Paris Court of Appeal, No. 13/16113 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 6 January 2015, No. 13/16113

S.A.R.L. AGORA TECHNIQUE

vs.

KORTA

By contract of 11 April 1995, the Spanish company Korta granted the French company Agora Technique the exclusive rights of sale and representation in France of its products ‘‘ball screws’’ as of the 1st of January 1995 and for three years, with tacit renewal in the absence of notice given three months prior to the term.

On 13 November 2007, following the failure of the negotiations initiated by a deed of 8 March 2007 and aiming at the purchase by Korta of the distribution activity devolved to AGORA, Korta informed its co-contractor that it would distribute its products on the French market as of the 1st of April 2008.

On 4 July 2008, AGORA filed an action before the Commercial Court of Créteil to establish the transfer of the ball screw distribution business on the French market to Korta, and to condemn Korta to pay the price, i.e., 2,000,000 euros plus interest at the legal rate as of the 1st of April 2008.

By judgment of 10 November 2009, the Commercial Court of Créteil granted this request.

Korta filed an appeal against this decision, which was overturned by a judgment of this court on 9 January 2011 on the grounds that the deed of 8 March 2007 was part of the relationship established between the parties since 1995, and that, pursuant to the arbitration clause stipulated in the contract of 11 April 1995, the state courts had no jurisdiction.

It is, under these conditions that, by virtue of the said arbitration clause, AGORA referred the matter to the ICC Court of Arbitration, taking up the arguments developed before the State courts.

In an award delivered in Paris on 24 January 2013, Mr. B C D, sole arbitrator appointed by the ICC Court of Arbitration, ruled that the deed of 8 March 2007 was a pre-contract through which the parties simply undertook to negotiate in good faith, and that, consequently, Korta did not commit to purchase the exclusive distribution activity of its screws for an amount of 2,000,000 euros.

Concerning the termination of the contract of 11 April 1995 before its term, the arbitrator ruled that Korta was liable, and condemned it to compensate the loss of gross margin incurred by AGORA for the year 2008. However, he considered that it was impossible for him to determine the damages incurred by AGORA for 2009, and rejected the claim for compensation of this period.

On 22 February 2013, AGORA filed an appeal for annulment against this award, which was declared null and void by an order of the 3rd of October 2013 for failure to serve submissions within the prescribed time limit.

On the 1st of August 2013, AGORA filed a second appeal for annulment.

By order of 6 March 2014, the pre-trial counselor rejected the incident raised by Korta challenging the admissibility of this action on the grounds that it was filed out of time.

In view of the submissions served by the appelant by RPVA on 24 June 2014, pursuant to which it requested the court to:

note that it could not explain itself on the legal ground on which the arbitrator based his award,
accept its appeal for annulment,
annul the award issued on 24 January 2013,
dismiss KORTA from all its claims and condemn it to pay the sum of 15.000 € based on the provisions of article 700 of the Civil Procedure Code, in addition to the entire costs, including distraction, in accordance with the provisions of article 699 of the Code of Civil Procedure;

Having regard to the submissions served by the defendant by RPVA on 10 September 2014, pursuant to which it requests the court to:

declare that in support of its appeal for annulment of the arbitral award issued on 24 January 2013, AGORA TECHNIQUE wrongly reproaches the sole arbitrator for any violation of the adversarial principle, therefore:

(i) that it is in full compliance with French law and the principles of the ICC rules applicable, that the sole arbitrator has assessed the damage claimed by AGORA TECHNIQUE, taking into consideration the documents that AGORA TECHNIQUE had produced, should have and could have produced, that no substitution of undisputed pleas nor infringement of the adversarial principle can be usefully reproached to him;

(ii) that the arbitrator cannot be criticized for having based his assessment of the amount of damages that must be awarded to AGORA TECHNIQUE, on the evidence that it had communicated in order to justify the reality and the extent of its prejudice, AGORA TECHNIQUE having been criticized by the company KORTA and the principle of full reparation not allowing the claimant to benefit from this non-performance;

(iii) that despite the arbitrator’s invitation to produce the documents that could justify the reality of its prejudice, AGORA TECHNIQUE deliberately omitted to produce its sales figures made with the company STEINMEYER, in order not to harm the claim for compensation subsidiarily made for the amount of 2M€;

