Distributorship agreement between Claimants and a company not party to the arbitration / Defendant not a signatory to the contract / Extension of the arbitral clause to Defendant (yes) / Presumption of assignment of the contract by the signatory company to Defendant inferred from the parties' behaviour (yes) / Performance of the contract by Defendant is evidence of identity between Defendant and the company signatory to the contract / Identical share ownership and representation of both companies are indicative of the existence of a group of companies / Application of international trade usages / Common will of the parties

The parties in dispute in this case are TAIXTILE B (France), TAIXTILE C (France), DNYLON (France) and FWOOL (FRG), Claimants; TAIXTILE S.A (France) as Intervenor; and P.P. Georges Inc. (USA) Defendant.

'Claimants are members of the group TAIXTILE, and all are directly or indirectly owned by the French société anonyme TAIXTILE, Intervenor in the present dispute. Since over 40 years, they executed with the Georges family, of the United States, a series of contracts of short duration, periodically renewable, to distribute in that country fibres and metal products manufactured by them in Europe.

In 1984, three new contracts were signed. One of those contracts was signed on . . . between DNYLON and P. and P. Georges Inc. (hereunder P and P), a company created in January 1984, between two representatives of the Georges family, Peter Georges and Paul Georges, who have been since that time, as they are since July 1987, the two only shareholders of a previously created company, bearing also the name of the family, P.P. Georges Inc. (hereunder PPGI).

That contract designated P. and P. as DNYLON's exclusive US importers of all its steel filaments, strands and tire cord.

. . . . . . . . .

A similar contract, except with regard to the products sold, was signed also in . . . 1984, between P and P and TAIXTILE B as well as with TAIXTILE C.

A third contract, referring to other products, was signed between P and P and FWOOL, in . . . 1984, similar to the two others, except that the German legislation was said to be applicable.

All those contracts must be characterized as exclusive distribution contracts.

. . . . . . . . .

Claimants filed a Request for Arbitration, with the Secretariat of the ICC, against PPGI. In that Request, the latter's nomination as Respondent is explained by the fact that the contracts of distribution of 1984 had been allegedly assigned by P and P to PPGI. A Response was filed by the latter, alleging that there was no agreement to arbitrate between Claimants and PPGI.

The Court of Arbitration of the ICC decided that there was, prima facie, such an agreement. A new Memorial in Response, containing various counterclaims, was filed by PPGI, in 1988, and the Terms of Reference were drawn up in 1988, with the intervention, accepted by the Respondent, of TAIXTILE S.A.

Under paragraph VII of those Terms of Reference, it has been provided:

"The rules governing procedure shall be the ICC Rules of Arbitration, as amended on January 1 1988, and where these Rules are silent, the Arbitrators shall freely determine the procedure to be followed, subject only to international public policy provisions of the French Code of Civil Procedure concerning international arbitration."

. . . . . . . . .

On the Tribunal's jurisdiction over the parties

In their Request for Arbitration, the Claimants (namely TAIXTILE B, TAIXTILE C, DNYLON and FWOOL AG), based the alleged "Jurisdiction of the ICC" on the arbitration clause included in the three contracts executed in 1984 between them and P & P Inc.

The Claimants labelled PPGI, nominated as Respondent in the Request: the "Georges Company".

TAIXTILE, the mother company of the Claimant companies, joined itself into the arbitration, apparently basing the Tribunal's jurisdiction over it and over the parties on the same arbitration clause.

Respondent PPGI did not deny the Tribunal's jurisdiction over Claimants and Intervenor, nor the admissibility of the latter's intervention into the arbitration.

[However] the Respondent strongly denied, in all its submissions, the Tribunal's jurisdiction over it.

. . . . . . . . .

The Respondent summarizes and sets forth as follows, in the Terms of Reference, the reasons on which it is grounding such denial:

"a) The Exclusivity Agreements are between Claimants and P & P, not Respondent.

b) Respondent and P & P were separate and independent companies.

c) Claimant DNYLON insisted on dealing only with P & P, not Respondent.

d) The Exclusivity Agreements were not, and as a matter of law affirmed by Claimants could not have been, assigned from P & P to Respondent."

. . . . . . . . .

The Tribunal's jurisdiction over the Respondent are related to the following questions (without prejudice of the arguments concerning the Tribunal's jurisdiction over the claims, and as to whether this Tribunal is the forum conveniens, which will be subsequently discussed)

Was there an assignment of the contracts in dispute by P and P to PPGI (a)?

Was or is P and P a company or entity truly different and distinct from PPGI, and if so, which were the consequences of the relationships between those companies or entities on the applicability of the arbitration clause (b)?

In the light of all parties' behaviour and statements as to the conclusion, the performance and the termination of the contracts in dispute, were those contracts, in the common will of all parties, deemed to be binding on PPGI (c)?

Before entering into the discussion of these questions, the Tribunal wishes to point out that there is not, and indeed there could not be any controversy between the Parties as to the fact that it was P and P, not PPGI, which signed the contracts of 1984: the actual question is whether this mere fact suffices to exclude the Tribunal's jurisdiction over PPGI. It is in order to decide upon this issue that the Tribunal has to consider the questions above defined.

a) The alleged assignment of the contract.

To conclude on the matter of assignment, the Tribunal will say that while full evidence of a formally executed assignment of the contracts by P and P to PPGI is not before it, the whole of the documents filed and of the circumstances proven may result in the presumption that such assignment did take place or at least prove that Respondent behaved, with the constant agreement of Claimants, as if the assignment had taken place, thus making the contracts binding on it.

