APPEALED DECISION Arbitral award rendered in Gothenburg on 14 May 2007, see appendix

Transcription

1 COURT OF APPEAL JUDGMENT Case No. T Department 2 Stockholm Division 24 Page 1 (7) APPEALED DECISION Arbitral award rendered in Gothenburg on 14 May 2007, see appendix CLAIMANT Profura AB, Reg. No Lilla Bommen 1, Gothenburg Counsel: Advokaten Johan Karlbom P.O. Box 11235, Gothenburg RESPONDENT SB Counsel: Advokaterna Robin Oldenstam and Fredrik Andersson P.O. Box 2235, Gothenburg MATTER Jurisdiction of arbitral tribunal JUDGMENT OF THE COURT OF APPEAL By amending the arbitral award of the arbitral tribunal, the Court of Appeal declares that an arbitral tribunal has jurisdiction to try the dispute between the parties. By also amending the arbitral tribunal s decision with respect to costs, the Court of Appeal discharges Profura AB from the obligation to compensate SB s litigation costs for the arbitration proceedings and annuls the decision of the arbitral tribunal that Profura AB alone shall bear the costs for the arbitrators. SB is ordered to compensate Profura AB for its litigation costs before the Court of Appeal by SEK 290,450, out of which SEK 290,000 comprises costs for legal counsel, plus interest thereon pursuant to the Swedish Interest Act (SFS 1975:635) from 19 March 2008 until the day of payment. Document ID Postal Address Address Telephone Telefax Opening Hours P.O. Box 40 Packhusplatsen Monday Friday Gothenburg hovratten.vastrasverige@dom.se 9 am 12 pm 1 pm 4 pm

2 Page 2 MOTIONS BEFORE THE COURT OF APPEAL Profura AB has moved that the Court of Appeal shall declare that an arbitral tribunal has jurisdiction to try the dispute between the parties, discharges the company s liability to compensate SB for his costs in the arbitration proceedings and annuls the decision of the arbitral tribunal s decision that Profura AB alone shall bear the costs for the arbitrators. SB has objected to any amendments of the arbitral award. The parties have claimed compensation for the litigation costs before the Court of Appeal. GROUNDS OF THE COURT OF APPEAL Before the Court of Appeal, the party representative BI and SB have been heard under oath, and witnesses MW, MH, FN, BF and JR have been heard under oath. The two latter, which were not heard by the arbitral tribunal, have testified on industry practices for mergers and acquisitions. The parties have presented documentary evidence, including draft agreements and s. The parties have referenced the same circumstances as before the arbitral tribunal. Thus, Profura AB has maintained that the parties at the meeting on 14 November 2005 entered into an oral arbitration agreement, to which SB has objected. He has maintained his objection that the agreement would be binding only when the written agreements were signed. What has been referenced before the Court of Appeal does not lead to another conclusion with respect whether the parties had agreed that the agreements should be in writing. Subsequently, the Court of Appeal must decide whether the parties have entered into a binding share purchase agreement at the meeting on 14 November 2005 and, if so, if this implies that the parties have agreed on an arbitration clause. In reviewing this, the Court of Appeal notes the following.

3 Page 3 On 27 October 2005, BI, SB, MW, MH and FN met to discuss the potential transfer of Arema Group AB (Arema) using the so-called Luxembourg structure. On the following day, MH sent three draft agreements to SB. A few days later, he sent another three draft agreements to him. Another meeting was held on 1 November The notes taken by MH at the meeting provides that he and SB section by section went through the draft agreement, which was intended to be the main agreement for the Luxembourg structure, i.e. the agreement by which all shares in Arema, via Delencia AB, were sold to Profura AB. From MH s notes, it is clear that SB had some issues with the wording of the agreement. On 3 November 2005, MH sent a redrafted version of the agreement to SB, in which he had taken SB s comments into consideration. On 14 November 2005, yet another meeting took place between SB, BI, MH, MW and FN. At the meeting, the purchase price and whether Ilsbo Förvaltning HB would be included were discussed, amongst other things. BI, MH and MW at some point took a sidebar to discuss the offer to be made by BI. MH wrote down the options that were discussed. On the paper, which has been referenced as evidence in the present case, two options were noted; the first regarding the purchase of Arema without Ilsbo Förvaltning HB being included in the deal, and the second regarding the purchase of the shares in Arema as well as Ilsbo Förvaltning HB. For the first option a purchase price of SEK 46,000,000 has been noted, which has been crossed out and replaced by the amount SEK 46,500,000. MH has explained this by BI, at a sidebar, had declared he was willing to offer a purchase price of SEK 46,000,000, but that when they reconvened SB requested SEK 47,000,000, upon which BI increased his offer to SEK 46,500,000. BI, MH and MW have stated to be certain that SB at this meeting accepted the offer of SEK 46,500,000 of option one and that, as a confirmation of this, SB and BI stood up and shook hands across the table. BI has further explained that he, since SB was hesitant whether to include Ilsbo Förvaltning HB in the deal, gave him the opportunity to revert no later than the following

