<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): March 31, 1995
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True North Communications Inc.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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State or Other Jurisdiction of Incorporation
1-5029 36-1088161
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(Commission File Number) (I.R.S. Employer Identification No.)
101 East Erie Street, Chicago, IL 60611-2897
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (312) 751-7000
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<PAGE>
Item [5] Other
As previously disclosed, in September 1994, the Company initiated an
arbitration proceeding seeking a determination that Publicis S.A., Publicis
Communication and Publicis . FCB B.V. ("Publicis and its affiliates") breached
various contractual obligations owed to the Company under "Alliance Agreements"
among the Company and Publicis and its affiliates.
On March 31, 1995, Publicis S.A. and Publicis Communication filed Amendment
No. 2 to its Schedule 13D which included as an exhibit a Notice from
Publicis to the Company dated March 29, 1995, regarding certain claims and
counterclaims. ("PC's Notice") The Notice lists a variety of alleged violations
by the Company of the "Alliance Agreements" and expressed the intention of
Publicis Communication to pursue its alleged claims in the contractual dispute
resolution process and, ultimately, in the arbitration initiated by the Company.
The Company believes it has meritorious defenses to each and every alleged
violation and intends to pursue such defenses vigorously. If necessary, the
Company is very comfortable, indeed eager, to have the arbitrators rule on the
merits of the various claims.
Because the Company's original Statement of Claim initiating the arbitration
has not heretofore been filed, the investing public now has before it only PC's
Notice, which presents only the point of view of Publicis S.A. and Publicis
Communication. In light of the March 31, 1995 filing and in order to make the
public disclosure regarding the arbitration and underlying disputes more even
handed, the Company is filing the following documents (without exhibits) with
this Form 8-K:
1. Notice of Arbitration dated September 23, 1994.
2. Claimant's Emergency Request for Immediate Interim Measures dated
March 1, 1995 (as supplemented on March 6, 1995).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRUE NORTH COMMUNICATIONS INC.
Date: March 31, 1995 By: /s/ Dale F. Perona
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Dale F. Perona
Treasurer and Secretary
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IN THE MATTER OF AN ARBITRATION BETWEEN
FOOTE, CONE & BELDING COMMUNICATIONS, INC.,
FCB INTERNATIONAL, INC.,
Claimants,
- and -
PUBLICIS S.A.,
PUBLICIS COMMUNICATION,
PUBLICIS F.C.B. B.V.,
Respondents.
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NOTICE OF ARBITRATION
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1. Demand for Arbitration
Foote, Cone & Belding Communications, Inc. ("FCB") and FCB International,
Inc. ("FCBI") demand that the disputes described below against Publicis S.A.
("Publicis") and Publicis Communication ("Communication") and involving Publicis
F.C.B. B.V. ("PBV") be referred to arbitration.
<PAGE>
2. Parties
A. The Claimants in this arbitration are:
Foote, Cone & Belding Communications, Inc. and
FCB International, Inc.,
each incorporated under the laws of Delaware, U.S.A., and both of
101 East Erie Street
Chicago, Illinois 60611
U.S.A.
The principal legal advisers providing representation and assistance to the
Claimants are:
Lloyd N. Cutler Thomas A. Cole
Andrew N. Vollmer Sidley & Austin
Wilmer, Cutler & Pickering One First National Plaza
2445 M Street, N.W. Chicago, Illinois 60603
Washington, D.C. 20037 1-312-853-7000
1-202-663-6000 Fax: 1-312-853-7036
Fax: 1-202-663-6363
Mary A. Carragher Patrick Bernard
Vice President and Bernard Tessler Hertz Bejot
General Counsel 153 Boulevard Haussmann
Foote, Cone & Belding 75008 Paris
Communications, Inc. France
101 East Erie Street 33-1-4256-3080
Chicago, Illinois 60611 Fax: 33-1-4563-2525
1-312-751-7013
Fax: 1-312-440-8070
Peter Roorda
Stibbe Simont Monahan Duhot
P.O. Box 75640
Strawinskylaan 2001
1070 AP Amsterdam
The Netherlands
31-20-546-0606
Fax: 31-20-546-0123.
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B. The Respondents in this arbitration are:
Publicis S.A. and
Publicis Communication,
each organized under the laws of France as a societe anonyme and both of
133 Avenue des Champs-Elysees
75008 Paris
France, and
Publicis F.C.B. B.V.,
a Dutch besloten vennootschap with its registered office at
Beethovenstraat 198
1077 JZ Amsterdam
The Netherlands.
3. Relevant Contracts
The disputes to be arbitrated arise out of or are related to the following
contracts, all of which are dated as of 1 January 1989 (collectively the
"Alliance Agreements"):
A. The Master Alliance Agreement entered into by Communication, Intermarco
Algemene Publiciteits Unie B.V. ("Intermarco"), Publicis Conseil
("Conseil"), FCB, and FCBI.
B. The Publicis Communication Shareholders Agreement entered into by
Communication, Publicis, and FCB.
