Paris Court of Appeal, No. 17/22494

Court of appeal Paris, 1st Pole - 1st chamber- 30 June 2020, n° 17/22494

SAS SOUFLET NEGOCE vs. Société EGYPTIAN INTERNATIONAL FACTORY FOR SPLITTING

By contract n ° 5.011602 of 16 January 2015, the company Soufflet Négoce (hereinafter the company Soufflet), specializing in the international trading of cereals, sold 6,500 metric tons of edible bean seeds (faba beans) to the company Egyptian international Factory for splitting (hereinafter EIF).

This contract provided for payment terms, in particular an advance of 50% of the amount of the price payable before delivery and also provided for the application of the Incograin Formula n ° 12 (standard purchase and sale contract adapted to trade in agricultural raw materials) which, in turn, provided for the claimant to have recourse to arbitration by the International Arbitral Chamber of Paris in the event of a dispute.

On 13 May 2015, contract n ° 5.011602 was amended to contract n ° 5.011602 A, providing for:

• delivery by July 2015, at the seller’s choice;
• The option for the company Soufflet to keep and deduct from the price of contract no. 5.011602 A an amount given as security by the company EIF on the occasion of a previous transaction between the parties.

At the same time, on 18 May 2015, the Soufflet Company delivered, with the vessel “MV TK ROTTERDAM”, in execution of a previous contract concluded between the parties (n ° 5.050502), nearly 5,300 tonnes of fava beans to the EIF Company, which has never paid the amount of the invoice, despite numerous reminders, for a total amount of USD 1,614,073.48.

The company EIF also refrained from paying the 50% deposit provided for in contract no. 5.011602 but has agreed to postpone the performance of this contract.

Following a meeting between the parties on 5 October 2015, they reached an agreement, under the terms of which, according to the report drawn up by Mr. X, sent by email to the companies on 12 October 2015, they have agreed to make the performance by Soufflet of contract no. 5.011602 subject to the clearance of the previous debt of the company EIF, under contract no. 5.050502, before 8 November 2015. In the event of non-performance by the company EIF, not attributable to a case of force majeure, the company Soufflet had the right to apply for its benefit, the difference between the contract price and the market price on the day of the default, by virtue of the stipulations of Article XVI of Incograin Formula n ° 12.

The Soufflet Company requested in vain the performance of this agreement by the company EIF as of 17 December 2015.

Subsequently, on 7 July 2016, the company Soufflet notified its default to the company EIF and its intention to take advantage of the possibility of having Article XVI of Incograin Formula n ° 12 applied, namely the invoicing of the difference in contract price and market price on the day of default. By letter of 13 July 2016, the company Soufflet presented the corresponding invoice, for an amount of USD 1,114,750.00, and sent a reminder on 19 July 2016, requiring payment before 21 July 2016 under the threat of filing of a request for arbitration.

On 28 July 2016, in default of payment, the Soufflet company filed a request with the International Arbitral Chamber of Paris which notified it to the EIF company, on the basis of the arbitration clause inserted in contract n ° 5.011602, the other two contracts n ° 5.011602 A and 5.050502 containing the same clause. EIF did not participate in the arbitration proceedings.

By an award issued on 17 November 2017 in Paris, the arbitral tribunal composed of Mr. YZ and Mr. ABC, co-arbitrators, and Mr. DE F, president, declared itself competent, ordered the company EIF to pay Soufflet the sum of USD 406,640.00 in compensation for the damage suffered by the latter, instead of USD 1,114,750, increased by legal interest at the rate provided for by French law as of 17 December 2015 and until full payment, in addition to compensation of EUR 1,500 under Article 700 of the Code of Civil Procedure and to bear all the costs of the arbitration.

By declaration of 8 December 2017, the company Soufflet filed an action for annulment against the arbitral award.

By submissions of 22 February 2018, Soufflet requests the court to annul the arbitration award issued on 17 November 2017 in that it violates the provisions of article 1520 -3 ° and 1520-4 ° of the code of civil procedure and also requests the court to order the company Egyptian International Factory to pay the sum of EUR 10,000 under Article 700 of the Code of Civil Procedure and to pay all the costs including distraction in accordance with the provisions of Article 699 of the Code of Civil Procedure. Soufflet claims that the principle of due process was not respected and that the arbitral tribunal ruled without complying with the mission entrusted to it.

The ‘Egyptian international Factory for splitting’ has not instructed cousel for its defence.

REASONS

The company Soufflet submits the act of the bailiff dated 14 March 2018, attesting to having completed the formalities of transmission of the request for notification in Egypt, by sending, according to the formalities provided for by the Hague of 15 November 1965, an international registered mail with acknowledgment of receipt, to the Ministry of Justice in Cairo (Egypt) the specific form and the document in duplicate containing a summons before the Paris Court of Appeal with service of the submissions.

In addition, at the request of the Pre-Trial Judge in accordance with article 688 of the code of civil procedure, paragraph 2, 3 °, the company Soufflet submitted a response from the Consulate General of France to Cairo, dated 2 July 2018, according to which “the Egyptian Ministry of Foreign Affairs has notified this Consulate General that the request for notification to the international company Factory for splitting has been successful”, accompanied by copies of the response letter from the Egyptian ministry Foreign Affairs dated 16 May 2018 and the annexed notification report, the two documents written in Arabic, as well as the translation of the only response from the Egyptian Ministry of Foreign Affairs from which it appears that “the Egyptian authorities mentioned that the notification took place by the administration concerned as indicated in the attached minutes”.

