Paris Court of Appeal, No. 15-12.349 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal - 1st Pole - 1st Chamber - 19 January 2016, No.15-12.349

S.A BOURBON Vs. Mr. G DE X

Pursuant to a private deed of 28 August 1992, Mr. G of X and the Company LES SUCRERIES DE BOURBON, now the Company BOURBON, concluded a Memorandum of Understanding under the terms of which was agreed and organised the participation of Mr. de X in the development of the presence of the Company LES SUCRERIES DE BOURBON à D.

Article 4 of the Memorandum of Understanding reserved notably for Mr. de X 20 % of the “holding” profits generated by the activity that he will have developed at D as well as the allocation of 20 % of the interest share of SUCRERIES DE BOURBON;

Article 7 of the protocol stipulated resorting to arbitration in the event of disagreement both on the determination of the method of calculation of this participation and on the market value of the assets created by the SUCRERIES DE BOURBON D Group since 1 September 1992.

As relations between the parties had deteriorated and they could not agree on the application of the terms of the Memorandum of Understanding, Mr. de X, by registered letter of 25 January 2007, initiated arbitration proceedings under the arbitration clause stipulated in the Memorandum.

Following an Arbitral Award rendered in Paris on 27 March 2009, the Arbitral Tribunal composed of Messrs. BORRA and CALLOUD, arbitrators and Mr. RONTCHEVSKY, Chairman, has, specifically:

observed that the Memorandum of Understanding of 28 August 1992 and the Convention of the 25 October 1999 entitled ‘Termination of employment contract and transaction’' were not concluded between the same parties;
said that the Convention of 25 October 1999 had no effect on Article 4 of the Memorandum of Understanding of 28 August 1992,
declared Mr. G de X admissible in his applications based on the provisions of Article 4 of the Memorandum of Understanding of 28 August 1992;
ordered Company BOURBON to communicate, within the framework of the arbitration proceedings, before 1st May 2009, all the accounting information necessary to calculate the sums due to Mr. G of X under the terms of Article 4 of the Memorandum of Understanding of August 28, 1992;
said that in the absence of agreement between the parties on the sums owed by Company BOURBON to Mr. G of X pursuant to Article 4 of the Memorandum of Understanding of August 28, 1992, the arbitration proceedings will continue, in accordance with Article IV, 3° of the Arbitration Compromise of 7 April 2008;
dismissed all other claims and counterclaims of the parties.

In an interim award issued on 26 June 2012, the arbitral tribunal has, notably:

said that E X’s request for communication of documents was well-founded and ordered company BOURBON, under a penalty payment of € 8,000 per day of delay or € 5,000 per day of delay in the event of partial communication, on the expiry of a period of two months from the notification of the award, to communicate various documents for the companies enumerated,
stated that BOURBON company must communicate a table drawn up under the responsibility of its Chairman indicating, for each of the companies, year by year since 1992 and until the completion of a disposal of the business, if no disposal has taken place, until 2001, the percentage of direct or indirect shareholding held by BOURBON company, and that if within a period of three months from the date of notification of this interim award, BOURBON company has not fully complied with its terms, it may decide solely on the information provided by the applicant,
decided that it is appropriate to order the provisional enforcement of this award;

By Procedural Order No. 8 issued in Paris on 27 November 2012, the arbitral tribunal has:

noted that BOURBON did not communicate, within two months of the notification of the interim arbitral award of 26 June 2012, all the documents referred to in the operative part of the said award, the communication of which was required in order to determine the sums likely to be due pursuant to Article 4 of the memorandum of understanding of 28 August 1992, and
Consequently, said that the penalty payment of € 5,000 per day of delay from 26 August 2012 provided in the event of partial communication of the documents required by the arbitral award of 26 June 2012 should be applied, and this, until communication by the company BOURBON of all the documents required, and that the arbitral tribunal remaining seized, it may subsequently liquidate the penalty payment if necessary;