C. The FCB Stockholders Agreement entered into by Communication and FCB.
D. The PBV Shareholders Agreement entered into by Communication, FCBI, and
PBV.
E. The Publicis Undertaking given by Publicis.
F. The Multiparty Arbitration Agreement entered into by Communication,
Publicis, FCBI, FCB, and PBV.
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Attachment 1 is a copy of the Multiparty Arbitration Agreement. The Claimants
will provide a copy of the remaining Alliance Agreements later in the
proceeding.
4. Applicable Arbitration Agreement
The Alliance Agreements provide that disputes arising under them are to be
settled in accordance with their terms and in particular the Multiparty
Arbitration Agreement (Attachment 1). The Multiparty Arbitration Agreement is
incorporated by reference into the Master Alliance Agreement (section 9.2(c)),
the Publicis Communication Shareholders Agreement (section 7.3(c)), the FCB
Stockholders Agreement (section 7.3(c)), the PBV Shareholders Agreement (section
8.08(c)), and the Publicis Undertaking (section 2).
The Multiparty Arbitration Agreement provides, among other things, that the
UNCITRAL Arbitration Rules are to govern the arbitration proceeding and that the
place of arbitration is to be Amsterdam, The Netherlands. It states that the
London Court of International Arbitration is to administer the arbitration
according to those Rules and is to appoint the three arbitrators for the
proceeding.
5. General Nature of Claims
FCB, Publicis, Communication, and the other parties entered into the
Alliance Agreements in early 1989 to effect a worldwide alliance in the field of
advertising and related businesses. A fundamental principle of the alliance is
that FCB and Communication each has primary spheres of influence. The United
States, subject to the exception of the New York office of Communication, is in
FCB's primary sphere of influence. France is in Communication's primary sphere
of influence. The agreements also created a joint venture company, PBV, to
conduct general advertising agency operations ("Venture Scope") throughout
Europe, excluding France, and other areas ("Venture Territory").
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The Alliance Agreements include the following relevant provisions:
A. The undertaking of Publicis to "conduct all of its general advertising
business through Communication and its subsidiaries, including Publicis
FCB B.V., as provided in the Master Alliance Agreement and the PBV
Shareholders Agreement." (Publicis Undertaking (S) 1)
B. Communication's obligation "to provide any advertising-related
services which are within the Venture Scope in the Venture Territory
only through" PBV, with certain exceptions. (Master Alliance Agreement
(S) 1.2; PBV Shareholders Agreement (S) 1.01)
C. Communication's obligation not to engage in business combinations in
its spheres of influence that "compete with, or otherwise have a
material adverse effect on, the conduct of business by" FCB in FCB's
spheres of influence and to "inform [FCB] of its intentions prior to
effecting [other] combinations." (Master Alliance Agreement (S) 1.2(a))
D. Communication's obligation not "to make extensions of [its New York]
office or small alliances in the United States, which ... compete
with, or have a major operating impact on, an existing FCB operation."
(Master Alliance Agreement (S) 1.2(b))
E. Communication's obligation to "secure approval from FCB before
establishing any operating entity or alliance within North America,"
except for extensions of its New York office or small alliances in the
United States that do not compete with or have a major operating impact
on an existing FCB operation. (Master Alliance Agreement (S) 1.2(c))
F. The obligation to obtain the advance approval of FCBI or a
representative of FCBI before PBV has the authority to enter into
certain types of transactions, called "Shareholders Committee
Transactions." (PBV Shareholders Agreement (SS) 2.03, 2.04)
Shareholders Committee Transactions include:
1. The merger of PBV or any of its subsidiaries with another person,
the formation by PBV or any of its subsidiaries of a joint venture,
partnership, or similar arrangement with another person, or the
acquisition of an interest in a business or enterprise by PBV or
any of its subsidiaries in which a third party retains a
significant interest,
2. The issuance of any new shares or shareholder capital calls by PBV,
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3. The formation by PBV or any of its subsidiaries of a subsidiary,
4. The approval of any material transaction between PBV or any of its
subsidiaries and either FCBI, Communication, or any of their
parents, subsidiaries, or affiliates, and
5. The acquisition by PBV of any subsidiary or business or enterprise
in one or more related transactions for total consideration in
excess of $1,000,000 (US). (PBV Shareholders Agreement (S) 2.03)
In December 1993, Publicis acquired control of FCA, a French company or
group of companies. FCA is a general advertising company that provides
advertising related services in France, Europe (other than France), and, through
an agency called Bloom FCA, the United States. Bloom FCA is a major advertising
agency in the United States.
Publicis transferred the shares of FCA to Communication. Publicis stated
that Communication intends to retain the French business of FCA within
Communication. Although Publicis informed FCB that Communication has not
transferred the non-French European business of FCA to PBV, Communication
appears as a practical matter to have transferred the business, operations, and
management of non-French European business of FCA to PBV subsidiaries operating
under the name BMZ to form a new agency with a European emphasis called FCA BMZ.
In the United States, Communication had the larger Bloom FCA operation,
consisting of offices in New York and Dallas, absorb the New York office of
Communication. As Communication said in a press release, it placed the
management of Bloom FCA in charge of the combined entity and moved the New York
employees of Communication into the offices of Bloom FCA.
