Paris Court of Appeal, No. 18/07943 | Rory Wheeler, avocat (Paris) & solicitor (England)

Paris Court of Appeal, First Chamber, First Pole, 20 October 2020, No. 18/07943

Challenged decision:

Paris Tribunal of Grande Instance, 20 November 2017, No. A16-8

FLASHBIRD LIMITED

Vs.

SA COMPAGNIE DE SÉCURITÉ PRIVÉE ET INDUSTRIELLE (CSPI)

CSPI is a French company specialising in safety and security, particularly for airports, to which it offers solutions for securing goods and people.

FLASHBIRD LIMITED (hereinafter referred to as “FLASHBIRD”), whose director is Mrs B Z, is a Mauritian company specialising in the provision of advice to the following companies and assistance in the negotiation of contracts with the African states.

CSPI, with the assistance of Mr Y, an independent Swiss consultant, an expert in airports and civil aviation and active on the African continent, has decided to apply for a “Call for International Expression of Interest" to ensure the management and operation of safety and security services at Madagascar’s international airports.

It was put in contact through Mr Y with Ms Z. Following the opening of the bids from the tenderers on 13 July 2012, CSPI has concluded a first framework consultancy contract dated 30 July 2012 with FLASHBIRD, as well as an amendment No. 1, in order to be assisted and be advised by FLASHBIRD in the contractual negotiations opened with the Madagascan Ministry of Transport and Civil Aviation (ACM).

On 28 February 2013, CSPI signed a 12-year exclusive concession contract with ACM, under the supervision of the Ministry of Transport, for the upgrading of airport security standards and its management at Madagascar’s eight international airports.

Following the signing of this contract, CSPI and FLASHBIRD signed a second framework consultancy contract No. 0913/13 on 19 March and 18 April 2013, containing an arbitration clause in Article 14, as well as an amendment No. 1.

Disputes arose between the parties, in which CSPI accused FLASHBIRD of contractual failures and the latter accused CSPI of not paying the profit-sharing invoices it issued. Proceedings were brought between the parties before the interim relief judge of Evry Commercial Court and then the Paris Court of Appeal, which ordered CSPI to pay a provision on the unpaid profit-sharing invoices by a judgment of 29 March 2016. The appeal against this ruling was rejected on 22 November 2017.

During these proceedings, on 24 August 2016, CSPI filed a request for arbitration before the Arbitration and Mediation Centre (MARC) of the Chamber of Commerce and Industry of A (MCCI), to have the framework consultancy contract No. 0913/13 annulled and, in the alternative, to obtain the reimbursement of the sums received by FLASHBIRD under this contract.

In its reply of 13 September 2016, FLASHBIRD challenged the jurisdiction of the arbitral institution seized to decide its dispute with CSPI, because the parties agreed to submit the resolution of their possible dispute to the International Arbitration Court of the International Chamber of Commerce, indicating that it would not proceed with this request for arbitration.

On October 24, 2017, at G-X, A, the arbitral tribunal, composed of a sole arbitrator, Mr H I J, rendered its award (MARC award case […] according to which it:

Declares it has jurisdiction to settle the dispute, following the MARC arbitration rules
Notes that FLASHBIRD LIMITED breached its contractual obligations but only concerning the difficulty suffered by CSPI SARL in collecting the fee, obtaining land and obtaining visas
Orders the judicial termination of the framework consultancy contract No. 0913/13 dated 10 March and 18 April 2013
Orders FLASHBIRD LIMITED to pay back CSPI SARL the sums paid by CSPI for an amount of 15,000 USD and 80,000 euros, with interest at the legal rate of 5% in application of Article 1 of Order No. 62- 016 of 10 August 1962 bearing ﬁxation of the rate of the legal interest and the maximum interest rate conventionnel, reglementation des prêts et répression de l’usure (J.O.R.D.M. 1962, p. 1709) as from the date of referral to the Arbitral Tribunal, i.e. 6 December 2016:
Furthermore, considers that FLASHBIRD LIMITED’s contractual failures has caused damage to CSPI of 24,000 euros
Orders FLASHBIRD LIMITED to pay damages to benefit from CSPI SARL of 24,000 euros.
Orders FLASHBIRD LIMITED to reimburse CSPI SARL for the costs and expenses incurred by CSPI SARL, i.e. for the arbitration costs an amount equivalent to MUR 494,900 and the sum of29,000 euros in consultancy fees for CSPI SARL
All other requests and claims are rejected.

