Paris Court of Appeal, No. 16/09386

Paris Court of Appeal, Pole 1, First Chamber, 27 March 2018, No. 16/09386

Upheld by: Court of Cassation, First Civil Chamber, 3 October 2019, No. 18-15.756

SAAD BUZWAIR AUTOMOTIVE CO
vs. AUDI VOLKSWAGEN MIDDLE EAST FZE

On 1 July 2007, the Qatari Company Saad Buzwair Automotive Co (SBA) entered into an agreement with the Emirati Company Audi Volkswagen Middle East Fze (AUDI MIDDLE EAST) for the distribution in Qatar of Audi vehicles and their spare parts, as well as the after-sales service for these products. An identical agreement was concluded on the same day with regard to Volkswagen vehicles.

On 14 March 2011, AUDI MIDDLE EAST announced its intention not to renew these two agreements.

On 8 February 2013, SBA initiated arbitration proceedings in accordance with the arbitration clauses which provided for arbitration in Paris under the supervision of the International Chamber of Commerce with application of German law to the merits of the dispute.

In an award rendered on 16 March 2016, the arbitral tribunal composed of Messrs. G-H X and B C, arbitrators, and Mr. D E, President, ruled that AUDI MIDDLE EAST was entitled not to renew the contracts, rejected the SBA’s claims and ordered the SBA to bear the costs of the arbitration, as well as all of AUDI MIDDLE EAST’s costs and fees.

On 20 April 2016, SBA filed an appeal against this award.

By submissions notified on 22 January 2018, it requested the court to set aside it for irregularity in the constitution of the arbitral tribunal and to order AUDI MIDDLE EAST to pay it the sum of 150,000 euros pursuant to Article 700 of the Code of Civil Procedure.

By submissions notified on 15 January 2018, AUDI MIDDLE EAST requested the court to reject the annulment action and to order SBA to pay him the sum of EUR 250,000 pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

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

The claimant considers that Mr. X failed to disclose the relationship between the law firm of which he is a partner and entities of the Volkswagen and Porsche groups and that these circumstances were such as to create a reasonable doubt as to the arbitrator’s independence and impartiality.

Considering that under the terms of paragraph 2 of Article 1456 of the Code of Civil Procedure, applicable in international matters by virtue of Article 1506 of the same code: “Before accepting a mandate, an arbitrator shall disclose any circumstance that may affect his or her independence or impartiality. He or she also shall disclose promptly any such circumstance that may arise after accepting the mission.”

Considering, however, on one hand, that according to article 1466 of the code of civil procedure, applicable to international arbitration by reference of article 1506-3 of the same code: “A party which, knowingly and without legitimate reason, fails to invoke an irregularity before the arbitral tribunal in due time shall be deemed to have waived the right to invoke such irregularity”; that such a presumption is opposable to a person who does not exercise his right of challenge within the time limits and in the manner provided for in the arbitration rules to which the parties have agreed to submit;

On the other hand, the arbitrator’s duty to provide information must be assessed considering the notoriety of the situation being criticized, its connection with the dispute and its impact on the arbitrator’s judgment;

Considering that if public and very easily accessible information, which the parties could not fail to consult before the beginning of the arbitration, is of such a nature as to characterise the notoriety of a conflict of interest, on the other hand, it cannot reasonably be required either that the parties carry out a systematic analysis of the sources likely to mention the name of the arbitrator and the persons related to him, or that they continue their research after the beginning of the arbitral proceedings;

Considering that in this case, following its request for arbitration filed on 8 February 2013, the SBA selected Mr. X as arbitrator; that the Secretariat of the ICC Court of Arbitration sent to the latter, in accordance with Article 11 of the Arbitration Rules, an information sheet on the file mentioning the names of the parties to the arbitration, as well as the names of all the entities involved in the dispute, including the Volkswagen Group; that on 12 March 2013, Mr. X replied that he accepted the arbitration, specifying that: “To the best of my knowledge and after due enquiry, there are no facts or circumstances, past or present, of such a nature as to call into question my independence in the mind of one of the parties and no circumstances that could give rise to a reasonable doubt as to my impartiality, which I should disclose”;

Whereas the award was rendered on 16 March 2016, unanimously by the arbitral tribunal composed of Messrs. G-H X, and B C, arbitrators, and Mr. D E, President;

Considering that SBA argues that after the award was rendered it discovered in the German Lawyers' Yearbook, JUVE, 2010/2011 edition, that the Haver & Mailänder (H&M), to which Mr. X belongs, represented a consortium of three banks, including Volkswagen Bank, part of the Volkswagen Group, in a competition dispute with Sparkasse Ingolstadt; when questioned by SBA on this fact, Mr. X, in a letter dated 23 May 2016, acknowledged that H&M represented Volkswagen Bank until a decision of the Munich Court of Appeal in June 2010, the further proceedings before the Federal Supreme Court were handled by the equivalent of a lawyer to French Councils; he added that he was not informed of the existence of this file in which he did not personally take part, that if he had been aware of it, he would obviously have revealed it, and that H&M did not ‘Otherwise act for or advised any company or entity of the Volkswagen Group, including the Porsche Group, from 2011 to the present';

