Thursday, 5 June 2014

No exequatur for an ICA award in Greece

This is a case demonstrating the pitfalls hidden in the arbitration agreement between the parties. The Lamia CoA dismissed the appeal of a UK company against the 1st instance ruling, which refused to declare enforceable an award rendered by the International Cotton Association Arbitral Tribunal. Applying Art. 2 NYC, the CoA found that the arbitration agreement signed between the UK company and the CEO of a Greek SA does not bind the latter, because the executive director had no authority to sign such an agreement pursuant to the company’s articles of association [Lamia CoA Nr. 10/2013, published in: Εφαρμογές Αστικού Δικαίου & Αστικού Δικονομικού Δικαίου (Theory and Practice of Civil Law & Civil Procedure Law) 2013, pp. 320 et seq.].

The facts: The applicant & appellant is a UK company with its seat in Liverpool, focusing on international cotton transactions. In the course of the above business activities it concluded a number of contracts in 2008 with a Greek SA, by virtue of which it purchased certain quantities of cotton. An arbitration clause in favor of the ICA Arbitral Tribunal was included in all contracts signed by the CEO of the Greek company. Following frictions and disagreements in the course of business between the parties, the UK company decided to activate the arbitration clause. The Greek company refused to participate in the arbitration proceedings. The ICA Tribunal issued its award in February 2010, ordering the default party to pay the amount of nearly 5 m. US $. The award was not challenged by the Greek company. The Livadia 1st Instance Court [Nr. 129/2011, unreported] dismissed the application to grant exequatur. The UK company appealed. 

The ruling: The CoA made special, if not exclusive reference to the articles of association of the Greek SA. Pursuant to Art. 20 of the above, the board has the exclusive powers of administration and representation of the company; it may however confer powers to persons, be they members of the board or not, in written, by defining the faculties given to those persons and their limits. By implementing Art. 20, the board conferred a number of powers to the CEO of the company. A right to conclude or sign arbitration agreements was however not included in the written authority granted.
Accepting that such a right should be included implicitly in the powers conferred would run contrary to the wording of Art. 20 of the articles of association, unless the Greek company would give its consent. This was however not the case, since the latter did not participate in the proceedings. In conclusion, a written and explicit power of attorney to sign the arbitration agreements did not exist. Hence, the 1st Instance court was right to refuse exequatur to the foreign award.  

Comments: It has been underlined already, that agency law often requires proof that the agent was granted authority, express or implied, to enter into the relevant contractual relationship on behalf of the principal. In this regard, national laws differ substantially on questions of necessary form and content [Wolf (ed.)/Wilske/Fox, New York Convention (2012), p. 168 et seq.]. Sad as it may seems for the free circulation of arbitral awards around the world, most notably for those issued by institutional arbitration panels, the court has reached a correct decision. Actually it is the first reported case refusing to grant enforceability to an ICA award in Greece; a number of earlier rulings followed the opposite direction. 

Conclusion: Foreign parties need to show the utmost diligence in the matter, so as to avoid a painful defeat, such as in the case reported.