On 18 March 2013, the arbitral tribunal issued a new interim award in Paris, declaring admissible the request of M. de X’s to liquidate the penalty payment made under the terms of the interim award of the 26 June 2012 with provisional enforcement, recalling that BOURBON did not communicate within two months of the notification of the interim arbitral award of 26 June 2012 all the documents referred to in the operative part of the said award, and stating that the delay in the enforcement of the interim award of 26 June 2012 and the behaviour of BOURBON justifies the liquidation of the penalty payment in the sum of € 500,000, therefore ordering BOURBON to pay M. de X. de X the said sum with interest at the legal rate, also stating that the penalty payment pronounced under the terms of the interim arbitral award of 26th June 2012 should be renewed, and that its rate should be increased to the sum of 10. 000 per day of delay from 16 January 2013, until full compliance by BOURBON. de X with the terms of the interim award, and therefore until communication of all the relevant elements required and set out in the Procedural Order No. 8 of 27 November 2012, further ordering BOURBON. de X to pay Mr. de X the sum of € 35,000 for his representation costs in the context of the present request for liquidation of the periodic penalty payment and ordering the provisional enforcement of the award;

On 30 May 2013, BOURBON filed an action to set aside the award of 18 March 2013. On 8 November 2013, BOURBON filed an action to set aside the arbitral award of 26 June 2012, as a ‘conservatory measure’.

By submissions on a point of law notified by Y on 18 December 2013, Mr. G of X referred the matter to the counsel for the state with the purpose of, under Articles 409, 410, 1520 and 32-1 of the Code of Civil Procedure, mainly to declare company BOURBON inadmissible in its action for annulment of the award of 26 June 2012 for having acquiesced in it.

By order of 13 February 2014, confirmed by the court’s decision of 24 June 2014, the counsel for the state dismissed the motion to dismiss raised by M of X.

By judgment of 7 October 2014, the court stayed the proceedings for the annulment of the interim award rendered in Paris on 18 March 2013 until the court rules on the action for annulment of the interim award rendered in Paris on 26 June 2012 brought by BOURBON.

By judgment of 5 May 2015, the court dismissed the action for annulment of the interim award of 26 June 2012 brought by BOURBON, dismissed Mr. De X’s claim for damages, dismissed BOURBON’s application pursuant to Article 700 of the Code of Civil Procedure, ordered BOURBON to pay the costs and ordered BOURBON to pay €75,000 pursuant to Article 700 of the Code of Civil Procedure.

By submissions notified on 8 December 2015 by Y, BOURBON requested the court, receiving it in its appeal, to annul the arbitral award rendered in Paris on 18 March 2013, to order Mr. de X to pay him €50,000 under Article 700 of the Code of Civil Procedure and to dismiss the opposing claims.

It claims, firstly, that the arbitral tribunal failed to comply with its mission (1520 3° of the Code of Civil Procedure) as it results from the arbitration agreement of 7 April 2008 in that it did not rule in law and did not apply French law. Secondly, it claims that the award is contrary to international public policy (1520 5° of the Code of Civil Procedure), on the one hand because of the violation of the law of civil enforcement proceedings and on the other hand because of the disregard of the nature and purpose of the periodic penalty payment. Thirdly, it claims that the arbitral tribunal was incompetent to liquidate the penalty payment which had not begun to run at fault for the decision pronouncing it to have been enforced (1520 1° of the code of civil procedure). It adds that its action for annulment is well-founded in view of the unlawful nature of the contested award and its failure to comply with the interim arbitral award of 26 June 2012.

By submissions notified on Y on 8 December 2015, M G of X requests that BOURBON be declared inadmissible and ill-founded in its action for annulment of the arbitral award of 18 March 2013, that it dismisses its claims and that it be ordered to pay €50,000 in damages for abusive proceedings, in addition to €50,000 in irrecoverable costs.

UPON WHICH

On the first ground for annulment, alleging non-compliance by the arbitral tribunal with its mission (1520-3 of the Code of Civil Procedure)

BOURBON first of all claims that the arbitral tribunal, which did not rely on any text, case law or doctrine and which liquidated a penalty payment that had not begun to run in the absence of exequatur of the decision pronouncing it, did not rule in law but as ‘amiable compositeur’. Secondly, it claims that the arbitral tribunal, which violated Articles R 131-1 and R 131-3 of the Code of Civil Enforcement Procedures, did not apply French law, in disregard of its mission as set out in the arbitration agreement of 7 April 2008.