The Tribunal will add that at the least, the actual performance of the contracts by all parties, during the whole period until the notice of termination, and even after such notice was given, but for limited exceptions concerning DNYLON, brings a persuasive evidence of the factual identity between PPGI and P and P in respect of the contracts in dispute, and/or of the fact that due to the tight links between PPGI and P and P, the former accepted to consider itself as being bound by the contracts with the Claimants: this analysis, as supplemented by other circumstances of and documents in the case, will be now presented.

b) Difference and distinction between P and P and PPGI, relationships between both and their consequences.

To deny the possible extension to it of the arbitration clause-supposing that the contracts were not assigned-Respondent strongly stresses that P and P is not an "alter ego", but an independent company, actually existing and active in trade, different and distinct from itself.

In support of such contention, Respondent offers several affidavits and documents, which show in particular that P and P do conduct business relationships with several third parties.

The Tribunal will not deny that P and P is a valid legal entity, under the laws of the State of Delaware, and indeed it would not have jurisdiction to make such a decision.

But the Tribunal is apt to notice two facts.

i. In all respects, the two legal entities (PPGI and P and P) are in fact substantially identical.

Indeed, according to the Respondent's answer to one of the questions raised by the Tribunal at its hearing of . . ., the ownership of the share capital on . . . (date of the Request for Arbitration) and on . . . (the nearest date to this award about which the Tribunal is informed) was identical in both companies, namely: Peter Georges 50%, Paul Georges 50%. The business place of both Companies is the same, and the commercial subject matter of their activities is the same too.

ii. There is more to this: an authorized representative of both companies clearly stated that in respect of the contracts in dispute, they were "the same", and more precisely, that PPGI was the exclusive distributor, in the United States, of the goods manufactured and sold by the Claimants.

Indeed, in the letter sent by Mr Peter Georges III, acting on behalf of PPGI, to the office in charge with the evaluation of this latter company (apparently in the framework of discussions then being held with TAIXTILE), one may read the following

"I have requested Mr. X's secretary . . . to mail you the following:

Copies of the contracts between P and P Georges, Inc. and TAIXTILE and DNYLON (P. and P. Georges Inc. and P.P. Georges Inc., are the same)" (emphasis provided).

"You are to prepare an evaluation of P.P. Georges Inc. ... This evaluation should use as a basis only the total annual sales done with TAIXTILE and also the commission paid to P.P. Georges. Inc., by TAIXTILE (emphasis provided).

In the memorandum attached to that letter, written on PPGI's headed paper, one may read:

"P.P. Georges, Inc. (PPGI-the Company) ... is the exclusive importer of

textile C synthetic yarns and fibers,

steel cord for tire reinforcement

for TAIXTILE S.A. (R.P.) in Paris" (emphasis provided).

There could not be more clear and obvious admission of the fact that P and P and PPGI are one and the same entity (in economic terms) and that the party to the distribution contracts is not even a kind of "mixed entity", comprising both companies, but PPGI alone. Such statement cannot be explained, but in two ways: either P and P was formally designated as party to the contracts for reasons of pure convenience, not changing anything as to the true distributor, which had always been and still was PPGI; or, supposing the contracts were really concluded with P and P, they had been assigned to PPGI before June 27, 1986, the date of the letter analysed above.

The inescapable conclusion is that PPGI are bound by the contracts in dispute, and therefore by the arbitration agreement included therein.

The Tribunal wishes to add that even forgetting this conclusion, the relationships between P and P and PPGI, be they regarded as two legally different and distinct companies, would lead to the necessary and justified extension of the arbitral clause from P and P, signatory of the contracts in which they are included, to PPGI, Respondent in the procedure before the Tribunal.

Indeed, nobody could deny that even distinct and different, P and P and PPGI form a group of companies. It is so, not even because, as in the situations generally met, one of the companies is owner of the majority of the shares of the other, or has by other means the control of the same; in the instant case, the substantial identity of the ownership of the share capital in the two companies results in a group of companies that could not be stronger welded than they are.

Now, it is largely admitted that by virtue of a usage of the international trade, where a contract, including an arbitration clause, is signed by a company which is a party to a group of companies, the other company or companies of the group which are involved in the execution, the performance and/or the termination of the contract are bound by the arbitration clause, provided the common will of the parties does not exclude such an extension, and even more so where the common will of the parties was to include a company of the group in the contractual relationship, even if such company did not formally sign the contract.

The Tribunal will now show, by recalling the circumstances and the documents previously analysed, that such is the situation in the instant case.

c) Common will of the parties.

The Tribunal has previously recalled the correspondence of 1983, between PPGI and Madame X, of TAIXTILE, which indicates that the former was negotiating, at that time, the new contracts that were executed in 1984.

It has shown, as well, that PPGI took by far the largest part in the performance of the contracts with the Claimants, and that they did so, not as subcontractors or agents of P and P, but on their own behalf.

Finally, the Tribunal recalls that when negotiations were in progress with TAIXTILE, linked with the possible termination of the contracts, it was PPGI that communicated to the office in charge with the evaluation of their goodwill the needed instructions and documents.

On their own side, the affiliates of TAIXTILE have shown, during the performance of the contracts, that they considered PPGI as their true partner in that performance.

Thus, the common will of the parties was obviously that PPGI be fully-and indeed, almost exclusively-involved in the conclusion, the performance and the termination of the contracts in dispute.

Accordingly, even if it would not appear that PPGI is not, in fact, the true party to those contracts, the usages of the international trade previously recalled would justify and require the extension to this company, party to a group of companies, of the arbitration clauses included in the contracts executed by P and P, the other company, party to the same group.

For all the above stated reasons, the Tribunal will conclude that it has jurisdiction on PPGI, the Respondent in the arbitral procedure before it, as well as on all the Claimants, which is not denied.'