FCB made repeated and unequivocal objections to the acquisition of FCA by
Publicis before and since it occurred. Publicis acknowledged the need to obtain
the approval of FCB before completing the acquisition and assured FCB that it
would take no action to breach agreements with FCB. Publicis and Communication
nonetheless made the acquisition and took the actions described above without
the necessary approvals. FCB still has not
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approved the acquisition, and neither have FCBI or anyone representing FCBI at
PBV. The acquisition of FCA business by PBV requires approval as a Shareholders
Committee Transaction and has not been approved as such a transaction.
In addition, before the completion of the FCA acquisition and despite
repeated assurances from Publicis that it would supply necessary information
about the proposed transaction to FCB, Publicis failed to provide sufficient
information to FCB in a timely manner. Neither Publicis nor Communication
informed FCB of the plan to acquire FCA until only a few months before the
closing of the transaction. FCB then made repeated requests for information
about the proposed acquisition and about the way Publicis and Communication
intended to conduct the business of FCA and Bloom FCA, but the response of
Publicis and Communication was completely inadequate.
FCB and FCBI retain their objections to the acquisition of FCA by Publicis
and Communication and to the transfer of FCA business to PBV or any PBV
subsidiaries without the prior consent of FCBI. Based on FCB and FCBI's current
understanding of the facts, the acquisition of FCA by Publicis and Communication
without the advance approval of FCB, the operation by Communication of non-
French European business of FCA and the Bloom FCA business, and the transfer of
non-French European business of FCA to PBV without the prior consent of FCBI
constitute material breaches of the provisions of the Alliance Agreements
described above. FCB and FCBI reserve the right to amend, modify, and supplement
these claims in their Statement of Claim and when further information is
available.
6. Remedies
FCB and FCBI seek the following relief and remedies:
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A. A determination by the Arbitral Tribunal under section 7.02(b)(i) of
the PBV Shareholders Agreement and section 7.1(g)(i) of the Publicis
Communication Shareholders Agreement and the FCB Stockholders Agreement
that Communication and/or Publicis is in default in a material respect
in the performance of their obligations under the Alliance Agreements.
B. Remedies provided by the Alliance Agreements, including in particular
but not limited to FCBI's right under section 7.02(a) of the PBV
Shareholders Agreement to acquire additional shares in PBV and to take
certain other actions in connection with PBV and the PBV Shareholders
Agreement and FCB's right under section 5.1 of the Publicis
Communication Shareholders Agreement and section 4.1 of the FCB
Stockholders Agreement to repurchase FCB Voting Stock owned by
Communication.
C. Relief available under applicable laws, including but not limited to
declarations of rights, monetary damages, injunctions, and penalties
for failure to comply.
D. Other relief the Arbitral Tribunal determines to be necessary or
appropriate.
E. An award of all costs, including costs for legal representation and
assistance, to the Claimants.
F. An order retaining the Arbitral Tribunal's jurisdiction to resolve any
dispute arising out of or related to relief or remedies under
paragraph 6(B).
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FCB and FCBI reserve the right to amend, modify, and supplement their request
for relief and remedies.
/s/ Bruce Mason
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Signed by BRUCE MASON
CHIEF EXECUTIVE OFFICER OF
FOOTE, CONE & BELDING COMMUNICATIONS, INC.
/s/ Craig Wiggins
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Signed by CRAIG WIGGINS
CHAIRMAN OF FCB INTERNATIONAL, INC.
23 SEPTEMBER 1994
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IN THE MATTER OF AN ARBITRATION BETWEEN
FOOTE, CONE & BELDING COMMUNICATIONS, INC.,
FCB INTERNATIONAL, INC.,
Claimants,
- and -
PUBLICIS S.A.,
PUBLICIS COMMUNICATION,
PUBLICIS F.C.B. B.V.,
Respondents.
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CLAIMANTS' EMERGENCY REQUEST
FOR IMMEDIATE INTERIM MEASURES
-----------------
As a matter of urgency and pursuant to Article 26(1) of the UNCITRAL
Arbitration Rules, the Claimants, Foote, Cone & Belding Communications, Inc.
("FCB")/1/ and its wholly owned subsidiary FCB International, Inc. ("FCBI"),
request that the Tribunal immediately order interim measures to preserve the
status quo as it existed when this arbitration commenced in September 1994 and
to prevent Respondents Publicis S.A. ("PSA") and Publicis Communication
("Publicis") from further injuring FCB and from dissipating the assets and value
of the third Respondent, Publicis F.C.B. B.V. ("PBV"), which is jointly owned by
FCBI and Publicis. The Claimants also seek these interim measures to prevent PSA
and Publicis from taking actions that would impair the jurisdiction and
authority of this Tribunal to award the Claimants complete and meaningful relief
if they are successful.
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/1/ In December 1994, FCB changed its name to True North Communications Inc.
For consistency, we continue to refer to FCB.
