Paris Court of Appeal, No. 16/23406 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, First Pole, First Chamber, 20 November 2018, No. 16/23406

SARL BAALOUDJ & SONS

Vs.

SARL DALL’AGLIO INTERNATIONAL (ZAglio), Company DALL’AGLIO INTERNATIONAL & SONS S.R.L

The company BAALOUDJ & SONS, hereinafter BAALOUDJ, under Algerian law, is a company producing mineral water and various non-alcoholic beverages. It is the concession holder of a mineral spring that it exploits and for which it carries out the collection, analysis, treatment, bottling and marketing of water in Algeria.

By a contract signed on 18 November 1999, governed by Algerian law pursuant to its article 28, and containing an arbitration clause, BAALOUDJ entrusted the company SARL DALL’AGLIO INTERNATIONAL (ZAglio) with the supply of a complete filling line for still water in 50 cl bottles and sparkling water in 33 cl bottles.

Disputes arose between the parties during the execution of the contract, notably concerning the supply of second-hand equipment, the compliance with delivery and start-up deadlines for the line, the achievement of the contractual performance expected from the equipment, the delivery of spare parts and the payment of contractual advances and the balance of the price.

As the parties were unable to reach an amicable agreement, ZAglio initiated various proceedings before the Algerian Courts, which ended with a decision of 4 April 2014 of the Tebessa Court, which declared itself incompetent due to the arbitration clause.

ZAglio then initiated arbitration proceedings before the International Court of Arbitration of the International Chamber of Commerce (ICC) by a letter received on 21 May 2015. This request was notified by the secretariat of the ICC to BAALOUDJ on the 3rd of June 2015. In the absence of agreement between the parties, Mrs. DE was appointed as sole arbitrator on 29 October 2015. The terms of reference were signed by the parties and the sole arbitrator on 18 December 2015.

By arbitral award of 25 October 2016, the arbitral tribunal has:

condemned BAALOUDJ to pay ZAglio the sum of 308,286 euros in performance of its contractual obligations,
condemned BAALOUDJ to pay ZAglio compensation for late payment of the sum of 308,286 euros which shall be calculated from the 1st of August 2001 to the date of this award at a simple annual rate of 2.5%;
condemned ZAglio to pay BAALOUDJ the sum of 90,000 $,
left to each of the parties the final charge of the costs and fees advanced, including administrative costs and arbitrator’s fees paid to the International Chamber of Commerce,
rejected all other pleas, requests or exceptions of the parties.

BAALOUDJ filed an appeal for annulment of the award before the Paris Court of Appeal on 23 November 2016, the proceedings being registered under No. RG 16-23406, and again on 24 November 2016, the new declaration having been registered under the n° RG 16-23471.

The two proceedings were conducted in parallel, and the parties reached the same agreements on the same dates in each of the proceedings.

By order issued on the 5th of October 2017, the pre-trial judge dismissed BAALOUDJ’s application for a declaration that ZAglio’s submissions were inadmissible.

By submissions notified on 20 February 2017 in each of the files, BAALOUDJ requested the court to annul the arbitral award delivered on 25 October 2016, invoking the provisions of article 1520 3°, 4° and 5°, and to condemn ZAglio to pay the sum of 50,000 euros pursuant to article 700 of the Code of Civil Procedure, as well as to pay the entire costs, including distraction pursuant to the provisions of article 699 of the Code of Civil Procedure.

By submissions notified on 12 May 2017, ZAglio requests the court to reject the application for the annulment of the arbitral award delivered on 25 October 2016 and to condemn BAALOUDJ to pay the sum of 70,000 euros for abusive appeal and to pay the costs.

UPON WHICH:

Whereas it is of good administration of justice to join the two procedures followed under n° RG 16-23406 and 16-23471 relating to the appeal for the annulment of the same arbitral award;

On the ground alleging non-compliance with the principles of due process (in French Principe du contradictoire) (article 1520, 4° of the Code of Civil Procedure)

The appellant claims that by misrepresenting the documents submitted to the proceedings and by failing to invoke any legal basis to justify the divergent interpretation of the same contractual document, from which BAALOUDJ’s claims against ZAglio arose, the arbitral tribunal violated due process.

It claims that it asked the arbitral tribunal for the reimbursement of 90,000 US dollars and 100 million Italian pounds transferred to ZAglio, which ZAglio acknowledged it owed to BAALOUDJ in a letter of 29 July 2001 from its legal counsel, and did not contest the content of this request, and that by ‘surprising reasoning’, the arbitral tribunal, on the one hand, ordered the reimbursement of the first sum, and on the other hand, considered that the sum of 100 million Italian pounds was not intended to be repaid by interpreting the same recognition document in a totally opposite manner, without the parties being able to comment on the argument raised ex officio by the arbitral tribunal according to which such recognition could not be qualified as partial payment of the contract price, nor how such qualification would be necessary for its payment to be ordered.