Whereas on the ground taken in its two branches that, in order to declare admissible the request for the liquidation of the penalty payment, the arbitrators who considered that they were vested under Article 1467 of the Code of Civil Procedure, according to which ‘if a party has evidence, the arbitral tribunal may order it to produce it in the manner it determines and, if necessary, under penalty payment’ of powers in the context of the proper investigation of the case, allowing them to order the parties, if need be, under penalty payment, to take the necessary measures to this effect, and which stated in particular that ‘This order of the arbitral tribunal, which is distinct from the power to judge but is at its service, does not require an exequatur procedure to be binding and enforceable on the parties’, gave reasons in French law for their award; that by raising the arbitrators' violation of Articles R 131-1 and R 131- 3 of the Code of Civil Enforcement Procedures, the appellant invites the judge of the annulment proceedings to review the merits of the award, which is prohibited;

Whereas the ground taken for the arbitral tribunal’s disregard of its mission, which is missing facts, is dismissed;

On the second ground for annulment, alleging violation of international public policy by the arbitral tribunal (1520-5 of the Code of Civil Procedure)

BOURBON claims the violation of international public policy by the interim award in question, firstly, because of the violation of the law of civil enforcement proceedings, in this case the provisions of Article R 131-1 of the Code of Civil Enforcement Proceedings, in that the arbitral tribunal liquidates the penalty payment pronounced by the interim award of 26 June 2012 enjoining it to communicate documents, not covered by the exequatur, in contradiction with the requirement required by the applicable French law.

Secondly, it claims that by appropriating for itself powers which it did not have, the arbitral tribunal also committed a concrete, effective and flagrant violation of international public policy. It argues that the award was made in disregard of the nature and purpose of the periodic penalty payment, an accessory and comminatory measure, which cannot be pronounced if the award has not been granted exequatur, since the power of coercion is directly linked to the imperium which the arbitrator does not have and the periodic penalty payment sanctions any delay in communication and not the party’s conduct.

Whereas, on the ground taken in its two branches, BOURBON does not demonstrate an actual and concrete violation of international public policy by the arbitral tribunal, whereas the liquidation of the penalty payment made by the arbitral tribunal has a contractual basis, in this case the arbitration agreement of 7 April 2008 by which the parties entrusted the arbitral tribunal with the resolution of their dispute; that it can be deduced from this that the parties have granted the arbitrators the power necessary for the proper investigation of the case and have undertaken to execute spontaneously the decisions rendered, including comminatory measures such as the awarding of the penalty payment;

That this ground must therefore be dismissed;

On the third ground for annulment based on the lack of jurisdiction of the Arbitral Tribunal (Article 1520-1 of the Code of Civil Procedure)

BOURBON claims that since the interim award of 26 June 2012 which awarded the penalty payment did not give rise to an order of enforceability, it never started to run and the arbitral tribunal was not competent to liquidate it.

Whereas, as has been said, the binding nature of the penalty payment is based on the effects of the arbitration contract without the effectiveness of the decision being subject to an exequatur;

That this ground of appeal is also dismissed and hence the action for annulment;

On the other requests

Whereas BOURBON’s misuse of his right to institute legal proceedings was not proven, Mr. de X’s claim for damages was dismissed;

Whereas BOURBON, who is unsuccessful in his appeal, is dismissed from his claim pursuant to Article 700 of the Code of Civil Procedure and is ordered to pay Mr. de X the sum of € 30,000 pursuant to Article 700 of the Code of Civil Procedure;

FOR THESE REASONS:

Dismisses the action for annulment;

Dismisses E X’s claim for damages;

Dismisses BOURBON’s claim under Article 700 of the Code of Civil Procedure;

Dismisses all other claims;

Orders company BOURBON to pay the costs and to pay Mr. de X the sum of € 30,000 pursuant to Article 700 of the Code of Civil Procedure.