4 Page 4 day if had changed his mind and would include the company in the deal, which BI was willing to accept despite his opinion that the industrial property belonging to Ilsbo Förvaltning was actually a liability. Both MH and MW have confirmed that SB, if he were to change his mind and choose the second option, was granted the opportunity to revert back on the following day. MH and MW have further stated that SB was given a copy of the note of MH s paper containing the two options. SB has for his part maintained that at the meeting he actually wanted to discuss other, more important matters than the purchase price, but that he confirmed that he accepted the purchase price of SEK 46,500,000, when all the outstanding matters had been settled. He has maintained that he left the meeting with two options to consider, but that no time limit was set. FN has stated the he did not perceive that an agreement was struck at the meeting, but that it was made clear that SB had until the following day to make up his mind if he wanted to accept any of the options written down in MH s note. Both SB and FN have stated that the handshake was not a confirmation that an agreement had been reached. In an to MH of 15 November 2005, MW referred to the previous day s agreement and that they now would start carrying out the transactions and that SB on the following day should sign the share purchase agreement for the sale of the shares in Atial S.A. On 16 November 2005, MW sent the final agreement for the transfer of Atial S.A. by to SB. On 17 November 2005, SB wrote in an to MW, amongst other things, that This means that I am willing to complete the deal based on the following: Profura acquires the Arema Group for SEK 46,500,000 according to our agreement. Profura will keep Ilsbo Förvaltning HB. MW forwarded this message to MH, who on 18 November 2005 responded to SB by explaining that SB s proposal was not in line with what SB and BI had agreed at the meeting on the Monday, when they had shook hands on option one, which excluded Ilsbo Förvaltning HB, and that SB had had until the following day to decide upon the second option, if he did not want to proceed with option one.

5 Page 5 The contents of the s from MW and MH referred to above clearly provide that they, when writing the s, were under the impression that a binding agreement had been entered at the meeting on 14 November Thus, the s strongly support what MW and MH stated in their respective testimonies, namely that SB and BI at the meeting on 14 November 2005 by the handshake confirmed the agreement that the deal would be made based on option one, i.e. a sale of Arema, without including Ilsbo Förvaltning HB, for the purchase price of SEK 46,500,000. Nothing has been presented to indicate that MW or MH are not being truthful or that they have misunderstood the meaning of the handshake. Based on the above, the Court of Appeal finds that it has been established the SB at the meeting of 14 November 2005 agreed to sell Arema, excluding Ilsbo Förvaltning AB, for a purchase price of SEK 46,500,000 and that he did not use the possibility to instead choose the second option. The question is if he thereby has entered into a binding share transfer agreement. What SB has maintained about him having the opinion that many major issues remained outstanding and that he intended to seek legal counsel once the fundamental issues had been settled has not in any way been expressed in the written communication between the parties referenced in the present case, to the contrary, the correspondence has revolved almost exclusively around the issue of the purchase price. Not even in the to MW of 17 November 2005 at which point SB reasonably must have realized that MW considered a binding agreement to have been entered has SB objected that there were other, important issues to settle. Instead, he has stated that he wished to complete the deal. The acceptance of option one meant that Ilsbo Förvaltning AB should not be included in the deal. The issues concerning the industrial property, such as environmental due diligence and surveying, were as a result irrelevant. For both parties it has been clear that both options one and two were to be carried out using the Luxembourg structure. Nothing in the correspondence between

6 Page 6 the parties or anywhere else would indicate that SB has objected to that structure, and FN has stated that he told SB that it was a good structure. The Court of Appeal finds upon considering all the evidence that the purchase price was the main and determining factor for SB and BI. Thus, and despite the fact that some issues remained to be finally agreed upon, they must be deemed to have entered into a binding share transfer agreement when agreeing upon the purchase price. The resulting question is whether the binding agreement entails that the parties have agreed upon arbitration. Each of the agreements that Profura AB had drafted included an arbitration clause and all agreements but one provide that the Swedish Arbitration Act shall apply. For the parties, the main and final agreement was the agreement through which Profura AB becomes the owner of the shares in Delencia AB, which in the agreed structure at that point in time should have acquired the shares in Arema. The parties to this agreement are Atial S.A. and Profura AB and the arbitration clause of the agreement provides that the Swedish Arbitration Act shall apply and that the arbitration proceedings shall take place in Gothenburg. This is the agreement which SB went through with MH at the meeting on 1 November 2005, and upon which SB then commented. As far as has been referenced before the Court of Appeal, SB has at no stage raised objections to that arbitration clause and not to the other arbitration clauses included in the other agreements with which he was provided. Consequently, the arbitration clause is, despite it never having been discussed between the parties, valid between the parties. It can be noted that SB personally is not stated as a party to the aforementioned agreement, but the idea was that he, when this agreement was due to be signed, should have acquired Atial S.A., all pursuant to the Luxembourg structure. As a result, there is such a link between the case brought against SB and the agreement that implied the transfer of the shares

7 Page 7 in Arema to Profura AB that the arbitration clause included in the agreement must be deemed to cover the dispute of the present case. The above means that Profura AB s motions shall be granted. The judgment of the Court of Appeal may not be appealed. [ILLEGIBLE SIGNATURES] The decision has been made by: Senior Judge of Appeal H.F., and Judges of Appeal M.S. (reporting Judge of Appeal) and H.Å.