Paris Court of Appeal, No. 14/00480 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 7 April 2015, No. 14/00480

Challenged decision:

Paris Tribunal of Grande Instance, 28 mars 2014

CONGOLESE WIRELESS NETWORK SPRL

Vs.

VODACOM INTERNATIONAL LIMITED

Congolese Wireless Network SPRL (hereinafter referred to as “CWN”), a company incorporated under Congolese law, and Vodacom International Limited (hereafter “VODACOM”), a company incorporated under the laws of Mauritius, both of which are active in the telecommunications sector, entered into a joint venture agreement on 24 October 2001 (Joint Venture Agreement) to jointly conduct mobile telephone operations in the Democratic Republic of the Congo (DRC). For this purpose and by a constitutional act of 28 November 2001, the companies incorporated Vodacom Congo Sprl RDC under Congolese law. The object of the latter was to install, operate and maintain a network of GSM communication in the DRC.

In application of the Joint Venture Agreement, Vodacom Congo was upon its creation, and is still held by, VODACOM in a proportion of 51% and by CWN in a proportion of 49%.

A dispute arose between the shareholders, in which CWN opposed the transformation of the corporate form of Vodacom Congo and the increase of its capital. VODACOM initiated arbitration proceedings against CWN under the supervision of the International Chamber of Commerce on 7 April 2010, and on the basis of the arbitration clause contained in Article 23 of the Joint Venture Agreement of 24 October 2001. The seat of arbitration was set in Brussels (Belgium) and the applicable law was the Congolese law.

On one hand, VODACOM requested that the tribunal rule that CWN committed an abuse of minority by refusing to consent to the corporate transformation of Vodacom Congo in 2002 and that it appoints an ad hoc representative. On the other hand, VODACOM requested that the tribunal acknowledge that CWN undertook to vote for the capital increase of Vodacom Congo and that CWN breached the affectio societatis and acted against the principles of good faith, and that it therefore orders the exclusion of CWN from Vodacom Congo. Finally, VODACOM requested that the tribunal order CWN to repair the damages caused.

By an award rendered in Brussels on 6 September 2013 (the award), the arbitral tribunal composed of Messrs Pierre Mayer, Chairman, Georges-Albert Dal and XXX, arbitrators:

appointed an ad hoc representative to exercise CWN’s rights on the issues relating to the increase of the capital of Vodacom Congo and the practical implementation of a resolution of the Extraordinary General Meeting of 6 September 2002 regarding the change in the corporate structure of Vodacom Congo through its conversion from a private limited liability company (PLLC) to a limited liability company (LLC).
ordered CWN to pay to VODACOM the cumulative sum of USD 203,744,975.28 in respect of various bases for damages;
dismissed all of CWN’s claims; and
ordered CWN to reimburse to VODACOM 80% of its defence costs, as well as the portion of the provision in an amount of USD 462,800 paid by the latter and not reimbursed by the ICC.

A request for interpretation of this award was filed before the arbitral tribunal. On 18 December 2013, the latter rendered an addendum to the award (the addendum), in which it specified that by the words “practical implementation of the resolution of 2002 relating to the conversion of Vodacom Congo into a limited liability company (SARL)” it meant to tackle “any measure that achieves the effective transformation of Vodacom Congo into a corporate form known to Congolese law at the time of the execution of the mandate, and which corresponded to the characteristics of the limited liability company (LLC) under the Congolese law in force in 2002”.

The award of 6 September 2013 and the addendum were made enforceable in France respectively by orders of 8 October 2013 and 28 March 2014 that were issued by the delegate of the President of the Paris Tribunal of Grande Instance.

Actions for the annulment of the award and its addendum were filed before the courts of the State of the seat of arbitration. The claims were dismissed respectively on 11 December 2014 and 23 January 2015 in Belgium, although these decisions are not final, given the appeals filed.

By declarations dated 8 January 2014 and 19 May 2014 respectively, CWN appealed against the order for enforcement (in French Ordonnance d’exequatur) of the award and the order for enforcement (in French Ordonnance d’exequatur) of the addendum. These two appeals were joined by order of 3 July 2014 of the Pre-Trial judge.

