Paris Court of Appeal, No. 14/20486

Paris Court of Appeal, 10 May 2016, N° 14/20486

Mr. A B X (trader operating under the name ETS A B DIEYE)

vs.

SA ASCOT COMMODITIES

Mr. ABX and the Swiss company ASCOT COMMODITIES SA (ASCOT) have a commercial relationship for the import of foodstuffs into Senegal.

A dispute arose between the parties on the execution of three rice sales contracts the first of which was concluded on 30 July and the other two on 20 October 2008, they provided for arbitration before the Paris arbitration chamber.

Since Mr. ABX was unable to settle the price, the parties concluded on 7 May 2009 a pledge contract for a certain volume of goods, and on 4 June 2009 an escrow agreement in the hands of the International Bank for Commerce and Industry of Senegal, in order to receive the proceeds from the sale of pledged goods, that the balance of the escrow account would be allocated to the payment of the sum of 27,350,240 euros of which Mr. ABX recognized himself as a debtor. The pledge contract and the escrow agreement contained a choice of court clause to the benefit of the Senegalese courts.

On 10 June 2009, ASCOT filed a request for arbitration with the Paris Arbitral Chamber.

The arbitral tribunal issued, on 23 July 2013, a draft award which granted most of ASCOT’s claims. On 4 September 2013, Mr. ABX requested a second-degree examination of the case.

By an award rendered in Paris on 21 July 2014, the second degree arbitral tribunal, composed of Messrs. Train, Laffaye, Marceron, Mayeux, and Ms.  Y, co-arbitrators said:

• that the law applicable to the dispute was Senegalese law,

• that the conclusion of the pledge contract and the escrow account agreement had not resulted in the deferral of the debt due for an initial amount of 23,750,475 euros,

• that after deduction of the partial payments, the outstanding balance amounted to 10,575,946.33 euros in principal and interest as of 30 June 2014, to the payment of which Mr. ABX was condemned with interest according to Senegalese law as of this same date.

On 10 October 2014, Mr. ABX filed an action against this award.

By submissions notified on 12 January 2016, he requests to annul the award and to order ASCOT to pay him 20,000 euros in application of article 700 of the code of civil procedure. He invokes the lack of jurisdiction of the arbitral tribunal (article 1520-1 of the code of civil procedure), the disregard by the arbitrators of their mission (article 1520-2 of the code of civil procedure), and the violation of international public policy (article 1520-5 of the code of civil procedure).

By submissions notified on 10 February 2016, ASCOT asks the court to reject Mr. ABX of his claims and to order him to pay 20,000 euros in application of article 700 of the code of civil procedure.

UPON WHICH:

On the first two grounds for annulment based on the lack of jurisdiction of the arbitral tribunal and the disregard by the arbitrators of their mission (article 1520-1 and -3 of the code of civil procedure):

Mr. ABX argues that the pledge contract contains an acknowledgment of debt, and that there was no longer, at the date of its conclusion a dispute relating to the existence and extent of the debt, and that the subsequent disputes only concerned the pledge contract, which expressly stipulated that even if it did not entail novation, it submitted all disputes arising from its interpretation or its execution to the Senegalese courts, the same applies to the sequestration agreement. The Appellant argues that by ruling on the exigibility and the quantum of the debt, the arbitral tribunal necessarily ruled on the execution and validity of the pledge and sequestration contracts, he adds that he availed himself of this plea before the arbitral tribunal by asking it to put a preliminary question to the Senegalese judge.

Mr. ABX alleges that, for the same reasons, in liquidating the debt, the arbitral tribunal disregarded its mission, which was limited to sales contracts excluding pledge and sequestration agreements.

Whereas, firstly, that under article 1466 of the code of civil procedure, applicable in international matters by virtue of article 1506 of the same code: ‘The party which, knowingly and without a legitimate reason, fails to raise an objection in a timely manner before the arbitral tribunal, shall be deemed to have waived its right to make that objection’;

Whereas the award states in paragraphs 22 and 23: ‘the parties disagree on whether the arbitral tribunal can take into consideration, and if so to what extent, the pledge agreement and the escrow account agreement, on which it is not competent, for the purposes of resolving the dispute relating to the three sales contracts, over which it is competent. In particular, one of the main contentious issues between the parties is whether the conclusion of the pledge contract and the escrow account agreement had an influence on the liability of the debt arising from the sales contracts. This interpretation of the will of the parties necessarily implies on the part of the arbitral tribunal that the contracts of pledge and escrow account are taken into consideration.

