Paris Court of Appeal, No. 14/14884 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, 12 April 2016, No. 14/14884

J.&P. AVAX (AVAX)

vs.

TECNIMONT SPA

By an agreement dated 23 November 1998, TECNIMONT SPA, a company incorporated under Italian law, subcontracted J&P AVAX (AVAX), a company incorporated under Greek law, for the construction of a propylene plant in Thessaloniki.

A dispute having arisen between the parties, TECNIMONT initiated arbitration proceedings before the International Chamber of Commerce on the basis of the arbitration clause stipulated by this agreement.

The arbitral tribunal composed of Mrs. Y and Mr. G, arbitrators, and Mr. E, Chairman, rendered a partial award on liability in Paris on 10 December 2007.

Upon AVAX’s appeal, the Paris Court of Appeal, by a judgment of 12 February 2009, overturned this award on the basis of the irregularity of the constitution of the arbitral tribunal because the firm K L, in which Mr. E is ‘of counsel’, provided consulting activities, during the arbitration, to the benefit of a subsidiary of TECNIMONT, and assisted the latter’s parent company a few months before the acceptance by the president of the arbitral tribunal of his appointment. In addition, the Paris office of K L, where Mr. E also works, represented a subsidiary of TECNIMONT during the arbitration even after the rendering of the partial award.

Upon TECNIMONT’s appeal, the Court of Cassation, by a judgment of 4 November 2010, quashed this decision on the grounds that:

‘in order to declare the ground of annulment admissible, the judgment of 12 February 2009 first notes that AVAX solicited information from Mr. E, on 16 July 2007, on the programme of an international conference held in London in May 2007. It then notes that AVAX filed a claim for recusal coupled with another claim for Mr. E’s replacement on 14 September 2007. The ICC dismissed the claims by a judgment of 26 October 2007, the grounds of which were not brought to knowledge of the parties. Then, on 31 October 2007, AVAX declared that it reserved its rights and pursued the arbitration in protest. Finally, AVAX questioned the president of the arbitral tribunal once more on his links with TECNIMONT by letters of 20 November 2007, 22 January 2008 and 25 January 2008, to which Mr. E replied on 25 January 2008, 18 October and 21 December 2007, 22 and 29 January and 20 March 2008 while progressively filtering revelations about the precise nature of K L’s activities with TECNIMONT and its parent and subsidiary companies,

However, by deducing that the contested situation was not known by the appellant prior to the rendering of the partial award of 10 December 2007 in order to declare the appeal admissible, whereas almost all of the criticised facts were included in the claim for recusal filed on 14 September 2007, the court of appeal modified the subject matter of the dispute and violated Article 4 of the Code of Civil Procedure'.

By a judgment of 2 November 2011, the appeal brought before the Reims Court of Appeal upon referral was declared admissible and annulled the award on the grounds that the lack of information from AVAX on the links between K L on the one hand and TECNIMONT, its parent company Edison SPA then EDF, and its wholly-owned subsidiary Sofregaz on the other, which was followed by incomplete information, was of a nature to reasonably give rise to doubts about the independence of the president of the arbitral tribunal.

By a judgment of 25 June 2014, the First Chamber of the Court of Cassation overturned this judgment, with referral to the Paris Court of Appeal on the grounds that:

‘Having regard to Article 1520-2 of the Code of Civil Procedure, in its wording resulting from decree no. 2011-48 of 13 January 2011;