FLASHBIRD brought an action for annulment against this award before the Supreme Court of A, which rejected it in a decision dated 30 November 2018.

The award handed down on 24 October 2017 was declared enforceable by order of the President of the Paris Tribunal of Grande Instance dated 20 November 2017. FLASHBIRD appealed against this order on 14 April 2018. These are the present proceedings.

Concurrently with the arbitration proceedings before the Arbitration and Mediation Center of the Chamber of Commerce and Industry of A, on 6 July 2017, FLASHBIRD filed a Request for Arbitration with the International Court of Arbitration of the International Chamber of Commerce (ICC Arbitration, case . No. 22937/DDA), to establish that CSPI failed to fulfil its contractual obligations to pay the profit-sharing provided for in the contract, and to obtain the judicial termination of the contract and order that CSPI pay damages. The ICC appointed Mr E F as sole arbitrator.

On 24 September 2019, the arbitral tribunal rendered its award (ICC award) in Island A, ordering CSPI to pay USD 1,657,893 to FLASHBIRD as damages for failure to comply with its contractual obligation to pay the profit-sharing for obtaining the concession to manage and operate security at Madagascar’s international airports. This award was declared enforceable by order of the President of the Paris Court of Justice on 31 January 2020 and CSPI appealed against this order on 28 February 2020. This appeal is being heard by Chamber 5 -16 of the Paris Court of Appeal.

CSPI also brought an action for annulment against this award before the Supreme Court of A.

PARTIES CLAIMS

By final submissions notified on 1 April2020 in the present proceedings, FLASHBIRD requests the court to reform in all its provisions the enforcement order (in French Ordonnance d’exequatur) issued on 20 November 2017 by the President of the Paris Tribunal of Grande Instance, consequently refusing to order the arbitral award, to dismiss all of CSPI’s claims, to declare that the arbitral award is null and void pursuant to Article 1520 of the French Code of Civil Procedure, to order CSPI to pay the costs of the proceedings and to pay it an indemnity of 5,000 euros pursuant to Article 700 of the French Code of Civil Procedure. It argues that the MARC award should not be recognised in France on the grounds that the arbitrator wrongly declared that he had jurisdiction, that he was improperly appointed and that he ruled without complying with his mission.

In its final submissions filed on 11 June 2020, CSPI requests the Court to confirm the enforcement order (in French Ordonnance d’exequatur) issued by the Paris Tribunal de Grande Instance on 20 November 2017 and to order FLASHBIRD to pay the costs of the case with distraction under the conditions of Article 699 of the French Code of Civil Procedure and to pay it an indemnity of 4,000 euros under Article 700 of the French Code of Civil Procedure.

REASONS FOR THE DECISION:

On the first ground for annulment based on the lack of jurisdiction of the arbitral tribunal (Article 1520-1 of the Code of Civil Procedure):

FLASHBIRD argues that the arbitral tribunal wrongly declared that it had jurisdiction in violation of the contractual provisions. It argues that the common intention of the parties is based on the choice of the ICC Rules of Arbitration. The parties never mentioned the choice of another arbitral institution, as its choice for ICC arbitration was not discussed by CSPI. It maintains that the choice of the ICC Rules of Arbitration results from the literal reproduction of the standard clause proposed by this arbitral institution, taking up spelling details, adapted only because of the signature of an amendment concomitant to that of the framework agreement.

It replied to the defendant that the parties, who drew up and signed the framework agreements on 30 July 2012 and 19 March and 18 April 2013 respectively, were unable to choose to settle any disputes by the MARC, whose arbitration rules did not enter into force until much later. Moreover FLASHBIRD stated that the express designation by the parties of Malagasy law as the law applicable to the contract had no bearing on the arbitration jurisdiction to settle the dispute, as the law applicable to the contract has no bearing on the competent arbitral jurisdiction to decide the dispute. It adds that the reference to the ICC Rules is not the result of a drafting error, and that the choice of the seat of arbitration is unrelated to the determination of the competent arbitral institution to administer the dispute. It claims that the choice of the ICC Rules of Arbitration is apparent from the submissions of CSPI dated 17 June 2017, addressed to the arbitral tribunal constituted by MARC, which constitutes a judicial admission under Article 1383 of the Civil Code.

