Paris Court of Appeal, No. 13/05087 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 27 May 2014, No. 13/05087

S.A. AVIVA ASSURANCES , MMA IARD , S.A. GROUPAMA , G D Company , vs. AIOI NISSAY DOWA INSURANCE CO LTD

XXX INTERNATIONAL INSURANCE AND REINSURANCE subscribed in the name and on behalf of its members, currently known as MMA D, G D, X SA, A B (hereinafter collectively referred to as Z or the reinsured), to a reinsurance program with FORTRESS RE reinsurance pool to cover their aviation risks relating in particular to the 2000 and 2001 underwriting years. Among the reinsurers of the pool is AIOI NISSAY DOWA INSURANCE CO LTD (hereinafter Y or the reinsurer).

A dispute has arisen between the parties over the reinsurance indemnity due by Y to Z following the four hijackings that led to the 11 September 2001 attacks in the United States. The dispute related to the determination, within the meaning of the contract, of the number of events that constituted the attack and destruction of the North and South Towers of the World Trade Center, using two hijacked airliners to the detriment of two separate airlines, the two attacks having occurred during the same 24-hour period and within a geographical radius of 10 miles.

Z initiated an ad hoc arbitration proceeding in accordance with the arbitration clause in the reinsurance treaties.

In an award rendered in Paris on 11 February 2013, the arbitral tribunal composed of Messrs. Nessi and Peugeot, arbitrators, and Mr. Aynès, Chairman, essentially:

decided that the claims that occurred on 11 September 2001 in New York did not fall within the scope of Article 4 (A) part. 2 of the reinsurance treaties, and constituted a single event under Article 4 (A) part. 3,
said that the sums of USD 675,436 and USD 705,305 were owed by Y,
rejected Z’s claims for USD 122,342 and USD 2,598,999
ordered Y to pay the balance of its debt, i.e. USD 1,607,835 with interest from 21 December 2012, the date of the application, capitalized in accordance with Article 1154 of the Civil Code.

Z filed an action for annulment against this award on 12 March 2013.

By submissions filed on 1 April 2014, it requested the annulment of the award and an order for Y to pay the sum of 20,000 euros pursuant to Article 700 of the Code of Civil Procedure. It submits that the arbitrators disregarded their mission and violated procedural public policy by failing to respond to a ground (Article 1520-3 and 1520-5 of the Code of Civil Procedure), that they further disregarded their mission by using powers of amicable composition that had not been entrusted to them by the parties (Article 1520-3 of the Code of Civil Procedure), and finally, that they violated due process (in French Principe de la contradiction) by fixing the starting point of interests at a date which had not been discussed by the parties (art. 1520-4 of the Code of Civil Procedure).

By submissions filed on 29 April 2014, Y requested the court, primarily, to declare inadmissible and, in the alternative, unfounded the complaint relating to the failure to adjudicate, to declare the complaints relating to the reasoning of the amicable composition and the setting of the starting point of the interest rate to be unfounded, and to dismiss the action for annulment, in the alternative, if the court considered the complaint relating to the starting point of the interest rate to be well-founded, to limit the annulment of the award to this ground and to order the restitution of the sum of 16. 421 USD, in any event, order that the reinsured to pay the sum of EUR 171,211.62 under Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the ground based on the non-compliance of the arbitrators with their mission (article 1520-3 of the code of civil procedure):

Z maintains that the arbitrators disregarded their mission, firstly, by usurping the powers of amiable compositeur which had not been conferred to them by the parties, and secondly, by failing to respond to submissions which alleged, in the alternative, that if the arbitral tribunal upheld the classification of an act of terrorism rather than that of hijacking an aircraft, it had to interpret Part 3 of Article 4 A, relating to terrorism, and Part 2 of the same Article, applicable to hijacking, in relation to each other, since the terrorist acts had been perpetrated by means of hijacked aircraft, and had to determine the moment of loss within the meaning of Part 3 in accordance with the provisions of Part 2.

