Paris Court of Appeal, No. 13/22288 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 4 November 2014, No. 13/22288

SARL FARMEX TECHNOLOGIES vs. FOREIGN FINANCING PROJECTS MANAGEMENT CENTER OF THE MINISTRY OF FINANCE (FFPMC)

On 30 September 2009, a consortium comprising the French company FARMEX TECHNOLOGIES SARL (FARMEX) concluded with MCA Armenia, a subsidiary of an American organisation, Millenium Challenge Corporation, a contract for the rehabilitation of 17 pumping stations in Armenia for an initial price USD 36 million. The contract was subsequently assigned by MCA Armenia to the Foreign Financing Projects Management Center (FFPMC) of the Ministry of Finance.

The FFPMC refused to pay the balance of the contract because it alleged defects and delays in the execution of the works. Thus, the parties submitted their dispute to ad hoc arbitration by virtue of a compromise of 15 April 2013. By an award rendered in Paris on 14 November 2013, Mr. AB, sole arbitrator, ordered FARMEX to pay the REPUBLIC OF ARMENIA the sum of USD 1,844,222.19.

FARMEX filed an action for annulment on 21 November 2013.

By an order of 3 April 2014, the pre-trial advisor rejected the ground of inadmissibility of the prosecution presented by FFPMC and stopped the enforcement of the award pending the judgment on the action for annulment.

In its submissions filed on 7 August 2014, FARMEX requests the court to set aside the award and to order the State of Armenia to pay him the sum of 80,000 Euros in application of article 700 of the Code of Civil Procedure. It invokes the failure by the arbitrator to comply with the arbitration deadline (article 1520-1, 1520-3 and 1520-5 of the Code of Civil Procedure). Moreover, it alleged the violation by the arbitrator of the compromise, the breach of due process (in French Principe de la contradiction) and of international public order. It also mentioned that the arbitrator did not hold an arbitration hearing on 19 September 2013, contrary to what had been agreed, did not take the measures allowing its representatives to attend the hearing and did not ensure the equality of the parties (article 1520-3, 1520-4 and 1520-5 of the Code of Civil Procedure). Finally, FARMEX alleged that the arbitral tribunal did not comply with its mission, breached the principles of independence and impartiality, of due process (in French Principe de la contradiction) and of international public order in imposing on the parties ‘private hearings’ of conciliation and continuing arbitration after the failure of the transaction (article 1520-2, 1520-3, 1520-4 and 1520-5 of the Code of Civil Procedure).

In its submissions on 26 September 2014, FFPMC requests the court to dismiss the appeal, to hold that such a rejection confers the enforcement (in French Exequatur) to the award, to reject FARMEX’s requests and to order it to pay the sum of 80,000 Euros in application of article 700 of the code of civil procedure.

UPON WHICH:

On the first ground for annulment based on exceeding the arbitration time limit (article 1520-1, 1520-3, and 1520-5 of the Code of Civil Procedure):

FARMEX alleges that the arbitrator unilaterally extended the arbitration time limit by 15 days and that if it appears from the statements of the award that this option had been given to him at the hearing by the parties. These parties could not, therefore advance, give it such power. It maintains, moreover, that it did not give its consent, that it was not regularly represented at the hearing in question, and that in any event, an extension could not be tacit but must, according to article 1.2 of the contract, result from a written document.

Whereas, under the terms of paragraph 2 of Article 1463 of the Code of Civil Procedure, applicable to international arbitration under Article 1506-3: “The statutory or contractual time limit may be extended by agreement between the parties or, where there is no such agreement, by the judge acting in support of the arbitration”;

Whereas in the present case, article 4.2 of the compromise stipulated that the arbitral tribunal had to render its award within three months of its appointment; that the sole arbitrator accepted his mission on 16 July 2013. Therefore, the initial period expired on 16 October 2013;

Whereas according to the arbitration award (p. 10) ‘during the hearings, the two parties agreed with the DAB (disputes arbitration board: the arbitrator) to extend the time limit for rendering the decision until 31 October 2013. The DAB had the possibility of deciding an additional extension until 15 November 2013, but it had the obligation to justify it. On 7 October 2013, the DAB decided to extend the time limit for rendering the decision until 15 November 2013, since other requests for information were pending and it seemed necessary to allow more time for submissions. The Contractor complained about this extension. The Contractor complained about this extension. The DAB, after hearing the two Parties and after further exchanges of information, finally confirmed the date of the decision as 15 November 2013 by an email dated 19 October 2013"; that the award was indeed made on 14 November 2013;

Whereas, first, while the parties could postpone the date on which the award would be made until 15 November 2013, leaving the arbitrator free to make his decision earlier, they could not, however, let the arbitral tribunal choose to unilaterally extend the duration of the arbitration, even if within certain limits; that it follows from the factual circumstances as set out in the award that the extension beyond 31 October 2013 was not agreed by the parties but was left to the discretion of the tribunal, which is not possible under the above-mentioned provisions of the Code of Civil Procedure;

Whereas, secondly, that it follows from the provisions of the award (p. 10), that on 21 October 2013, the arbitrator closed the proceedings and announced that he would not take into account any further unsolicited information; that it is not alleged that after that date FARMEX took any steps to investigate the case by which it expressed its tacit agreement to an extension of the arbitral proceedings beyond 31 October 2013; that the arbitrator announced in an e-mail dated 7 October 2013 his intention to postpone the date on which the award would be made until 15 November, and FARMEX protested in an e-mail dated 8 October in which, after pointing out the economic difficulties it was encountering, it concluded that the arbitrator was not aware of any such postponement: “Therefore, with all due respect, I hereby consider it fair that DAB and the other Party cannot decide to postpone the date of the decisions beyond 31/10/2013; that DAB should send the final timetable accordingly”

And whereas, the circumstance that by an email of 18 October 2013 FARMEX asks the arbitrator whether he will finally render his decision on 31 October or 15 November 2013 cannot be considered as a tacit agreement to an extension until this last date;

Whereas the award made beyond the expiry of the time agreed by the parties in the arbitration agreement must be set aside;

On article 700 of the code of civil procedure:

Whereas FFPMC, which succumbs, cannot benefit from the provisions of article 700 of the code of civil procedure; that it will be ordered on this basis to pay FARMEX the sum of 50,000 euros;

FOR THESE REASONS:

Sets aside the award rendered between the parties on 14 November 2013.

Orders the FFPMC to pay the costs.

Orders the FFPMC to pay SARL FARMEX TECHNOLOGIES the sum of 50,000 euros in application of article 700 of the code of civil procedure.