<PAGE>
Since the Claimants commenced the arbitration in September 1994, Publicis
has taken a series of actions that aggravate FCB's injury from the conduct
challenged in the main proceeding, deny FCB rights specified in the agreements
among the parties (the "Alliance Agreements"),/2/ and threaten to deprive FCB of
further rights specified in the agreements and the full value of its investments
in the Alliance. Publicis, through an acquisition FCB challenges in the main
proceeding, is competing with FCB in the United States. Publicis, by its control
of the joint venture, PBV, is disregarding FCB'S rights as a minority
shareholder.
In addition, Publicis recently sent an unlawful and invalid notice
attempting to terminate one or more of the Alliance Agreements, and then its
representatives held extensive discussions with the press and financial analysts
about the notice and the Publicis view of the dispute with FCB. That unlawful
notice, which FCB intends to contest in the main arbitral proceeding, and the
Publicis publicity about it have already caused a significant decline in FCB's
stock price. The notice is also a clear signal that Publicis intends to damage
FCB by acting as if it is free of the contractual rights and obligations it
assumed in the Alliance Agreements and that Publicis intends to flout the
authority of this Tribunal by avoiding remedies specified in the Alliance
Agreements.
A key remedy specified in the Alliance Agreements for a material default by
one party is the other party's right to obtain a majority and controlling
interest in the joint venture. This is one of the remedies the Claimants
specifically seek.
We therefore request as an interim measure that the Tribunal prevent PSA and
Publicis from taking any action that would adversely affect FCB's ability to
realize this remedy and any other final relief the arbitrators deem appropriate
if the Claimants prevail in the arbitration. We also request that, until the
arbitrators issue a final award on the legality of the conduct of PSA and
Publicis, the Tribunal adopt interim measures to prevent further injury to FCB,
preserve the
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/2/ On December 16, 1994, the Claimants provided three copies of the relevant
Alliance Agreements to the London Court of International Arbitration. We
understand the LCIA delivered a set to each arbitrator.
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<PAGE>
status quo as of the commencement of these proceedings, and promote the ability
of the arbitrators to review this dispute fairly and completely.
Below we first describe the background of the Alliance and summarize the
general subject matter of the main arbitration. We then demonstrate that the
Tribunal has the authority to adopt interim relief to prevent injustice to a
party and allow the arbitrators to proceed normally and with due deliberation to
a final decision. Next we describe in more detail the series of actions by
Publicis that justify the adoption of interim measures in this case. Finally, we
propose the precise elements that an award of interim relief should include.
I. Background of the Alliance and the Main Dispute.
In 1988, FCB and PSA decided to form an alliance to conduct their worldwide
advertising businesses. Two related trends in that business were the impetus for
the Alliance. First, existing and potential multinational clients of both FCB
and PSA were increasingly demanding that advertising agencies provide services
across regional and national boundaries and markets. Second, the competitors of
FCB and PSA were creating global organizations and/or alliances to meet the
demands of multinational clients.
In May 1988, PSA and FCB signed a statement of intent concerning their
Alliance and, during the following months, negotiated a set of agreements to
form and govern it. The parties entered into the Alliance Agreements as of
January 1, 1989 and then proceeded to make substantial investments in the
Alliance.
The first recital of the Master Alliance Agreement states that the intent of
the parties is "to effect a worldwide alliance." That was their principal goal,
and they effected this worldwide Alliance in a variety of ways, several of which
are relevant to this application for interim relief.
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First, they created PBV, a joint venture company, to conduct general
advertising agency operations (the "Venture Scope") throughout the "Venture
Territory," which includes all of Europe except France, Africa (except South
Africa), and the Middle East./3/ Publicis owns 51 percent of the PBV, and FCBI
owns 49 percent. The parties promised "to provide any advertising-related
services which are within the Venture Scope in the Venture Territory only
through the Joint Venture."/4/ The purpose of the joint venture is and was to
enable Publicis and FCB to compete successfully with other advertising agencies
in the European market by creating a new organization with a "major position in
the advertising agency industry,"/5/ and, in so doing, advance and support the
worldwide Alliance./6/ The parties created a Shareholders Committee to supervise
and review the business of the joint venture. The Shareholders Committee also
served as a method of protecting FCB as the minority shareholder of PBV: On a
variety of important strategic and financial matters, such as acquisitions and
mergers ("Shareholders Committee Transactions"), the prior approval of both
Publicis and FCBI at a Shareholders Committee meeting is required, thus ensuring
joint decisionmaking on fundamental issues./7/
The second means by which the parties effected their worldwide Alliance was
by "closely associat[ing]" their economic activities and sharing multinational
clients and services outside of Europe./8/ Publicis and FCB each had a "primary
sphere of influence," with FCB having as its primary areas Asia Pacific and
North and South America, including the "United
_______________________
/3/ PBV Shareholders Agreement, Preliminary Statement, (SS) 1.01, 1.02; Master
Alliance Agreement, first recital, (S) 1.2. Because of this definition of
"Europe," references in this Statement of Claim to "Europe" mean the
countries of Europe except France, unless the context requires otherwise.
