Paris Court of Appeal, No. 16-24.374

Paris Court of Appeal, Pole 1 – Chamber 1, 23 October 2018, No. 16-24.374

SARL CABINET DE MAITRISE D’OEUVRE (CMO)

Vs.

SNC LAVALIN INTERNATIONAL (Y)

The Canadian group SNC-Lavalin Inc. is active internationally in the field of engineering and infrastructure construction. In 2011 and 2012, one of its French subsidiaries, SNC Lavalin International (hereafter Y) has concluded with the SARL Cabinet de Maîtrise d’Oeuvre (hereafter CMO), which works as a building and infrastructure consultant, five contracts for technical assistance in real estate transactions carried out in Casablanca by various clients.

On 23 December 2013, Y informed CMO of the termination of business relations with the entire SNC-Lavalin Group.

In application of the arbitration clause stipulated by the five Casablanca contracts, CMO filed a request for arbitration with the International Chamber of Commerce in July 2014.

In a partial award issued in Paris on 2 June 2015, Mrs X, sole arbitrator, ruled that French law was applicable to the merits of the dispute.

In an award issued in Paris on 18 October 2016, the sole arbitrator ordered Y to pay unpaid invoices for a total amount of approximately EUR 300,000, plus interest at the French legal rate. She dismissed CMO’s claim for the production of tax returns relating to these invoices, dismissed CMO’s claims for profit-sharing and pro rata account management, declared that the termination of the contracts by Y was wrongful, dismissed CMO’s claim for damages in respect of this wrongful termination, dismissed CMO’s claim for damages which is based on Y’s bad faith and abusive resistance to the application of the law dated 31 December 1975 on subcontracting, and dismissed all of Y’s counterclaims, divided by half the costs of the arbitration, liquidated at the sum of USD 49,100, and left each party to bear the burden of the costs incurred for its defence.

On 2 December 2016, CMO filed an action for partial annulment of the last award.

By an order of 14 March 2017, the pre-trial judge granted CMO’s claim for the enforcement of the award in so far as it condemns Y to the payment of invoices.

By submissions notified on 13 March 2018, CMO requested the court to declare the annulment of the award, but only in so far as it dismissed CMO’s claims for damages in respect of wrongful termination and abusive resistance, and where it accompanied CMO’s condemnation to the payment of invoices with the French legal interest rate. CMO invokes the violation of the principle of adversarial proceedings (Article 1520, 4° of the Code of Civil Procedure), the arbitrator’s disregard for his mission (Article 1520, 3° of the Code of Civil Procedure), as well as the violation of international public order (Article 1520, 5° of the Code of Civil Procedure).

By submissions notified on 30 May 2018, Y requested that the court dismiss the action for annulment, dismiss CMO’s claims and condemn it to pay to Y the sum of EUR 35,000 under Article 700 of the Code of Civil Procedure.

UPON WHICH,:

On the ground for annulment directed against the condemnation to interest for late payment and deriving from the violation of the principle of due process (Article 1520-4 of the Code of Civil Procedure):

CMO claims that by substituting the French legal interest rate to the refinancing rate of the European Central Bank increased by 10 points, which was requested and was not contested by the defence, without inviting the parties to explain themselves thereon, the arbitrator violated the principle of due process.

Whereas, it appears from the award that CMO had requested that Y be ordered to pay ‘the legal interest at the refinancing rate of the European Central Bank plus ten points, as of the day after the due date indicated on each invoice and at least the formal notice of 18 January 2014" (award, § 77 and §§ 333), and that ‘Y did not make a claim for interest, nor did it challenge CMO’s claim for interest’ (award, § 335).

Whereas, according to paragraph 337 of the award: ‘The sole arbitrator considers that it is appropriate to apply French law to this matter given that French law is applicable to Contracts 1 to 5 and Paris (France) is the seat of this arbitration’.

After recalling the provisions of Articles 1153, 1153-1 and 1154 of the French Civil Code, the award states: ‘The principle in French law is to grant interest at the legal rate. In the present case, CMO does not justify its claim for interest at the refinancing rate of the European Central Bank plus ten points. The sole arbitrator therefore decides to apply the French legal rate’ (Award, § 343 and 344).

Whereas, no statement of the award nor the documents of the arbitral proceedings entail, nor is it incidentally alleged, that the sole arbitrator invited the parties to explain themselves on this point.

Whereas, contrary to Y’s allegations, the ground does not claim that the decision on interest is not justified, nor that the justification is legally incorrect. It only maintains, and rightly so that, if a certain rate was requested and was not contested by the opposing party, the arbitrator could not, without soliciting the observations of the parties, apply another rate.

Whereas, therefore, the award should be annulled in that it couples the condemnation to the payment of invoices with interest at the French legal rate.

On the ground directed against the dismissal of the claim for compensation for wrongful termination and deriving from the arbitrator’s disregard for his mission, as well as the violation of international public order (Article 1520-3 and 1520-5 of the Code of Civil Procedure):

CMO claims that the arbitrator, having noted the existence of a wrongful termination and of a subsequent prejudice, could not refuse to assess the prejudice resulting therefrom without disregarding the scope of her mission or commit a denial of justice and thus violate the international public order.

Whereas, the award entails that CMO requested the condemnation of Y to pay to CMO the sum of EUR 632,128 ‘as compensation for the prejudice it incurred as a result of the early and wrongful termination of the contracts’ (award, § 156).