Having regard to the submissions served through the Réseau Privé Virtuel Avocat (RPVA) by the claimant on 19 February 2015, under the terms of which it requests the court to:

declare that the award and the addendum which were granted enforcement (in French Exequatur) in France breach the provisions of Article 1520-1 of the Code of Civil Procedure, as the tribunal wrongly declared it has jurisdiction to settle the dispute;
declare that the award and the addendum which were granted enforcement (in French Exequatur) in France breach the provisions of Article 1520-3 of the Code of Civil Procedure, as the tribunal did not comply with the mission defined by the parties;
declare that the award and the addendum which were granted enforcement (in French Exequatur) in France breach the provisions of Article 1520-4 of the Code of Civil Procedure, as the court did not respect due process (in French Principe de la contradiction);
declare that the award and the addendum which were granted enforcement (in French Exequatur) in France breach the provisions of Article 1520-5 of the Code of Civil Procedure, because the recognition of the award and the addendum is contrary to the international public order;
consequently, reform the orders of 19 September 2013 and 28 March 2014 granting enforcement (in French Exequatur) respectively to the award of 6 September 2013 and the addendum of 18 December 2013;
order VODACOM INTERNATIONAL LIMITED to the payment of a sum of 50.000 euros under Article 700 of the Code of Civil Procedure as well as the complete costs.

Having regard to the submissions served through the RPVA by VODACOM on 2 March 2015, under which the court is requested to:

declare inadmissible the stay of proceedings requested by the Congolese Wireless Network Sprl;
declare inadmissible the ground for refusal of enforcement (in French Exequatur) based on the violation of the provisions of Article 1520-1 of the Code of Civil Procedure;
declare that all the grounds developed by Congolese Wireless Network Sprl are unfounded;
consequently, confirm the enforcement orders (in French Ordonnances d’exequatur) issued by the President of the Tribunal of Grande Instance on 19 September 2013 and 28 March 2014;
more generally, dismiss Congolese Wireless Network Sprl of all its requests, purposes and claims;
order Congolese Wireless Network Sprl to the payment of 130,000 euros under Article 700 of the Code of Civil Procedure as well as the entire costs while giving effect to the provisions of Article 699 of the same Code.

By incidental submissions served on 25 February 2015, CWN filed a claim before the Pre-Trial jduge for a stay of proceedings while awaiting the final decisions of the Congolese courts. Disputes were raised before these courts concerning the seizure of Vodacom International Limited (VODACOM)’s rights as partner in Vodacom Congo, the ownership of VODACOM’s rights within Vodacom Congo and contentions regarding the management.

By order of 26 February 2005, the Pre-Trial judge joined the incident to the merits of the case.

UPON WHICH

On CWN’s claim for a stay of proceedings

Whereas, in support of its claim, CWN argues that the order that deprived its manager, Mr A, of his statutory powers and ultimately allowed the transformation of Vodacom Congo following a vote by the extraordinary general meeting of 15 August 2014, which VODACOM uses to claim that CWN consented to the Award, was reformed on 6 November 2014. On the basis of the irregularity of the proceedings, the Congolese judge issued null and void all acts taken by the new manager Mr X F G, including the acts taken within the bodies of Vodacom Congo. While Mr X’s appeal against this decision was dismissed on 8 December 2014, and upon the request of CWN which was represented by the latter, the Congolese judge reconsidered his decisions, and on 8 January 2015, annulled the orders of 6 November and 8 December 2014.

An appeal against this decision is currently pending.

CWN further emphasises that another dispute has been raised before the Congolese courts with respect to VODACOM’s partnership rights within Vodacom Congo. Such rights were seized in view of their sale which could have the effect of depriving VODACOM of any prerogative within Vodacom Congo, irrespective of what the Award and Addendum could have granted it.

CWN consequently considers that, since the issue of the ownership of VODACOM’s rights within Vodacom Congo and the validity of its actions are still uncertain by reason of proceedings that are currently pending, as is the case with respect to the governance of Vodacom Congo, proper administration of justice requires that the Court stay the proceedings pending a final decision by the courts.

Whereas, in the present case, there are no circumstances deriving from the proper administration of justice that could justify a stay of proceedings. Therefore, CWN’s claim must be dismissed.