/4/ PBV Shareholders Agreement (S) 1.01; see also Master Alliance Agreement,
first recital, (S) 1.2.
/5/ PBV Shareholders Agreement, Preliminary Statement.
/6/ PBV Shareholders Agreement, Preliminary Statement, (S) 6.01(a).
/7/ PBV Shareholders Agreement (SS) 2.01, 2.03.
/8/ See Master Alliance Agreement (S) 1.1(a).
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States (except for Publicis New York)," and with Publicis having Europe and
several other areas./9/ The parties allocated management and operational
responsibility for multinational clients between Publicis and FCB based on these
"spheres of influence." Publicis agreed to use its best efforts to direct to FCB
any multinational clients of Publicis desiring services in FCB's spheres of
influence, including North America./10/ They created an International Committee
for coordinating multinational client matters affecting more than one area and
agreed to share extensive financial and business information and to keep that
information confidential./11/
Third, each party promised that it would not engage in acquisitions or
business combinations, even in its own sphere of influence, that would "compete
with, or otherwise have a material adverse effect on, the conduct of business
by the other Party in its own sphere of influence," absent consent of the other
party./12/ In the United States, Publicis was permitted only "to make extensions
of" its New York office "or small alliances in the United States, which do not
compete with, or have a major operating impact on, an existing FCB operation."
Publicis was otherwise required to "secure approval from FCB before establishing
any operating entity or alliance within North America."/13/ Obviously, allowing
such transactions would have been fundamentally at odds with the basic
principles of a worldwide Alliance.
The Claimants commenced this arbitration because, in December 1993, PSA
acquired and transferred to Publicis an international, general advertising
company called FCA. This action materially breached the key provisions of the
Alliance Agreements cited above. FCB did not consent to the acquisition and
continues to object to it. Specifically, FCB objects to the
_______________________
/9/ Master Alliance Agreement (S) 1.1(a). The parties' primary spheres of
influence other than the United States and Europe are not relevant here.
/10/ Master Alliance Agreement (S) 1.2(d).
/11/ Master Alliance Agreement (SS) 1.1(b)-(f), 1.3; Publicis Communication
Shareholders Agreement (S) 1.7.
/12/ See, e.g., Master Alliance Agreement (S) 1.2(a).
/13/ Master Alliance Agreement (S) 1.2(b), (c).
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Publicis acquisition of the U.S. arm of FCA, the Bloom FCA network, which is a
major U.S. advertising agency that competes with FCB in the United States, one
of FCB's spheres of influence and its most important market. The FCA acquisition
also breached the critical obligation of Publicis to conduct its advertising
business in Europe (outside of France) only through the joint venture. Publicis
committed a further breach by effectively merging the European operations of FCA
with parts of PBV without FCBI's consent. This practical combination of
operations fell within the definition of a Shareholders Committee Transaction
under the terms of the PBV Shareholders Agreement and required the advance
approval of FCBI. The Claimants' Notice of Arbitration describes the material
breaches in more detail, as will the Statement of Claim the Claimants will file.
II. The Tribunal Has the Authority To Order the Interim Measures Sought by the
Claimants.
The purpose of provisional or interim measures is to preserve the essential
rights of the parties pending the ultimate resolution of the dispute by the
arbitrators. They protect a party from serious injury that can occur while the
litigation proceeds and protect an arbitration panel's ability to render a
meaningful final award./14/
PSA, Publicis, PBV, and the other parties to the Alliance Agreements
accepted that conservatory measures could validly be ordered during an
arbitration. They explicitly recognized a party's right to request interim
relief in paragraph 12 of the Multiparty Arbitration Agreement: "Nothing herein
shall limit the right of a Party to seek provisional or injunctive
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/14/ See Anglo Iranian Oil Co. Case (United Kingdom v. Iran), 1951 I.C.J. 89,
93 (the object of interim protection is "to preserve the respective rights
of the Parties pending the decision of the Court"); E-Systems, Inc. v.
Gov't of Islamic Republic of Iran, 2 Iran-U.S. C.T.R. 51, 57 (1983) (Award
No. ITM 13-388-FT) (arbitral tribunals have "an inherent power to issue
such orders as may be necessary to conserve the respective rights of the
Parties and to ensure that [the] Tribunal's jurisdiction and authority are
made fully effective"). See generally Gary Born, International Commercial
Arbitration in the United States 754-55 (1994); Stephen R. Bond, "The
Nature of Conservatory and Provisional Measures" in ICC, Conservatory and
Provisional Measures in International Arbitration 8, 11 (1993) (noting
arbitrators' power to order preliminary injunctions "aim[ed] at protecting
the rights of a party from the prejudice that may occur while the
resolution of a dispute is pending").
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<PAGE>
relief pending resolution of a dispute pursuant to this Agreement." They also
explicitly directed that the UNCITRAL Rules would govern any arbitration. As we
now show, those Rules grant an arbitral tribunal wide discretion to adopt
provisional relief,/15/ which other arbitration panels frequently have used to
protect parties in positions similar to FCB's.