Whereas, in order to declare the ground of annulment admissible, the judgment holds that the judge ruling on annulment is not bound by the time limit for the admissibility of the claim for recusal before the arbitration institution, which TECNIMONT claims to have been exceeded on 14 September 2007 because AVAX would have been aware of the events motivating the recusal at the latest between 16 July, when it began to question Mr. E about the London conference, and 26 July 2007, the date of the latter’s first reply. The judgment also maintains that the absence of any claim for the subsequent recusal of Mr. E before the ICC on the basis of other facts discovered by the appellant, according to the statements of TECNIMONT, within the period between the claim for recusal of 14 September 2007 and the partial award of 10 December 2007 and then after the award until 1 April 2008, date on which Mr. E resigned, does not prohibit AVAX from contesting the award insofar as the latter did not waive its rights. The judgement noted that AVAX had, on several occasions, questioned the president of the arbitral tribunal on the extent of the links between K L where he works, and TECNIMONT as well as other related companies, while also undertaking investigations in parallel, and then waived its rights. The judgment deduces therefrom that a conclusion cannot be drawn to the effect that AVAX waived its right to contest the lack of independence of Mr. E because it did not exercise the recusal procedure before the ICC.

By so ruling, whereas the party who knowingly refrains, within the time limit provided for in the applicable arbitration rules, from exercising his right to recusal on the basis of any circumstance that may call into question the independence or impartiality of an arbitrator, is deemed to have waived the right to rely thereon before the judge ruling on annulment. Therefore, such party had to investigate, in relation to each of the facts and circumstances that it considered as constituting a “serious failure to comply with the arbitrator’s duty of independence and impartiality, whether the thirty-day time limit to exercise the right of recusal provided for in the arbitration rules was respected or not. The court appeal did not provide a legal basis for its decision'.

The case was brought before the Paris Court of Appeal by referral after cassation on 11 July 2014.

By an order of 22 October 2015, the Counsellor of the Pre-Trial Chamber dismissed AVAX’s claim for the communication of documents subject to penalty.

By submissions served on 4 February 2016, AVAX requests that the court annul the award by reason of the irregular constitution of the arbitral tribunal and order TECNIMONT to pay 70,000 euros pursuant to Article 700 of the Code of Civil Procedure.

By submissions served on 5 January 2016, TECNIMONT requests the court to rule that the ground of annulment is inadmissible, and in the alternative, ill-founded, and order AVAX to pay 250,000 euros under the provisions of Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the sole ground of annulment based on the irregularity of the constitution of the arbitral tribunal (Article 1520-2 of the Code of Civil Procedure):

Whereas, under the terms of paragraph 2 of Article 1456 of the Code of Civil Procedure, applicable to international matters pursuant to Article 1506 of the same Code: ‘It is up to the arbitrator, before accepting his mission, to reveal any circumstance likely to affect his independence or impartiality. He is also required to disclose without delay any circumstance of the same nature that may arise after acceptance of his mission’.

However, whereas, on one hand, according to Article 1466 of the Code of Civil Procedure, applicable to international arbitration by reference from Article 1506-3 of the same Code: ‘The party that, knowingly and without legitimate reason, refrains from invoking an irregularity in due time before the arbitral tribunal shall be deemed to have waived the right to rely thereon’. Such an assumption is enforceable against the party who does not exercise its right of recusal during the time limits and in accordance with the procedures provided by the arbitration rules to which the parties have agreed to abide by.

And, on the other hand, the duty of information borne by the arbitrator must be assessed in respect of the notoriety of the contested situation, its link with the dispute and its impact on the arbitrator’s judgment.

Whereas, in the present case, the arbitration clause that binds the parties provides for arbitration proceedings under the auspices of the International Chamber of Commerce.

Article 11 of the Arbitration Rules of this institution, in force as of 1 January 1998, provides: ‘1. The claim for recusal, based on an allegation of lack of independence or on any other basis, is made by sending a written statement to the Secretariat specifying the facts and circumstances on which this claim is based.

2.Such a claim must be sent by a party, under penalty of foreclosure, either within 30 days from the receipt by that party of the notification of the appointment or confirmation of the arbitrator, or within 30 days from the date on which the party making the claim for recusal was informed of the facts and circumstances that it invokes in support of such claim, if that date is later than the date of receipt of the aforementioned notification'.

