- Arbitral Award
- ICC International Court of Arbitration 12745
SHARE PURCHASE AGREEMENT - GOVERNED BY FRENCH LAW
ASSIGNMENT OF A MEMORANDUM OF UNDERSTANDING - NOT EFFECTIVE ON ACCOUNT OF FAILURE TO GIVE NOTICE THEREOF TO ASSIGNED PARTY - REFERENCE TO ARTICLE 9.3.4(2) UNIDROIT PRINCIPLES
Seller and Buyer entered into a Share Purchase Agreement whereby the latter acquired all shares held by the former in a holding company whose assets consisted solely of the shares in Seller’s subsidiary. In preparation for the sale of shares, Seller entered into an agreement with Mr. X, a shareholder in Seller’s subsidiary, whereby the latter would waive his pre-emption right on the subsidiary’s shares.
A dispute arose between Buyer and Seller when Mr. X brought an action before an Italian court, claiming that he had not waived his pre-emption right as one of the conditions set out in the agreement with Seller had not been met (namely, the assignment of a Memorandum of Understanding concluded between Mr. X and the Seller to the above-mentioned holding company), thereby rendering the Share Purchase Agreement ineffective. The Buyer then commenced ICC arbitration alleging that Seller had failed to deliver to Buyer (through the holding company) effective control over the subsidiary and had breached its obligation to warrant the peaceful possession of the shares.
By applying French law, as the law chosen by the parties in the Share Purchase Agreement, the Arbitral Tribunal held that Seller violated its contractual obligation of representation and warranty by stating that it had full and exclusive title to the subsidiary’s shares, while in fact it failed to terminate the pre-emption right of Mr. X. In the opinion of the Arbitral Tribunal, Mr. X’s pre-emption right had not been waived because the assignment, even if concluded, had not been timely notified to the assigned party (Mr. X), and therefore was not effective on the agreed date. In support of its conclusion, the Arbitral Tribunal referred to Art. 9.3.4(2) UNIDROIT Principles.
Albert Jan van den Berg (ed), Yearbook Commercial Arbitration 2010 – Vol. XXXV (Kluwer Law International 2010) pp. 40-128}}