Rachad Itani v. Société générale de Banque au Liban SAL

At a glance

Parties

Rachad Itani (appellant; respondent in the arbitration) v. Société générale de Banque au Liban SAL (respondent on appeal; claimant in the arbitration)

Case no.

Cour d'appel du Québec No. 500-09-028792-208 (500-17-093234-162); 2022 QCCA 920

Court

Court of Appeal of Quebec (Mark Schrager, Benoît Moore, Peter Kalichman, JJ.A.)

Underlying award(s)

Award of 10 August 2006 in an arbitration before the Beirut Chamber of Commerce, Lebanon

Forum and rules

Recognition and enforcement under arts. 652–653 C.p.c., read with the New York Convention

Treaty

New York Convention 1958 (arts. V, V(1))

Sector

Banking; loan and trust (securities portfolio)

Outcome

Appeal dismissed in substance. Recognition and enforcement of the award upheld; the appeal was allowed only to add an order that the Bank pay CAD 13,158 under a Paris Court of Appeal judgment.

Amount

Award: EUR 1,319,733.27 with 4% interest from 29 January 2005 (over CAD 2.5 million in the Superior Court judgment); Paris costs order of EUR 40,000 also recognised; CAD 13,158 (EUR 10,000) ordered against the Bank; legal costs against the appellant

The dispute

In April 2000 Rachad Itani borrowed EUR 1,000,000 from Société générale de Banque au Liban SAL (the Bank) to buy a portfolio of Lebanese securities. The securities were held in a trust managed by the Bank under a trust contract that contained an arbitration clause. After French court proceedings, the Bank started arbitration before the Beirut Chamber of Commerce in January 2005. On 10 August 2006 the arbitrator ordered Itani to repay EUR 1,319,733.27 with interest. The arbitrator declined jurisdiction over Itani's counterclaim for the loss of the securities, because that claim arose under a separate 1999 Custodian and Securities Service Agreement (CUSSA) that the arbitration clause did not cover. The Bank applied to the Quebec Superior Court in April 2016 for recognition and enforcement. Itani argued that the application was time-barred under the three-year limitation period of art. 2925 C.c.Q., that the arbitration had not followed the parties' agreement because his counterclaim was left out, and that there was lis pendens with proceedings in Lebanon.

Key holdings

1. The limitation period for recognising a foreign award is a procedural matter governed by the law of the enforcing forum, here the Civil Code of Québec. Art. 2925 C.c.Q. (three years) does not apply. An arbitral award is not a contract, and the Bank sought to enforce rights the arbitrator had already recognised, not to assert them. The ten-year period therefore applies. ¶¶ 29–33
2. An arbitral award is not a judgment. But read consistently with the provisions on interruption of prescription (arts. 2892, 2895, 2896 C.c.Q.), the word "judgment" in art. 2924 C.c.Q. includes a foreign arbitral award, so the ten-year period of that article applies. The Court distinguished Yugraneft, which concerned the Alberta Limitations Act. ¶¶ 34–39
3. Itani's objection that the arbitrator failed to rule on his counterclaim may not be admissible under the Convention: the Court noted that art. V(1) does not allow an objection on the ground that the arbitrator failed to decide a matter within his jurisdiction. Assuming the objection is available, it fails on the facts. ¶ 43 and n. 27
4. What the arbitration agreement covered is a question of fact, and the Court defers to the trial judge. The judge made no palpable and overriding error in finding that the parties had not agreed to submit the counterclaim. The CUSSA is not mentioned in the arbitration clause, and the pre-arbitration exchanges show that the Bank refused to include the counterclaim. The arbitrator decided the point, and reopening it would mean reviewing the merits, which art. 653 C.p.c. forbids. ¶¶ 44–50
5. The motion to file new evidence on the conversion rate was granted. On the parties' agreement, the Bank was ordered to pay CAD 13,158 (EUR 10,000 under the Paris Court of Appeal judgment of 13 December 2012), with interest and the additional indemnity from 25 April 2019. Legal costs were awarded against the appellant. ¶¶ 51–54

Procedural history

1. May 2002The Bank sued Itani in the Tribunal de Grande Instance de Paris for repayment of the loan. Itani counterclaimed for damages.
2. 2003–2004The Tribunal de Grande Instance declined jurisdiction over the counterclaim because of the arbitration clause. In 2004 the Paris Court of Appeal held that the Tribunal de Grande Instance had no jurisdiction over any part of the dispute.
3. January 2005The Bank started arbitration before the Beirut Chamber of Commerce.
4. 10 August 2006Award: Itani ordered to pay EUR 1,319,733.27 with interest; the counterclaim was held to fall outside the arbitrator's jurisdiction.
5. 25 September 2006The Tribunal de Grande Instance de Paris recognised the award. Itani's appeal to the Paris Court of Appeal was dismissed.
6. 14 April 2016The Bank applied to the Quebec Superior Court for recognition and enforcement.
7. 11 December 2019The Superior Court (Dominique Poulin J.) recognised the award and declared it enforceable.
8. 16 November 2021Hearing before the Court of Appeal of Quebec.
9. 29 June 2022The Court of Appeal upheld recognition and enforcement. It allowed the appeal only to add the CAD 13,158 order against the Bank.

Tribunal, counsel and experts

Decided by

• Mark Schrager Judge, Cour d'appel du Québec
• Benoît Moore Judge, Cour d'appel du Québec
• Peter Kalichman Judge, Cour d'appel du Québec

For the claimant

Prévost Fortin D'Aoust

For the respondent

Osler, Hoskin & Harcourt

Run a conflict check on these names →

Keywords

• New York Convention
• recognition and enforcement
• foreign arbitral award
• limitation period
• prescription
• art. 2924 C.c.Q.
• art. 2925 C.c.Q.
• Yugraneft
• Quebec
• Beirut Chamber of Commerce
• Lebanon
• counterclaim
• scope of arbitration agreement
• Article V(1)
• art. 653 C.p.c.
• no review of merits
• banking loan
• trust contract

Summary generated with AI from the published documents — refer to the award for the authoritative text.