Paris Court of Appeal, No. 15/20168

Paris Court of Appeal, First Pole, First Chamber, 29 May 2018, No. 15/20168

ELCIR

vs.

S.A. BOUYGUES BATIMENT ILE DE FRANCE

Under two contracts dated 19 June 2012, Bouygues Bâtiment IDF (hereinafter “Bouygues”) has entered into a subcontracting agreement with the Lebanese company Elcir for various carpentry work packages for the construction and renovation of the Laënnec site in Paris, de Sèvres street.

Following a dispute between the parties, Bouygues initiated an arbitration proceeding on 28 May 2014, referring the matter to one of the arbitrators whose names appeared on the list of ten people that was annexed to the arbitration clauses of the two contracts.

Elcir challenged this arbitrator and suggested the appointment of Mr. X, whose name was also mentioned on the list. Bouygues accepted the proposal and a compromise agreement was signed on 12 January 2015.

On 10 September 2015, the sole arbitrator issued an award that pronounced reciprocal condemnations against both parties, leaving Elcir with a balance of approximately 380,000 euros.

On 12 October 2015, Elcir filed an action for annulment of this award. It claimed that the arbitration was internal and invoked two grounds for annulment based on the irregular composition of the arbitral tribunal and its failure to comply with its mission.

In a ruling dated 21 November 2017, the court revoked the closure and, before ruling, invited the arbitrator, Mr. X, to specify the number of arbitrations and amicable expert appraisals, involving the companies of the Bouygues group, in which he was involved between 1 January 2008 and 1 October 2014.

Following receipt of Mr. X’s response, Elcir notified, on 12 March 2018, that it sought the annulment of the award pursuant to Articles 1520-2 and 1520-3 of the French Code of Civil Procedure, and the setting of a timetable for the hearing of the claim on the merits, with costs and expenses reserved.

In a statement of claim served on 9 March 2018, Bouygues requested the court to declare Elcir inadmissible and, in any event, unfounded in its appeal, and to order it to pay the sum of 30,000 euros pursuant to Article 700 of the Code of Civil Procedure.

UPON WHICH:

On the qualification of the arbitration:

Considering that under the terms of article 1504 of the code of civil procedure: “An arbitration is international when international trade interests are at stake”; that it follows from this exclusively economic definition that an arbitration proceeding is international when the dispute submitted to the arbitrator concerns an operation which is not economically settled in a single State, regardless of the status or nationality of the parties, the law applicable on the merits of the dispute or the procedure, and the seat of the arbitral tribunal; that this classification does not depend on the will of the parties and it is therefore irrelevant whether the parties have referred to the provisions of the Code of Civil Procedure relating to domestic arbitration in the arbitration agreement;

Considering that it is common ground that in the present case, Elcir carried out work on French territory and was paid for it by transfer to a bank account opened in Lebanon; that this transfer of funds across borders qualifies as international arbitration;

On the ground for annulment based on the irregularity of the composition of the arbitral tribunal (article 1520-2 of the code of civil procedure):

Elcir maintains, firstly, that the restrictive list of arbitrators set out in the arbitration clause was imposed on it by Bouygues, and that the award is liable to be set aside on this ground alone. Secondly, Elcir alleges that the declaration of independence of arbitrator X was inaccurate or incomplete, one the one hand, in that the arbitrator claimed that he had no economic subordination to Bouygues, even though the sole fact that he was usually included in the arbitration clauses of Bouygues' contracts constituted such a relationship. On the other hand, Elcir alleges that the declaration of independence of arbitrator X was inaccurate or incomplete, in that he stated that he had no other arbitration agreements with the parties, even though Bouygues signs approximately 4,000 subcontracts in which his name appears each year. Finally, Elcir alleges that the declaration of independence of arbitrator X was inaccurate or incomplete, in that the arbitrator stated in ambiguous terms that he was not in charge of an arbitration proceeding with either party “to date” and “currently”, when in fact he had been the arbitrator in a dispute between Bouygues Bâtiment IDF and SNEF in 2013. Elcir adds that the arbitrator is listed in his declaration of independence as an expert before the Paris Court of Appeal, although he has not been on the list since January 2014.

Considering that following the beginning of the arbitration proceeding by Bouygues and the challenge of the first arbitrator chosen by it, namely, Mr. Y, Elcir proposed another name on the list annexed to the arbitration clause, that of Mr. X;

Considering that on 1 October 2014, Mr. X drew up a declaration of independence which states: “I, the undersigned, A-B X, Engineer from the Ecole Spéciale des Travaux Publics, expert before the Paris Court of Appeal, member of the company of expert engineers before the Paris Court of Appeal, certify on my honor that I have no known friendship with the directors of the companies ELCIR and BOUYGUES BATIMENT ILE DE FRANCE, and that I have no economic, personal or family subordination with these two companies and their subsidiaries.

To date, I have not been appointed as an arbitrator or legal expert by any of the parties involved or their subsidiaries.

I am not currently sitting in an arbitration proceeding involving one of the parties or one of its subsidiaries and I do not represent the interests or counsels of one of the parties or one of its subsidiaries.

Accordingly, I declare that I am completely independent and impartial with respect to the parties, and unrelated to their interests”.