Whereas, after analysing Y’s contentions, the arbitrator states: ‘Whether they are taken individually or collectively, none of the alleged breaches by Y, even supposing all of them to be true, constitutes a behaviour of sufficient severity so as to justify a unilateral termination of Contracts 1 to 5. Consequently, the sole arbitrator shall qualify the early termination of Contracts 1 to 5 as wrongful’ (award, §§ 267).

Whereas, after noting that the prejudice resulting from the wrongful termination consisted in the gains of which CMO had been deprived by this early termination (award, § 272); the arbitral tribunal analyses the Excel file produced by the plaintiff, which is supposed to show the fees that the manager of CMO would have received ‘if the current contracts were to be spread over 42 months’ (award, § 274-277). The arbitral tribunal notes that this document is marred by insufficiencies and contradictions and it deduces therefrom that ‘The document produced by CMO in support of its claim does not therefore enable the sole arbitrator to assess whether the assessment of the compensation sought is well-founded or not.’ (award, § 277). It adds: ‘Similarly, the amendments to Contract 1 do not allow the sole arbitrator to assess the amount of compensation sought by CMO. Thus, CMO has not justified the amount that it is seeking. Finally, not only does CMO not demonstrate the amounts that it is seeking under Contracts 1 to 5, but it also does not present the elements allowing for the calculation of the monthly payments due. Furthermore, it does not demonstrate the margin that it expected to make or even the amount of the costs relating to the services that it would have had to provide. In fact, a contract price (divided or not into monthly instalments), even if it is a lump sum, is only due in case of execution of the contract. However, no argument has been brought forward by CMO in this respect, nor any documents produced. Thus, even if the other pieces produced would allow the Sole Arbitrator to determine the amount of the sums that would have been received if Contracts 1 to 5 had been pursued, CMO did not enable the Sole Arbitrator to determine the amount of the lost profit. In view of the above, the Sole Arbitrator dismisses CMO’s claim for compensation for the wrongful termination of Contracts 1 to 5". (Award, § 278 to 282);

Whereas, the arbitral tribunal dismisses the claim for damages by stating that it is not able to assess the lost profit. However, in reality, it appears that it is the very existence of the prejudice that appeared to it as not being established, since CMO did not provide any explanation or justification regarding the costs that it would have incurred for the execution of its services in the event where the contracts would have been pursued until their term.

Therefore, CMO wrongly contested the arbitrator for having refused to assess its prejudice, and the grounds directed against the dismissal of the claim for damages for wrongful termination should be excluded.

On the ground directed against the dismissal of the claim for damages for abusive resistance and deriving from the arbitrator’s disregard towards his mission, as well as the violation of international public order (Article 1520-3 and 1520-5 of the Code of Civil Procedure):

CMO alleges that the arbitrator, by refusing to apply the law dated 31 December 1975 on sub-contracting, whereas he had ruled in his partial award that French law was applicable to the dispute, violated by this award the authority of res judicata, in violation of his mission and international public order. It argues that a distinction should be made between the scope and the conditions of application of the law, and that the question of the scope having been definitively resolved by the partial award, the arbitrator could not revert thereto in the final sentence and set aside the law dated 31 December 1975 based on the fact that the location of the works is Morocco.

Whereas, the partial award of 2 June 2015 states: ‘Thus, whether the conflict of law rule of the seat of the arbitration is used, or the conflict of law rules of the countries involved in the dispute and/or a conflict of law rule in force in many countries, French law is designated as applicable to contracts 1 to 5. Accordingly, the Sole Arbitrator decides that French law is applicable to Contracts 1 to 5" (award, § 104);

Whereas, the final award states, with regard to the claim for damages based on Y’s refusal to apply the law dated 31 December 1975 regarding subcontracting, that, if this law ‘was the subject matter of a major doctrinal debate, the spirit of this text confirms that its territorial scope is limited to works located in France. As stated in the opinion of the Advocate General on the ruling of the Court of Cassation’s mixed chamber of 30 November 2007, it is ‘when the work is performed on national territory that the 1975 law must be applied, whether the subcontractor is French or foreign’ because the purpose of this law is to ensure fair competition on French territory. The Sole Arbitrator ratifies such a conclusion. Consequently, the law dated 31 December 1975 relating to subcontracting does not apply to the relationship between CMO and Y, the works being located in Morocco.’ (Award, § 295 and 296).

Whereas, the partial award did not specifically rule on the law dated 31 December 1975 and that, contrary to what CMO maintains, its choice of applying French law to the merits of the dispute did not have the effect of removing the question of the scope of application of a particular French overriding mandatory provision. In resolving this question by applying French conflict of law rules, the arbitrator complied with the opinion decided in the partial award.

The grounds directed against the dismissal of the claim for damages for bad faith and abusive resistance are therefore unfounded.

Whereas, all of the foregoing entails that the final award must be annulled, but only in so far as it rules on the interest that accompanies the order to pay the invoices. The appeal will be dismissed for the rest.

On Article 700 of the Code of Civil Procedure:

Whereas, equity does not command that either of the parties benefit from the provisions of Article 700 of the Code of Civil Procedure.

On the costs:

Whereas, each of the parties being partially unsuccessful, the costs will be pooled and each party will bear half of these costs.

FOR THESE REASONS:

Annuls the award rendered in Paris between the parties on 18 October 2016, but only in so far as it rules on the interests that accompany the condemnation to the payment of invoices.

Dismisses the appeal for the rest.

Dismisses the claims made pursuant to Article 700 of the Code of Civil Procedure.

Pools the costs and states that each of the parties shall bear half of these costs.