Consequently:

to declare and judge that the allegation by AGORA TECHNIQUE of a violation of the adversarial principle on the basis of article 1520, 4° of the Civil Procedure Code, is unfounded;
to declare and judge that under cover of a violation of the adversarial principle, which is unfounded in the present case, AGORA TECHNIQUE’s appeal for annulment is in fact aimed only at a revision of the merits of the award, which is prohibited to the judge in charge of the annulment;
to reject the appeal for annulment of AGORA TECHNIQUE against the arbitral award of 24 January 2013, in the absence of a well-founded basis;
to state that the dismissal of the appeal for annulment will confer exequatur to the arbitral award of 24 January 2013;
to condemn AGORA TECHNIQUE to pay the sum of 100 000 € pursuant to article 700 of the Code of Civil Procedure and to pay all costs, including distraction pursuant to article 699 of the Code of Civil Procedure;

UPON WHICH,

On the unique ground of annulment based on the arbitrator’s failure to respect the adversarial principle (article 1520-4 of the Civil Procedure Code).

The appellant claims that the arbitrator violated the adversarial principle, on the grounds that he had raised a ground of law that was not part of the case without inviting the parties to discuss it in a contradictory manner.

It argued that in its request for arbitration it asked for a compensation for loss of earnings due to the early termination of the contract, that the arbitrator considered that the assessment of this damage should also take into consideration the contract concluded by AGORA with the Steinmeyer company, under the terms of which this company succeeded Korta in the supply of screws for the benefit of AGORA as of 29 October 2008, and that he considered that in the absence of communication by AGORA of the gains resulting from this contract, he cannot award any compensation for losses incurred during 2009.

The AGORA considers that this obligation, which was imposed by the arbitrator to minimize its damages, and which “is not subject to French law applicable to the case” was never raised by Korta and that the arbitrator failed to submit this legal argument to the parties' adversarial debate.

Whereas the adversarial principle only requires that the parties have been put in a position to debate the pleas invoked and the documents produced in a contradictory manner;

That in the present case, according to the terms of its reply and rejoinder (page 19) as reproduced in the award and not contested, AGORA filed a subsidiary request with the arbitrator seeking to have the termination of the exclusive distribution agreement of 11 April 1995 established, to the exclusive detriment of Korta, and to condemn the latter to pay 2,000,000 euros in compensation for the prejudice incurred;

That Korta, in the statement of defense of 30 January 2012 (and not 2011 as erroneously indicated in the writings on page 11), while denying having committed a fault at the time of the termination of the exclusive distribution agreement, disputed the reality and extent of the damage alleged by AGORA anyway, arguing in particular that Korta had ‘been able to convert and develop a new activity with the company Steinmeyer, which replaced Korta’s activity during the notice period, so that it could have avoided the negative consequences that it claims to have incurred’;

That therefore, the consequences on the assessment of the damage of the conclusion by AGORA of a new distribution contract with the Steinmeyer company were in the debate;

That AGORA, who was invited by the arbitrator, in a contradictory manner during the hearing, to complete the evidence of the loss it alleged, and who expressly declined this offer, just like Korta, the parties having both considered the evidence provided to be sufficient, cannot complain that the arbitrator rejected its claim for compensation for the year 2009;

That the arbitrator, whose task was to verify the existence of the alleged loss and to determine, if necessary, the quantum of the loss in the light of the evidence produced, far from being required to minimize the loss by applying a new ground raised ex officio, limited himself to finding, in the exercise of his sovereign power of appreciation of the probative value of the documents produced, that AGORA, who could not attribute the fall in its turnover in 2009 to the termination of its contract with Korta, had failed to justify the substitution profit made in the context of the contract concluded with Steinmeyer, which was such as to reduce the loss incurred and that, therefore, it did not show, for the year in question, a loss resulting from Korta’s wrongful breach of the exclusive distribution agreement of 11 April 1995;

That under cover of the ground based on the violation of the adversarial principle, the appellant intends to criticize the relevance of the reasons by which the arbitrator took his decision, which is beyond the control of the annulment judge;

That the appeal will, consequently, be dismissed;

Whereas AGORA, who is unsuccessful and must assume the costs, cannot claim compensation pursuant to article 700 of the Code of Civil Procedure and will be condemned on this same basis to pay Korta the sum of 30,000 euros.

FOR THESE REASONS,

Dismisses the appeal for annulment filed against the award issued in Paris on 24 January 2013 in the proceedings between the Spanish company Korta and the French company Agora Technique;

Condemns the French company Agora Technique to pay the costs that may be recovered pursuant to article 699 of the Code of Civil Procedure and to pay the Spanish company Korta the sum of 30,000 euros pursuant to article 700 of the same Code.

Rejects all other claims.

THE CLERK THE PRESIDENT