Paris Court of Appeal, No. 14/08653

Paris Court of Appeal, Pole 1, First Chamber, 17 March 2015, No. 14/08653

CARRECON PIGUILLE B.V.

vs.

SAKAPHEN GMBH

By an agreement entered into on 21 January 2010, SAKAPHEN GMBH, a German company that manufactures and distributes anti-corrosion coatings, granted the Dutch company CARRECON PIGUILLE B.V. an exclusive licence to use its technology in the Netherlands in return for the payment of a royalty and an obligation to purchase a minimum annual quantity of coating materials manufactured by SAKAPHEN.

The implementation of this agreement gave rise to disputes that were submitted by the parties to arbitration in accordance with the rules of the United Nations Commission on International Trade Law (UNCITRAL).

By an award rendered in Paris on 28 March 2014, Mrs Z, the sole arbitrator, held that SAKAPHEN validly terminated the agreement without prior notice on 23 May 2012, ordered CARRECON PIGUILLE to pay to SAKAPHEN a principal amount of 930,457.25 euros as loss of profit in addition to interest, and a contractual penalty in the amount of 1,042,191.78 euros, ordered SAKAPHEN to transfer to CARRECON PIGUILLE the ownership of the domain name www.saekaphen.com for the price of 3,600 euros, and ruled on the arbitration costs.

On 18 April 2014, CARRECON PIGUILLE filed an action for annulment against this award.

CARRECON PIGUILLE filed a claim for a stay of enforcement before the Pre-Trial judge. This claim was dismissed by order of 26 June 2014.

By submissions notified on 30 January 2015, the appellant requested the annulment of the award and the condemnation of the opposing party to pay the sum of 50,000 euros pursuant to Article 700 of the Code of Civil Procedure. The appellant alleges the breach of due process (in French Principe de la contradiction).

By submissions notified on 6 January 2015, SAKAPHEN requested the court to dismiss the claim and order CARRECON PIGUILLE to pay the sum of EUR 50,000 pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the sole ground for annulment based on the breach of due process (in French Principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure):

The appellant submits that, in the arbitration proceedings, it presented a ground alleging that SAKAPHEN was liable for the termination and the resulting damages, given that it had not sought an amicable solution to the dispute and thus breached the contractual provisions. It submits that the arbitrator disregarded the principle of due process (in French Principe de la contradiction) by reclassifying this ground, which is a ground on the merits, as a ground for inadmissibility without inviting the parties to explain themselves thereon.

Whereas, due process (in French Principe de la contradiction) requires only that the parties should have been able to state their claims in fact and in law and discuss those of the opposing party so that nothing that is used as a basis for the decision of arbitrators escaped their adversarial debate.

Whereas, in the present case, section 10.9 of the agreement of 21 January 2010 stipulates that the parties undertake to settle their disputes amicably, and that the dispute will be submitted to arbitration if no solution is found within thirty days of the notification by one of the parties of its wish to conduct negotiations.

Whereas CARRECON PIGUILLE argued before the arbitrator that the opposing party breached this stipulation by failing to seek an amicable settlement. SAKAPHEN replied that this obligation did not apply to disputes in respect of which the possibility of such a solution could only be dismissed forthwith, which was the case in the present case with regard to the breaches committed by the other party.

Whereas, the arbitrator found that the absence of prior negotiation did not constitute a violation of a substantial obligation of the agreement. She retained that the consequence contractually attributed to the failure of the negotiations was the use of arbitration, so that the prerequisite of negotiation was a procedural rule, which “could at best” constitute a cause for inadmissibility if it was not respected (Award, § 143). She added that “the sole arbitrator would not have declared the Claimant’s claims inadmissible in so far as they were clearly capable of being adjudicated. Procedural efficiency requires, as the Claimant’s adjustment indicates, that the obligation to seek an amicable settlement can only apply to disputes for which the possibility of settlement cannot be ruled out from the outset” (award, §. 144);

Whereas, as suggested by SAKAPHEN in its submission, the sole arbitrator thus restricted the scope of the clause to the sole premise whereby the significance of the failures charged by one party to the other do not render any negotiated solution impossible. She found that in this case the grounds were such that they exempted the parties from the prerequisite negotiation.

Whereas this reasoning was sufficient to support the arbitrator’s decision which provides that the absence of negotiation was not a material breach of the contract that may charge SAKAPHEN with responsibility for termination.

Moreover, whereas, the question of the scope of section 10.9 and the effects attributed to the non-compliance therewith, were certainly part of the discussions, and the arbitrator, who does not have the obligation to previously submit her reasoning to the parties’ discussion, could rule that the consequences of this non-compliance were procedural in nature without disregarding due process (in French Principe de la contradiction).

Whereas, the foregoing entails that the sole ground for annulment must be excluded and the appeal dismissed.

As regards Article 700 of the Code of Civil Procedure:

Whereas CARRECON PIGUILLE, who is unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure and will be ordered on this basis to pay to SAKAPHEN the sum of 50,000 euros.

FOR THESE REASONS:

Dismisses the action for annulment of the award rendered between the parties on 28 March 2014.

Condemns CARRECON PIGUILLE B.V. to pay to SAKAPHEN GmbH the sum of EUR 50,000 on the basis of Article 700 of the Code of Civil Procedure.

Orders CARRECON PIGUILLE B.V. to pay the costs which will be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure.