Arbitral Award
ICC International Court of Arbitration 10335





Claimants, two Greek companies, and Defendants No. 1 and No. 2, two French companies, entered into a series of agreements concerning the purchase of shares in a company listed on the Athens stock exchange from a Greek State entity and the allotment of these shares among themselves. The dispute arose when Defendants refused to pay their part of the purchase price, thus prompting the seller to call the first demand guarantee issued in its favour by a bank on request by Claimants and Defendants and the bank subsequently to demand the refund of the guarantee paid to the seller.

The agreements in question contained a choice of law clause in favour of Greek law.

In order to decide the merits of the case the Arbitral Tribunal proceeded to a careful interpretation of the agreements in question. In doing so it relied first of all on the Greek Civil Code Article 173 stating “[w]hen interpreting a declaration of will, the true intention shall be sought without sticking to the literal meaning of the words”, and Article 200 stating “[c]ontracts shall be interpreted according to the requirements of good faith taking into account business usages”. Yet the Arbitral Tribunal also referred to the similar provisions to be found in §§ 133 and 157 of the German Civil Code, § 914 of the Austrian Civil Code and Article 18 of the Swiss law of obligations, and in order to demonstrate that “modern international commercial law is evolving in the same direction” expressly referred to Articles 1.7, 1.8 and 4.1-4.3 of the UNIDROIT Principles.


‘Claimants assert a right ex articles 383,385 Greek Civil Code (CC.) to be compensated for damages resulting from delayed and ultimately non-performance of [Respondent No. 2] ‘s obligation to pay its share of the purchase price to [the seller].
The Shareholders’ Agreement. . ., after identifying the Parties to it, introduces on little more than one typed page to its history and business background.
The clause cited by Claimants and Respondents as a possible source of an obligation which may have been breached, reads as follows:
1. Payment Responsibility Each Party shall be solely responsible for the payment of the purchase price of the shares which correspond to its participation.
In order to support the Claimants’ claim two questions would have to be answered in the affirmative: (1) Is the Shareholders’ Agreement at all applicable to the acquisition of shares from [the seller]? (2) Does the Shareholders’ Agreement create an obligation, on the part of Respondent No. 2, to pay its part of the purchase price to [the seller]?
In both respects, Claimants have made affirmative assertions while Respondents have denied both.
It is submitted that the language of the provision as such does neither permit to answer the question as to the Agreement’s sphere of application nor does it indicate to whom the purchase price corresponding to each Party’s quota shall be paid. As the sphere of application, of course, will only be revealed if one looks at the Agreement in its entirety I shall first turn to the second question.
The obligee of the obligation to pay, i.e. the recipient of the payment for which responsibility is described is not named at all. Taking a grammatical approach to interpreting clause 1, the salient features are rather the word “solely” as well as the emphasis on responsibility for the payment of those shares “which correspond to its [i.e. the Party’s] participation”. “Solely” having the meaning of “alone” or “only”, taken together with the last five words of the clause therefore, suggests that the provision’s gist is to limit and circumscribe each Party’s obligation rather than imposing any such obligation.
Claimants from the very outset have drawn the Arbitrator’s attention to the fact that, for the purposes of interpreting a declaration of will and, for that matter, a contract, the two arguably most important provisions of the Greek Civil Code (CC.) are articles 173 and 200. They read:
Article 173
When interpreting a declaration of will the true intention shall be sought without sticking to
(the literal meaning of) the words.
Article 200
Contracts shall be interpreted according to the requirements of good faith taking into account business usages.
Both provisions are well known as common heritage of and fundamental to most civil-law systems, and in particular to the civil codes of the so-called germanic legal family. For example, §~ 133, 157 of the German Civil Code are identical. § 914 of the Austrian Civil Code and article 18 Swiss Law of Obligations enshrine the same principle. Modern international commercial law is evolving in the same direction (cfr. for example, articles 1.7, 1.8,4.1-4.3 of the Unidroit Principles of International Commercial Contracts).
Both Claimants and Respondents agree that the telos of the provisions quoted is to strike a balance between a subjective and an objective approach to determine what the “true” meaning is, when the parties to a contract, at a later stage, find themselves in disagreement. They have quoted Greek authorities and I find confirmation in this respect in Symeonides, “The General Principles of the Civil Law” in: Kerameus/Kozyris (eds.) ,Introduction to Greek Law, 2d ed. (Deventer/Boston, 1993) pp. 53, 68.
Claimants and Respondents, at least initially, further agreed that articles 173, 200 apply when there are doubts and the need to clarify and, in particular, gaps and ambiguities in the exchange of declarations and the wordings of a contractual provision. Only recently Claimants, citing two older supreme court cases and two writers, have put forward the theory that all declarations of will (and not only ambiguous or incomplete ones) are subject to interpretation and, moreover and citing two high court decisions, that the judge “has an unlimited freedom to evaluate all the elements presented to him (either written or not) and draw conclusions, using the common sense rules, as well as his experience and common knowledge”... Respondents contest this analysis, citing both doctrinal writings and case law, including three supreme court cases...
I do not see an irreconcilable contrast of theory. Of course, all declarations are, logically speaking, subject to interpretation. But it is equally clear that interpreting an unambiguous term or phrase will necessarily result in identifying that unambiguous meaning. By the same token, no judge or arbitrator will ever disregard the letter of a contract nor will he hold that there is a lacuna where the parties have merely agreed (to his eyes and with hindsight) on an “unjust” allocation of risks. Finally, it appears safe to say that, however far the theory of “supplementing”, “gap-filling” or “integrating” interpretation may be stretched, never will it reach beyond the substantive boundaries of the contract giving, for example, to one party something which that party may have tried, but was unable, to obtain in the negotiation process. The freedom of the judge or arbitrator may be unlimited in a procedural sense, but it is undoubtedly limited by the law and the parties’ freedom to determine the content of their contracts, cfr. art. 361 Greek Civil Code.
Finally, Claimants.. . and Respondents. . . agree on the elements interpretation will draw on, namely the document in its entirety, surrounding facts, related documents, negotiations, interests of the parties, purposes of the agreement and custom.

