claims against Falkony and declared that he had jurisdiction over CPL’s claims against the M. Schneider companies. In a second award dated 8 May 2008, the sole arbitrator ordered M. Schneider to pay various sums to CPL and dismissed the counterclaims of M. Schneider, which filed an action for annulment of the 8 May 2008 award;

Whereas the company Mr. Schneider complains that the judgment dismissed the action for annulment, then according to the ground of appeal:

1°/ that the judge is required to examine and rule on all the evidence regularly submitted by the parties to the proceedings; that by refraining from examining and ruling on the memorandum filed by M. Schneider before the arbitral tribunal on 7 December 2007, from which it appeared that the fraud committed by Mr. X… , representing CPL, consisting of an attempt to evict M. Schneider from the company, M. Schneider Nigeria, had been expressly raised during the arbitration proceedings by M. Schneider (§ 29 and § 45), the Court of Appeal infringed Article 455 of the Code of Civil Procedure, together with Article 6 § 1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms;

2°/ that in any event, the scope of judicial control regarding the respect of the requirements of international public policy, to which the fight against fraudulent behaviour participates, is not conditioned by the attitude of the parties before the arbitrators; that by refusing to investigate, as it was invited to do, whether the sole arbitrator had not characterised fraudulent behaviour by CPL in its award, from which he had not drawn any consequences, it resulted that the solution of this award, in that it allowed this fraud to take effect, was in flagrant, effective and concrete breach of French international public policy, On the grounds that “it is not up to the court in the context of an action for annulment to retry the case and review it on its merits, as the appellant would have wished to do, since it had not raised this ground relating to fraud before the arbitral tribunal in view of the elements already in her possession”, the Court of Appeal violated Articles 1502-5 and 1504 of the Code of Civil Procedure;

3°/ that in ruling that the arbitral tribunal “did not deny its jurisdiction” to rule on M. Schneider’s counterclaim, although the sole arbitrator had noted in this award that “not all of the claims which Mr. Schneider can rely on in this respect fall within the scope of the present proceedings”, which meant that he had decided that the claim made by Mr. Schneider did not fall within the material scope of the arbitration clause, the Court of Appeal distorted the clear and precise terms of the arbitral award issued on 8 May 2008, in breach of Article 1134 of the Civil Code;

4°/ that the annulment judge should examine the decision of the arbitral tribunal on the assessment of the lawfulness of a contract in the presence of allegations of corruption, looking for all the legal or factual elements allowing to effectively and concretely assess the lawfulness of the contract in question; that in ruling as it did, on the grounds that " concerning the violation of international public policy, only the recognition or enforcement of the award is examined by the annulment judge with regard to the compatibility of its solution with this public policy, the control of which is limited to the flagrant, effective and concrete nature of the alleged violation “, that M. Schneider “is in fact requesting a new investigation of the case on the merits and not a review of the award” and “that the arbitrator did indeed examine the question of corruption submitted to him by M. Schneider and drew the conclusion that there were no acts of corruption”, thus refusing to investigate in fact and in law whether the alleged acts of corruption were proven, the Court of Appeal infringed Articles 1502-5 and 1504 of the Code of Civil Procedure;

5°/ that in any case, the sentence may be annulled when its recognition or enforcement flagrantly, effectively and concretely contravenes international public policy; that by merely pointing out that the M. Schneider company did not prove that the solution adopted by the sentence breached international public policy by having covered up acts of corruption, without investigating precisely, as it was invited and required to do, whether the solution adopted by the sentence, in that it had condemned the M. Schneider company to pay the company CPL the sum of 50,963,591 nairas to reimburse its costs pursuant to Article 4 of the joint venture contract, did not flagrantly, effectively and concretely offend French international public policy, in that it allowed a contract tainted by corruption to take effect in France, this corruption being characterised, on the one hand, by the use of an assumed name by Mrs Y…, the daughter of the President of the Republic of Nigeria, Commissioner of the Government of the State of Ogun, who represented the company Akiya, on the other hand, by the recognition by Mr. X…, representing the company CPL, that the latter had intervened in the transaction to facilitate the obtaining of public contracts in view of its links with the State authorities and, finally, by a gift from Mr. X… to Mrs. Y…, these facts being condemned by the relevant provisions of Nigerien law, the Court of Appeal did not legally justify its decision in the light of Articles 1502-5 and 1504 of the Code of Civil Procedure;

Whereas, however, the annulment judge is the judge of the award in order to admit or refuse its inclusion in the French juridical order and not the judge of the case for which the parties have concluded an arbitration agreement; whereas, having precisely retained, for reasons which are beyond the objections of the ground of appeal, that the action for annulment was in fact aimed at a new investigation of the merits of the case, the Court of Appeal rightly dismissed it;

FOR THESE REASONS:

DISMISSES the appeal;

ORDERS M. Schneider Schaltgerätebau Und Elektroinstallationen GmbH to pay the costs;

Pursuant to Article 700 of the Code of Civil Procedure, dismisses his application and orders him to pay the sum of EUR 3 000 to CPL Industries Limited;

Thus, done and judged by the Court of Cassation, First Civil Division, and pronounced by the President in its public hearing of the 12th February two thousand and fourteen.