Paris Court of Appeal, No. 13/13301 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 24 February 2015, No. 13/13301

SYSTEM ONE WORLD COMMUNICATIONS IBERIA vs. EMPRESA DE TELECOMUNICACIONES DE CUBA

EMPRESA DE TELECOMUNICACIONES DE CUBA SA (EDTC) is a public limited company under Cuban law created by the Cuban State, it has a monopoly in Cuba on national and international fixed and mobile telecommunications. SYSTEM ONE WORLD COMMUNICATIONS IBERIA (SOWCI) is a Spanish public limited company which operates as a private telecommunications operator.

Through several successive agreements, the first of which was signed by the parties on 19 September 2001 and the last on 1 July 2008, in addition to amendments and supplementary agreements, EDTC has assigned to SOWCI direct telephone communication capacities with Cuba for their subsequent marketing on the international market. On 19 March 2009, EDTC, invoking the non-payment of invoices, terminated the operating agreement of 1 July 2008.

On 17 June 2010, EDTC initiated an arbitration proceeding under the aegis of the International Chamber of Commerce, on the basis of the arbitration clause stipulated in this agreement.

By an award issued in Paris on 11 February 2013, the arbitral tribunal composed of Messrs. Fernandez Rozas and Derains, arbitrators, and Mr. Ramirez Espana, Chairman, found that SOWCI had not honored its payment obligations and that the termination carried out by EDTC was therefore lawful, ordered SOWCI to pay the arrears, rejected EDTC’s claim for compensation for the loss of earnings resulting from the blocking of the circuits and the termination of the contract, declared itself incompetent to rule on certain counterclaims by SOWCI, dismissed the others, and finally, ruled on costs.

By an award dated 21 June 2013, the arbitral tribunal rejected SOWCI’s request for correction and interpretation of the previous award.

On 28 June 2013, SOWCI appealed against both awards. By submissions notified on 8 December 2014, it sought the annulment of the first award on the grounds that the arbitrators failed to exercise their jurisdiction and violated the adversarial principle, and of the second award by way of consequence. It requests that EDTC be ordered to pay the sum of 15,000 euros pursuant to Article 700 of the Code of Civil Procedure.

By submissions notified on 16 December 2014, EDTC asks the court to reject the action for annulment and to order SOWCI to pay EUR 20,000 pursuant to Article 32-1 of the Code of Civil Procedure and EUR50,000 pursuant to Article 700 of the same code.

UPON WHICH

On the first ground for annulment alleging the arbitral tribunal’s lack of jurisdiction (article 1520-1 of the code of civil procedure):

SOWCI claims, firstly, that the Arbitral Tribunal, using the absence of the Cuban State in the arbitration, wrongly declared itself incompetent to take into consideration the Cuban practices of international trade according to which verbal agreements with State authorities take precedence over written contracts, which are merely legal dressings, and secondly, that it also failed to exercise its jurisdiction by considering that the arbitration clause stipulated by the agreement of 1 July 2008 did not apply to disputes that did not result from the application of this agreement, like those that resulted from verbal agreements.

Whereas the agreement of 1 July 2008, succeeding a series of other contracts concluded between the parties since 19 September 2001, provided that SOWCI should pay a price per minute for the international telephone traffic that it transited through the networks of EDTC in Cuba;

Whereas EDTC, invoking the non-payment of the invoices of January, February and March 2009 on their due date, declared the contract terminated and initiated an arbitration proceeding on the basis of Article 17 of the Agreement of 1 July 2008, which provided that the law of the contract was French law and that “any disagreement or claim arising of or in connection with this Agreement, its termination, invalidity or breach of its provisions” would be submitted to arbitration in Paris in accordance with the rules of the International Chamber of Commerce;

Whereas SOWCI argued in its brief before the Arbitral Tribunal that relations between the parties were governed by verbal agreements which, in accordance with Cuban custom, took precedence over written agreements, and that these agreements gave it the benefit of payment periods of 45 to 60 days, so that the disputed invoices were not due when EDTC suspended the telephone circuits and terminated the contract; that it deduced that EDTC should compensate it for the damaging consequences of this irregular termination;

Whereas SOWCI has, moreover, requested the intervention of the Cuban State in the arbitration proceeding by arguing that it was the real claimant in the arbitration, EDTC only being its emanation;

Whereas on 20 January 2011, the International Court of Arbitration of the ICC decided that the Cuban State could not intervene as a party to the arbitration;

Whereas SOWCI complains that the Arbitral Tribunal has declared itself incompetent to assess Cuban customs, on the ground that the Cuban State was not a party to the arbitration proceeding, and to compensate for damages resulting from an oral agreement, on the ground that this agreement was not included in the scope of the arbitration clause;

Whereas the annulment judge shall review the decision of the arbitral tribunal on its jurisdiction, whether it has declared itself competent or not, by seeking all elements of law or fact which make it possible to assess the scope of the arbitration agreement and to deduce the consequences relating to the respect of the mission entrusted to the arbitrators;

Whereas, however, in the present case, the Arbitral Tribunal uses the term “lack of jurisdiction” in order to reject SOWCI’s counterclaims - directed against EDTC and in no way against the Cuban State - after having examined on the merits the hypothesis supported by SOWCI concerning verbal agreements between the parties relating to payment periods, and having concluded that the existence of such agreements was not proven; that these reasons, independently of superfluous considerations on the absence of the Cuban State in the proceedings or on the scope of the arbitration clause, form the basis of the arbitrators' decision and cannot be discussed before this court without prejudice to the prohibition of the revision of the award by the annulment judge;

That the ground, in its two branches, must therefore be dismissed;

On the second ground of annulment alleging violation of due process (Article 1520-4 of the Code of Civil Procedure):

SOWCI argues that the Arbitral Tribunal, in declaring that it could not rule on “Cuban practices” on the grounds that they were acts of the Cuban State and that the latter was not a party to the arbitration, based its decision on a legal argument raised ex officio and not discussed by the parties.

Whereas, contrary to the appellant’s contention, the arbitrators, having found that the Cuban State was not a party to the proceedings, nevertheless examined the hypothesis submitted by SOWCI relating to the existence of oral agreements which could prevail over the written agreement, and rejected the counterclaims after finding that there was no evidence of SOWCI’s allegations; that the ground was therefore unfounded;

Whereas it follows from the foregoing that the action for annulment of the main award must be dismissed and that the same applies to the interpretative award, against which no separate grievances are articulated;

On Article 32-1 of the Code of Civil Procedure:

Whereas the abusive nature of the appeal has not been demonstrated, the application on this ground will be rejected;

On Article 700 of the Code of Civil Procedure:

Whereas SOWCI, who is unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure and will be condemned on this basis to pay the sum of EUR50,000;

FOR THESE REASONS

Rejects the action for annulment of the awards rendered between the parties on 11 February and 21 June 2013.

Rejects all other applications.

Orders SYSTEM ONE WORLD COMMUNICATIONS IBERIA to pay the costs to be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure.

Orders SYSTEM ONE WORLD COMMUNICATIONS IBERIA to pay EMPRESA DE TELECOMUNICACIONES DE CUBA SA the sum of EUR50,000 pursuant to Article 700 of the Code of Civil Procedure.