Elektrim SA v Vivendi Universal SA [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mr Justice Aikens,THE HONOURABLE MR JUSTICE AIKENS |
| Judgment Date | 20 March 2007 |
| Neutral Citation | [2007] EWHC 11 (Comm),[2007] EWHC 571 (Comm) |
| Docket Number | Case No: 2006/695,Case No: 2007/91 |
| Court | Queen's Bench Division (Commercial Court) |
[2007] EWHC 11 (Comm)
the Honourable Mr Justice Aikens
Case No: 2006/695
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Mr Richard Millett QC and Mr Paul McGrath (instructed by Barlow Lyle & Gilbert, Solicitors, London) for the Claimants
Mr Toby Landau (instructed by Watson Farley & Williams, Solicitors, London) for the Defendants
Hearing dates: 4 th, 5 th and 6 th December 2006
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Aikens:
I. The parties, the applications and the background to them
Elektrim SA (“Elektrim”) makes three applications to the Court in relation to an arbitration which is continuing before the London Court of International Arbitration (“LCIA”). The arbitration is between Elektrim and the defendants to the present applications. I will refer to the defendants Vivendi Universal SA and Vivendi Telecom International SA collectively as “Vivendi”. I will refer to the other defendants as follows: Elektrim Telekomunikacja Sp. z.o.o. as “Telco” and Carcom Warzsaw Sp. z.o.o. as “Carcom”. The arbitration arose out of a contract known as the Third Investment Agreement (“TIA”) to which Vivendi, Elektrim, Telco and Carcom were parties. That contract was concluded in September 2001.
The first application is made under section 68(2)(g) of the Arbitration Act 1996 (“ the 1996 Act” or “ the Act”). Elektrim seeks an order to set aside a Partial Award of the LCIA tribunal which is dated 22nd May 2006 (“the Partial Award”). The grounds of the application are that the Partial Award was obtained by fraud or, in the alternative, that the way in which the Partial Award was procured is contrary to public policy.
The second application is for the court to extend the time for applying under section 68(2)(g) beyond the permitted 28 day period after publication of the Award. That application is made under section 80(5) of the 1996 Act and the CPR Pt 62.9 (1)(a).
The third application is for a declaration to the effect that the defendants have collectively repudiated or renounced the arbitration agreement and that an injunction be granted to restrain any further conduct of the arbitration.
In the current applications to the Court, the central allegation made by Elektrim is that Vivendi, but not its lawyers, Salans, deliberately concealed a vital Memorandum that had been written by M. Dominique Gibert on 29 August 2001, at a crucial stage of the negotiations for the TIA between Vivendi and Elektrim. These negotiations were themselves at the heart of the disputes in the LCIA arbitration. The Memorandum, which was called “the Gibert Memorandum” in the hearing before me, was addressed to M. Jean – Marie Messier, then the CEO of Vivendi (and on its main board) and other senior executives of Vivendi, including M. Guillaume Hannezo, the Chief Financial Officer. It is alleged that this Memorandum reveals that, contrary to representations made by Vivendi at the time of the negotiations with Elektrim for the TIA, Vivendi were in negotiations with Deutsche Telecom (“DT”) about the sale of shares in Telco. It is said that any negotiations with DT would be contrary to Elektrim's rights under the TIA and its expectations about Vivendi's strategic intentions concerning Elektrim, Telco (then owned partly by Vivendi) and through Telco, Vivendi's investment in Polska Telfonia Cyfrowa Sp zo.o, or “PTC”, whose shares were partly owned by Telco. PTC is the largest mobile phone network in Poland.
Elektrim submits that if this Memorandum had come to light in the course of the arbitration and before the oral hearing in January 2006, then the Partial Award would have upheld Elektrim's case and the arbitrators would have found that Elektrim had entered the TIA as a result of a mistaken view of Vivendi's intentions or as a result of Vivendi's deceit. The arbitrators would have accepted Elektrim's submission that the TIA was void and made a declaration accordingly.
The defendants resist all these applications by Elektrim. There was a three day hearing before me on Monday, 4 th December to Wednesday, 6 th December 2006. Although a great many documents were referred to and although Elektrim made allegations of fraud by Vivendi, there was no oral evidence. At the end of the hearing I reserved judgment.
The LCIA arbitration and the present court applications by Elektrim are only two battlegrounds in a complicated and very hard fought corporate campaign in several theatres of war for control of PTC. This campaign has been carried on since 1999. The main protagonists are Elektrim, Vivendi and DT.
