Paris Court of Appeal, No. 13-02.594 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal - 1st Pole - 1st Chamber - 9 September 2014, No.13-02.594

SPEZIA CONSULTANTS METALS LIMITED Vs. GENERALE DES CARRIERES ET DES MINES

Since 1994, SPEZIA CONSULTANTS METALS LIMITED (hereafter SPEZIA), a company incorporated under English law, has been sourcing cupper from SOCIÉTÉ GÉNÉTÉ GÉNÉRALE DES CARRIÈRE ET DES MINES (GECAMINES SA), a limited liability company incorporated under Congolese law, for cupper metal mainly in the form of off-grade cathodes.

For this purpose, the companies signed various fixed-term supply contracts, the terms of which were renewed each year, as well as various additional contracts.

Difficulties relating to the quality of the goods and their price having arisen, “minutes” were drawn up and signed by the parties in March 2007, September 2009 and June 2010.

As a result of these minutes, SPEZIA was able to benefit from an additional discount and was able to make a deduction from the bills to be paid to GECAMINES SA.

SPEZIA considered that the provisions of these minutes also applied to the contracts later concluded with GECAMINES SA and it continued to apply discounts. GECAMINES SA, for its part, considered that the minutes were merely derogatory solutions to the contracts usually concluded and that the discounts were unduly applied by SPEZIA. GECAMINES SA notified SPEZIA, by letter of 21 July 2011, of its decision to suspend the current contracts.

It is under these conditions that SPEZIA filed a request for arbitration with the Secretariat of the International Chamber of Commerce on 24 August 2011 pursuant to the arbitration clause contained in each successive contract.

On 24 November 2011, the International Court of Arbitration of the International Chamber of Commerce appointed Mr. C D as sole arbitrator.

The Terms of Reference, signed on 16 January 2012, entrusted the sole arbitrator with the mission to rule in law under French law.

In an award rendered in Paris on 11 January 2013, the sole arbitrator :

decided that GECAMINES SA was entitled to suspend the performance of its obligations following the non-performance by SPEZIA of its obligation to pay the balance of the price of the goods;
ordered SPEZIA to pay the sum of USD 1,406,912.30 with simple interest at the French legal rate;
dismissed SPEZIA’s claims for truck unemployment costs and the application for an injunction to resume deliveries in the quantities agreed under contracts Cu/800/2010 and Cu/206/2011;
ordered the two companies to negotiate in good faith the settlement of the tonnage to be delivered under contracts Cu/800/2010 and Cu/206/2011 within six weeks of the payment of the sums charged to SPEZIA;
stated that each party shall bear the full costs of the arbitration;
dismissed any other application;

This award was notified to the parties on 13 January 2013.

By declaration dated 8 February 2013, SPEZIA brought an action for annulment against this award. Having regard to the submissions filed on 16 June 2014 by SPEZIA, which requests the Court to:

declare admissible the action for annulment brought by company SPEZIA against the arbitral award issued on 11 January 2013;
declare well-founded the action;
set aside the mentioned award;
dismiss GECAMINES SA’s counterclaim for payment of € 100,000 in damages for abusive proceedings;
to reject GECAMINES SA’s application on the basis of the provisions of Article 700 of the Code of Civil Procedure;
order it to pay SPEZIA the sum of 60,000 euros pursuant to the provisions of Article 700 of the Code of Civil Procedure;
order GECAMINES SA to pay all the costs.

Having regard to the conclusions filed by 19 June 2014 by company GECAMINES SA, which requests the Court to:

declare the action for annulment brought by SPEZIA inadmissible and unfounded;
to dismiss SPEZIA from all its requests;
order SPEZIA to pay the sum of EUR 100,000 by way of damages for abusive proceedings;
order SPEZIA to pay GECAMINES SA the sum of EUR 50,000 pursuant to Article 700 of the Code of Civil Procedure;
order SPEZIA to pay all the costs.