Article 26(1) of the UNCITRAL Rules gives the Tribunal wide authority to
order interim measures. It states: "At the request of either party, the arbitral
tribunal may take any interim measures it deems necessary in respect of the
subject-matter of the dispute ...." Neither of the potentially applicable
national laws, Dutch and French, restricts an arbitration panel's authority
under UNCITRAL Rule 26 (1). The Dutch Code of Civil Procedure confirms that
authority in Article 1051(1), (3) and, in Article 1056, grants arbitrators the
power to impose monetary penalties for violating interim measures.
Similarly, French courts will enforce interim awards issued by arbitrators
in international arbitrations. Although the Revised Code of Civil Procedure does
not explicitly address interim relief in international arbitrations, it
recognizes the freedom of the parties to select rules of procedure./16/ French
courts therefore will enforce interim measures when the parties choose rules of
procedure authorizing the arbitrators to order such relief and the law of the
place of the arbitration does not prohibit such measures./17/ Here, the parties
did choose such rules, the UNCITRAL Rules, and the law of the place of the
arbitration, The Netherlands, explicitly authorizes arbitrators to order interim
relief.
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/15/ Arbitrators also have "inherent authority" to order interim measures
necessary to provide security to the parties and to safeguard the
tribunal's own jurisdiction. See Behring Int'l, Inc. v. Iranian Air Force,
8 Iran-U.S. C.T.R. 238 n.41 (1985) (Award No. 52-382-3) (discussing
"inherent power of international tribunals to indicate interim measures of
protection"); Charles Construction Co., Inc. v. Derderian, 412 Mass. 14,
17-18, 586 N.E.2d 992, 995 (1992) ("It is reasonable to assume that
parties in agreeing to arbitration, implicitly intended that the
arbitration not be fruitless and that interim orders to preserve the
status quo or make meaningful relief possible would be proper" and
referring to an arbitrator's "inherent authority" to order security).
/16/ French Revised Code of Civil Procedure art. 1494.
/17/ Boisseson, Le Droit Francais de l'Arbitrage (S) 757 (1990).
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International arbitral tribunals have not developed a specific set of
criteria for determining when to order interim relief. They act mainly to
protect a party from "irreparable prejudice"/18/ often by preserving the
status quo or conserving the value of assets or property./19/ They also order
interim measures to enforce the "well established principle in international
arbitration law" that the "parties must refrain from any measure likely to
adversely affect the enforcement of the pending decision and, generally, must
not allow any action whatsoever likely to aggravate or widen the dispute."
Arbitrators may order interim measures to prevent a dispute from becoming
"aggravated or magnified," which makes the task of the Tribunal more
complicated./20/
Arbitral tribunals award interim measures in a variety of forms, including
relief in the nature of injunctions or mandatory orders. Arbitrators have
appointed a receiver for a party's
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/18/ The "irreparable prejudice" that must be shown in this regard is not the
equivalent of "irreparable harm" required by Anglo-American jurisprudence
for temporary injunctive relief. As explained by a leading decision of the
Iran-U.S. Claims Tribunal: "A definition of 'irreparable prejudice' is
elusive; however the concept of irreparable prejudice in international
law arguably is broader than the Anglo-American law concept of irreparable
injury. While the latter formulation requires a showing that the injury
complained of is not remediable by an award of damages ... the former
does not so require." Behring Int'l, 8 Iran-U.S. C.T.R. at 276.
/19/ See, e.g., note 14 above; Behring Int'l, Inc. v. Iranian Air Force, 3
Iran-U.S. C.T.R. 173, 174-75 (1983) (Award No. ITM 25-382-3) (under
authority of Article 26 of Tribunal Rules (identical to the UNCITRAL
rules), panel ordered party not to sell goods at issue pending outcome of
arguments concerning whether sale would be contrary to its prior orders,
whether sale would render the arbitration moot, and whether the goods at
issue were irreplaceable); Behring Int'l, Inc. v. Iranian Air Force, 8
Iran-U.S. C.T.R. 44 (1985) (Award No. ITM 46-382-3) (panel ordered party
to move goods at issue from storage in an inadequate facility to storage
in a modern air-conditioned and humidity-controlled facility in order to
preserve and protect them). See also Sperry Int'l Trade, Inc. v. Gov't of
Israel, 532 F. Supp. 901 (S.D.N.Y.), aff'd, 689 F.2d 301 (2d Cir. 1982)
(reviewing decision of international arbitrators to require that proceeds
of letter of credit be paid into an escrow account pending outcome of
arbitration that would determine whether the party seeking to draw on the
letter of credit had a right to do so); Island Creek Coal Sales Co. v.
City of Gainesville, Florida, 729 F.2d 1046 (6th Cir. 1984) (reviewing
arbitrators' requirement of continued performance of coal purchase
contract to preserve status quo until the panel rendered a final order as
to whether there was a right to terminate the contract).
