Paris Court of Appeal, No. 16/12944

Paris Court of Appeal, Pole 1 – Chamber 1, 29 May 2018, no. 16/12944

PRIOSMA (PREVIOUSLY KBS INTERNATIONAL LTD) vs. CAT SA

In a letter dated 30 September 2013, the COVEA group (including MMA, MAAF and GMF) appointed KBS International Ltd, a company registered in Bermuda, for the placement of some of its reinsurance programmes in the Bermuda insurance market, thus replacing Bermuda Kitson Brokerage Services Ltd (KBS Ltd) to which CAT SA, the group’s captive brokerage company, had entrusted this mission by an agreement of 16 February 2011. The letter of 30 September 2013 specified that the financial conditions remained the same, i.e. the retrocession of 5% of the commissions to CAT (i.e., half of the 10% commission from KBS International). This appointment, accepted on the same day by KBS International, did not contain any clause relating to dispute resolution.

Priosma, being the new name of KBS International, did not settle the stipulated commissions and, without denying its debt, indicated that it made the payment conditional upon the formalisation of a co-brokerage contract with CAT SA. The latter initiated arbitration proceedings on the basis of the arbitration clause stipulated in the contract of February 2011.

An arbitral award issued in Paris on 10 May 2016 by the ad hoc arbitral tribunal constituted of Messrs X and Job, arbitrators, and Mr Y, Chairman, ruling as amiable compositeurs, sentenced Priosma to pay the amount of 556,958.00 to CAT SA as retrocession of half of the commissions received. This sum was set at a lower amount than the amount of EUR 606,958.00 which had been requested, in order to take into account, on the basis of equity, the abrupt termination by CAT SA of its relation with Priosma.

On 10 June 2016, Priosma filed an appeal against the award.

By submissions notified on 16 January 2018, Priosma requested the court to annul the award, order the restitution of any sums paid to CAT SA in execution of the award and order the opposing party to pay to it the sum of EUR 50,000 under Article 700 of the Code of Civil Procedure. It raises the ground of the lack of competence of the arbitral tribunal.

By submissions notified on 28 February 2018, CAT SA requested the court to reject the claims of the opposing party and to order the latter to pay the sum of 20,000 euros under Article 700 of the Code of Civil Procedure.

UPON WHICH

On the sole ground for annulment based on the arbitral tribunal’s lack of competence (Article 1520-1 of the Code of Civil Procedure)

Priosma claims, on one hand, that the agreements of 30 September 2013 do not refer to, nor even disclose, the arbitration clause stipulated in the appendix to the co-brokering contract between CAT SA and Kitson of 16 February 2011, and that, therefore, it did not consent to this clause. It claims, on the other hand that no demonstration was made of an assignment of contract entailing the transmission of the arbitration clause between the former broker Kitson and Priosma, since this clause, which was contained in the co-brokerage contract between CAT SA and Kitson could not have been transferred by the insurers of the COVEA group, which were not party to this convention and which are the only ones to have contracted with it on 30 September 2013. Priosma adds that the letter of 30 September 2013 was sent by the insurers of the COVEA group acting in the interests of the group, i.e. as brokers and not as representatives. Thus, they could not be bound on behalf of CAT SA.

Whereas, on 16 February 2011, CAT SA, a reinsurance brokerage company captive of the COVEA group, entered into a co-brokerage agreement with Kitson Brokerage Services Ltd (KBS Ltd), a company of reinsurance brokerage subject to the laws of Bermuda, for the placement of certain reinsurance programmes in the Bermuda market. This agreement contained an arbitration clause.

In 2013, Mr Z A, an employee of KBS Ltd, defected in order to set up a new reinsurance brokerage company incorporated in Bermuda, named KBS International Ltd, and later renamed Priosma Ltd.

By a letter dated 30 September 2013, the COVEA group appointed this new company as a replacement for KBS, while specifying that the financial conditions remained the same, i.e., the retrocession of 5% of commissions to CAT (i.e., half of Priosma’s 10% commission). This appointment, accepted on the same day by KBS International, did not contain any clause regarding the settlement of disputes.

Whereas, Priosma claims that the contract concluded with the COVEA group results exclusively from the terms of the letter of 30 September 2013, which refers only to the financial conditions of the contract dated 16 February 2011, and therefore did not have the effect of incorporating the other stipulations of this contract into the new contract and, in particular, its arbitration clause.

Whereas, however, the letter of 30 September 2013 merely confirms the appointment of KBS International Ltd as broker for the placement of the TGN programs of the COVEA group and orders the transfer to this company of all the files and responsibilities held by KBS Ltd. The accompanying email specified that the financial conditions remained the same as those agreed upon with the previous counterparty.

Whereas, the letter and e-mail do not define the object of the contract, namely the substance of the mission entrusted to KBS International, nor do they define the rights and obligations of the parties, other than the amount of the commission. The 2013 contract is devoid of substance if it does not reference all of the stipulations of the 2011 contract. Therefore, KBS International’s consent necessarily concerned the whole of the stipulations, including the arbitration clause.

Whereas, the ground alleging the lack of competence of the arbitral tribunal must therefore be rejected and the action for annulment dismissed.

On Article 700 of the Code of Civil Procedure

Whereas, Priosma, who is unsuccessful, cannot benefit from the provisions of Article 700 of the Code of Civil Procedure and will be ordered on that basis to pay CAT SA the sum of EUR 20,000.

FOR THESE REASONS

Dismisses the action for annulment of the award issued in Paris between the parties on 10 May 2016.

Orders Priosma Limited to pay the costs and to pay to CAT SA the sum of 20,000 euros under Article 700 of the Code of Civil Procedure.

Dismisses all other claims.