Enforcement of a JAG award in Greece
The Thessaloniki 1st Instance Court granted
enforceability to an arbitral award rendered by an arbiter of the Judicial
Arbiter Group, situated in Denver, Colorado. Among other issues, the Greek
judge examined the conformity of the US award to Greek public policy [Case Nr. 21870/2013,
unreported].
The facts: The parties, i.e. a US company, with its seat in
Greenwood Village, CO, and a Greek entrepreneur, concluded a franchise agreement
in 2009. It was agreed that the US company (franchisor) would grant franchise rights
to the Greek counterpart (franchisee). The latter issued two promissory notes
to the order of the franchisor, due in October 2009 and April 2012. The
franchisee failed to pay the agreed amounts, which led the franchisor to the decision
to terminate the agreement in July 2012. Mid November 2012 the US company filed
an application for an arbitral award at the JAG, thus activating the
arbitration clause agreed by virtue of the franchise agreement. Pursuant to
Art. 21.2 of the contract, the parties agreed not to question the validity or
enforceability of the award. According to Art. 21.5, the Federal Arbitration
Act would be applicable. The Greek court referred to § 2, 201 & 202 of the
above Act. The applicant sought damages consisting of: 46.127,81 $ for trade
mark infringement, alternatively for violation of the franchise agreement; 75.935,77
$ & 22.221,91 $ for payment of the promissory notes, interests included; 16.887,90
$ for costs and lawyer’s fees. The hearing was set for February 13, 2013. The
franchisee was notified of the proceedings through e-mail sent by the applicant
on November 15, 2012, and by the arbiter’s office on December 6, 2012. The award
was issued end February 2013, ordering the payment of the amounts above. It was
also ordered that the franchisee should refrain from any competitive acts
within the Greek territory for one year. The US company requested that the
arbitral award be recognized and enforced pursuant to the 1958 New York
Convention on the recognition and enforcement of arbitral awards. Both countries
are signatories of the Convention.
The ruling: The court applied the New York Convention, which
forms part of Greek law since 1961. The franchisee raised a number of points
under Art. 5.1, however it did not produce any evidence in order to support the
grounds of refusal asserted.
The court examined the public policy reservation in
light of the following allegations made by the franchisee:
a.
That the
agreement was imposed to her by the US company. It has not been proven that the
arbitration agreement was the result of duress by the applicant against its
Greek counterpart.
b.
That she
was deprived of her rights to participate in the arbitration proceedings. It
has been proven that she was given proper notice and in time sufficient to
arrange for her defense.
c.
That she
would have to spend a significant amount for protecting her interests before
the arbiter in Denver, i.e. approximately 10.000 $ advance payment, plus 420 $
per billable hour. It has not been proven that the franchisee’s financial situation
was such, as to impede her participation in the arbitral proceedings. Besides,
so the court, the amounts mentioned above were probably high, however in
proportion to the subject matter, thus not excessive and disproportionate, so
as to activate the public policy ground for refusal.
d.
That the
interest rate agreed (18 %) is 10 % higher than the present rate in Greece. The
court stated that an interest rate exceeding the current domestic rate does not
constitute per se a public policy violation. It also added that it is not
permitted to the court of destination to examine how the foreign award applied
the agreement of the parties in this respect.
e.
That the
order of the arbiter against the franchisee to refrain from any competitive activities
violates domestic public policy. The court dismissed the point, referring to
the facts of the case as accepted by the arbiter, namely that the franchisee
continued to offer the same services without fulfilling her obligations towards
the applicant.
Comments: To my mind, two issues should be highlighted in this
decision.
a.
The court
did not hesitate to grant full validity to e-mail messages for the purposes of
Art. 5.1 b of the NYC. I don’t recall any decision from my jurisdiction being
so generous to such a method of notification. The reason lies probably in the
franchisee’s omission to challenge this form of notice.
b.
The second
point relates to the part of the award, which grants damages for trade mark infringement,
or alternatively for violation of the franchise agreement. As noted in earlier
postings with respect to a Ukrainian and a Chinese arbitral
award, a penalty for non-performance is not per se contrary to Greek public
policy; still, Greek courts are obliged to estimate whether the amount is to be
considered as excessive according to domestic public policy standards. Failure
to proceed to the test leads to reversal [Supreme Court 1260/2002]. In the
present case, the court did not examine the issue whether punitive damages for
non performance reaching almost 50 % of the actual claim are in sync with Greek
public policy.
Labels: International Arbitration