Paris Court of Appeal, No. 15/13696

Paris Court of Appeal, Pole 1 – Chamber 1, 17 October 2017, no. 15/13696

POLOWANIE

D E TUNISIE SARL

SNC SM2G

SA TRANS F G (Y)

MESSRS B AND C Z (MESSRS Z)

Vs.

NOV BRANDT EUROPE FRANCE (NOV)

Polowanie, a company incorporated under Luxembourg law, is a holding company which was the majority partner of D E Tunisie SARL (of which Mr B Z was a minority partner) before it was sold to Nov Brandt Europe France (NOV).

NOV is a SAS (equivalent to a simplified joint stock company) under French law, member of the National Oilwell Varco group, active in the production and sale of equipment for oil and gas drilling, oilfield inspection and logistics services in the same sector.

Through an agreement called ‘Master share and business transfer agreement’ (hereinafter the agreement) concluded on 11 March 2008 between the parties listed above, NOV purchased two stock-in-trade from French and Gabonese companies, as well as units of D E Tunisie SARL (hereafter, the Tunisian company), which operated a waste treatment centre near Sfax (Tunisia). Article 11 provided that Polowanie, D E, SM2G, Y and Messrs Z undertook to indemnify NOV in case of breach of warranties provided for in Annex 1 of the agreement, subject to several restrictions. Article 22.3 provided for the settlement of disputes through arbitration under the auspices of the Paris Arbitration and Mediation Centre (CAMP). The sale was preceded by an audit, namely legal and environmental audits, of the Tunisian company in 2006 and 2007.

In 2010, NOV notified four claims relating to alleged breaches of the guarantees stipulated by the agreement. On 12 August 2010, the parties signed a settlement agreement under which the guarantors undertook to remove a certain volume of sludge at their own expense in return for which all existing disputes were definitively settled. The settlement agreement contained a clause conferring jurisdiction to the Paris Commercial Court.

In 2012 and 2014, NOV notified new claims.

A judicial expertise was ordered by the President of the Paris Commercial Court but could not be executed. An amicable expert appraisal was in progress.

On 6 March 2014, NOV filed a request for arbitration with the CAMP regarding a claim for damages of EUR 8,000,000 in compensation for the prejudice resulting from false declarations of the sellers and from on-site storage of untreated sludge.

On 1 June 2015, the arbitral tribunal composed of Messrs X and Berbineau, arbitrators, and Mrs A, President, declared itself competent to rule on the dispute.

On 6 July 2015, Polowanie, D E, SM2G and Y, as well as Messrs Z filed an appeal against this award.

By submissions notified on 5 December 2016, the appellants request the annulment of the award, the dismissal of their opponent’s claims and the condemnation of the latter to pay them a sum of EUR 20,000 under Article 700 of the Code of Civil Procedure. They invoke the incompetence of the arbitral tribunal, the disregard of the principle of adversarial proceedings and the violation of the international public order.

By submissions notified on 7 December 2016, NOV seeks the dismissal of the action for annulment and the condemnation of the appellants to pay to NOV the sum of EUR 50,000 under Article 700 of the Code of Civil Procedure.

UPON WHICH,

On the first ground for annulment based on the incompetence of the arbitral tribunal (Article 1520-1 of the Code of Civil Procedure):

After having recalled the principle of the autonomy of the forum clause which applies even if the agreement containing it is ineffective for one reason or another, the appellants request the court to annul the award, retaining, as a ground for annulment, that by inserting a forum clause in the settlement agreement, the parties waived arbitration. Alternatively, they claim that the forum clause of the settlement agreement and the arbitration clause of the agreement are irreconcilable, and in the further alternative, that the arbitral tribunal is incompetent to interpret the settlement agreement and assess the scope thereof, and even more alternatively, that the arbitral tribunal misrepresented the terms of the settlement agreement.

Whereas, the judge ruling on annulment examines the decision of the arbitral tribunal on its competence, whether it has declared itself competent or incompetent, by looking for all elements of law or fact allowing to assess the scope of the arbitration agreement and to deduce the consequences thereof on the arbitrators’ respect of the mission entrusted to them.

Whereas, the request was brought before the arbitral tribunal on the basis of Article 22.3 of the agreement for the transfer of units in the Tunisian company, according to which: Any dispute arising out of or in connection with this agreement shall be decided in accordance with the arbitration rules of the Paris Arbitration and Mediation Centre (CAMP) by one or more arbitrators appointed in accordance with the audit regulation'.

Whereas, NOV’s request for arbitration concerned the implementation of the guarantees stipulated by the agreement with respect to the following facts:

• a claim addressed to the guarantors on 23 July 2012 following the discovery of large volumes of untreated drilling waste in the northern part of the site operated by the Tunisian company,

• a notification to the guarantors on 25 February 2014 of the discovery in October 2013 of the existence of two ongoing disputes between the Tunisian company and the National Tunisian Commission for the protection of the environment (ANPE) concerning the discharge of water polluted with oil in the sand basins on the site. The true nature of these disputes had been concealed in the annexes to the agreement.

Whereas, the appellants claim that, as a result of the notification by NOV in 2010 of claims relating to alleged violations of the guarantees stipulated by the agreement, the parties concluded on 12 August 2010 a settlement agreement that ended all of the disputes in return for their commitment to remove a certain volume of sludge at their own expense. They also claim that the forum clause conferring competence to the Paris Commercial Court and stipulated by this settlement agreement renders the arbitration clause provided for in the initial agreement ineffective.

Whereas, firstly, the circumstance that the settlement is not enforceable against NOV, as a result of its counterparties’ failure to comply with the conditions thereof, does not influence the effectiveness of the forum clause, due to the autonomy of such clause in relation to the convention containing it.

