Paris Court of Appeal, No. 13/24165 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 7 April 2015, No. 13/24165

S.A.R.L. FAIRTRADE

vs.

S.A.S. FACONNANABLE

SARL FAIRTRADE and SAS FACONNABLE entered into a license agreement on 17 May 1993 for the operation of the brand FACONNABLE, followed by a new contract on the 1st of June 2004. Following the first dispute, the parties organized the termination of their contractual relationship and set the conditions for the takeover by FACONNANABLE of the products held by FAIRTADE.

The execution of this agreement created a new dispute which led FAIRTRADE to file a request for arbitration.

By an award issued in Paris on 25 November 2013, the arbitral tribunal composed under the auspices of the International Chamber of Commerce of Messrs. Vatier and Pinsolle, arbitrators, and Mr. Tercier, Chairman:

said that FACONNANABLE was required, within 30 days, to take back certain products and advertising materials and that FAIRTRADE was required, within the same period, to destroy the remaining items of its residual stock,
condemned FACONNANABLE to pay FAIRTRADE the sum of 528,468.24 euros including VAT corresponding to the value of the products taken back, and condemned FAIRTRADE to pay FACONNANABLE the sum of 1,075,282.53 euros in damages for breach of contractual obligations,
attached a provisional execution to the decision,
ruled on the arbitration costs.

This award was completed by an addendum on 13 December 2013.

On 18 and 20 December 2013, Y filed two actions for annulment against the award and its addendum.

By an order of 27 March 2014, the pre-trial counselor ordered the joinder of the proceedings and ordered the deposit of the sum due by FAIRTRADE, after deduction of the sum that it should receive. An order of 15 May 2014 dismissed FACONNANABLE’s request for rectification of a material error.

By submissions notified on the 3rd of February 2015, FAIRTRADE requested the court to annul the award and its addendum, to dismiss the opposing party’s claims and to order it to pay 50,000 euros for “abusive opposition to the annulment action” and 25,000 euros pursuant to article 700 of the Civil Procedure Code. It claims a breach of the terms of reference in that the arbitral tribunal disregarded the expert’s conclusions, by disregarding article 146 of the French Civil Procedure Code concerning the burden of proof, and by calculating damages on the basis of a counterfeiting action not covered by the terms of reference.

By submissions notified on 8 January 2015, FACONNANABLE primarily requests the court to declare the pleas inadmissible, because the first was not presented to the arbitrators and because none of them were related to a case of opening provided for in article 1520 of the Civil Procedure Code, in the alternative, to rule that the action is unfounded, and finally to order FAIRTRADE to pay the sums of 50,000 euros for abusive proceedings and 30,000 euros based on article 700 of the Civil Procedure Code.

UPON WHICH:

On the sole ground alleging violation of the terms of reference (article 1520-3 of the Civil Procedure Code):

FAIRTRADE invokes the violation of the terms of reference, as well as the expert’s terms of reference for the first branch of the ground, 1° in that the arbitral tribunal disregarded the expert’s conclusions on the qualification of the finished products which were to be taken over by FACONNANABLE, 2° in that the President of the arbitral tribunal imposed to produce the documents required by FACONNANABLE, which allowed the latter to make up for its failure to provide evidence, in violation of article 146 of the French Civil Procedure Code under which the parties had voluntarily placed themselves and which, according to the terms of reference, prevailed over the arbitration rules and the rules adopted for the investigation of the case, 3° in that the arbitral tribunal awarded damages to FACONNANABLE calculated on the basis of a counterfeiting action whereas such an action was not included in the terms of reference.

Whereas the mission of the arbitrators, as defined by the arbitration agreement, is mainly bounded by the subject matter of the dispute as determined by the claims of the parties;

Whereas by a settlement agreement of 18 March 2010, the parties agreed on the conditions for the termination of their license agreement and, in particular, on the conditions for the takeover of FAIRTRADE’s residual stock of products by FACONNANABLE; whereas article 24 provided for the recourse to arbitration in order to settle all litigations related to the agreement, as well as, by reference to the 2004 contract, for the determination of the seat of arbitration in Paris and the application of French law;

Whereas it results from the terms of reference of 5 November 2012, that FAIRTRADE requested the arbitrators to condemn FACONNANABLE under penalty to take over the entire stock of products and advertising elements referred to in its invoice of 15 November 2011 for an amount of 1.584.503,41 euros, and to pay damages; that FACONNANABLE claimed that the number of products to be taken back was capped by the settlement agreement at 676,282.74 euros and that, in addition, FAIRTRADE did not show that the products in the residual stock corresponded to the definition and presented the characteristics provided for by the settlement agreement;

Whereas the terms of reference stated that French law was applicable to the substance of the litigation and that the procedure was ‘subject (in the following order of precedence) to the mandatory provisions of the law applicable at the place of arbitration, the ICC rules and the rules of procedure to be agreed upon or ordered';

Whereas on the 5th of November 2012 a ‘terms of reference of the Expert’ was also drawn up, based on article 25 of the ICC Rules, appointing Mr. X to determine the composition of the stock of all products ' FACONNANABLE' or ‘intended for FACONNANABLE’ that were in the hands of FAIRTRADE, in order to specify for each product, its quantity, date of manufacture and expiry, conditions of storage, value and inclusion in the inventory drawn up in January, and to determine whether the advertising material included in the stock referred to FAIRTRADE;

Considering, firstly, that it does not result from neither the arbitration agreement, nor the provisions of the Civil Procedure Code, nor the ICC regulations, nor the terms of reference, nor the expert’s mission statement, that the arbitrators were bound to adopt the conclusions of the expert whose report was only one of the elements submitted to their appreciation, so that the ground, in that it criticizes the court for having violated its mission by disregarding the expert’s qualifications, is unfounded;

Considering, secondly, that the forced production of documents by a party is governed by articles 142 and 138 to 141 of the Civil Procedure Code; that it may be requested by a party who intends to report an act to which it is not a party or a document that it does not hold, provided that these acts and documents are determinable and that their existence is probable; that the production may be refused if the holder of the document reports a legitimate impediment; that FAIRTRADE did not report such an impediment, it was without disregarding the relevant provisions of the Civil Procedure Code and without reversing the burden of proof, as it results from these provisions, that the president of the arbitral tribunal ordered the production of various documents held by the appellant; that the ground is therefore unfounded in its second branch;

Considering, thirdly, that if the arbitral tribunal referred, for the calculation of the compensation, to the techniques used in the field of counterfeiting, neither a change in the nature of the claims submitted, nor, in the absence of a methodology imposed by the agreement of the parties, a failure of its mission, resulted from this choice;

Whereas it follows from the foregoing that the ground must be dismissed in its three branches and the appeals against the main sentence and the addendum rejected;

On the ancillary claims:

Whereas it follows from the meaning of the judgment that FAIRTRADE will be dismissed from its claims for damages and compensation for irrecoverable costs;

Whereas it has not been shown that the right to sue has degenerated into an abuse; that FACONNANABLE will be dismissed from its claim for damages on this count; that FAIRTRADE, who is unsuccessful, will be condemned to the sum of 30,000 euros in application of article 700 of the Civil Procedure Code;

FOR THESE REASONS:

Dismisses the appeal for annulment of the arbitral award delivered between the parties on 25 November 2013 and the addendum of 13 December 2013.

Rejects all other requests from SARL FAIRTRADE.

Rejects the claim for damages from SAS FACONNANABLE.

Condemns the company FAIRTRADE to pay the costs and to pay SAS FACONNANABLE the sum of 30,000 euros pursuant to article 700 of the Civil Procedure Code.

THE CLERK THE PRESIDENT