Paris Court of Appeal, No. 13/11759 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 4 November 2014, No. 13/11759

FILALI FILM ALIMENTAIRE S.A.R.L vs.
BIELLONI CONVERTING SPA

In 1997, the Algerian company FILALI FILM ALIMENTAIRE (FILALI) purchased from Reflex Mold SA a machine to produce plastic films manufactured by the Italian company BIELLONI CONVERTING SPA (BIELLONI). Following the trial for non-compliance initiated by FILALI before the Brescia Court, a settlement agreement was signed between the parties on 19 April 2007. It provided for the exchange of the former installation for a new one, with a return guarantee provided by FILALI, as well as the payment by BIELLONI of 100,000 euros and included an arbitration clause.

Difficulties in the performance of the transaction led FILALI to file a request for arbitration with the International Arbitration Chamber of Paris on 28 April 2010. By an award rendered in Paris on May 11, 2012, the arbitral tribunal composed of Mr. X and Mrs. Arigoni, arbitrators, and Mr. Mettoux, Chairman:

declared it had jurisdiction,
ordered FILALI to pay BIELLONI 100,000 euros in damages,
stated that the parties would have to perform the substantial obligations of the transaction, namely the provision by FILALI of a letter of credit of EUR 150,000 as security for the return of the former machine and the delivery of the latter by FILALI under conditions allowing its normal use, the delivery by BIELLONI of the new machine on receipt of the letter of credit and the payment by BIELLONI of the sum of EUR 100,000,
ordered the set-off between the reciprocal claims.

Y filed a motion for rectification of errors and omissions and for interpretation which was dismissed by an award dated 14 May 2013.

On 11 June 2013, FILALI filed an action for annulment of the award of 11 May 2012.

By submissions served on September 17, 2014, FILALI requests the court to set aside the award, arguing that the arbitral tribunal failed to comply with its mission. FILALI further requests the court to release it from any condemnation pronounced by the arbitral tribunal, to dismiss the claims of BIELLONI, to note that BIELLONI replaced in its conclusions the terms ‘letter of guarantee’ by those of ‘security deposit’ for the return of the former machine and that it itself accepts this modification, and to state that the only points remaining to be decided are the unconscionable nature of the clause on the return of the machine and the practical arrangements for its return. It also requests the Court to state that if a new arbitral tribunal were to be appointed, it would have to respect its mission, in the alternative, to propose any adjustments enabling the solution of the difficulties in implementing the transaction, and in any event, to order BIELLONI to pay it 25.000 pursuant to Article 700 of the Code of Civil Procedure.

By submissions served on September 4, 2014, BIELLONI requests the court to declare the action inadmissible, firstly, in so far as it aims at reforming the Award of 11 May 2012, and in so far as it conflicts with the res judicata of the Award of 14 May 2013, secondly, in so far as it was initiated one year after the notification of the Award of 11 May 2012 by the International Arbitration Chamber of Paris, in accordance with its rules to which the parties have agreed. In the alternative, BIELLONI requests the court to declare that the arbitral tribunal has complied with its mission, to reject the claims of FILALI in so far as they relate to the merits, to dismiss FILALI from all its claims and to order it to pay the sum of 50,000 euros pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the pleas of inadmissibility:

Considering that under Article 914 of the Code of Civil Procedure, the Pre-Trial Judge, when he or she is appointed and until such time as he or she is stepped aside from the case, has sole jurisdiction to rule on the admissibility of the appeal; that the grounds for dismissal presented by BIELLONI before the court are therefore inadmissible;

On the grounds for setting aside the award based on the failure of the arbitral tribunal to comply with its mission (Article 1520-3 of the Code of Civil Procedure) :

Y argues that the arbitral tribunal did not comply with its mission by, on the one hand, merely inviting the parties to execute the transaction without resolving the difficulties of interpretation and practical implementation which it raised, and, on the other hand, by awarding on its own initiative damages to BIELLONI after rejecting its claims and thus modifying the substantial elements of the transaction.

Whereas article 14 of the settlement agreement of 19 April 2007 states that: ‘The parties agree that all disputes relating to, arising out of or in connection with the interpretation, performance, failed performance, non-execution, resolution, validity, effectiveness and conduct of the Transaction shall be resolved by arbitrators appointed in accordance with the rules of the Arbitration Chamber of Paris’;

In application of this arbitration clause, FILALI brought a claim before the arbitral tribunal seeking, in essence, the delivery of a new machine by BIELLONI, the fixing of a penalty payment, the appointment of an expert to monitor the proper performance of the protocol, and finally the award of damages; that BIELLONI, for its part, requested the arbitrators to find that FILALI failed in its obligation to deliver a letter of credit of 150. 000 as security for the obligation to return the former machine, to order it to pay damages and to deliver the letter of credit and the missing parts of the former machine;

Considering that the Arbitral Tribunal found that neither party sought the resolution of the transaction, that it could only invite them to perform the obligations resulting therefrom and that the failure of FILALI to deliver the letter of credit provided for by the protocol was a breach which justified its condemnation to pay 100,000 euros in damages to BIELLONI;

Considering that the fact that the arbitrators refused to prescribe a penalty payment and to order an expert’s report, as requested by FILALI, as well as to modify the express terms of the settlement providing for its obligation to deliver a letter of credit to the other party, does not in any way characterise a failure by the arbitrators to fulfil their mission, nor does the fact that they accepted the claim for damages brought by BIELLONI on account of FILALI’s failure to fulfil its obligations under the settlement agreement;

Whereas the ground shall be dismissed and the action for annulment of the award shall be dismissed;

On the other applications of FILALI:

Considering that it is not for the annulment judge to rule on the applications relating to the merits of the dispute; that these applications will be rejected;

On Article 700 of the Code of Civil Procedure:

Considering that FILALI, who is unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure; that it will be ordered on this basis to pay 25,000 euros to BIELLONI;

FOR THESE REASONS:

Declares admissible the action for annulment of the award rendered between the parties on 11 May 2012.

Dismisses it.

Dismisses all of FILALI FILM ALIMENTAIRE SARL’s requests.

Orders FILALI FILM ALIMENTAIRE SARL to pay the costs which will be recovered in accordance with the provisions of article 699 of the Code of Civil Procedure.

Orders FILALI FILM ALIMENTAIRE SARL to pay BIELLONI CONVERTING SPA the sum of 25,000 euros in application of article 700 of the Code of Civil Procedure.