/20/ Partial Award of December 23, 1982, ICC Case No. 3896, 1983 Journal du
Droit International 914 (shorter version of the award in English in 10
Y.B. Comm. Arb. 47 (1985)). A comment by the then general counsel of the
ICC Court of Arbitration at the end of the award stressed: An "important
principle in the field of international arbitration deserves being
retained and emphasized: the parties to a dispute must refrain from any
action likely to adversely affect the pending decision."
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<PAGE>
business,/2l/ called upon the respondents to renounce rights under a performance
guarantee while the merits of the underlying contract were arbitrated,/22/ and
ordered a party to stay litigation pending in another forum./23/
Resort Condominiums v. Bolwell, which was governed by AAA arbitration rules,
is particularly noteworthy because the arbitrator granted many of the same types
of interim relief FCB requests here. The claimant alleged that the respondents
breached a license agreement by failing to make required payments, properly
discharge other financial obligations, provide financial information, and permit
access by the claimant's auditor. The arbitrator ordered the respondents, among
other things, not to create a new business or enter into a contract with a
third party to offer services that were the subject of the agreement. As you
will see, FCB seeks similar relief here. The arbitrator also ordered the
respondent to refrain from disseminating proprietary information in ways not
contemplated by the agreement and to provide access to financial and business
records. FCB seeks similar relief. Finally, in a measure comparable to relief
requested here by FCB, the arbitrator commanded the respondent to open an escrow
account into which all revenues from operations under the agreement would be
deposited and from which payments could be made only with the signatures of both
parties./24/
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/21/ See In re Lepercq De Neufliz & Co., Inc. as discussed in Michael F.
Hoellering, "Conservatory and Provisional Measures in International
Arbitration" in AAA, Arbitration and the Law, 1992-93, at 114, 122 (1993).
/22/ Partial Award of December 23, 1982, ICC Case No. 3896, 1983 Journal du
Droit International 914 (shorter version of the award in English in 10
Y.B. Comm. Arb. 47 (1985)).
/23/ See, e.g., E-Systems. Inc. v. Gov't of Islamic Rep. of Iran, 2 Iran-U.S.
C.T.R. 51, 57 (1983) (Award No. ITM 13-388-FT) (tribunal asks party to
move for a stay of proceedings in duplicative action pending in Public
Court of Iran); Isaak I. Dore, The UNCITRAL Framework for Arbitration in
Contemporary Perspective 72-78 (1993) (discussing power of tribunal to
stay other litigation and arbitration under authority of Article 26(1)).
Two other ICC awards dealing with interim relief are ICC Case No. 4498,
1986 Journal du Droit International 1139, and ICC Case No. 4126, 1984
Journal du Droit International 934.
/24/ Resort Condominiums International, Inc. v. Bolwell as discussed in
Michael Pryles, "Interlocutory Orders and Convention Awards: the Case of
Resort Condominiums v. Bolwell" in 10 Arbitration International 385,388-
390 (1994).
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III. A Pattern of Conduct by the Respondents Justifies an Order of Interim
Measures in this Case.
Interim measures are necessary in connection with the subject matter of this
dispute. To protect FCB from irreparable prejudice during the pendency of this
proceeding and to preserve the authority of the Tribunal to afford remedies
specified in the Alliance Agreements, the Tribunal must both order PSA and
Publicis generally to comply with the Alliance Agreements and to cease and
refrain from a variety of specific actions plainly inconsistent with those
contracts.
Since the commencement of this arbitration, Publicis has taken a series of
injurious actions, some of which relate directly to the Publicis acquisition of
FCA, which is the basis for the arbitration. This pattern of conduct
demonstrates that the Respondents, and in particular their common senior
management, Mr. Maurice Levy and Mr. Jean Paul Morin, regularly and persistently
disregard contractual obligations imposed on them in the Alliance Agreements and
that there is a high likelihood they will continue to do so.
In describing this series of incidents, we are not asking the Tribunal to
rule that any of them constitutes a material breach of the agreements. The panel
need only conclude, based on the attached documentary submissions, that the
conduct of Publicis raises a sufficient doubt about its continued compliance
with the agreements and, as a result, creates a risk of irreparable prejudice to
FCB. These conclusions would justify entry of an order of interim relief to
preserve the status quo and the effective operation of the Alliance Agreements
until the arbitrators render a final award.
A. Publicis use of FCA to cause continuing injury to FCB.
Because of the Publicis' acquisition of FCA, Publicis is currently competing
against FCB in the United States and is continuing to acquire advertising
businesses in Europe outside
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of France without FCB's consent. Both activities contravene the Alliance
Agreements and injure FCB.
1. Bloom FCA is competing with FCB in the United States.
Publicis is using Bloom FCA to compete with FCB in the United States. As
discussed above, the Master Alliance Agreement prohibits Publicis from making
acquisitions or business combinations that compete with FCB in the United
States./25/
The following are two very recent and indisputable examples of competition
in the United States. One concerned the U.S. advertising business for a well-
known restaurant chain called TGI Friday's. FCB competed head-to-head with Bloom
FCA as finalists for the $30 million advertising account, and Bloom FCA
prevailed,/26/ to FCB's damage, partly by relying on its new ownership by
Publicis and, remarkably, the network of agencies created and owned by FCB and
available to Publicis only through the Alliance.
