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Derains & Gharavi succeeds in the setting aside of an ICC award before the Paris Court of Appeal

Derains & Gharavi has succeeded in the setting aside of an ICC award before the Paris Court of Appeal on the grounds of an arbitrator’s non-disclosure. The case has been reported by GAR in an article dated 29 March 2018:

Audi Volkswagen award set aside in Paris

An ICC award won by the Middle Eastern branch of Audi Volkswagen has been set aside in Paris on the grounds of a German arbitrator’s non-disclosure – with the court dismissing a suggestion that a legal directory had incorrectly represented his firm’s work for an affiliate car company, Porsche.

In a six-page judgment on 27 March, the Paris Court of Appeal annulled the award dismissing claims worth US$150 million brought by Qatari vehicle distributor Saad Buzwair Automotive Co (SBA). The award was issued in March 2016 by a Paris-seated tribunal made up of three German arbitrators: Wolfgang Wiegand (as president), Klaus-Albrecht Gerstenmaier (appointed by SBA) and Stefan Kröll (appointed by Audi Volkswagen). ‎

The appeal court found that Gerstenmaier had failed to disclose work that was carried out by his law firm, Haver & Mailänder in Stuttgart, for the Volkswagen Group during the course of the arbitration – creating reasonable doubt as to his independence and impartiality.

The work in question only came to light after the arbitration was over, when SBA consulted Haiver & Mailänder’s entries in successive editions of the German directory of lawyers, JUVE. The 2010/2011 edition said that the firm had represented a consortium of three banks including Volkswagen Bank, a Volkwagen Group entity, in a competition dispute with German public bank Sparkasse Ingolstadt. The 2015/2016 edition said the firm’s arbitration and mediation department was representing Porsche – another part of the group – in a disput‎e in progress.

On accepting his appointment as arbitrator in 2013, Gerstenmaier had signed a declaration of independence, as required by the ICC. ‎Questioned by SBA about the information in the 2010/2011 edition of JUVE, he acknowledged in a letter in May 2016 that his firm had represented Volkswagen Bank in the competition dispute until a judgment of the Munich Court of Appeal in 2010, with a separate lawyer representing it in subsequent proceedings before the Federal Supreme Court in Germany.

Gerstenmaier said he had not personally taken part in the case or been aware of it and his firm had “not otherwise acted or advised a Volkswagen Group company or entity, including the Porsche Group, from 2011 to the present.”

In the set-aside proceeding in Paris, Audi Volkswagen was confronted with Haiver & Mailänder’s 2015/2016 JUVE entry mentioning work for Porsche. It argued that the information was incorrect‎ and probably the result of an updating error by the publisher, noting that the next edition of the directory made no mention of the work.

Audi Volkswagen also relied on a statement from Florian Wandel, legal director of Porsche’s distribution law department, dated January 2017. He wrote that he had not appointed Haiver & Mailänder from the date of his arrival at Porsche in 2008 and did not know of any “substantial terms of reference” given to the firm by colleagues since that date.

The only exception Wandel mentioned was some consulting work that Haiver & Mailänder had provided on an issue of banking law in connection with the financing of Porsche sales, which he said was carried out over several months in 2010 for a fee of €7,520. He said Gerstenmaier was not involved in the work.

The Paris Court of Appeal was unconvinced by Audi Volkswagen’s explanations. It noted that Wandel, as an employee of the Volkswagen Group, was hardly neutral with respect to the case‎ and appeared not to have conducted “exhaustive searches” of instructions given by legal departments of Porsche other than his own.

The court also said the suggestion that JUVE had made an updating error in mentioning Porsche in the 2015/2016 edition was contradicted by the fact that it had not been mentioned in the previous edition‎. The court noted that Audi Volkwagen had not produced as evidence the form Haiver & Mailänder would have completed for entry in the directory, which required it to list its “top 5 most important cases from a legal point of view or for the development of the firm”. Only by doing so could it show that the mention of Porsche was an error of the publisher, the court suggested.

Contrary to what Audi Volkswagen had argued, the court said that business law firms in Germany use JUVE to “showcase” their most impressive work and most coveted clients and that the portrayal of the firm would “not be left to chance”. It accordingly took the view that Haiver & Mailänder had included the work conducted for Porsche during the arbitration in its list of “top 5″ cases. ‎

The court said that the arbitration work for Porsche created doubt as to Gerstenmaier’s independence, observing that the arbitrator had also failed to disclose Haiver & Mailänder’s consulting work for the Volkswagen Group in 2010.

The court further ruled that the fact that the award was unanimous and that the impartiality of the other arbitrators was not disputed was irrelevant, since each member of the arbitral tribunal is likely to influence other members.

Hence it said the award must be annulled under French law and ordered Audi Volkswagen to pay €100,000 costs in addition.

Dentons and Orrick Herrington & Sutcliffe in Germany represented SBA in the arbitration, which concerned the termination of deals to distribute Audi and VW vehicles in Qatar and was governed by German law. For the annulment proceeding in Paris, the Qatari company turned to new counsel, instructing a team from Derains & Gharavi led by Hamid Gharavi and including his fellow founding partners, Yves Derains and Bertrand Derains. The team also included partner Marie-Laure Bizeau.

Gharavi tells GAR, “We look forward to starting a new arbitration with basic safeguards in place of which my client was deprived in the first case.”

