Paris Court of Appeal, No. 13/11333 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 25 November 2014, No. 13/11333

ELECTROPUTERE VFU PASCANI vs. BLUE ENGINEERING SRL

On 20 July 2009 the ELECTROPUETRE VFU PASCANI (Pascani), incorporated under Romanian law, and BLUE ENGINEERING SRL (Blue Engineering), incorporated under Italian law, concluded a contract for engineering, design, production and support on a bunk and a bogie.

Disputes have arisen arose in the performance of the contract, Pascani initiated arbitration proceedings under the supervision of the International Chamber of Commerce in application of the arbitration clause.

By an award rendered in Paris on 2 May 2013, the arbitral tribunal composed of Messrs. Y and Matromatteo, arbitrators, and Ms. X, President:

noted the termination of the contract by agreement of the parties,
said that Pascani had failed to fulfill its contractual obligations and that Blue Engineering had complied with its own,
ordered Pascani to pay Blue Engineering the sum of 416,000 Euros as partial payment of unpaid invoices in addition to interest at the reference rate of the European Central Bank increased by seven points,
rejected the surplus of requests,
pronouncement on arbitration costs.

On 6 June 2013, the company CLM (formerly named Pascani) (CLM) filed an action against the award.

By submissions notified on 30 September 2014, CLM, presenting itself as the new name of Pascani, requests the court to reject the nullity exception (in French: Exception de nullité) of the declaration of appeal, to declare its action for annulment admissible, to set aside the award, to dismiss Blue Engineering’s counterclaim and order Blue Engineering to pay it 15,000 Euros in application of Article 700 of the Code of Civil Procedure. CLM claims that the Arbitral Tribunal was irregularly composed and that the award violates international public order.

By submissions notified on 8 October 2014, Blue Engineering requests the court to hold that the declaration of appeal does not contain the information required by Article 58 of the Code of Civil Procedure which would allow it to identify his adversary and that CLM failing to justify being the same person as Pascani does not demonstrate its interest in bringing proceedings, so that the action for annulment is inadmissible. Blue Engineering concludes in the alternative that the appeal is unfounded and requests the Court, in any event, to order the claimant to pay it the sum of 15,000 Euros under Article 32-1 of the Code of Civil Procedure and that of 25,000 Euros in application of article 700 of the same code.

The court noted ex officio the ground alleging inadmissibility of the plea of inadmissibility which was not presented to the pre-trial judge and invited the parties to submit their observations on this point by a note under advisement.

No note was filed within the one-week time limit for responding.

UPON WHICH:

On the ground of inadmissibility of prosecution based on the lack of standing to act:

Whereas it results from Article 914 of the Code of Civil Procedure that the pre-trial judge has, when appointed and until his relinquishment, only jurisdiction to declare the appeal inadmissible;

Since Blue Engineering did not present the cause of inadmissibility it invokes before the pre-trial judge, it is not admissible to do so before the Court of Appeal.

On the ground based on the irregularity of the declaration of appeal:

Whereas, contrary to what Blue Engineering claims, the declaration of appeal of CLM, which was not required in this pleading to specify how it came to Pascani’s rights, contains all the information required by Article 58 of the Code of Civil Procedure when the party who is the author is a legal person; that the ground is unfounded;

On the ground of annulment based on the irregularity of the composition of the arbitral tribunal (article 1520-2 of the Code of Civil Procedure):

CLM argues that one of the arbitrators was Italian in violation of the arbitration clause which excluded any link of nationality between the arbitrators and the parties. It follows that, the Code of Civil Procedure does not set out any rule relating to the nationality of arbitrators in the international arbitrations taking place in France; That it is appropriate to give effect, where appropriate, to the agreements reached on this point between the parties, either in the arbitration agreement, either by reference to arbitration rules;

Whereas, in this case, article 16 of the contract of 20 July 2009 refers disputes to arbitration according to the rules of the Chamber of Commerce Paris International Convention; that the Rules of this institution is limited to stating in Article 9.1 that: “In confirming or appointing arbitrators, the Court shall consider the prospective arbitrator’s nationality, residence and other relationships with the countries of which the parties or the other arbitrators are nationals and the prospective arbitrator’s availability and ability to conduct the arbitration in accordance with the Rules”.

Whereas point 3 of article 16 of the contract of July 20, 2009 specifies that: “The arbitrators from countries having a hostile relationship with the two Parties will not be appointed”;

Whereas Blue Engineering, a company incorporated under Italian law, appointed on 16 March 2011 an Italian arbitrator, Mr. Z; that Pascani, company Romania, appointed a Swiss arbitrator on the same day, Mr. Y, and that the two arbitrators chose a French president, Mrs. X; that the arbitral tribunal thus constituted was confirmed by the Court of the International Chamber of Commerce despite the dispute formulated on March 16, 2011 by A against the appointment by its opponent of an arbitrator of Italian nationality;

Whereas the claimant maintains that such a choice is contrary to the will of neutrality of the tribunal which resulted from the terms of the arbitration agreement;

However whereas it is through the effect of a broad interpretation, which has not been shown to correspond to the common intention of the co-contracting parties, that CLM claims that a clause which excludes the appointment of an arbitrator of a “country having a hostile relationship with the two Parties” must be understood as prohibiting the appointment of an arbitrator for the sole reason that he/she is of the same nationality as one of the parties, without further justification of animosity with regard to the other party resulting from this national affiliation;

That the ground based on the irregularity of the composition of the arbitral tribunal will therefore dismissed;

On the ground of annulment based on the violation of international public order (Article 1520-5 of the Code of Civil Procedure):

CLM argues that the award is contrary to international public policy in that it violates the binding force of the contracts in three respects, on the one hand, by refusing to recognise the binding nature of contractual definitions, and on the other hand, by refusing to apply the agreement relating to the adjustment of payments, finally, by refusing to give effect to the agreement of the parties relating to interest in the event of non-performance.

Whereas an international award made in France cannot be set aside on the basis of Article 1520-5 of the Code of Civil Procedure only if recognition or enforcement violates in effective and concrete manner the international public policy;

Whereas the challenged award, after analysing the question of the innovative character of the wagon and of the bogie, and the issue of the schedule of settlements according to the progress of the design work, stated that Blue Engineering had complied with its obligations and that Pascani had defaulted on its by not honoring the invoices on the dates provided for in Annex 3 of the contract; that the award acknowledged the termination of the contract by mutual agreement between the parties and ordered Pascani to settle unpaid invoices, in addition to interest at the reference rate of the European Central Bank increased by seven points;

Whereas nothing in the enforcement of such a decision is likely to violate the French conception of international public order; that the ground, under the guise of violation of the binding force of contracts, challenges the interpretation and application made by the arbitrators of the disputed agreement and invites the court of appeal to a review of the merits of the award which is not allowed to the appeal judge; that such a ground can only be dismissed;

Whereas it results from the foregoing that the appeal will be dismissed;

On the claim for damages for abusive proceedings

Whereas it has not been demonstrated that the right of action degenerated into abuse, that the claim for damages will be rejected;

In view of Article 700 of the Code of Civil Procedure:

Whereas CLM, who succumbs, will be ordered to pay to Blue Engineering the sum of 25,000 Euros pursuant to Article 700 of the Code of Civil Procedure;

FOR THESE REASONS:

Declares inadmissible the objection of inadmissibility of the prosecution.

Dismisses the action for annulment.

Rejects the request based on article 32-1 of the Code of Civil Procedure.

Orders CLM to pay the costs.

Orders CLM to pay Blue Engineering the sum of 25,000 Euros in application of article 700 of the Code of Civil Procedure.