Whereas, the arbitral tribunal, composed of Mrs. Y, appointed by TECNIMONT, Mr. G, chosen by AVAX, and Mr. M E, the president appointed by the co-arbitrators, was constituted in October 2002. On 14 September 2007, AVAX sent the ICC a claim for Mr. E’s recusal, which was rejected by an unmotivated decision on 26 October 2007. A partial award on liability was rendered in Paris on 10 December 2007. Mr. E resigned on 20 March 2008.

Whereas, Mr E, who is ‘of counsel’ of K L and working in Paris, made on 30 October 2002 a declaration of independence which merely mentioned that ‘last year, the Washington and Milan offices of K L assisted TECNIMONT’s parent company in a case that is today finished. I have never worked for this client’.

Whereas, AVAX claims that his attention was drawn to the possibility of closer links between Mr. E’s firm and the opposing party through the programme of an international construction conference, held in London from 20 to 22 May 2007. One of the sessions of this conference, dedicated to ‘opportunities for foreign participation in the Chinese oil and gas industry’, was exclusively sponsored by K L and showcased a panel of speakers consisting of two partners in this firm, Messrs. A and B, and a commercial director of TECNIMONT, Mr. F. By invoking this event, as well as the discovery that K L and TECNIMONT S.p.A. were both involved in the project of a liquefied natural gas terminal in Guangdong, China, AVAX’s counsel requested Mr. E, by fax of 16 July 2007, to provide ‘all pertinent information relevant to the relationship between your firm and TECNIMONT’.

Whereas, by an e-mail dated 17 July 2007, Mr. E replied within the following terms:

‘I would like to inform you that Mr. I B, who spoke at the Super conference, has left K L. Mr. F, who also spoke at the Super conference, was invited by my colleague Mr. O A of K L China to sit on the same panel of speakers.

Mr. A informed me that he temporarily assisted TECNIMONT in 2005 in its bid for the Fujian LNG Project in China and that he has not worked for TECNIMONT since then. With respect to the Guangdong LNG terminal that you mention in your fax, Mr. A represented another party, not TECNIMONT. TECNIMONT is the client in this project and, according to my colleague, it is not represented by lawyers. I have not been involved in any way in either of these two Chinese projects. I know nothing about them, and I have no involvement with TECNIMONT outside the present arbitration.

Sofregaz SA TECNIMONT SPA Consortium is a former subsidiary of Sofregaz, current client of K L.

It is a subsidiary of our former client, Edison SPA. The client file was closed in 2005, with a final report in 2002.

In all other archives kept by K L, TECNIMONT SPA is an opposing party'.

Whereas, upon a new request addressed by AVAX, Mr. E specified, in an e-mail dated 26 July 2007:

‘The consortium Sofregaz SA TECNIMONT SPA was a client, precisely at the time of its bid for the ‘Fujiang LNG Project’ in 2005. After additional research, the correct answer is that the consortium, not just TECNIMONT, was the client. K L was involved for a period of about 3 months in 2005.

On the subject of Edison, my answer means that the lawyers of K L have not worked for Edison since 2002.

To answer your last question, Sofregaz is a client of the Paris office since 2004, in the context of a French litigation. Sofregaz was also a client of the Paris office for advice on a Franco-Greek tax treaty. This case is finished’.

Whereas, in order to maintain that its claim for recusal presented on 14 September 2007, following the revelations made on 17 and 26 July, was not late, AVAX maintains that it discovered, in the 20 August 2007 issue of the Engineering News- Record (ENR) magazine, a ranking of the best subsidiaries of international entrepreneurs, which revealed that Sofregaz SA and TECNIMONT SPA were subsidiaries of Maire TECNIMONT. This information was not consistent with the statements of the arbitrator and led it to undertake additional research. Such research informed AVAX that Sofregaz was a wholly-owned subsidiary of TECNIMONT, that the directors of Sofregaz also held management positions at TECNIMONT, that this was particularly the case for Mr. H, stakeholder in the arbitration, and finally that the two companies regularly presented bids in consortium or as a joint venture, so that their interests were closely interlinked.