Whereas it is not disputed that the letter of 29 July 2001, in which ZAglio’s legal counsel states that his principal acknowledges being in possession of a sum of 90,000 US dollars and of 100 million Italian pounds and undertakes to reimburse these sums, has been submitted to the contradictory debate between the parties, that BAALOUDJ has, referring to this letter before the arbitral tribunal, counterclaimed for the reimbursement of these sums, stating that ZAglio, who acknowledged that it held them in its favor, should reimburse it in accordance with the commitment made;

Whereas it results from the statements of the arbitral award that the arbitrator has analyzed the reciprocal commitments of the parties of 29 July 2001 (pages 28 to 31 of the arbitral award) made in the context of an amicable settlement of the dispute, on the one hand the “Commitment Decision”, signed by Mr. X, on the other hand, the letter of the counsel of ZAglio, recalling BAALOUDJ’s position on the first document (§ 105 of the arbitral award) and on the second document invoked (§ 108), concluding that this letter was not very clear and proposing a reading which ‘seems the most plausible and which is also the one espoused by both parties during the hearing'; that it emerges that the scope of this second letter was debated between the parties both in their memoirs and at the hearing;

Considering furthermore that, in examining all the payments made by BAALOUDJ (pages 31 to 39), the arbitrator recalled the divergent explanations of the parties on the nature and destination of each of these payments (§120 to 128), to conclude that ZAglio had to reimburse BAALOUDJ the sum of 90,000 US dollars if BAALOUDJ paid the full price provided for in the contract and that the 100 million ITL, the amount of which did not correspond to any of the payments provided for in the contract, constituted a commission or other payment for delivered services that was not intended to be reimbursed;

Whereas it was on the basis of these statements that the arbitral tribunal then ruled on the merits of BAALOUDJ’s claims (§ 192-196);

Whereas it appears from the foregoing that the arbitral tribunal made its decision after a contradictory discussion between the parties, on the basis of submissions that were regularly exchanged and documents that were regularly communicated, and that it did not raise any ground of its own motion on which the parties were not given an opportunity to comment;

Whereas the ground alleging non-compliance with the principle of contradiction will therefore be rejected;

On the ground alleging that the arbitral tribunal did not comply with its mission (article 1520, 3° of the Code of Civil Procedure)

The appellant complained to the arbitral tribunal that it had not complied with its mission, pointing out that since it was not vested with the powers of amiable compositeur, it had to comply with the law.

It claims that by relying on attestations produced by ZAglio, in particular the written testimony of MCF, which is questionable, in order to adopt an eminently questionable version of the context of the conclusion of the contract, thereby modifying contra legem the interpretation to be made of the written contract, to which each of the parties had subscribed, and no stipulation of which referred to the sale of used or refurbished equipment, the arbitral tribunal exceeded its mission.

Whereas the parties have agreed to submit to arbitration the dispute between them as it arises from the summary statement of their claims and the requested decisions contained in the terms of reference signed on 18 December 2015, the arbitrator was thus entrusted with the task of ruling on the counterclaim for termination of the disputed contract filed by BAALOUDJ, that it is not discussed whether the arbitrator’s task was to rule on the breach of contract, alleged by BAALOUDJ, relating to the second-hand nature of the equipment supplied by ZAglio, that the issue between the parties was to know whether the supply of second-hand equipment was contractually provided for or whether the contract required the equipment to be new;

Whereas the arbitrator set out, in paragraphs 156 to 160 of the arbitral award, the reasons that led him to consider that the contract did not contain any indication on this point, he concluded that the parties did indeed agree that the equipment was partly new and partly second-hand, based on the testimonies gathered from the representatives of MCF, which were not denied on the side of BAALOUDJ, on the circumstance that M. BAALOUDJ had complained only very late about the alleged obsolescence of the equipment, whereas he had complained very quickly about the deliveries, for various other reasons, deducing that the fact that the equipment was not new did not surprise him because it was in accordance with the agreement of the parties;

Finally, he compared the wording of article 14 concerning the “Technical Guarantee of the equipment” in each of the contracts signed between BAALOUDJ and Y, on the one hand, and SASIB/Simonazzi, on the other hand, companies which also supplied certain equipment necessary for the implementation of the bottling line, and that of article 15 of the contract between BAALOUDJ and ZAglio which deals with the same guarantee, the arbitrator deduced that the parties had knowingly omitted the term “new” in the contract between BAALOUDJ and ZAglio;

