Court of Cassation, No. 14-25.147 | Rory Wheeler, avocat (Paris) & solicitor (England)

Court of Cassation, First Civil Chamber, 2 December 2015, No. 14-25.147

Mr. X

Vs.

Crédit Foncier de France

Summary

A court of appeal, which holds that general allegations that the decision on the termination of a loan contract had a direct impact on the surety bond are insufficient to create a bias on the dispute that gave rise to an arbitral award, infers exactly that the ground for annulment based on the improper constitution of the arbitral tribunal must be rejected. A court of appeal which notes that the arbitrators based their reasoning on the rules of private international law as well as on the principles established in the Civil Code for the interpretation of contracts, rightly deduces that the arbitrators have complied with their mission to rule in law and by application of French law. The provisions of Articles L. 341-2 and L. 341-3 of the Consumer Code lay down standards whose disregard is not contrary to international public policy.

THE COURT OF CASSATION, FIRST CIVIL CHAMBER, delivered the following judgment:

Whereas, according to the judgment under appeal (Paris, 9 September 2014), that an arbitration proceeding between Mr. X… and Crédit Foncier de France took place before the International Chamber of Commerce in application of the arbitration clause inserted in the contract of guarantee for a loan granted by this banking institution to a company in which Mr. X… held a majority of shares; whereas Mr. X…. filed an action to set aside the award, claiming that it had been issued by a tribunal with the same president as the tribunal constituted in the arbitration concerning the loan;

On the first ground:

Whereas Mr. X… complains that the judgment dismissed his appeal, then, according to the ground:

1°/ that, on the one hand, Article 1520-2 provides that an action for annulment is open if the tribunal has been irregularly constituted; that an arbitral tribunal is irregularly constituted if the Chairman of the tribunal suffers from a lack of independence, i.e. if the facts are such as to give rise to doubts for the parties as to his independence; that, in the present case, the Chairman of the arbitral tribunal was present both in the proceeding concerning the lawfulness of the termination of the loan contract between CFF and the company Gulf Leaders, of which Mr. X… was director, and in the proceeding concerning the validity of the guarantee given by Mr. X…; that the simultaneous presence of the same judge in the dispute relating to the main contract and in the dispute relating to the ancillary contract was likely to give rise to doubts for the parties as to his independence, so that by refusing to annul the award for irregularity of the constitution of the arbitral tribunal, the Court of Appeal violated Article 1520-2 of the Code of Civil Procedure;

2°/ that, on the other hand, Article 1520-2 provides that an action for annulment is admissible if the tribunal has been irregularly constituted; that an arbitral tribunal is irregularly constituted if the president of the tribunal suffers from a lack of independence, i.e. if facts that give rise to doubts for the parties as to his independence are characterized; that by dismissing the action for annulment of the award on the ground that no adverse prejudice on the part of the president of the arbitral tribunal against Mr. X.. was characterized, without considering whether the simultaneous presence of the same Chairman of the arbitral tribunal, in the first instance of the arbitration between the lender, CFF, and the borrower, Gulf Leaders, on the merits of the termination of the loan agreement, and in the second instance between CFF and Mr. X…, was unlikely to give rise to doubts for the parties as to his independence, the Court of Appeal deprived its decision of legal basis in the light of Article 1520-2 of the Code of Civil Procedure ;

Whereas, however, after carrying out the research allegedly omitted, the judgment holds that general allegations that the decision on the termination of the loan contract had had a direct impact on the surety are insufficient to create a bias on the dispute that gave rise to the contested award, since the first arbitration proceeding between the lender and the borrower concerned the merits of the termination of the loan agreement, and the second proceeding concerned the separate issues of the regularity of the guarantee and the existence of an obligation to give a valid guarantee; that in the light of these statements, the Court of Appeal rightly decided to reject the ground for annulment based on the irregular constitution of the arbitral tribunal; that the ground could not be upheld ;

On the second ground:

Whereas Mr. X… makes the same complaint at the judgment, then, according to the ground:

1°/ that Article 1520-3 provides an action for annulment on the grounds that the arbitral tribunal has ruled without complying with the mission entrusted to it; that the said tribunal, which ruled as an ‘amiable compositeur’ when it had a mission to rule in law, even if it had disguised the use of its powers as amiable compositeur under legal considerations, does not comply with the mission entrusted to it; that the absence of reference to alleged powers of amiable compositeur, or even to equity, does not prevent the award from being null and void if it appears in the reasoning of the arguments, that the application of the law could not be justified; that in the present case, by rejecting the ground for annulment based on the arbitrators' noncompliance with their mission, without considering whether the arbitral tribunal had ruled out the application of Articles L.341-2 and L. 341-3 of the Consumer Code outside the provisions of the law for considerations of equity, thus usurping the powers of amiable compositeur, the Court of Appeal deprived its decision of legal basis in the light of Article 1520-3 of the Code of Civil Procedure;

2°/ that Article 1520-3 provides for an action for annulment on the grounds that the arbitral tribunal has ruled without complying with the mission entrusted to it; that the court does not comply with the mission entrusted to it if it refuses to apply the law chosen by the parties; that in the present case, by rejecting the ground for annulment based on the arbitrators' noncompliance with their mission, without investigating whether the arbitral tribunal had refused to apply the solution of French law, which was unambiguous, and therefore had refused to apply the law chosen by the parties, the Court of Appeal deprived its decision of legal basis in the light of Article 1520-3 of the Code of Civil Procedure;

Whereas, however, having noted that the arbitrators had based their reasoning on the rules of private international law as well as on the principles established in the Civil Code for the interpretation of contracts, the Court of Appeal rightly deduced that the arbitrators had complied with their mission to rule in law and by application of the French law; that the ground is unfounded;

On the third ground:

Whereas Mr. X… makes the same complaint at the judgment, then, according to the ground, that Article 1520-5 provides for an action for annulment on the grounds that the recognition or enforcement of the award is contrary to international public policy; that the enforcement in France of an award which gives effect to a surety without the handwritten mention required by Articles L. 341-2 and L. 341-3 of the Consumer Code is contrary to international public policy; that by dismissing the action for annulment on the ground that these texts establish standards whose disregard by an international award is not contrary to the French concept of international public policy, the Court of Appeal infringed Articles L. 341-2 and L. 341-3 of the Consumer Code, as well as Article 1520-5 of the Code of Civil Procedure ;

Whereas, however, the provisions of Articles L. 341- 2 and L. 341-3 of the Consumer Code lay down standards whose disregard, if it is presumed, is not contrary to international public policy, the Court of Appeal decided exactly that, in the absence of opposition to the latter, the refusal of recognition or enforcement of the award was unfounded; that the ground could not be upheld;

FOR THESE REASONS:

DISMISSES the appeal;

Orders Mr. X… to pay the costs;

Having regard to Article 700 of the Code of Civil Procedure, dismisses Mr. X…’s application… and orders him to pay Crédit Foncier de France the sum of EUR 5,000;

Thus done and judged by the Court of Cassation, First Civil Chamber, and pronounced by the President at a public hearing on the second of December two thousand and fifteen.