Paris Court of Appeal, No. 12-15.479 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 1st April 2014, No. 12-15.479

SOCIETE NOVOLIPETSKI METTALURGUICHESKI KOMBINAT

vs.

Mr. F G B

On 22 November 2007, Mr. F G B sold to the Russian public limited company NOVOLIPETSKI METTALURGUICHESKI KOMBINAT (KOMBINAT) the majority of the shares of the Russian public limited company Maksi-Grupp.

A dispute having arisen between the parties in relation to the price determination mechanism, and in application of the arbitration clause stipulated in the contract, Mr. F G B has referred the matter to the court of international commercial arbitration at the Chamber of Commerce and industry of the Russian Federation (CACI).

On 31 March 2011 the arbitral tribunal composed of Mr. Zykin, chairman and Mr. Belykh and Mr. Y, arbitrators, issued an award in Moscow ordering KOMBINAT to pay to Mr. F G B the sum of 8 928 001 875, 70 rubles in addition to interest and pronouncing on the arbitration costs.

On 16 May 2012, the award was declared enforceable by an order of the Court of order by the President of the Paris Court of First Instance.

Following submissions notified on 7 February 2014, KOMBINAT requests the court to overturn this order and to convict Mr. F G B to pay the sum of EUR50,000 pursuant to Article 700 of the Code of civil Procedure. KOMBINAT raises the irregular composition of the arbitral tribunal (article 1520 2 of the Code of civil procedure) as well as the breach of international public order in the recognition or the enforcement of the award (article 1520-5 of the Code of Civil Procedure).

Following submissions notified on 19 February 2014, Mr. F G B applied to the court to confirm the undertaken order, to reject the claims of the party and to order it to pay the sum of EUR50,000 in application of Article 700 of the Code of civil procedure.

UPON WHICH:

On the ground of the irregular composition of the arbitral tribunal (article 1520-2 of the Code of Civil Procedure):

KOMBINAT claims that two of the arbitrators are in a position of hierarchical subordination to academics whose consultations were submitted by Mr. F G B in the arbitration proceedings; that these links have not been revealed by the arbitrators, contrary to the provisions of the arbitration rules; that they were not well known, that neither the curriculum vitae of the arbitrators at the of the Chamber of Commerce and Industry, nor the indication of the professional qualifications of the experts leading the consultations provided an extensive description of them; that such connections are of a nature to raise doubts about independence and impartiality of the arbitral tribunal, and that moreover, the award was annulled, on this ground in particular, by a judgment of the Moscow Commercial Court of 28 June 2011 confirmed by a Federal commercial Court of Moscow on 10 October 2011 against which an appeal has been filed and later rejected by the Supreme Commercial Court on 30 January 2012.

Whereas, firstly, the French law of international arbitration does not consider that the annulment of the sentence in its country as a ground for refusing the recognition and performance of an award issued abroad;

Whereas, secondly, that the arbitrator shall disclose to the parties any circumstances that might affect his judgement and to justify a reasonable doubt on behalf of the parties as to his impartiality and independence qualifications which are the very essence of the arbitral function; that, however, the arbitrator’s duty to provide information, at the time of his designation and during the proceedings, must be assessed in the light of the notoriety of the disputed situation and its impact on the arbitrator’s judgment;

Whereas a party who belatedly raises grounds, without establishing that it did not have, or could not have had prior knowledge of them, fails in its duty of procedural fairness;

Whereas KOMBINAT states that Mr. F G B has submitted to the debate, during the arbitration proceedings, a consultation established by Mr. A, professor of business law; that the plaintiff argues that this document did not mention the status of rector of the Academy of the signatory’s Ural State, a status which conferred him a power of appointment and dismissal of arbitrator Belykh in his capacity as director of the Institute of Business Law within this Academy, as well as a power of influence in the appointment of the same arbitrator as director of the business law department;