Whereas thus the arbitral tribunal, which concluded that Mr. X had indeed chosen certain second-hand equipment and that it was understood that all the MCF equipment to be supplied would not be new, did not rule as amiable compositeur but in law, seeking the common intention of the parties on this point; that it thus respected the terms of the mission entrusted by the parties;

Considering, in addition to the criticisms made by BAALOUDJ, that the content of the motivation of the arbitral award is beyond the control of the judge of the regularity of the arbitral award and that the alleged distortion of a contractual document by the arbitral tribunal cannot be assimilated to the violation by the latter of its obligation to comply with its mission, which was that of enforcing the contract;

Whereas this ground for annulment should be rejected;

On the ground alleging violation of the principles of the right to a fair trial and equal treatment, contrary to French international public policy (article 1520, 3° and 5° of the Code of Civil Procedure)

The appellant claims that French international public policy was not respected since the arbitral tribunal disregarded the principles of the right to a fair trial and equal treatment of the parties by reducing its motivation to the almost servile reproduction of ZAglio’s writings and by misapplying and/or grossly misinterpreting the documents filed in the proceedings.

Whereas it has been recalled above, the reasons by which the arbitral tribunal decided that the parties had agreed on the supply of second-hand equipment;

Whereas, in reality, under the guise of a violation of French international public policy, this ground invoked by BAALOUDJ, which repeats the arguments already developed in his previous ground and which tends to contest the relevance of the reasoning followed by the arbitrator and the reasons given to reach the decision that there was no failure to comply because some of the equipment was second-hand, can only be dismissed;

On the exceeding of the time limit set for the arbitrator to render the award, contrary to French international public policy (article 1520, 3 and 5° of the Code of Civil Procedure)

The appellant recalls that the terms of reference do not provide for the date on which the award must be made but refer to the rules of arbitration procedure of the ICC, which state that these Rules grants the arbitral tribunal a period of six months to render its award.

It claims that no act, whether explicit or implied, was issued by BAALOUDJ (or even ZAglio) to accept the extension of the arbitration period, initially set on 29 July 2016 and successively extended to 31 August, 30 September and 31 October 2016 at the sole discretion of the ICC Court, that therefore the three extensions constitute an abuse of power of the arbitral tribunal to continue its mission as arbitrator in the absence of the consent of the parties.

Whereas it is constant that the arbitration procedure was governed by the rules of arbitration of the ICC, as stated in the terms of reference, that according to article 30 of the said rules, the arbitral tribunal shall deliver the final award within a period of six months, that the arbitral Court may, upon a reasoned request of the tribunal or, if necessary, ex officio, extend this period if it deems it necessary;

Whereas the time limit for making the final award was initially set on 29 July 2016 (appellant’s exhibit No. 8); that BAALOUDJ contests only the regularity of the successive extensions until 31 August, 30 September and 31 October 2016, the award having been delivered on 25 October 2016;

Whereas it results both from exhibits 9 to 12 produced by BAALOUDJ and from the award itself, the statements of which are authentic until forgery is proven, that the arbitral tribunal closed the proceedings based on article 27 of the rules on 5 August 2016 and submitted a draft award to the ICC on 12 August 2016, that the arbitral Court extended the time limit, initially set on 29 July to August 31 during the session of 21 July, to 30 September during the session of 11August and finally to 31 October during the session of 8 September 2016;

Whereas the time limit for making the final award has therefore been extended based on the ICC rules governing the procedure, the conditions of which have been accepted by the appellant, who has thus consented to the extensions duly granted by the Court’s decisions, against which, moreover, it made no observations during the course of the arbitration proceedings;

Whereas the ground must be set aside;

Whereas the request to annul the award of 25 October 2016 will consequently be rejected;

Whereas ZAglio asks the court to condemn BAALOUDJ to pay the sum of 70,000 euros for abusive appeal without giving reasons for its request and without invoking any pleas likely to establish an abuse in the exercise by BAALOUDJ of his action for annulment, which does not result from the sole rejection of its claims; that this request must consequently be rejected;

Whereas BAALOUDJ who is unsuccessful must be condemned to pay the costs;

FOR THESE REASONS:

ORDERS the joinder of the procedures followed under No. RG 16/23406 and 16/23471.

DISMISSES the appeal for annulment filed by the company BAALOUDJ & Sons against the award of 25 October 2016.

REJECTS ZAglio’s request for payment of damages for abusive appeal.

Condemns BAALOUDJ & SONS to pay the costs.

THE CLERK THE PRESIDENT