According to Mr. ABX, the interpretation of the pledge contract and the escrow account agreement is necessary for the resolution of the dispute between the parties and can only be made by the courts of Dakar, in accordance with the jurisdiction clause appearing in each of these two contracts. Mr. ABX considers that the arbitral tribunal can only interpret the will of the parties at the time of the conclusion of the sales contracts, because this is the limit of its jurisdiction. In other words, he invokes the existence of a preliminary question, falling within the exclusive jurisdiction of another court and which the arbitral tribunal could not therefore decide, which would oblige him to stay the ruling while waiting for the Senegalese courts themselves to have pronounced their decision’;

Whereas it follows from these statements that Mr. ABX who, during the arbitration proceedings, did not contest the jurisdiction of the arbitrators in the main proceedings over the dispute relating to the sales contracts, is not admissible to argue before the annulment judge that on the date of referral to the arbitral tribunal, the conclusion of the pledge and sequestration agreements would have put an end to any dispute arising from the sales; that on the other hand, however, contrary to what ASCOT claims, the ground based on the limitation of arbitral jurisdiction with regard to the consequences of pledge and sequestration contracts had been invoked by Mr. ABX before the court, so that this ground is admissible before the court of appeal;

Whereas, secondly, that the annulment judge controls the decision of the arbitral tribunal on its jurisdiction by looking for all the elements of law or of fact allowing to assess the scope of the arbitration agreement and to deduce the consequences on compliance with the mission entrusted to the arbitrators;

Whereas an arbitral tribunal does not have the power to seize a state court of a preliminary question, it is up to it to resolve all the difficulties whose solution is a necessary precondition for that of the main dispute of which it is seized and in which it is competent, unless these matters are inherently non arbitrable;

Whereas in the present case, ASCOT asked the arbitrators to fix its claim against Mr. ABX by ruling on its due date, on the charging of the partial payments made under the three aforementioned sales contracts and a fourth one which came under another arbitral jurisdiction, as well as the rate and course of interest;

Whereas the liquidation of the debt resulting from the sales contracts containing the arbitration clause fell within the competence of the arbitral tribunal; That the latter, taking into account, as a fact necessary for the solution of this dispute and, in particular, in search of the common intention of the parties relating to the exigibility of the debt, the existence of the pledge and sequestration which stipulated a choice of court clause, neither exceeded its jurisdiction nor disregarded its mission;

That the first two grounds must therefore be rejected;

On the third ground for annulment based on the violation of international public policy (article 1520-5 of the Code of Civil Procedure):

Mr. ABX argues that the award rendered on 21 July 2014 is contradictory to the judgment rendered on 24 December 2013 by the Dakar Hors Class Regional Court which annulled article 4 of the pledge contract, as well as the sequestration agreement, and ordered an expert report, and with the decision of the Dakar Court of Appeal of 23 January 2015 which confirmed the judgment in that it had annulled article 4 of the pledge contract, reversed it in what concerned the expertise and the complete cancellation of the sequestration agreement, which declared only Article 2 of this agreement void and referred to the arbitral tribunal the calculation of the remainder. The Appellant states that the annulment of Article 4 was ordered by the Senegalese courts on the grounds that this mechanism did not comply with the provisions of the OHADA uniform act which provide that the allocation of the pledge to the pledgee is authorized by the competent court following the expert’s opinion.

Whereas, the recognition or enforcement of an award irreconcilable with a foreign court decision previously enforced in France violates in a manifest, effective and concrete way international public policy; that judicial decisions which entail mutually exclusive legal consequences are irreconcilable;

Whereas in the present case, Mr. ABX does not allege that the Senegalese decisions which he relies on have benefited from the exequatur in France; that the ground based on their irreconcilability with the award can therefore only be rejected;

Whereas it follows from all of the above that the appeal must be dismissed;

On article 700 of the code of civil procedure:

Whereas the appellant, who is unsuccessful, cannot benefit from the provisions of article 700 of the code of civil procedure and will be ordered on this basis to pay ASCOT the sum of 20,000 euros;

FOR THESE REASONS:

Dismisses the appeal against the award rendered between the parties on July 21, 2014.

Orders Mr. ABX to pay the costs, which may be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure, and to pay ASCOT COMMODITIES SA the sum of 20,000 euros in application of Article 700 of the Code of Civil Procedure. »