Whereas, however, titles and functions of arbitrator Belykh appeared on his curriculum vitae available at the CACI; that the status of the consultant A, and in particular that of rector of the Ural’s State Legal Academy, were mentioned on the web page of this institution as shown in the screenshot produced by KOMBINAT; that the institutional links between the arbitrator and the expert were therefore public; as well as the scientific cooperation for book publishing of arbitrator Belykh with Mr. A, as well as two of his colleagues, Mr. Alekseev and Mr. Stepanov, whose consultations were also held by Mr. F G B;

Whereas the circumstance that Mr. Z, another expert of Mr. F G B, has been an assistant Director of the State Institute of the Russian Academy of Sciences, in which arbitrator Zykin was acting as the Director of the department of Legal conflicts and international economic relations, was also well-known information on the web page of the Institute and that it is not essential in this matter that the statuses of this entity indicating the nature and the precise scope of the delegations likely to be granted by the Director to his assistants, have not been public;

Whereas the disputed consultations have all been established in June 2010 and that it is not alleged that they have been submitted to the arbitration proceedings after that date;

Whereas KOMBINAT, which could, by a simple consultation of freely accessible websites to know all the connections it reports on between the arbitrators and the consultants, but chose to wait until 30 March 2011, the day that the award was issued, in order to present to the CACI a motion for recusal, rejected later on, has failed to its duty of procedural fairness and is not qualified to criticise the award by reproaching the arbitrators with breaching their obligation of disclosure;

That the ground must therefore be dismissed;

On the ground of breach of the public order (Article 1520-5 of the Code of Civil Procedure):

KOMBINAT claims, firstly, that the lack of independence and impartiality of the arbitrators constitutes a violation of the rights of defence and, secondly, that the award was obtained by fraud, Mr. F G B having misled the arbitral tribunal by producing audit reports prepared from erroneous data regarding the financial situation of the MaksiGrupp companies, by claiming recognised current assets of MaksiGrupp for their face value as unrecoverable depts of the Group and by concealing the risk of starting collective proceedings regarding Maksi-Grupp and its subsidiaries.

Whereas, as stated above, the ground taken in its first branch is inadmissible as it concerns a belated ground;

Whereas, on the second branch of the ground, alleging breaches international public order by the recognition in France of an award struck by fraudulent manoeuvres;

KOMBINAT claims that constitutes such manoeuvres the production by Mr. F G B of incorrect or misleading accounting documents regarding the situation of Maksi-Grupp and its subsidiaries;

Whereas, however, it follows from the award (p. 15) that KOMBINAT had expressly alleged before the arbitrators the concealment by Mr. F G B, during of the conclusion of the contract, the risks of bankruptcy of MaksiGrupp and its subsidiaries, and that it had produced the documents of ongoing insolvency proceedings (p. 18), that KOMBINAT had also expressly pointed out during the arbitral tribunal that Mr. F G B had artificially increased the debts held on Maksi-Grupp by companies he controlled (p. 15);

Whereas, therefore, contrary to what the appellant claims, these issues were subject to contradictory debate and that the decision of the arbitrators has been no surprise, but was issued as a result of the examination of the reliability of the documents provided for by the two parties;

Whereas the ground must therefore be dismissed;

Whereas, it results from the foregoing that the undertaken order must be confirmed;

On Article 700 of the Code of Civil Procedure:

Whereas KOMBINAT, who is unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure that it will be condemned on this basis to pay Mr. F G B the sum of EUR50,000;

FOR THESE REASONS:

Confirms the Order of 16 May 2012 of the Tribunal of Grande Instance of Paris, which has conferred exequatur to the award issued between the parties on 31 March 2011.

Orders the company NOVOLIPETSKI METTALURGUICHESKI KOMBINAT to pay the costs which shall be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure.

Orders the company NOVOLIPETSKI METTALURGUICHESKI KOMBINAT to pay to Mr. F G B the sum of EUR50,000 in application of Article 700 of the Code of civil procedure.