Turning now to the document in its entirety, the analysis of the text will at the same time be aimed at understanding its clause 1 and the Agreements’ sphere of application.
The Shareholders’ Agreement’s Preamble, after describing the target ([X]) and the (anticipated) successful outcome of the bidding process as well as Respondent No. 2’s and Claimants’ respective quota in the shares to be acquired from [the seller], turns to the next stage, the (anticipated) internal and final division of the shares. The bid and this second stage are clearly distinguished.
After setting out the (internally and not vis-à-vis [the seller]) envisaged allotment of the shares among Respondent No. 2 and Claimants, the Preamble defines the end of the entire transaction (“For the purpose of achieving the above shares allocation”) as well as the means to be employed (“the Parties hereto and [Respondent No. 1]. undertake..”). Only thereafter does the document set out the agreement proper: “In view of the above, (emphasis added; i.e. the final allotment) and of the impending acquisition of the shares (emphasis added), the Parties agree as follows” (emphasis added).
It is undisputed among the Parties to this arbitration that the technique to be employed for the acquisition of the shares for [the seller] was to be a reverse leveraged buyout... It is equally undisputed that this was the very purpose to bring in the “vehicle”. . ., i. e. Respondent No. 2. Lastly, it is undisputed that [the seller] would not have agreed to substitute Respondent No. 2 for the successful official (co-)bidder, Respondent No. 1. All this is reflected in the Agreement’s Preamble which distinguishes (1) acquisition from [the seller] (by Respondent No. 1 and Claimants), (2) re-allotment for purposes of the financing scheme and the restructuring of the future group, (3) relationship of the eventual shareholders (Respondent No. 2 and Claimants) subsequent to the acquisition and to the intermediate stage of re-allotting the [X] shares.
Neither the written submissions nor the testimony given by Messrs.. . suggest that any of the Parties to this arbitration, at the time of signing of the Shareholders’ Agreement, expected Respondent No. 2 to step into the shoes of Respondent No. 1 vis-à-vis [the seller] and to actually acquire the [X] shares.
To conclude, the text of the Agreement’s Preamble, while alluding to the acquisition of the shares (and in this sense “applicable” to that first stage of the transaction), does not support the theory that Respondent No. 2 was under an obligation vis-à-vis Claimants to acquire and to pay the purchase price for those shares.
Turning now to outside elements for the Shareholders’ Agreement’s proper construction, related documents might be of assistance. The first one coming to mind, and indeed cited by Claimants in their brief dated. . ., is the Cooperation Agreement, signed on. . . and regulating the relationship of the same Parties with regard to their first bid... However, that bid was unsuccessful and rejected by [the seller]. The Shareholders’ Agreement in question here and signed after the second bid had been successful, provides in its clause 12:
This agreement included the complete agreement of the Parties hereto as to its subject matter and supersedes to any prior written or oral agreement between the Parties which are hereby declared null and void.
Therefore, the Cooperation Agreement, while certainly a predecessor in the history of the transaction, cannot provide guidance as to the interpretation of the Shareholders’ Agreement which is in dispute in this arbitration. In any event, it does not support the Claimants’ theory. On the contrary, although the Shareholders’ Agreement was signed prior to the completion of the acquisition. . ., the Parties to it apparently deliberately dropped a clause contained in the (superseded) Cooperation Agreement which provides that:
The parties agree... to use their best endeavours in order to succeed in the final bid and acquire the Shares...
At a later stage, a new draft Cooperation Agreement. . . contained a clause i identical to the previous one. However, this draft remained unexecuted.
The testimony given by Claimants’ witness. . . corroborates the result that the parties, during the negotiations of what was to become the Agreement signed, had decided to cover only their post-acquisition relationship.
Counsel for Respondents: “There were things that you decided not to regulate, which if you were to make another agreement of this sort now you might decide to regulate?”
[Claimants’ witness]: “. . Of course, since I have the knowledge now, I would regulate it”. And:
I would ask [Respondent No. i] for the money.”
Shareholders’ agreements are highly negotiated made-to-measure documents. Consequently, custom as one of the accepted tools for interpreting declarations of will is not of assistance. The interests of the parties being entirely subjective (and in the case at hand in open conflict) and the negotiations and the purpose of the contract being reflected in the history from the various drafts to the Agreement executed on.. ., the ways to discover the meaning of clause 1 asserted by Claimants are thus exhausted.
To sum up, neither does clause 1, to the best of my understanding, establish an obligation for Respondent No. 2 to pay for its share of the purchase price to [the seller] nor does it say that completion of the share purchase is owed to the Claimants.
To my eyes and according to my experience, with similar transactions, the Respondents’ interpretation of clause 1, namely that it refers to and limits the responsibility of Respondent No.2 and Claimants to pay [Respondent No. 1] in consideration for the (second-stage) re-allotment of the [X] shares, is highly plausible. But Respondents do not have to prove that. Claimants had the burden of proof for the facts in support of their claim and they have been unable to discharge it as far as the alleged breach of clause 1 is concerned.’}}


Excerpts of the award published in
ICC International Court of Arbitration Bulletin, Vol. 12, No. 2 (Fall 2001), 102-106.}}