Publications

FRANCE

French courts can hear a suit against German arbitrator for non-disclosure

The French Court of Cassation has upheld the conflict of interest award from a lower court based on the fact that the arbitrator did not disclose that his law firm was working with one of the parties during the arbitration process, a proceeding that arose as a consequence of the challenge to an  ICC award.

The ruling came after the appeal by Saad Buzwair Automotive Co, a Qatari vehicle distributor, to a decision from Paris’ Tribunal judiciare, which decided not to hear the claim because under the EU’s 2012 Brussels I Regulation, an action intending to hold an arbitrator liable for poor performance should be judged in the jurisdiction where the duties were performed.

The Paris Court of Appeal overturned the ruling of the lower court holding that in the Brussels Regulation there is an exception for matters related to arbitration, including the ones that entail the constitution of an arbitral tribunal and the conduct from the arbitrators.

ITALY

Italian energy group compensated for arbitrator´s conflict of interest

In 1996, Becchetti Energy Group (BEG) was granted the concession to build a hydroelectric power project in Albania. In order to complete the project, Enelpower (an Enel subsidiary) and BEG entered into a cooperation agreement in 2000 to “sell power for distribution to Enel´s Italian customers”. Later that year, Enelpower decided to exit the project, which led BEG to launch the arbitration process demanding EUR 130 million in compensation.

During the arbitration, BEG discovered that the Italian arbitrator appointed by Enelpower did not disclose that he used to be part of Enel´s Board of Directors and was acting as part of Enel´s legal team in an unrelated litigation.

BEG appealed the arbitration award before the Rome Court of Appeal, as well as in the Italian Court of Cassation, ultimately lodging a negligence suit against the Rome Chamber of Chamber of Commerce as the administrating arbitral institution and bringing criminal complaints against all three arbitrators. All these proceedings were either discontinued or dismissed.

BEG then brought proceedings before the European Court of Human Rights (ECtHR).The ECtHR upheld recently BEG´s claims, holding that BEG had been deprived a fair trial in the arbitration. The ECtHR found that BEG´s right to a fair trial had been violated due to the arbitrator´s failure to disclose his ties to the Enel Group and awarded BEG EUR 50,000 in non-pecuniary damages and costs. Although the verdict was a legal win for BEG, it wasn’t from a financial perspective, since the previous proceedings resulted in a loss of millions of dollars for BEG in terms of lost profits, procedural expenses and damages –valued by BEG in EUR 1.2 billion– that were not awarded by the ECtHR.