Bertrand Derains says the judgment of the appeal court is “symptomatic of the Paris court’s tendency in recent years to control the independence and impartiality of arbitrators.”

And Bizeau says that the Paris court recognised “the importance for the integrity of process of full and prompt disclosures by arbitrators.”

Audi Volkswagen was represented by Freshfields Bruckhaus Deringer in both the arbitration and annulment proceeding. Paris-based partner Elie Kleiman, who led the team in court, was not at liberty to comment”.

In the ICC arbitration

Tribunal
• Wolfgang Wiegand (Germany) (President)
• Klaus-Albrecht Gerstenmaier (Germany) (appointed by SBA)
• Stefan Kröll (Germany) (appointed by Audi Volkswagen)

‎Counsel to Saad Buzwair Automotive Co (SBA)
• Dentons
Partner Wolfram Krohn
• Orrick
Partners Karlsten Faubhaber and Ian Johson

Counsel to Audi Volkswagen Middle East Fze
• Freshfields Bruckhaus Deringer
Partners Rolf Trittmann in Frankfurt and Hans-Patrick Schroeder in Hamburg and associates Renata Macejna and Wolfgang Jung

‎In the Paris Court of Appeal

‎Counsel to Saad Buzwair Automotive Co (SBA)
• Derains & Gharavi
Partners Hamid Gharavi, Yves Derains, Bertrand Derains and Marie-Laure Bizeau in Paris

Counsel to Audi Volkswagen Middle East Fze
• Freshfields Bruckhaus Deringer
Partner Elie Kleiman and associate Claire Pauly in Paris”.

Protegiendo la integridad del Arbitraje

Yves Derains will speak on “Como conducir eficazmente un arbitraje internacional” at the ICC conference “Protegiendo la integridad del Arbitraje” that will be held in Cuzco (Peru) on 30 May 2018.

Primera Conferencia Conjunta ITA-ALARB sobre Arbitraje Internacional

Yves Derains will speak at the “Primera Conferencia Conjunta ITA-ALARB sobre Arbitraje Internacional” organised by the Institute for Transnational Arbitration (ITA) and the Asociación Latinoamerícana de Arbtiraje (ALARB) and dedicated to “Arbitraje sobre Conflictos de Recursos Naturales” on 3 and 4 May 2018 in Santiago (Chile).

Melanie van Leeuwen chosen to chair an ICSID Arbitration Tribunal

Melanie van Leeuwen has been chosen to chair the Tribunal in an ICSID arbitration dispute between US investors and the Republic of Armenia. This nomination has been reported in two articles.

Article published in Investment Arbitration Reporter on 16 March 2018:

A tribunal has been constituted to hear an ICSID arbitration brought by Edmond Khudyan and Arin Capital & Investment Corp against the Republic of Armenia.

The tribunal was finalized on March 16 2018 with the appointment of Melanie Van Leeuwen by the parties. Ms. Van Leeuwen is a partner at Derains & Gharavi in Paris and was previously tapped by Horthel Systems Tesa Beheer BV and Poland Gaming Holding BV to sit as the claimants’ nominee in a BIT claim against Poland.

Ank Santens of White & Case was earlier appointed by the claimants and Armenia nominated Zachary Douglas.

As we reported, the dispute relates to the US claimants’ investment in a luxury real estate project. The claimants contend Armenian authorities did nothing to come to their assistance after they were defrauded by their local partners.

We reported that, due to the relatively small size of their claim ($10-15 million) the investors initially proposed that a sole arbitrator should hear the case. However, it appears that Armenia has not agreed to that proposal.

The claimants are represented by Hughes, Hubbard & Reed. Armenia has retained CMS Hasche Sigle in Munich and Hong Kong, and Concern Dialog Law Firm in Yerevan“.

Article published in GAR on 26 March 2018 (extracts):

The latest round of panels formed at ICSID has seen first-time appointments for Melanie van Leeuwen of Derains & Gharavi, Ank Santens of White & Case, Brazil’s Eduardo Damião Gonçalves and five others, while beleaguered Bulgarian arbitrator Stanimir Alexandrov has received six appointments.

Since GAR’s last tribunal round-up in January, new panels have been formed in 23 cases. These include 14 new claims against countries including Armenia, Croatia, Egypt, Kazakhstan, Mexico, Romania, Saudia Arabia, Spain, Tanzania and Uzbekistan. Four annulment committees have been formed while five tribunals have been reconstituted following the resignation of an arbitrator (in one case, an arbitrator rejoined the panel after having resigned from it).

First-timers van Leeuwen and Santens are sitting together on a tribunal that will hear a US$15 million claim against Armenia brought by US businessman Edmond Khudyan and his California company Arin Capital. The case concerns the state’s alleged failure to act on allegations that Khudyan was defrauded by his business partner in a bankrupt real estate venture.

A Dutch national based in Paris, van Leeuwen is chairing the tribunal while Santens, a Belgian-based practitioner in New York, has been appointed by the claimants. Armenia has nominated Australian Zachary Douglas QC of Matrix Chambers in Geneva.

[…]

Edmond Khudyan and Arin Capital & Investment Corp v Republic of Armenia (ICSID Case No. ARB/17/36)
Date constituted: 15 March
• Melanie van Leeuwen (Netherlands) (appointed by the parties)
• Ank Santens (Belgium) (appointed by the claimants)
• Zachary Douglas QC (Australia) (appointed by Armenia)

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