Paris Court of Appeal, No. 12-11.849

Paris Court of Appeal - 1st Pole - 1st Chamber – 18 February 2014, No.12-11.849

S.A. DOUNIA HÔTELS (B) , S.A. HÔTELS NOUVELLE GÉNÉRATION (HNG) (X) vs. S.A. KEMPINSKI HÔTELS (Y)

On 22 May 2001, the Moroccan company B Z SA (B) and the Swiss company Y Z SA (Y) concluded various agreements, including a management agreement by which the former entrusted the latter with the functioning, management and direction of a ‘complex’ consisting of the Mansour Eddahi Hotel and the “Palais des Congrès” in Marrakech (Morocco).

On 14 February 2002, the Moroccan company Z NOUVELLE GENERATION (X) declared that it was replacing B with the latter’s agreement, which was accepted by Y.

A dispute having arisen between the parties, B and X filed a request for arbitration pursuant to the arbitration clause stipulated in the management agreement.

In an award rendered in Paris on May 31, 2012 under the supervision of the International Chamber of Commerce, the arbitral tribunal composed of arbitrators Weil and Terré and Chairman Tricot judged, in substance, that the attacks of September 11, 2001 and Casablanca in May 2003 constituted events of force majeure within the meaning of the agreement, which put an end to Y’s obligation to pay its “minimum guarantee” in 2003 and 2004 and which justified the termination of the agreements on May 15, 2004. The court ordered a joint and several condemnation to B and X to reimburse the sums paid by Y under the minimum guarantee in 2003 and 2004, and to pay the management fees for those same years as well, and an indemnity to compensate for the damage caused by the maintenance of the Y banner on the roof of the complex after the termination, with interest at the legal rate. The court dismissed the other claims and ruled on costs.

B and X filed an action for annulment of this award on 28 June 2012.

By an order of 24 October 2013, the pre-trial judge (in French Conseiller de la mise en état) dismissed B and X’s request for the stay of the enforcement of the award.

In their submissions notified by the RPVA on 9 January 2014, B and X seek the annulment of the award as amended by an addendum of 10 August 2012 and an order that the opposing party pay them EUR 50,000 pursuant to Article 700 of the Code of Civil Procedure. They claim that the arbitral tribunal misunderstood the scope of its mission and breached due process (in French Principe de la contradiction) (Article 1520-3 and 1520-4 of the Code of Civil Procedure).

According to its submissions notified by the RPVA on 8 January 2014, Y asks the court, principally, to dismiss the requests, subsidiarily, to limit the scope of the annulments only to the parts of the award disputed by the grounds and, in any event, to order the appellants to pay the sum of EUR 70,000 pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the grounds of the arbitrators' failure to comply with their mission and the breach of due process (in French Principe de la contradiction) (Articles 1520-3 and 1520-4):

The claimants maintain that the arbitral tribunal disregarded the scope of its mission and breached due process (in French Principe de la contradiction) by pronouncing a joint and several judgment when joint and several liability was not expressly requested and had not been argued, by applying the legal interest rate to the judgments when Y requested the conventional interest rate, and finally, by invoking systematically a ground according to which the agreement reserved the benefit of the exemption for force majeure to the debtor of the minimum guarantee.

Whereas, in the first place, although Y did not expressly request the arbitrators to order B and X to pay jointly and severally, he requested that each of his two opponents be ordered to pay all the debts; that since solidarity is presumed in commercial matters under French law, whose arbitration clause provides for application to the merits of the dispute, a request thus formulated necessarily concerned a joint and several award, so that the arbitrators in interpreting it in this way did not disregard their mission and were not required to draw this point specifically to the attention of the parties, who were required, where necessary, to discuss solidarity on their own initiative;

Whereas, secondly, in its requests after expert appraisal, Y requested that the sums due in respect of management fees and royalties be accompanied by contractual interest from the date of the first formal notice; whereas the arbitrators having excluded the application of the contractual rate for the grounds set out in paragraph 199, the alternative application of the legal rate of interest from the date of the award was necessarily subject to the tribunal and to the adversarial proceedings, since it resulted automatically from the French law to which the parties had chosen to submit the dispute;

Whereas, thirdly, that contrary to the claimant' assertions, the matter of whether the effects of force majeure benefited only Y or should be extended to it was submitted to the arbitrators and debated by the parties, as reflected in the submissions submitted on 16 May 2012 (Award § 64);

Whereas the means can only be dismissed;

On the ground of breach of due process (in French Principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure):

The claimants argue that by unilaterally deciding, without any discussion between the parties, that the month of January 2003 was necessarily the starting point of the first 6-month period set out in Article 16.5 of the management contract because of Y’s waiver of its right to claim sums for the year 2002, the arbitral tribunal failed to comply with due process (in French Principe de la contradiction).

Whereas Article 16.5 of the Management Agreement gives different consequences to events of force majeure depending on their duration; whereas it provides that if the duration is less than six months, the parties are released from their obligations; whereas if the duration exceeds six months, the parties are invited to consult each other and, finally, that in the absence of agreement and in the event that the circumstances of force majeure persist for a further six months, either party may invoke termination;

Whereas the Arbitral Tribunal, interpreting these provisions as requested by the parties, recalled that force majeure within the meaning of the Convention could only result from events materially affecting tourist activities in the country of the ‘Complex’, and considering that the irresistible nature of force majeure did not necessarily have the effect of impeding partial performance of the Convention. In addition, the tribunal considered that the attacks of 11th September 2001 and the attack in Casablanca in May 2003 were events of force majeure which had repercussions on tourist activities in Morocco. The arbitral tribunal retained that the effect of the first event was felt in 2002 and was amplified after the second. Then it judged that both the letter and the spirit of the management agreement did not include an obligation of speed in the invocation of the event but suggested on the contrary that the parties should be given sufficient time to assess the consequences of the event on tourist activity in Morocco, and, finally decided that Y was entitled not to invoke force majeure as from 2002 pending a possible improvement in the situation. Thus, B and X had no grounds for reproaching the opposing party for having waited until 20 June 2003 to send the letter which referred to it (§ 137);

Whereas the arbitral tribunal specifically reopened the proceedings to allow the parties to explain whether force majeure could only suspend enforcement (award § 61) and whereas B and X, in their counsel’s letter of 16 May 2012, argued that the conventional termination process could only work if the event of force majeure was promptly invoked (award § 136); whereas the above-mentioned statement of reasons in the award is the answer to this argument;

Thus, contrary to the claimants' contentions, the question whether the decline in tourist activity observed in 2002 should be considered in assessing force majeure was a matter of debate; the ground of non-observance of due process (in French Principe de la contradiction) can therefore only be dismissed;

Considering that it follows from the foregoing that the action must be dismissed; that the claimants, who are unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure and will be ordered on that basis to pay Y the sum of 50. 000 to Y.

FOR THESE REASONS:

Dismisses the action for annulment of the award rendered between the parties on 31 May 2012.

Orders B Z and Z NOUVELLE GENERATION to pay the costs which will be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure.

Orders the companies B Z and Z NOUVELLE GENERATION to pay the company Y Z the sum of 50,000 euros in application of article 700 of the code of civil procedure.