Paris Court of Appeal, No. 17/02677

Paris Court of Appeal, Pole 4, Eighth Chamber, 22 June 2017, No. 17/02677

Challenged decision: Tribunal of Grande Instance de Paris, 23 January 2017, No. 16/84187

S.A ANCIENNE MAISON MARCEL BAUCH vs. INDAGRO

FACTS, PROCEDURE AND CLAIMS OF THE PARTIES

A dispute has arisen between the company under Swiss law INDAGRO and the limited company under French law SA ANCIENNE MAISON MARCEL BAUCH (MARCEL BAUCH) in the performance of the contract by them concluded on 13 December 2007, concerning the purchase of fertilizers from Russia to be delivered in Lomé (Togo) and/or Cotonou (Benin), and more precisely on the payment of penalties due to the delay in unloading the vessel at the two ports concerned.

In accordance with the international arbitration clause in the contract, INDAGRO referred the matter to the London Maritime Arbitrators Association, which appointed Mr. X as sole arbitrator on 23 September 2008. Mr. X initially decided to suspend the arbitration proceedings because of the complaint filed on 28 January 2009 by MARCEL BAUCH for corruption of one of its employees, Mr. F Y, by INDAGRO. Since MARCEL BAUCH did not renew the guarantee ordered by the arbitrator, the latter rendered a final award in London on 6 May 2015, stating that MARCEL BAUCH would pay to INDAGRO the sum of USD 1,000,000, plus interest at a rate of 4.5% payable over three months, starting 28 March 2008, in addition to costs, and dismissed Company MARCEL BAUCH’s counterclaim.

This award was made enforceable in France by an enforcement order (in French Ordonnance d’exequatur) of the delegate of the President of the Paris Tribunal of Grande Instance dated 4 June 2015.

By order dated 3 July 2015, the pre-trial judge, referred to the appeal against this order, stopped the enforcement of the award on 6 May 2015, pending the decision of the court of appeal.

In a second award rendered in London on 4 January 2016 on the costs of the arbitral proceedings, the arbitrator said that MARCEL BAUCH should pay to INDAGRO the sums of USD 231,696.54, £9,852.81 and EUR 13,616.66, in addition to interest at the rate of 4.5% per annum and the costs of the award amounting to £5,450.

The award was made enforceable in France by an enforcement order (in French Ordonnance d’exequatur) dated 13 April 2016.

By order dated 30 June 2016, the pre-trial judge adapted the enforcement of the award dated 5 January 2016 and ordered the deposit by MARCEL BAUCH, within the month of the order, of the sum of 13,616.66 euros and the equivalent in euros on the day of payment of the sums of 231,696.54 USD, 9,852.81 pounds and 5,450 pounds plus interest that it was ordered to pay by the award handed down on 5 January 2016. The pre-trial judge also appointed the Caisse des Dépôts et Consignations as court receiver.

In addition, in a judgment dated 12 May 2016, the Paris Criminal Court found INDAGRO and Mr. Y, an employee of Company MARCEL BAUCH, guilty of corruption and ordered INDAGRO to pay MARCEL BAUCH, jointly and severally with others, the sums of $100,000 and $852,544 or their equivalent value in euros, in addition to 2,000 euros pursuant to Article 475-1 of the French Code of Criminal Procedure.

In a decision dated 27 September 2016, the Court of Appeal of this seat reversed the order dated 4 June 2015, which granted enforcement (in French Exequatur) to the award rendered between the parties in London on 6 May 2015. Moreover, the Court of Appeal rejected the application for enforcement (in French Exequatur) to this award and ordered INDAGRO to pay MARCEL BAUCH the sum of 50,000 euros in application of Article 700 of the code of civil procedure.

In a judgment dated 15 November 2016, the court overturned the order dated 13 April 2016, which granted enforcement (in French Exequatur) to the award rendered between the parties in London on 4 January 2016.

Following the decision overturning the enforceability orders of the arbitral awards, INDAGRO released on 2 December 2016 the attachment on bank accounts that it had ordered on 20 May 2016 from the hands of Selarl Ascagne AJ, pursuant to the arbitral award of 4 January 2016, which was enforceable on 13 April 2016. On the same day INDAGRO made two preventive seizure in the hands of the same third party on the basis of articles L. 511-1 and L. 511-2 of the Civil Enforcement Proceedings Code, one based on the arbitral award of 6 May 2015 for payment of the sum of 1,388,934.85 euros in principal, interest and costs, and the other based on the arbitral award of 4 January 2016 for payment of the sum of 269,252.29 euros in principal, interest and costs. On 12 December 2016, Selarl Ascagne AJ, in the person of Me G H, the liquidator of Company MARCEL BAUCH, declared that it held in its books, on behalf of the latter, the sum of 1,661 493.88 euros, subject to the transactions in progress.