On the ground alleging the lack of jurisdiction of the arbitral tribunal (Article 1520-1 of the Code of Civil Procedure)

The claimant firstly argues that the tribunal erroneously declared it had jurisdiction on the dispute submitted by VODACOM, while Vodacom Congo, the liquidation of which was claimed, was not a party to the procedure. The award ruled on the question of the liquidation of Vodacom Congo and decided to appoint an ad hoc representative to exercise CWN’s voting rights to increase its capital and transform its corporate structure.

Furthermore, it argues that only the Congolese courts were empowered to settle the dispute submitted to them, insofar as Article 36 of Vodacom Congo’s articles of association, which are subsequent to the Joint Venture contract, gave exclusive jurisdiction to the Congolese courts by stipulating that “All disputes that may arise during the performance or interpretation of this act or subsequent acts amending it will be submitted, in the absence of an amicable settlement, to the exclusive jurisdiction of the Kinshasa courts”. By virtue of this clause, the parties intended to modify the dispute settlement clause in force between them, and to broaden the scope of the jurisdiction of the Kinshasa courts to all disputes arising from the relations between CWN and VODACOM with respect to Vodacom Congo.

Whereas, on the basis of an appeal filed against an order for enforcement (in French Ordonnance d’exequatur) of an arbitral award, the Court of Appeal controls the decision of the arbitral tribunal on its jurisdiction by examining all elements of law or fact which allow for the assessment of the arbitration agreement’s existence.

Whereas, on 24 October 2001, CWN and VODACOM concluded a joint venture agreement (Joint Venture Agreement) to jointly conduct mobile telephone operations in the Democratic Republic of the Congo (DRC). This convention stipulates in Article 23.1 that “any dispute arising from this agreement or in connection therewith shall be resolved in a definitive manner in accordance with the Rules of the International Chamber of Commerce by an arbitrator or by arbitrators appointed by the Chamber”

Whereas, under both the terms of reference that it signed, and the submissions presented on 27 September 2012 to the arbitral tribunal which summarise its grounds and requests, CWN did not at any time challenge the jurisdiction of the arbitral tribunal with respect to its ruling on the dispute between CWN and VODACOM.

CWN is therefore inadmissible to raise the ground based on the lack of jurisdiction of the arbitral tribunal for the first time before the judge ruling on enforcement, since it should have raised this ground in due time.

The ground will be dismissed.

On the second ground based on the non-compliance of the arbitral tribunal with its mission (Article 1520-3 of the Code of Civil Procedure)

The claimant argues, on one hand, that the arbitrators applied rules of law that were not provided for by the parties since they differ from those of Congolese law, by appointing an ad hoc representative and recognising an abuse of minority. On the other hand, they ruled ultra petita by correcting the results of the expert’s report produced by VODACOM to assess the amount of damages, whereas no claim was filed before them in this respect.

Whereas the dispute between the two partners of the joint venture agreement of 24 October 2001, as amended by four successive amendments dated respectively 6-9 September 2002, 22 June 22 July 2004, 12 September 2006 and 25 May 2007, was brought before the arbitral tribunal.

Whereas, these agreements entail that, if VODACOM committed to providing CWN with the funds required until 31 December 2010, CWN in turn would participate, as of such date, in the financing either in form of a loan, or in the form of a capital increase subject to certain conditions.

The dispute derives, on one hand, from CWN’s refusal to contribute to the financing of Vodacom Congo, and on the other hand, from the impossibility to implement the transformation of VC SPRL into a limited liability company (LLC), which transformation was decided for reasons relating to tax savings at an extraordinary general meeting held on 6 September 2002.

VODACOM argued that, by obstructing the vote for the capital increase during the meeting held on 7 April 2010, CWN committed an abuse of minority. Conversely, CWN claimed that the meeting voted to dissolve Vodacom Congo.

Whereas, after deducting from the attitude of CWN’s representative during the meeting that the latter did not vote in favour of this dissolution, the arbitral tribunal retained, by reference to the contractual documents binding the parties, that the abuse of minority by CWN was characterised.

The tribunal cannot, in recognising such undue use, be considered as not having complied with its mission on the basis that Congolese law, which is applicable to the arbitration, does not provide for this notion.