I need only sketch in an outline of the battles that have taken place in Poland, Austria, France, Switzerland, and England, in order to set the current applications in context. In 1999 Elektrim and Vivendi agreed to use their reasonable efforts to form a long – term equity alliance in the telcom business, particularly in relation to Elektrim's equity holdings in PTC. At this time DT owned 49% of the PTC shares. Elektrim also owned shares in PTC. Some of Elektrim's shares were transferred to Telco, which had been created as a joint – venture company with Vivendi in early 1999 by virtue of the First Investment Agreement between Elektrim and Vivendi. Also under that agreement, Vivendi took a stake in Telco. Two smaller companies, Carcom and Elektrim Autoinvest (“ EA”) owned 1.9% and 1.1% respectively of PTC's shares. 1 Telco, Carcom and EA were thus all vehicles for Elektrim and Vivendi's holdings in PTC. By the latter half of 1999, Elektrim owned a large minority of the PTC shares, and Vivendi had an interest in PTC via its Telco shares. However, four other companies 2 owned a small but vital tranche of the PTC shares. The initial battle for control of PTC centred on the ownership of the PTC shares owned by these companies. At the same time, Elektrim was in financial difficulties. In October 1999 Elektrim hoped to obtain assistance from Vivendi in its campaign against DT's interest in PTC. Elektrim wished Vivendi to provide funds for the acquisition of the all—important small block of PTC shares. In order to do this Vivendi and Elektrim entered into the Second Investment Agreement. Vivendi effectively provided US$650 million which would be used to fund the purchase, by Elektrim, of the PTC shares owned by the small shareholders. This purchase was effected in October 1999. Subsequently in December 1999 this block of shares and the remainder of Elektrim's original holding in PTC were all transferred into the joint venture company, Telco. Telco became the registered owner of all those PTC shares. Thus Telco, Carcom and EA together became the owners of 51% of the shares in PTC. 3 (As already noted, DT owned the other 49%). At that stage Elektrim owned 51% of Telco's shares and Vivendi owned 49%.
The sale of the PTC shares from the small shareholders to Elektrim and the transfer of these shares and those in Elektrim's original holding in PTC were then challenged by DT. The challenges were made in two separate international arbitrations in Vienna. The challenges were made respectively under the PTC Shareholders' Agreement and a Deed of Formation. The first Vienna arbitration challenged the initial transfer on two grounds. The first was that DT had rights of first refusal over any transfer of PTC shares under the PTC Shareholders' Agreement. The second ground of challenge by DT was that Elektrim's actions constituted a “material breach” of the PTC Shareholders' Agreement, which entitled DT to exercise a call option so as to acquire all of Elektrim's PTC shares at their book value. If DT could make this call then it would obtain those PTC shares at a discount of several hundred million dollars.
Vivendi came to the aid of Elektrim in respect of this first Vienna arbitration under the terms of the Second Investment Agreement (“SIA”). Under the SIA Vivendi had agreed to indemnify Elektrim in respect of its potential exposure to DT (but only up to US$ 100 million). In return Vivendi was given the right to select the legal team acting for Elektrim in any challenge by DT. Vivendi chose the legal team in the first Vienna arbitration and it also chose the team acting for Elektrim and Telco in the second Vienna arbitration.
In the first Vienna arbitration Elektrim was successful. The tribunal upheld the validity of the transfer of PTC shares from the smaller shareholders. But in the second Vienna arbitration the tribunal held that the transfer of PTC shares from Elektrim to Telco was ineffective. However this declaration was made only so far as Elektrim was concerned. The tribunal held it had no jurisdiction over Telco. Therefore Telco remained the registered owner of the PTC shares. This decision, in Second Partial Award in the second Vienna arbitration, was made on 26 th November 2004.
This Award of the second Vienna arbitration was then challenged by Telco in the Higher Regional Court of Vienna. On 23rd December 2005 the Vienna Court partially annulled the Award, insofar as the latter declared that the transfer of the shares by Elektrim to Telco was not effective. The Vienna Court held that this conclusion in the Award was inconsistent with the declaration that the Tribunal had no jurisdiction over the legal owner of the PTC Shares (i.e. Telco). In turn, that decision of the Higher Regional Court of Vienna was challenged by both DT and Elektrim. The Court of Appeal...
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