UPON WHICH:

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

SPEZIA complains that the sole arbitrator violated international public policy by not allowing the reopening of the proceedings which it requested in order to enable it to raise requests for an order against GECAMINES SA to pay it damages on the basis of the abrupt termination of the commercial relations established, even though the provisions of Article L. 442-6-1, para. 5, of the Commercial Code are of international public policy.

Whereas, contrary to what GECAMINES SA maintains, the admissibility of the ground for annulment based on the violation of international public policy is not subject to the continuation of recognition or enforcement of the award in France;

However, SPEZIA cannot seriously claim that the enforcement of the award would be contrary to international public policy within the meaning of article 1520-5 of the Code of Civil Procedure, as the arbitrator failed to apply the provisions of article L.442-6-1, para 5, of the Commercial Code. Indeed, the arbitrator, to whom SPEZIA did not submit any claim for the application of the above-mentioned provisions before the close of the proceedings, limited himself in accordance with his duty to ensure the proper conduct of the proceedings. He thus refused at his discretion an application by SPEZIA contained in its Statement of Reply dated 21 May 2012 under which it conditionally requested “authorisation” to apply for the reopening of the proceedings in order " if the court uphold the existence of a de facto termination” to claim payment by GECAMINES SA of " damages as a result of the abrupt termination of the commercial relations established “;

Moreover, the condition to which SPEZIA subordinated this claim had not been fulfilled, which deprived it of any subject matter, since, far from noting the ‘de facto termination’ of the contracts to which SPEZIA intended to respond with a claim for damages, the arbitrator considered that GECAMINES SA was entitled to ‘suspend’ the contracts by reason of SPEZIA’s failure to perform its obligation to pay the balance of the price of the goods;

Therefore, in the absence of any effective and concrete violation of international public policy, the ground can only be dismissed;

Company SPEZIA claims that the sole arbitrator, by forcing the parties to negotiate in good faith on the clearance of tonnage, adopted a proposal supported by GECAMINES SA which was not contained in the operative part of its statement of case. Thus, SPEZIA claims that it was unable to respond to this point and therefore due process (in French Principe de la contradiction) was violated.

Whereas, firstly, the fact that GECAMINES SA did not include its claim in the operative part of its statement of rejoinder dated 29 June 2012 is irrelevant when the arbitrator is seised of all the requests made in the parties' statement of case;

Secondly, in its submission of 29 June 2012, GECAMINES SA replied to SPEZIA’s claim for an injunction “to take over the deliveries agreed at contract No. Cu/800/2010 and Cu/206/2011”. Then, after raising the defence of non-performance against SPEZIA as the main claim, GECAMINES SA argued in the alternative that forced performance of the contracts could not be ordered under the contractual provisions. It also argued that if the arbitrator found that GECAMINES SA was not entitled to suspend deliveries “in the sense that the contract would have expired without the entire tonnage having been delivered”, the arbitrator could ‘at most’ find that GECAMINES SA would be obliged “to negotiate with SPEZIA an arrangement for the future delivery of the missing tonnage”, in accordance with the contractual terms which GECAMINES SA reminded in its statement of case;

Thus, it follows that since the ground was part of the debate, SPEZIA was able to discuss it usefully;

Moreover, it follows from the transcript of the proceedings (pages 140 and 141) that SPEZIA explained itself and expressly agreed with its counsel that “the only thing that you (the arbitrator) can necessarily be requested to do under this contract is to oblige GECAMINES SA… to renegotiate in good faith the delivery of this tonnage for 2010 since there’s expiration”;

that specifically interrogated by the arbitrator in the following terms (transcript page 156) “I have heard that the request, if I were to reach that point, would, if necessary, be to oblige the parties to negotiate the discharge, in accordance with the terms of the contract”, counsel for SPEZIA replied “I am afraid we have no choice”;

that after a suspension of the hearing to allow SPEZIA and its counsel to discuss the matter, they informed the arbitral tribunal (transcript page 158) that “after consideration of this technical difficulty, we have heard that, in view of the provisions of the contract, both parties have concluded that the only possible forced performance is to order negotiations. As strange as it may sound, we cannot propose anything else”;