It infers from the fact that the parties have adhered to the Rules of Arbitration of the International Chamber of Commerce, that Article 6.2 of the said Rules should be applied and that the parties have accepted that it be administered by the Court. This rule that the arbitration centre has sole jurisdiction to apply its arbitration rules is stipulated in the respective arbitration rules of the two arbitration institutions.

In response, CSPI argues that the arbitration clause in the 2013 framework agreement, which must be interpreted in accordance with the principles of international law, good faith and effectiveness (in French Effet utile), shows the parties' willingness to settle the dispute through arbitration by the Permanent Court of Arbitration of the Chamber of Commerce and Industry of A. It notes in this respect, as the MARC award points out, that the first paragraph of the arbitration clause starts by referring to the Permanent Court of Arbitration of the Chamber of Commerce and Industry of A by reproducing its hyperlink, and that it is only in the following paragraph that it mentions the arbitration rules of the International Chamber of Commerce.

It argues that the reference to the ICC is clearly only the result of a drafting error resulting from the confusion between the two model arbitration clauses contained in the two very similar arbitration rules of these two institutions. According to the MARC Rules, this similarity is explained by the fact that “the Permanent Court of Arbitration of the Chamber of Commerce was created on the model of the International Court of Arbitration of the International Chamber of Commerce (ICC), with rules inspired by those of the ICC and the UNCITRAL Model Law on International Arbitration.

It argues that the arbitration clause is not identical to the ICC model arbitration clause, given its first and last paragraphs. The arbitration clauses contained in the draft agreements exchanged between the parties prior to the signing of the 2012 framework agreement in no way demonstrate a willingness by the parties to submit their disputes to ICC arbitration. The reference to the fact that “A has a Permanent Court of Arbitration at the Chamber of Commerce and Industry” and the reproduction of its hyperlink cannot be explained by a concern of the drafters to identify the choice of Island A as the place of arbitration.

It adds that it never acknowledged that the choice of parties was ICC arbitration in its letter of 17 June 2017. On the contrary, FLASHBIRD openly acknowledged that the parties chose the Permanent Court of Arbitration of the Chamber of Commerce and Industry of A, which was a common intention.

The enforcement judge (in French Juge de l’exequatur) reviews the decision of the arbitral tribunal on its jurisdiction, whether it has declared it has jurisdiction or not, by looking at all the legal and factual elements that allow to assess the existence, scope and enforceability of the arbitration agreement and to deduce the consequences on the respect of the mission entrusted to the arbitrators.

The arbitration clause is legally independent of the main contract containing it, so that the existence and effectiveness of the clause are assessed, subject to the mandatory rules of French law and international public policy, according to the common will of the parties, without it being necessary to refer to a domestic law.

It is a principle of international arbitration law that the interpretation of contracts involves seeking the common intention of the parties rather than the literal meaning of the terms. This search must be guided by the principle of effectiveness (in French Effet utile), which presumes that the parties intended to give effectiveness (in French Effet utile) to the stipulations they have included in their agreements.

The arbitration clause cannot therefore be understood in a way that would render the arbitrators' intervention ineffective. The clause contained in the Master Consultancy Agreement No. 0913/13 concluded on 19 March and 18 April 2013, contained in Article 14 “Applicable Law and Settlement of Disputes”, reads as follows:

“A has a Permanent Court of Arbitration at the Chamber of Commerce and Industry (http://www.jurisint.org/fr/ctr/75.html).

All the dispute arising out of or in connection with this Framework Agreement, such as any amendments thereto, shall be decided definably t under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed following these Rules.

The applicable law will be Malagasy. The arbitration will take place in G X, A.”

The reference to two different arbitration institutions in this arbitration clause, which in its first paragraph indicates that A has a permanent Court of Arbitration at the Chamber of Commerce and Industry, and which in its second paragraph submits disputes between the parties to the Rules of Arbitration of the International Chamber of Commerce, without any intrinsic precision useful for the understanding of this double reference, must be interpreted in the light of the principles mentioned above.

As a preliminary point, it should be noted that even if the parties disagree on the interpretation of this clause, none of them disputes the clear and common will expressed to submit the disputes between them and arising from this framework agreement to an arbitration body and to remove them from the domestic jurisdictions. This common will is also clear from the draft contracts exchanged between the parties and from the first framework contract signed between the parties on 30 July 2012, which, despite certain changes in their wording, all contained an arbitration clause, as well as from the procedural conduct of the parties, each of which initiated arbitration proceedings to have their dispute decided on the merits, pursuant to the clause contained in Article 14 of framework contract No. 0913/13.

The ambiguity of this clause therefore relates only to the choice of arbitration institution.

In its award, the arbitral tribunal considered, based on the principle of autonomy of the arbitration clause, that it was appropriate to give primacy to Mauritian law, the law of the seat of the arbitration. To establish its jurisdiction, the arbitral tribunal essentially held that, on reading the clause, it appeared that “the parties, in drafting the Arbitration Clause, did indeed assume that the arbitration centre in A should have jurisdiction to manage the arbitration, even going so far as to reproduce a hypertext link that refers, one assumes, to the page of what was the predecessor of the MARC”. It was more logical and reasonable to give precedence to the first paragraph over the second and to consider that the mention “international” had been substituted by mistake for the mention “and industry” in the second paragraph and that the connection to an arbitration centre physically located in A is reinforced by the designation of the seat in G-X, A. This explanation seems to be the only one to give useful effect to the arbitration clause.

However, the first paragraph of the clause merely states the existence of a permanent Court of Arbitration at the Chamber of Commerce and Industry in A, without designating it as having jurisdiction to settle disputes between the parties. Whereas, on the contrary, the second paragraph requires the referred arbitral tribunal to settle the dispute in accordance with the “Rules of Arbitration of the International Chamber of Commerce”.

Thus, the imperative nature given by the parties to the use of the ICC Rules of Arbitration leads, in order to give useful effect to the clause, to give precedence to the second paragraph over the first, which is of a purely declaratory nature, and which does not contain any clearly expressed intention of the parties nor any effect attributing jurisdiction to the Permanent Court of Arbitration of the Chamber of Commerce and Industry of A. The mention of a hyperlink, which it is not even established refers to the page of that institution, the arbitrator himself stating ‘one assumes’ as he was unable to access it (§ 156), is irrelevant in determining the intention of the parties and the useful effect of the clause.

On the other hand, the choice made by the parties to submit the arbitration to the ICC Rules of Arbitration means that the arbitration must be brought before ICC, which is the only institution that can administer arbitrations under the ICC Rules of Arbitration, under Article 1.2 (wording in force as from 1 January 2012), excluding the possibility of referring the matter to the Permanent Court of Arbitration at the Chamber of Commerce and Industry at A.

Furthermore, the interpretation of the clause in favour of the willingness to resort to arbitration under the supervision of ICC is supported by the almost literal reproduction in the second paragraph of Article 14 of the two framework contracts successively concluded by the parties, of the standard clause proposed by ICC, which reads as follows: “All dispute arising out of or in connection with the present contract shall be settle under the Rules of Arbitration of the International Chamber of Commerce by one or more arbitrators appointed following those Rules”.

In comparison, the standard clause proposed by the Rules of Arbitration of the Chamber of Commerce and Industry of A in its then-current wording read as follows: “All disputes arising out of this contract shall be decided following the Rules of Conciliation and Arbitration of the Chamber of Commerce and Industry of A by (one or three) arbitrator(s) appointed under these Rules”.

In the first framework agreement, the arbitration clause faithfully reproduces the ICC clause, except that it specifies ‘framework agreement’ instead of contract. The only difference in framework agreement No. 0913/13 is justified by the inclusion of the signature of the amendments. It can be deduced from this that the parties voluntarily intended to submit to the ICC Rules of Arbitration and that the drafters of the said contracts paid particular attention to the wording of the second paragraph of the arbitration clause by adapting it, depending on the contract, to take into account the classification given to the contract and the signature of the amendments.