On the ground taken in its first part:

Whereas the Terms of Reference state in point 3 that: “In accordance with the arbitration clause, the arbitrators shall apply French law as the relevant law of the contract, but they are invited to interpret the disputed contracts as a “commitment of honour”. In addition, they shall “render their award with the objective of giving effect to the general scheme of this Contract in a reasonable manner, rather than by strictly adhering to the rules of law and to the literal interpretation of the contractual texts”. The parties confirm that the Arbitral Tribunal does not have the power of amiable compositeur”;

Considering that, contrary to what Z claims, the reference made by the award to the “distinctive criteria that a reasonable operator may have in mind”, or to a “reasonable interpretation, mindful of the general scheme of the treaties” does not express the exercise of the power of amiable composition, but the use of the methods of legal interpretation and classification provided by the arbitration clause and by the Terms of Reference;

That the ground taken in its first part can therefore only be dismissed;

On the ground taken in its second part:

Considering that the reinsurance treaties provide in part 2 of Article 4 (A): “Clause relating to hijacking (all claims). With regard to losses resulting from the risks referred to in paragraph (g) of the AVN.48.B clause (whether or not such losses are actually indemnified by virtue of the cover offered by paragraph (g)), the priority and the resulting indemnity will be applied to the total of the losses indemnified by the Reinsured which are covered hereafter and which derive or would derive from each act of hijacking taken separately, the loss taking place from the moment the hijacker manifests himself”;

That Part 3 of the same article stipulates with regard to the risks provided for in clause AVN.48.B, which include war, strikes and riots, acts committed for political or terrorist purposes, sabotage, confiscation, requisition or nationalization, as well as the hijacking of an aircraft, that: “Definition of the cover of certain risks. With regard to claims arising from the risks provided for in the AVN.48.B clause (whether or not these risks are actually indemnified by cover provided by the AVN.48 clause) other than losses excluded by paragraph Part. 1 above and losses covered by the provisions of paragraph Part. 2 above, the words “each event” shall be understood for the purpose of this contract: “all damage assumed by the Reinsured occurring within a period of 24 consecutive hours and within a radius of 10 miles resulting from one of the risks provided for in clause AVN.48.B”;

Considering that Z argued before the arbitral tribunal, principally, that the crash on the towers of the World trade center of two previously hijacked aircrafts fell within the classifcation of hijacking and not within that of an act of terrorism, and in the alternative, if this second classification were to prevail, the aggregation of claims clause provided for in Part 3 should apply at the time when the pirates seized the aircraft, in accordance with Part 2; that Z claims that by failing to respond to this second ground, the arbitrators failed in their duty;

But considering that it follows from the analysis set out on page 30 of the award that the arbitral tribunal considered that the treaties clearly provided for a distributive application of Part 2 to hijackings only and of Part 3 to other incidents, in particular those resulting from acts of terrorism, so that the determination of the nature of the peril which caused the two incidents involving the application of one or other system was the only question to be decided;

Considering that the arbitrators thus answered on the basis of the clarity of the conventional stipulations, the ground for annulment taken in its second part is lacking in fact;

On the ground alleging violation of international public policy (Article 1520-5 of the Code of Civil Procedure):

Z argues that by failing to reply to the subsidiary ground on the application of the rule for determining the accident provided for in Part 2 to the aggregation clause in Part 3, the arbitrators deprived it of real access to the court.

Considering that, as mentioned above, the award mentions on this point, the ground is lacking in fact;

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

Z states that the arbitrators fixed the starting point of interest at a date that had not been discussed by the parties.

Considering that in its four pleadings, Z requested that Y be ordered to pay interest on the principal from the date of pleading No. 1 (10 January 2012); that in its pleading No. 4 (21 December 2012), it made for the first time a subsidiary request for Y to be ordered to pay the sum of USD 4,552,017 in the event that the court were to select only one event;

Considering that in deciding that the sum awarded to Z under this subsidiary request was subject to interest from the date on which it was made, i.e. 21 December 2012, the arbitrators confined themselves to interpreting Z’s submissions by applying the general principles of French law which were necessarily in the proceedings;

That the ground must be dismissed;

Considering that it follows from the foregoing that the action must be dismissed;

On Article 700 of the Code of Civil Procedure:

Considering that the appellants, who succumb, cannot benefit from this provision; that they will be ordered, on this basis, to pay Y the sum of 100,000 euros;

FOR THESE REASONS:

Dismisses the action for annulment of the award rendered on 11 February 2013 between the parties.

Dismisses all other applications.

Orders the XXX INSURANCE AND REINSURANCE and the companies MMA D, C D, X SA, A B to pay the costs.

Orders the XXX INSURANCE AND REINSURANCE and the companies MMA D, C D, X SA, A B to pay the company AIOI NISSAY DOWA CO LTD the sum of 100,000 euros pursuant to Article 700 of the Code of Civil Procedure.