Whereas, secondly, contrary to the appellants’ contentions, the arbitrators are entitled to decide, in accordance with the principle of competence/competence, to rule by priority on their own competence and, to this end and to this extent, to interpret the settlement agreement and to assess the scope of the forum clause that it contains, in order to deduce the extent of the scope of the arbitration clause.

Whereas the ground taken from the fact that the arbitral tribunal exceeded its competence by ruling on this matter, such ground can only be dismissed.

Whereas, thirdly, the settlement agreement stated that, in return for the reciprocal concessions and commitments entered into by the parties, the latter ‘expressly recognised that all of the existing accounts, claims, disputes and liabilities, whatever they may be, in relation to the [agreement] shall be settled definitively and irrevocably’ ('The Parties explicitly agree that all existing accounts, claims, disputes and liabilities whatsoever in relation to the [agreement] are hereby definitely and irrevocably settled'). They provided in Article 5 that their agreement had the scope of a settlement within the meaning of Articles 2044 and following of the French Civil Code.

According to Article 2048 of this Code: ‘The settlements are restricted to their subject matter; the waiver provided therein of all rights, actions and other contentions, shall be understood only in relation to the dispute that gave rise to it’.

If Article 2044 stipulates that, through a settlement, the parties can not only end a dispute that has already arisen, but also prevent an unborn dispute, it is only in so far as the parties have stipulated in this manner.

In the present case, the settlement agreement expressly refers to the ‘existing’ disputes. Therefore, it necessarily reserves all disputes arising from the initial agreement which would relate to subject matters that are distinct from those foreseen by the 2010 claims and which would therefore fall within the scope of the arbitration clause contained in this agreement.

Whereas, the foregoing entails that the arbitration clause and the forum clause, which have different subject matters, are not irreconcilable, and that the insertion of the latter in the settlement agreement does not entail a waiver by the parties of the former.

Whereas, fourthly, the settlement agreement describes the dispute between the parties in the following terms:

‘On 12 January 2010, NOV notified Y of the following difficulties:

- The Tunisian company had been inflicted with various fines related to environmental issues. NOV considered that the Guarantors were in breach of their declaration under Section 17 of Annex 1, since these fines were imposed before the closing, or were born before the closing.

- The Tunisian company did not have an industrial permit which NOV considered a breach of Section 11 of Annex 1 (…)

On 9 April 2010, NOV was required to notify Y of two additional claims:

- The presence of processed drilling cuttings on the site of the Tunisian company deriving from the activity of the Tunisian company prior to the acquisition. NOV estimated that the presence of drill cuttings on the site was contrary to Tunisian environmental laws and therefore constituted a failure to comply with Section 17 (a) of Annex 1.

- The consequences of mistakes made by the tax authorities following the tax inspection of the Tunisian company of February 2004, which have never have been resolved. NOV believed that this was a breach of the commitments of the guarantors under Section 11.3 of the Framework Agreement for the Purchase of Shares'.

Whereas, on one hand, the April 2010 notification, which involved ‘transformed’ drilling cutting cannot be regarded as relating to the same subject matter as the July 2012 notification on the ‘untreated’ drilling wastes. Contrary to the appellants’ allegations, the settlement agreement is clear, and thus there is no need to apply the former Article 1162 of the Civil Code nor the new Article 1190 of the Civil Code, which set the interpretation rules in case of doubt.

Whereas, on the other hand, the January 2010 notification of fines that the settlement agreement suggests were penalties not declared at the time of sale or issued after such sale on the basis of earlier facts, and the notification of February 2014 which concerns fines that would have been declared by the sellers but were misrepresented as relating to a pollution by domestic sewage while it was oil pollution, cannot furthermore be considered as relating to the same subject matter.

Therefore, whereas, the arbitral tribunal, correctly and without distorting the terms of the settlement agreement, recognised its competence with respect to claims which were not within the scope of the settlement agreement.

Whereas, the foregoing entails that the ground alleging the arbitrators' incompetence is unfounded.

On the ground alleging the violation of the principle of due process (in french principe de la contradiction) (Article 1520-4 of the Code of Civil Procedure):

The appellants submit that, by ruling on the scope of the settlement agreement when questions on admissibility and on the merits of the claims had not yet been brought before it, the arbitral tribunal disregarded the principle of adversarial proceedings.

Whereas, the principle of due process requires only that the parties were able to communicate their claims in fact and in law, and discuss their opponent’s claims in such a way that nothing that was used as a basis for the arbitrators’ decision would have escaped their adversarial debate.

Whereas, since the guarantors contested the competence of the arbitral tribunal by invoking the forum clause stipulated in the settlement agreement, the question of knowing whether the claims presented in the request for arbitration were related to subject matters included within the scope of the settlement agreement had been placed by the appellants themselves at the centre of the debate before the arbitrators.

The ground must therefore be dismissed.

On the ground alleging the violation of the international public order (Article 1520-5 of the Code of Civil Procedure):

The appellants claim that the arbitrators reversed the burden of proof and thus violated the international public order.

Whereas, the arbitral tribunal did not disregard any principle of international public order by ruling that the guarantors bore the burden to prove that, contrary to the inferences made from the terms of the settlement agreement, the claims submitted to the arbitral tribunal were identical to those that were the subject matter of the settlement.

Whereas the grounds must be dismissed.

Whereas the foregoing entails that the appeal must be dismissed.

On Article 700 of the Code of Civil Procedure:

Whereas, the appellants, who are unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure and will be ordered on this basis to pay NOV the sum of 30,000 euros.

FOR THESE REASONS:

Dismisses the appeal.

Condemns Polowanie, D E industry, SM2G, Trans F G, and Messrs B and C Z to pay the costs and to pay to NOV Brandt Europe France the sum of EUR 30,000 under Article 700 of the Code of Civil Procedure.