It follows that the parties have been able to explain themselves in an adversarial manner on the request of GECAMINES SA who, by way of defence on the merits to oppose the request for forced performance, requested the arbitrator, in the alternative, to oblige the parties to negotiate the delivery of the missing tonnage, a solution which SPEZIA expressly considered to be the only possible solution, the latter cannot maintain that due process (in French Principe de la contradiction) or the duty of procedural fairness have been disregarded;

that the ground of appeal must be set aside;

On the ground of nullity based on the arbitrator’s ignorance of his mission (Article 1520-3 of the Code of Civil Procedure)

Company SPEZIA maintains that the sole arbitrator failed to fulfil his mission by, on the one hand, ruling in equity and not in law as he had been asked to do, and, on the other hand, by making an imperfect award and, finally, by pronouncing a decision which is impossible to enforce;

Whereas SPEZIA wrongly maintains that the sole arbitrator, who had to rule according to French law and who was not entrusted with the power of amiable compositeur, suggested, disregarding his mission, a solution which he considered fair without responding to the request for deliveries formulated by SPEZIA;

that the arbitrator, after finding that the 2010 contract had expired without all the agreed tonnages having been delivered and that the resumption of deliveries was to take place for the remaining term of the 2011 contract and ruled out any forced performance, enjoined the parties to negotiate “the settlement of any quantities not delivered”, in application of article 5 paragraph 2 of the 2010 contract and article 2 paragraph 2 of the 2011 contract stipulating that “the settlement of the tonnage not delivered at term (sic) of the validity of this contract shall be subject to renegotiation between the parties”;

that the arbitrator who performed the contract, has ruled in law what makes inoperative the ground of appeal based on what he would have ruled as an amiable compositeur;

Whereas the claimant can no more claim that the arbitrator, in ordering the resumption of negotiations, rendered an “imperfect” decision for failing to settle the dispute submitted to him and that this decision would moreover be insusceptible to enforcement, as the arbitrator did not consider the production capacities of GECAMINES SA which, due to the decline in output of its mines, would no longer be able to deliver the quantity of tonnage necessary for the clearance of deliveries;

Under the terms of the Terms of Reference, the arbitrator could order ‘all necessary measures’ and was not required to make an interim award, pending the outcome of the negotiations. However, in implementing the prior negotiation agreed between the parties, he ruled on the application before him by a binding decision to which the parties had to comply. The fact that these negotiations may not succeed or that GECAMINES SA cannot, for reasons relating to the reduction of its production capacity, discharge the quantities not delivered is not likely to affect the effectiveness of the award, SPEZIA retaining, in the event of failure of the negotiations, the right to act by all legal means and in particular to formulate a new request for arbitration;

That, as a result, the ground which is not further substantiated must be dismissed;

On the claim for damages

Whereas there is no reason to consider that SPZEZIA has abused its right of action by bringing an action for annulment, as such abuse cannot result solely from the weakness of the means invoked;

that GECAMINES SA must therefore be dismissed from its claim for damages for abuse of process;

On costs

Whereas SPEZIA who dis unsuccessful must be ordered to pay the costs;

On the application of Article 700 of the Code of Civil Procedure

Whereas SPEZIA is ordered to pay the costs, SPEZIA cannot claim the application in its favour of the provisions of Article 700 of the Code of Civil Procedure and must be ordered on the same basis to pay GECAMINES SA a sum of EUR 50,000.

FOR THESE REASONS:

Dismisses the English company SPEZIA CONSULTANTS METALS LIMITED’s action for annulment of the award rendered in Paris on 11 January 2013 in the case opposing it to the Congolese limited liability company SOCIETE GENERALE DES CARRIERES ET DES MINES;

Dismisses the limited liability company under Congolese law SOCIETE GENERALE DES CARRIERES ET DES MINES' claim for damages for abusive proceedings;

Orders the English company SPEZIA CONSULTANTS METALS LIMITED to pay the costs and the sum of 50,000 euros in application of article 700 of the Code of Civil Procedure.