However, whereas, in his claim for recusal, AVAX made no reference to the fact that the information published in the 20 August 2007 issue of the ENR magazine would have constituted a revelation to it and merely invoked additional research that it undertook in the month of August 2007. The alleged research was taken from the Sofregaz website, that this research is public and easily accessible, and could have been done on the same day as the receipt of the email of 26 July 2007, assuming that AVAX was then unaware of the relations between Sofregaz and TECNIMONT, which is not likely in so far as AVAX and Sofregaz have submitted bids concurrently or in conjunction with various calls for tenders between 2002 (Melitah gas export terminal in Libya) and 2005 (extension of the Revithoussa liquefied natural gas import terminal in Greece by Sofregaz and Athena in which AVAX was a shareholder, and even a majority shareholder as of June 2007).

Therefore, whereas, the claim for recusal is late as it was introduced more than one month after AVAX received the information that undermined his trust in the president of the arbitral tribunal, and without any notorious additional information being discovered meanwhile. Therefore, it is inadmissible for AVAX to invoke before the court the facts on which this request was based in support of the action for annulment of the award.

Whereas, AVAX argues that new elements were brought to its attention after its claim for recusal, namely:

the amount of the fees invoiced on 9 September 2005 by K L to TECNIMONT for the legal assistance provided on the Fujiang project (18,049.50 USD per month, according to a letter dated 30 July 2007 from Mr. Z, member of TECNIMONT’s legal department and received by fax by AVAX on 26 September 2007, Exhibit X No. 10),
the acquisition by EDF of Edison SpA, which was TECNIMONT’s parent company until the end of 2005, in a merger announced in May 2005, and the sale by Edison to TECNIMONT of Sofregaz at the end of 2005 (e-mail from K L of 21 December 2007),
the status of the cases followed by K L for Sofregaz, i.e., two cases opened in February 2004, a third in July 2005, one of which was completed in 2005, the other in 2007, and for Sofregaz SA TECNIMONT SPA Consortium a case started in July 2005 and completed in April 2007 (e-mail from K L of 21 December 2007),
the participation as an arbitrator of a lawyer from the Madrid office of K L in an ICC case introduced in December 2004 where Sofregaz was co-defendant and which was completed by the rendering of the award in May 2007 (e-mail from K L of 21 December 2007);
the circumstance that EDF was a client of K L in 2005 for two cases (e-mails from Mr. E of 29 January and 20 March 2008);

However, whereas, this information concerning the relations between K L and TECNIMONT or Sofregaz was not of a nature as to significantly aggravate the doubts over the independence and impartiality of the arbitrator, that those doubts could have resulted from the elements which were at AVAX’s disposal before its claim for recusal. Therefore, it is inadmissible for the appellant to rely thereon before the judge ruling on annulment.

Whereas, with respect to EDF, the press releases from Edison, a report from the Court of Auditors on EDF’s international activity from 2003 to 2005, and several articles published by the daily Les Echos from May to September 2005 entail, on one hand, that TECNIMONT was sold by Edison to Maire TECNIMONT SPA on XXX, and on the other hand, that following the agreement of the European Commission of 12 August 2005, it is only in September 2005 that EDF became the majority shareholder, then the sole shareholder in Italenergia Bis SpA, itself majority shareholder in Edison. The fact that EDF was a client of K L in 2005 does not appear in these circumstances as having been of such a nature as to create a reasonable doubt about the arbitrator’s independence.

Whereas, the foregoing entails that the ground alleging the irregularity of the constitution of the arbitral tribunal can only be excluded and the action for annulment dismissed.

On Article 700 of the Code of Civil Procedure:

Whereas, AVAX, who is unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure and, on that basis, will be ordered to pay TECNIMONT the sum of 100,000 euros.

FOR THESE REASONS:

Dismisses the action for annulment of the award rendered between the parties on 10 December 2007.

Orders J&P AVAX to pay the costs and to pay to SpA TECNIMONT the sum of 100,000 euros under Article 700 of the Code of Civil Procedure.

THE CLERK THE COUNSELLOR, acting as president