On the same day, Indagro denounced to Selarl Ascagne AJ, in its capacity as third party seized, the appeals lodged against the judgments of 27 September 2016 and 15 November 2016.

MARCEL BRAUCH challenged the seizures made against it before the enforcement judge of the Paris Tribunal of Grande Instance which, by judgment of 23 January 2017, dismissed its application for nullity of the two preventive seizures made against it and their withdrawal. The judge ordered MARCEL BRAUCH to pay Indagro the sum of 3,000 euros under Article 700 of the Code of Civil Procedure.

MARCEL BAUCH appealed against this judgment in its declaration dated 3 February 2017.

Authorised by order of 13 February 2017 to be assigned on a fixed date for the hearing of 3 May 2017, it summoned INDAGRO, pursuant to a writ of summons issued on 21 February 2017, to the elected domicile by the bailiff who processed the disputed seizures, and on 1 March 2017, to the address of INDAGRO registered office in Geneva.

In its final submissions dated 2 May 2017, it requested the court to reverse the judgment in all its provisions, and by ruling again, primarily, to pronounce the nullity of the deeds of preventive seizures made on 2 December 2017 (in reality 2016) and of the subsequent acts and to order the withdrawal of these seizures. Subsidiarily, MARCEL BRAUCH requested the Court to pronounce the lapsing of these seizures. As an infinitely subsidiary, it requested the Court to order the substitution of the preventive seizure of receivables by a judicial mortgage on the real estate belonging to it and located at XXX in Paris 7e. It also requested the Court to reduce the amount of the seizures by the amount that INDAGRO still owes it on the grounds of the criminal judgment 12 of May 2016, i.e., EUR 203,182.70, in any event, and to order INDAGRO to pay it compensation of EUR 100,000 pursuant to Article L. 512-2 paragraph 2 of the Code of Civil Enforcement Proceedings and an indemnity of 80,000 euros pursuant to article 700 of the Code of Civil Procedure, as well as all the costs of the first instance and of the appeal.

By final submissions dated 2 May 2017, INDAGRO requested the court to uphold the judgment and to order MARCEL BAUCH to pay the sum of 5,000 euros pursuant to article 700 of the Code of Civil Procedure and to pay the costs of the proceedings.

UPON WHICH,

Pursuant to Article L. 511-1 of the Code of Civil Enforcement Proceedings, any person whose claim appears to be well-founded in principle may request the judge’s authorisation to take protective measures against the assets of his/her debtor, if it can justify circumstances that could threaten the recovery. Under article L. 511-2, prior authorisation from the judge is not required when the creditor boasts of a writ of enforcement or a court decision that is not yet enforceable.

Taking advantage of these provisions and the two arbitral awards rendered on 6 May 2015 and 4 January 2016, INDAGRO made two preventive seizures made on 2 December 2016 without seeking the authorisation of the enforcement judge.

MARCEL BAUCH, which challenges the regularity of the seizures made without prior authorisation, objects to the judgment in that it held that the decisions rendered on 27 September and 15 November 2016 overturning the orders of enforceability of the arbitral awards had the sole consequence of removing the enforceability of the awards but not of depriving them of any effect and that, consequently, INDAGRO was justified, in application of Article L. 511-2 of the Code of Civil Enforcement Proceedings, to rely on these two arbitral awards in order to carry out a preventive seizure without the authorization of the judge.

It maintains that, insofar as the enforcement orders (in French Ordonnances d’exequatur) have been overturned, INDAGRO no longer holds a writ of execution or court decision within the meaning of Article L. 511-2 of the Code of Civil Enforcement Procedures, justifying that it be exempt from obtaining an authorisation from the enforcement judge to carry out a preventive seizure and that, as a result, the seizures carried out on 2 December 2016 are irregular.

INDAGRO, in its turn, argues that the decisions of the Court of Appeal overturning the enforcement orders only questioned the enforceability of these awards in France. INDAGRO also argues that it continues the proceedings in order to obtain a writ of execution once it has appealed against these judgments, adding that if a cassation intervened, it would not restore the effects of the orders of the Pre-Trial Judge who stopped provisional enforcement in one hand, and began provisional enforcement in the other hand, and that the enforcement orders (in French Ordonnances d’exequatur) would then resume all their effects. It specifies that the arbitral awards have not been the subject of an action for annulment in England and can no longer be contested by MARCEL BAUCH.