Indeed, where the arbitral tribunal noted that there was no provision of Congolese law nor any case law relating to abuse of minority, it was also careful to point out that CWN expressly admits in its statement of defence (No. 406 and 407) that “use to the teachings of comparative law is an established and legally recognised practice in the Congo, with reference to the French and Belgian law being privileged, so long and to the extent that there are no provisions settling the issue in Congolese law”.

Consequently, by referring to the principles extracted by Belgian rulings to define the abuse of minority, and by further noting that the OHADA Uniform Act on commercial companies now enshrined this principle, which in turn made it known to Congolese law, the arbitral tribunal did not exceed the limits of its mission.

Whereas, on the other hand, for the same reasons, the court cannot be criticised because it used comparative law considering the silence of Congolese law to decide the appointment of an ad hoc administrator in charge of exercising the right to vote on behalf of the partner responsible for an abuse of right, since in such a case, it is a question of legal practice admitted in the Congo. CWN recognised this and the court referred to the principles identified by the French and Belgian legal systems, which are very similar to that of the Congo.

Whereas, finally, CWN cannot argue that the arbitral tribunal, which examined the experts’ report of CD which was established on 9 March 2012 based on VODACOM’s claim and which was lawfully included in the discussions, made a correction to the amount of damages that the experts had determined for each of the bases of prejudice invoked after substituting its own assessment to that of the experts. CWN cannot argue the foregoing since this decision was in favour of its interests, it being further noted that CWN was not prohibited from discussing this report in its submissions and renounced to quote the two experts who wrote the report since they were heard.

Moreover, the arbitral tribunal, which had to determine the damages for the prejudice suffered by VODACOM as a result of the abuse committed by CWN, also had to determine the relevance and probative value of the evidence produced and discussed before it, by virtue of its discretionary power of assessment.

The ground taken in its three parts must be dismissed.

On the ground alleging the breach of due process (in French Principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure)

CWN argues that due process (in French Principe de la contradiction) was breached in the assessment of the scope of the financial expertise report, which was established by the firm C D upon VODACOM’s request and aimed to justify the prejudice that VODACOM claimed it suffered, as the parties were not previously invited to express their views on the elements that the court intended to correct.

Whereas, as previously stated, the report, which was lawfully included in the discussions, was submitted to the free discussion of the parties. Hence, the tribunal, which had the power to determine the amount of the prejudice suffered as a result of the fault that it previously retained, did not have to gather the parties' observations on the corrections that it intended to make to the assessments made by the experts in the various bases of prejudice.

The ground must be dismissed.

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

CWN states that the award violates the international public order in that it rules on the claims of the co-shareholders of Vodacom Congo, and on those formulated by VODACOM, who was seeking the transformation of Vodacom Congo, without such company being a party to the arbitration proceedings.

Whereas the international public order prevents the recognition of an award pronouncing the dissolution of a legal entity without the latter having been called upon to take part in the proceedings. However, in the present case, the arbitral tribunal merely appointed an ad hoc administrator charged with voting on behalf of CWN, during a general meeting of Vodacom Congo to be held and in accordance with the latter’s interests, on the draft resolutions relating on one hand to a capital increase and on the other hand to the practical implementation of the 2002 resolution relating to the conversion of Vodacom Congo into a limited liability company (LLC).

Therefore, no demonstration was made as to how the award would effectively and concretely have violated the international public order in a way that would obstruct its recognition in France.

Consequently, the ground must be dismissed, and the referred orders confirmed.

Whereas CWN, which is unsuccessful, cannot claim compensation under Article 700 of the Code of Civil Procedure and will be ordered on the same basis to pay a sum of 100,000 euros.

FOR THESE REASONS,

States that there is no basis for a stay the proceedings.

Confirms the orders of 8 October 2013 and 28 March 2014 which made enforceable in France the arbitral award rendered in Brussels on 6 September 2013 and the addendum of 8 December 2013 rendered in the proceedings opposing the Congolese company Wireless Network SPRL to the Mauritius company Vodacom International Limited.

Orders the Congolese company Wireless Network SPRL to pay to the Mauritius company Vodacom International Limited the sum of 100,000 euros under Article 700 of the Code of Civil Procedure.

Dismisses the remaining claims.