Failure to demonstrate the existence of an arbitration agreement impedes enforcement of an ICC award

In yet another case, Greek courts have dismissed an application to grant exequatur to an ICC arbitral award issued in Paris, on the grounds of insufficient evidence provided as to the existence of an arbitration agreement between the parties. The decision joins a group of earlier judgments, and makes clear that domestic courts are not bound by the position taken on the matter by the arbitral tribunal [Thessaloniki 1st Instance Court Nr. 24637/2013, unreported].

THE FACTS: The parties are a Greek (the seller) & an Italian company (the buyer). The seller trades in cereals, whereas the buyer engages in selling cereals and feedingstuffs globally. May 2011 the buyer cooperated with a Swiss broker, in order to proceed to the purchase of wheat. Late May 2011 the Swiss broker contacted a Greek broker on behalf of the buyer. Following negotiations on the selling price of a certain quantity of wheat, the brokers agreed on the terms of a sales contract. The Greek broker’s CEO sent an e-mail containing the terms (one of which was referring to arbitration [ARBITRATION: PARIS]), and assured the Swiss broker that his company acts on behalf of the seller. After some exchange of e-mails with respect to amendments of contract terms and the replacement of the seller’s legal representative, the Swiss broker sent the agreement signed by the buyer, and requested that the latter be returned signed by the seller. The Greek broker forwarded the agreement by e-mail to the seller, requesting the same. Mid July 2011 the seller’s new representative answers by the same means of communication, denying the conclusion of any agreement binding for the seller, supposedly resulting from the e-mail correspondence between the Greek broker and the seller’s previous representative. The Greek broker responded by reproaching the seller for not respecting an international brokerage contract, which had been agreed orally by the seller’s earlier representative. At the same time, the broker informed the buyer on the developments. Early August 2011 the seller is notified by the Greek broker on the vessel chartered for the merchandise’s shipment; the seller responds three days later, contesting the existence of any binding agreement between the parties. As a result, the buyer decides to refer the case to the ICC court in Paris, for violation of contractual terms. The ICC court acknowledged the existence of a sales agreement, and ordered the Greek company to pay the sum of 93.000 €, plus extra expenses.

THE RULING: The court dismissed the application: The conclusion of an arbitral agreement has not been demonstrated by the applicant. The document produced pursuant to Art. 4 of the 1958 New York Convention (NYC) fails to meet the requirements set. In particular, its main features are the following: It is submitted in the form of a fax copy, drafted by the Swiss broker, bearing its logo, and confirming a sales contract between the parties. The name of the buyer and a signature are to be found at the end of the document. The latter would have constituted a solid ground for the award’s recognition and enforcement, if it contained a signature from the seller’s side, or if any other documents (of the alternatives set forth under the NYC, such as a telegraph, a telex, a confirmation e-mail by the seller) were produced. On the contrary, none of the above has been submitted. Beyond that, the mere participation of the seller before the ICC tribunal does not give rise to the conclusion, that it had given its tacit approval to the ICC court’s jurisdiction, given the fact that its presence took place solely for the purpose of challenging both the conclusion of the agreement and the ICC court’s competence to examine the case and issue an award. In addition, it has not been proven that the Greek broker was not in possession of any written power of attorney, so as to proceed with negotiations aiming at the conclusion of an agreement on the seller’s behalf. In light of the above, the court considered that the requirements set forth under Art. 4 in conjunction with Art. 2 NYC have not been proven. As a result it dismissed the application.

COMMENTS: The question whether the parties have indeed concluded an arbitration agreement has been examined in numerous cases before Greek courts [see for instance here]. Depending on the facts, courts decide in favour or against exequatur. Focusing on the case at hand, I would like to underline the following aspects:

a. The court has rightly examined the question according to the provisions of the NYC, granting prevalence of Art. 4 & 2 NYC over any other rules, as to the validity of the arbitration agreement.

b. The court has however applied automatically Greek Civil Law on the power of attorney issue. On the one hand it is true that Art. 1 Para. 2 (e) of the Rome I Regulation (593/2008) excludes arbitral agreements from its field of application; on the other hand however, it is not unanimously accepted in Greece that domestic law prevails over the NYC, i.e. the case law developed on the matter (since it is not explicitly covered by the text of the Convention).

c. The court has referred to a number of Greek decisions, by virtue of which courts are allowed to examine the validity of an arbitration agreement de novo, even if the matter had been brought to the attention of and decided by the arbitral tribunal. In this case, the issue will be examined as being a ground for refusal, and regardless of the arbitral tribunal’s judgment on the matter. Needless to say, that an appeal has been lodged against the judgment. It will be very interesting to wait for the Thessaloniki CoA to re-examine the case. Most importantly, it will be highly helpful to see whether there will be any referral to the ICC court’s reasoning on the central point of the agreement’s validity, which for some reason is missing here. I’m not suggesting an open confrontation, but more likely a constructive dialogue with the ICC court’s line of argument, so as to compare the diverging solutions and draw respective conclusions.