⚖ [Communiqué] Arbitrage frauduleux ayant conduit à un détournement de fonds.
👓Lire le communiqué et la décision >> https://t.co/rErI9JCzdQ pic.twitter.com/T7YT1gUjIX— Cour de cassation (@Courdecassation) June 28, 2023
In an arbitration fraud case that led to the embezzlement of funds held by a consortium responsible for managing litigation related to the liquidation of harmful assets of a bank:
- the guilt of one of the arbitrators and that of the lawyer of a private financial group executive are confirmed;
- The conviction of the president of the consortium and that of the chief of staff of the Minister of the Economy in office on the date of the arbitration are quashed: these two defendants will be retried;
- the State could not join the proceedings as a civil party.
Warning: the press release is not intended to set out in its entirety the content of the judgments rendered. It tends to present in a synthetic way their main legal contributions.
Facts and procedure
In the 1990s, a French bank ran into financial difficulties. A consortium was formed to liquidate its harmful assets. The shares in the consortium were held by a public institution, under the supervision of the Minister of the Economy. The mission of this public institution was to manage the financial support provided by the State to the bank.
In 2008, a dispute between the bank and a private financial group was submitted to an arbitration tribunal: the consortium was ordered to pay the financial group and its director about 400 million euros. Believing that one of the arbitrators had lacked impartiality, the consortium appealed to the Paris Court of Appeal in 2013: the judge annulled the arbitral award and ordered the return of the 400 million euros to the consortium.
The head of the private financial group, his lawyer and one of the arbitrators were prosecuted for fraud: they allegedly sought to obtain an arbitration award in favour of the financial group and its director in order to embezzle funds held by the consortium. The then Chief of Staff of the Minister of the Economy and the President of the consortium were prosecuted for complicity in the embezzlement of funds handed over to a person entrusted with a public service mission.
In 2021, the Paris Court of Appeal noted the termination of the proceedings against the deceased leader of the financial group.
It condemned:
- the arbitrator for fraud;
- the president of the consortium and the chief of staff of the Minister of the Economy for complicity in the misappropriation of property handed over to a person entrusted with a public service mission;
- the lawyer of the leader of the private financial group for fraud and complicity in the misappropriation of property handed over to a person entrusted with a public service mission;
- some of the defendants to compensate the consortium for the damage suffered as well as the French State.
The defendants lodged cassation appeals against these decisions.
The decision of the Court of Cassation
The criminal convictions of the arbitrator and the lawyer of the director of the private financial group
The Court of Cassation dismissed the appeals of the arbitrator and the manager’s lawyer.
However, the Court of Cassation specifies that the manager’s lawyer could not be sentenced to a temporary ban on exercising the profession of legal adviser: indeed, this profession no longer has a legal existence. Only a ban on practising as a lawyer could be imposed.
Subject to this reservation, their convictions and sentences are now final.
The criminal convictions of the Director of the Cabinet of the Minister for Economic Affairs and the President of the Consortium
The Court of Cassation censured the convictions of the chief of staff and the president of the consortium. Indeed, they were unaware of the fraudulent nature of the decision rendered by the arbitral tribunal; Therefore, the Court of Appeal could not consider that they were complicit in the embezzlement.
These two defendants will therefore be retried by the Paris Court of Appeal.
The damages awarded to the civil parties
The consortium
The Court of Appeal ordered the lawyer of the leader of the private financial group, the arbitrator and the liquidators of the financial group to pay the consortium approximately 392 million euros in compensation for its damage.
The Court of Cassation specifies that this sentence will take place “in deniers or discharge“. This means that if the consortium recovers all or part of the €400 million embezzled, these funds cannot be combined with the sum obtained in compensation for its damage.
In other words, the consortium will not be able to receive more than EUR 400 million.
The French State
On the other hand, the Court of Cassation quashed the decision of the Court of Appeal which declared admissible the civil action of the French State.
It considers that the damage alleged by the State does not flow directly from the infringement of which the consortium was the victim. They exist because of the State’s obligation to guarantee its debts.
The Paris Court of Appeal will therefore have to rule again on this point.
https://www.courdecassation.fr/files/files/Communiqu%C3%A9s/pourvoi_n%C2%B021-87.417_28_06_2023.pdf