It is thus established that the formalities required by the Hague Convention of 15 November 1965 and the procedures carried out in accordance with the provisions of Article 688 of the Code of Civil Procedure, make it possible to retain that the company EIF has been duly notified of the proceedings, even if it did not construct a counsel for its defence, without however it being possible to affirm that the notification was made in person.

This judgment will therefore be issued by default.

On the first ground of appeal alleging failure to respect the principle of due process (Article 1520-4 of the Code of Civil Procedure)

The company Soufflet essentially claims that by deciding to assess the loss of profit due to the non-performance by its co-contractor of its contractual obligations, without the parties being able to present their observations, the arbitral tribunal did not merely change the assessment of the loss but undoubtedly engaged in an outright substitution of the basis of its claim for compensation in violation of the provisions of article 1520, 4 ° of the Code of Civil Procedure.

The principle of due process requires that the parties were able to make known their factual and legal claims and discuss those of their opponent in such a way that nothing which served to base the arbitrators' decision has escaped their adversarial debate. Arbitrators must in all circumstances ensure that this principle is observed and musgt observed it themselves, even if they do not have to submit beforehand the legal argument which supports their motivation for discussion by the parties.

The Soufflet Company asked the arbitral tribunal to order the EIF Company to pay the sum of USD 1,114,750.00, plus interest at the legal rate, claiming the application of the difference between the contract price and the market price. on the day of the default, on the grounds that the company EIF had not paid neither the balance of the previous contract before the term of 8 November 2015, on which the parties had agreed on 5 October 2015, nor the advance of 50% of the price of contract no. 5.011002, and was therefore in default (exhibit no. 10).

After the preliminary hearing on 20 June 2017, the arbitral tribunal issued a procedural order on 26 June 2017. On 8 September 2017, the arbitral tribunal invited the company Soufflet to specify the reasons , according to it, the use of c) of article XVI of the Incograin contract n ° 12 was justified in this case and to provide an explanatory note relating to the methods of calculation as well as any relevant document.

Soufflet responded on 18 September 2017 on these two points (Exhibit 12).

The arbitral tribunal recognized that “ the Soufflet company is therefore well justified in requesting the application of the price difference, to its benefit, between the contract price and the market price on the day of the default provided for by article XVI c)”.

Regarding the amount of its claim, the company Soufflet explained that it estimated at USD 171.50 per tonne, the difference between the contract price and the market price on the day of the default, resulting on the one hand from the price per tonne provided for in the disputed contract, including the price of the goods plus its various accessories (391.94 USD) as well as the commercial margin (62.56 USD), for a total of USD 454.50, and on the other hand, the price of contract no. 5,092105A, of 283 USD per tonne, and which therefore resulted, under the clause, in its claim of USD 1,114,750 (i.e. 171.50 x 6,500 tonnes). Soufflet clarified that the supply of bean food to Egypt was not a very common activity and that there were only a few similar cases.

It follows from the award that the arbitral tribunal took note of the fact that there was no market price for bean destined for Damietta in Egypt, which did not however deprive the company Soufflet of any compensation on the basis of article XVI c), considered that similar contract no. 5.092105A produced by the plaintiff was insufficient, that the method of calculating the price difference proposed by the company Soufflet was not relevant.

To base its decision, holding that “ the elements provided by the plaintiff, in particular the various accessories of the gross price of the goods, allow the Arbitral Tribunal to assess the commercial margin that it would have achieved on this transaction which corresponds to the lack of win that it suffered as a result of the defendant’s default”, the court then “in the absence of sufficiently convincing evidence to implement the mechanism for assessing the damage provided for in Article XVI c) of the Incograin contract n ° 12”, assessed the damage suffered by the plaintiff at the level of the loss of profit from which it had suffered due to the defendant’s non-performance of its contractual obligations, that is to say the sum of USD 406 640, corresponding to the commercial margin per tonne calculated by him, multiplied by 6,500 tonnes.

Whereas, however, the arbitral tribunal could not, without inviting the parties to explain it, set aside the mechanism of a contractual assessment clause for the damage which it recognized as being applicable to the claim of the applicant for arbitration. , sanctioning the default of one party by allowing the other party to benefit from an advantage calculated on the difference between the contract price and the market price on the day of the default, to replace it with compensation calculated on a loss of commercial margin, thus retaining a method of repairing damage which had not been the subject of any contradictory debate.

Whereas therefore, by not inviting Soufflet to explain itself before ruling on this point, the arbitral tribunal violated the principle of due process.

Whereas this disregard entails annulment of the award.

On costs and compensation under Article 700 of the Code of Civil Procedure

The costs will be borne by the unsuccessful EIF Company.

Equity dictates that it be ordered to pay compensation of EUR 10,000 under Article 700 of the Code of Civil Procedure.

FOR THESE REASONS

Annuls the arbitration award issued on 17 November 2017 in Paris by the arbitral tribunal composed of Mr. YZ and Mr. ABC, co-arbitrators, and Mr. DE F, president,

Orders the company Egyptian International Factory for splitting to pay the company Soufflet Négoce compensation of EUR 10,000 under article 700 of the Code of Civil Procedure.

Orders the company Egyptian International Factory for Splitting to pay the costs which may be recovered directly in accordance with the provisions of Article 699 of the Code of Civil Procedure.