Whereas SBA states that the same professional directory, 2015/2016 edition, mentions the representation of Porsche, an entity of the Volkswagen group, in the context of an ongoing dispute, by the arbitration and mediation department of the law firm Haver & Mailänder;

Considering that AUDI MIDDLE EAST claims that this reference is erroneous and that it is probably the result of a lack of updating attributable to the publisher; that it submits to the debates the 2016/2017 edition which no longer mentions such collaboration, as well as a certificate from Mr. F Y, legal director of the distribution law department of the Porsche company dated 5 January 2017, stating that “I have not, at any time since the date of my arrival in the legal department of Porsche A.G. on October 1st 2008 mandated and I have not been aware of any substantial mandate entrusted to H&M by other colleagues in the legal department since October 1st 2008 with the exception of (…) a specific banking law mission in connection with the financing of sales by authorised Porsche centres. Mr. X was not involved in these advisory services which were provided from June to November 2010 and which were charged 7, 520, 80 euros”;

But considering, on the one hand, that apart from the fact that Mr. Y is not neutral vis-à-vis any party, it appears that he works in the distribution law department and does not claim to have made an exhaustive search for mandates which might have been granted by Porsche to H&M by other departments of the legal department, merely stating that ‘he was not aware of any substantial mandates’ granted by his colleagues, which, strictly speaking, does not commit him to anything;

That, furthermore, the disappearance of the reference to Porsche in the 2016/2017 edition of the JUVE yearbook has nothing to do with an erratum for the previous edition and that AUDI MIDDLE EAST’s alleged explanation that that reference was the result of a lack of updating attributable to the publisher is contradicted by the fact that the name Porsche does not appear in the 2013/2014 edition;

Whereas, finally, that SBA included in the discussions the model form sent by the JUVE editorial team to the business law firms to draw up its directory; whereas one of the headings relates to the ‘top 5 most important cases from a legal point of view or for the development of the firm’ and has four lines to indicate the name of the client, and the characteristics of the case;

Considering that AUDI MIDDLE EAST does not produce the only part which would demonstrate that the mention of Porsche would be an error on the part of the publisher, namely the copy of the form which it returned to JUVE for the 2015/2016 edition;

Considering, moreover, that, contrary to what AUDI MIDDLE EAST claims, this publication by which the business firms highlight the most flattering businesses they have had to deal with and the most coveted clients who have mandated them is an important element of communication that cannot be left to chance;

Considering that AUDI MIDDLE EAST does not therefore demonstrate that the mention of Porsche among its customers in 2014 and/or 2015 would be erroneous;

Considering that while the existence of a contract executed in 2010 by the law firm H&M for Volkswagen Bank must be regarded as notorious by virtue of its publication prior to the commencement of the arbitration in a professional directory known to all German business law firms, on the other hand, AUDI MIDDLE EAST was not obliged to continue its research after the commencement of the arbitration and it was incumbent on the arbitrator to inform the parties of any circumstances likely to affect its independence or impartiality arising after the acceptance of its assignment;

Considering that it has been established that in 2014 and/or 2015, Porsche, an entity of the Volkswagen group, was a client of the law firm H&M for a noteworthy mission sufficiently notable for the firm to make it an element of its communication and to include it in the “top 5” of its most remarkable cases;

Considering that this assignment, which took place during the course of the arbitration proceedings and which was of undeniable importance in the eyes of the firm to which Mr. A belongs, was a circumstance likely to create reasonable doubt as to the independence and impartiality of this arbitrator, it being furthermore observed that it results from the aforementioned certificate of Mr. Y that in 2010 an assignment was entrusted by Porsche to H&M, an assignment which was admittedly of minor importance, but not declared by the arbitrator and not made public by the firm;

And whereas the circumstance that the award was made unanimously and that the impartiality of the other arbitrators was not discussed is irrelevant, each member of the arbitral tribunal being equally susceptible, by his questions during the debates and by his arguments during the deliberation, to influence the other arbitrators;

Whereas it follows from the foregoing that the award must be set aside;

On Article 700 of the Code of Civil Procedure:

Considering that AUDI MIDDLE EAST, who succumbs, cannot benefit from the provisions of article 700 of the Code of Civil Procedure, and will be ordered on this basis to pay the sum of 100,000 euros to SBA;

FOR THESE REASONS:

Set aside the award rendered in Paris between the parties on 16 March 2016.

Order Audi Volkswagen Middle East Fze to pay the costs which may be recovered in accordance with the provisions of Article 699 of the Code of Civil Procedure and the payment to Saad Buzwair Automotive Co. of the sum of EUR 100,000 pursuant to Article 700 of the Code of Civil Procedure.