It is not disputed that an international arbitral award that has not yet been declared enforceable constitutes a judicial decision allowing a preventive seizure because such an award benefits from a presumption of regularity and may produce effects in France even before it is enforceable.

Moreover, when an enforcement order is appealed, it follows from articles 1525 and 1520 of the Code of Civil Procedure that the court exercises its powers of review over the arbitral tribunal and the award, since the overturn of an enforcement order can only take place for grounds affecting the award and restrictively enumerated in article 1520. Thus, the court carries out a review relating to the compatibility of the award with the requirements of the French legal system.

As a result, when an order of enforceability of an international arbitral award is overturned, the award can no longer produce legal effects in France, even those of an award not yet subject to enforceability, and a party can no longer, in France, oppose it to the other party on any grounds whatsoever. The judgment which pronounces the overturn of the enforcement order is not limited to rendering the award unenforceable, but renders it unenforceable in the French legal system.

In the present case, both arbitral awards were declared enforceable by orders of the president of the Trribunal of Grande Instance of 4 June 2015 and 13 April 2016, which were confirmed by rulings dated 27 September and 15 November 2016 on the grounds, in particular, that due to the res judicata effect of the decision of the criminal court relating to the condemnation and the facts found to constitute the necessary support for the criminal condemnation. The unlawfulness of the cause of the contract between MARCEL BAUCH and INDAGRO was established and that the recognition or enforcement in France of an award allowing INDAGRO to benefit from the effects of the corrupt pact violated in a manifest, effective and concrete manner the French conception of international public order.

These judgments had the effect of depriving the arbitral awards in question of any effect in France, and INDAGRO is therefore not entitled to rely on these awards to make preventive seizures without the authorisation of the court.

The fact that the awards were not set aside at the seat of the arbitration has no impact on the question of the regularity of the seizures made in France.

Appeals brought by INDAGRO do not appear to have suspensive effect.

Preventive seizures made without prior authorisation of the enforcement judge are therefore irregular, without there being any need to examine whether the conditions set forth in article L. 511-1 have been fulfilled nor to rule on the claims presented in the alternative. These seizure must be released, and the judgment is overturned in this respect.

On a claim for damages

In accordance with article L. 512-2 paragraph 2 of the Code of Civil Enforcement Procedures, where release has been ordered by the court, the creditor may be ordered to pay compensation for the prejudice caused by the protective measure.

If this provision does not require the creditor to demonstrate a fault on the part of the creditor at the time of the preventive seizure which he has initiated, the award of damages depends on the existence of a prejudice resulting from the seizure carried out.

MARCEL BRAUCH explains that the disputed seizures have made all of its cash unavailable, causing it particularly serious prejudice when it is already suffering from its amicable liquidation situation and has to face the execution of a protocol committing it to the banks in the context of a conciliation procedure that it was forced to initiate.

However, it does not provide evidence of the reality of a loss actually suffered due to the unavailability of the sums seized as a precautionary measure. Indeed, it is noted that in a certificate drawn up on February 2, 2017, its chartered accountant stated that following the disputed seizures, the available cash balance at 31 December 2016 amounted to 273,202 euros, enabling the company’s general expenses to be paid over a period of approximately three months. Furthermore, the chartered accountant indicates that there is no evidence that MARCEL BRAUCH, which is being amicably liquidated, encountered difficulties in meeting its expenses and obligations to banks.

For this reason, the judgment will be confirmed in that it dismissed the claim for damages brought by MARCEL BAUCH.

On the claim for expenses and irrecoverable costs

The unsuccessful party, INDAGRO will bear the entire costs of the first instance and of the appeal, will retain the costs of its non-repayable expenses and will be ordered, pursuant to Article 700 of the Code of Civil Procedure, to pay to MARCEL BAUCH the sum of 5,000 euros for the purpose of compensating it for the costs incurred in the present proceedings.

FOR THESE REASONS,

Upholds the judgment except in that it rejected the claim for damages brought by the S.A ANCIENNE MAISON MARCEL BAUCH;

and, ruling once again on the basis of the contested provisions,

Declares null and void the two seizures of assets made on 2 December 2016 in the hands of Selarl Ascagne AJ, to the prejudice of S.A ANCIENNE MAISON MARCEL BAUCH;

Orders the release of these seizures;

Orders INDAGRO to pay SA ANCIENNE MAISON MARCEL BAUCH the sum of 5,000 euros pursuant to Article 700 of the Code of Civil Procedure;

Rejects any other request;

Orders INDAGRO to pay the costs of the first instance and of the appeal.