Whereas by an email sent on 9 February 2016, Mr. Z, representative of the company, Elcir wrote to the arbitrator the following:

“In order to enable us to proceed with the settlement, I simply ask you to confirm clearly:

1 - Whether or not you had already been appointed as arbitrator by Bouygues Bâtiment Ile de France in the past

2 - Whether or not your name has appeared, since 2006, on the subcontracting agreements prepared by Bouygues Bâtiment Ile de France, as an arbitrator in the event of a dispute with these subcontractors

3 - That you are a “Judicial Expert before the Paris Court of Appeal” and were also a “Legal Expert before the Paris Court of Appeal” at the time of your declaration of independence regarding the dispute between Elcir and Bouygues Bâtiment Ile de France”;

That Mr. X replied in an email dated 10 February 2016: “Although I am under no obligation to answer your three questions, and in order to bring this case to a swift and final conclusion, I answer yes to all three questions and I am enclosing, for your information, an extract, concerning me, from the directory of the Company of Expert Engineers before the Paris Court of Appeal”;

Considering that in its judgment of 21 November 2017, this court noted that Mr. X’s participation in other arbitrations involving Bouygues Bâtiment Ile de France was new information, subsequent to the award; that if only one case was proven concerning SNEF in 2013/2014 for which Elcir produced an email from a manager of this company, a case for which the defendant claimed, without providing any justification, that it had been closed by an agreement of the parties, this element justified that Mr. X was asked to clarify the terms of his email of 10 February 2016; that the court asked the arbitrator to file a certificate stating:

“- the number of arbitrations in which he had acted between 1 January 2008 and 1 October 2014 as sole arbitrator or as a member of the arbitral tribunal in disputes concerning companies in the Bouygues group, either on the appointment of one of those companies or under a list of potential arbitrators annexed to the arbitration clause,

-the number of cases concerning Bouygues group companies in which he had been appointed as an amicable expert between 1 January 2008 and 1 October 2014”;

Considering that on 5 December 2017, Mr. X drew up a certificate in the form provided for in Articles 200 to 203 of the Code of Civil Procedure, it states that:

“Between 1 January 2008 and 1 October 2014, I intervened in a single arbitration proceeding to settle a dispute between Bouygues Bâtiment IDF and SNEF, the plaintiff in the arbitration.

In the present case, I was appointed as the second arbitrator of the arbitral tribunal by Bouygues Bâtiment IDF on 4 July 2013, from the list of potential arbitrators attached to an arbitration clause for subcontracting contracts.

I should point out that no award was made by the arbitral tribunal in the present case, as the parties signed a settlement agreement on 17 April 2014.

Finally, I would like to point out that I have not been appointed as an amicable expert in any case concerning the companies of the Bouygues group, between 1 January 2008 and 1 October 2014”;

Considering, first of all, that the appointment of Mr. X as arbitrator by Elcir’s opponent in an arbitration which would have ended less than six months before the declaration of independence in the present case, is a circumstance which the arbitrator could not ignore by hiding behind ambiguous formulas, such as “To date, I have not been appointed as arbitrator or court expert by any of the parties involved or their subsidiaries. I am not currently sitting in an arbitration involving one of the parties”;

Considering that if Mr. X and Bouygues claim that this arbitration proceeding ended in a settlement, suggesting that it is therefore not worthy of consideration, - which, in reality, does not change the fact that an arbitral tribunal has indeed been constituted and Mr. X has been chosen by Bouygues Bâtiment IDF -, Bouygues never produced the settlement agreement despite Elcir’s doubts about its existence, and never gave any explanation for this omission, so that this settlement outcome has not been demonstrated;

Considering that the appointment of Mr. X in the SNEF arbitration was not a known fact, that it was even very unlikely to be discovered, and that it was only confronted with the evidence that Bouygues admitted the reality of this fact, after having stated in its initial submissions that Mr. X had “never actually been chosen as arbitrator in a dispute before the one between the conclusive party and ELCIR” (Bouygues' conclusion of 11 May 2016, p. 5);

Considering, secondly, that the court, in its judgment of 21 November 2017, expressly invited Mr. X to explain his appointment as arbitrator or amicable expert not only in the cases concerning Bouygues Bâtiment Ile-de-France but also in the cases concerning all the companies in the Bouygues group; that, while he clearly replied with regard to the expert reports, he did not mention the arbitrations that might have been of interest to other companies in the Bouygues group; that, in view of the way the declaration of independence had been conceived, this omission cannot be regarded as inadvertent;

Considering, finally, that the deliberate concealment by the arbitrator of his appointment by the opposing party in another lawsuit only a few months before the beginning of the present arbitration is a circumstance of such a nature as to give rise, in the mind of the party which proposed this arbitrator only because it was obliged to choose from the list annexed to the arbitration clause, to a reasonable doubt as to the independence and impartiality of the arbitral tribunal; that this doubt can only be confirmed by the arbitrator’s reluctance to answer the specific questions put to him by the court;

Considering that the award should be set aside;

On the application for a determination of the merits of the dispute:

Considering that, in international arbitration, setting aside the award does not allow the court to decide the merits of the dispute; that the application will be dismissed;

On Article 700 of the Code of Civil Procedure:

Considering that Bouygues, which is unsuccessful, cannot benefit from the provisions of article 700 of the Code of Civil Procedure;

FOR THESE REASONS:

Sets aside the award rendered in Paris between the parties on 10 September 2015.

Rejects the request that the dispute be decided on the merits.

Orders Bouygues Bâtiment Ile-de-France to pay the costs.