Thus, the explanation given by CSPI, according to which the reference to the International Chamber of Commerce was the result of a purely material drafting error whereby the adjective “international” was mistakenly substituted for the words “and industry”, does not convince. On the one hand, at the time the contracts were drafted, the arbitration rules proposed by the Chamber of Commerce and Industry of A, which is known by the acronym MCCI (Mauritius Chamber of Commerce and Industry), were entitled “Rules of Conciliation and Arbitration of the Chamber of Commerce and Industry of A”. This name is very different from the one appearing in the arbitration clause of the two framework agreements, which expressly refers to the Rules of Arbitration of the International Chamber of Commerce, and which does not use the acronym ICC to designate the International Chamber of Commerce. This excludes any alleged confusion of this acronym with that of the Chamber of Commerce and Industry of A and the simple omission of changing the reference to ICC in the mention of the model clause.

Similarly, the choice of G-X as the seat of the arbitration, given the option available under the ICC Rules of Arbitration, and the choice of Malagasy law, which is not covered by the arbitration clause due to its autonomy, are not relevant elements that could reflect the intention of the parties to designate the arbitral jurisdiction of A.

Contrary to what CSPI still maintains, it follows from the terms of FLASHBIRD’s repeated letters, in particular those of 13 September and 11 January 2017, that the claimant maintained its challenge to the jurisdiction of the Permanent Court of Arbitration at the Chamber of Commerce and Industry in A, after offering to compromise on the arbitration rules under the sine qua non that the arbitral tribunal should be constituted of three arbitrators, a request which was rejected. It cannot therefore be inferred that FLASHBIRD would have recognised that the parties agreed to submit the resolution of their possible disputes to the Permanent Court of Arbitration at the Chamber of Commerce and Industry in A, in accordance with its Rules. Finally, the arbitration clause cannot be interpreted as showing the parties' willingness to resort to institutional arbitration while leaving the claimant free to choose to which of the two arbitral institutions designated in the clause he would like to submit his arbitration claim. Indeed, the first paragraph of the arbitration clause does not explicitly attribute any jurisdiction to the Permanent Court of Arbitration of the Chamber of Commerce and Industry in A and the second paragraph obliges, on the contrary, the parties to settle the dispute in accordance with the Rules of Arbitration of the International Chamber of Commerce.

As a result, the arbitral tribunal referred by CSPI wrongly declared that it had jurisdiction to settle the dispute between the latter and FLASHBIRD under the arbitration rules of the Chamber of Commerce and Industry in A.

The order of the President of the Paris Tribunal of Grande Instance of 20 November 2017 which rendered enforceable in France the arbitral award handed down on 24 October 2017 in G-X, A (MARC arbitration case […] must be reversed and the application for enforcement (in French Exequatur) of the said award rejected.

It is inadmissible before the Paris Court of Appeal, referred of the appeal against the order that made the said award enforceable in France, the request of the FLASHBIRD, mentioned in the operative part of its submissions, to declare that the arbitral award is null and void according to Article 1520 of the Civil Code Procedure.

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

CSPI, which is unsuccessful in the proceedings, shall bear the costs and, in the interest of fairness, it is ordered to pay compensation of EUR 5,000 to CSPI under Article 700 of the Civil Code Procedure.

FOR THESE REASONS:

Reverses the enforcement order (in French Ordonnance d’exequatur) issued on 20 November 2017 by the President of the Paris Tribunal of Grand Instance.

Holds again:

Rejects the request by CSPI for the enforcement of the award (in French Exequatur) of the arbitral tribunal composed of a sole arbitrator, Mr. H I J, rendered on October 24, 2017 in G-X, A (MARC aﬀaire […].

Declares inadmissible FLASHBIRD LIMITED’s application to set aside the said arbitral award according to Article 1520 of the civil code Procedure.

Orders CSPI to pay to FLASHBIRD LIMITED an indemnity of 5,000 euros under Article 700 of the Civil Code Procedure.

Orders the company CSPI to pay the costs.