One of the features TGI Friday's sought was an advertising agency with the
ability to provide advertising services outside the United States. Bloom FCA has
offices only in the United States, but, at a presentation to TGI Friday's, it
provided marketing material touting its "global network [which] encompasses
Europe, Asia, Latin America and the Pacific Rim" (the latter three regions being
covered only by FCB operations and not Publicis offices) and its "availab[ility]
to assist with TGI Friday's international expansion."/27/ Thus, Bloom FCA
actually used the FCB global network, available to Publicis through the
Alliance, to compete with FCB and attract a multinational client based
principally in the United States, FCB's most major market.
/25/ Master Alliance Agreement (S) 1.2.
/26/ Attachment 1.
/27/ Attachment 2.
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<PAGE>
The second concerns a letter Mr. Levy sent on February 4, 1995 on "Publicis-
FCB" stationery to Whirlpool Corporation in Michigan, U.S.A. He urged Whirlpool
to consider retaining FCB for U.S. advertising services but then told Whirlpool:
"We also have another `arm' in the States with an agency which we wholly own,
Publicis/Bloom in New York. This is a vibrant and fast-growing shop run by the
energetic entrepreneur Bob Bloom."/28/
These recent examples of violating the "non-compete" provisions of the
Alliance Agreements are sufficient to justify an order from the Tribunal
preventing Publicis from further such acquisitions in the U.S. market until the
Tribunal has an opportunity to rule on the legality of the FCA acquisition. The
continuing competition prejudices FCB by decreasing revenues and profits and
increasing expenses of client development efforts. FCB intends to present the
main body of its proof of Bloom FCA's competition in its Statement of Claim.
2. Improper European acquisitions by Publicis and PBV.
As described above, the Alliance Agreements restrict the ability of Publicis
and PBV to acquire advertising businesses in Europe outside France. Publicis
must conduct its European advertising business through PBV,/29/ and PBV must
have FCBI's consent before making acquisitions and engaging in other significant
joint venture transactions./30/
FCB's principal claims in this arbitration implicate these provisions
because FCA has a network of offices that conduct advertising businesses in
Europe. As the Claimants will show in their Statement of Claim, Publicis both
acquired the European operations of FCA and, without FCBI's approval, has, as a
practical matter, merged various European operations of FCA with
/28/ Attachment 3.
/29/ Master Alliance Agreement (S) 1.2; PBV Shareholders Agreement (S) 1.01.
/30/ PBV Shareholders Agreement (SS) 2.01, 2.03.
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<PAGE>
parts of PBV. Notwithstanding the pendency of these claims - indeed, in the face
of them - Publicis and PBV recently made a further acquisition in violation of
the provisions.
The recent violation of these provisions concerned the acquisition of
control of CID/FCA in Spain, which FCB learned about in February 1995. A
February 16, 1995 fax from Mr. Morin informed FCB that Publicis would make the
acquisition,/31/ but a news report stated that PBV had already acquired the
Spanish agency. The February 8, 1995 issue of the periodical "Euromarketing"
reported: "Publicis/FCB, multinational agency group based in Paris, has
increased its stake in Cid/FCA from 25% to 75% by buying an additional 50%
from Multigrupo Madrid."/32/ In any event, Publicis apparently intends to merge
the operations of CID/FCA with a part of PBV called BMZ, as it did with other
European operations of FCA. The same Euromarketing article stated: "Executives
at Publicis's BMZ!FCA agency say . . . that the agency will be renamed FCA!BMZ."
The statement shows that, legal form aside, Publicis has combined FCA and BMZ,
both in Spain and elsewhere in Europe.
Whether Publicis or PBV made the acquisition, this incident is clear proof
that the Publicis entities are continuing their pattern of violating their
contracts with FCB. If Publicis acquired CID, it is violating the provision
prohibiting it from conducting an advertising business in Europe outside of
France. It is competing with PBV, the joint venture, and is injuring FCB to the
extent Publicis, through FCA, is depriving PBV of revenue. If PBV acquired
CID/FCA, it needed FCBI's advance approval, but FCBI has never approved either
the legal or practical acquisition of CID/FCA. Acquisition of CID/FCA by PBV
would prejudice FCB by forcing it to be a non-consenting partner in a venture
growing in unknown directions with which it might not agree and adding costs,
employees, and clients to which it might object.
______________________________
/31/ Attachment 4.
/32/ Attachment 5. If PBV made the acquisition, the transaction would be
troubling for a further reason. On November 10, 1994, at a PBV Shareholders
Committee meeting, Mr. Levy categorically denied that PBV was having discussions
with CID. Attachment 6.
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<PAGE>
The acquisition of CID mirrors the Respondents' violation of these same
provisions by their acquisition of the European operations of FCA -- one of the
central issues raised by FCB in the main arbitration proceeding. The importance
of the CID acquisition is that it reaffirms the need for the Tribunal to take
interim measures to prevent another recurrence of this conduct and further
damage to FCB.
3. Publicis intent to injure FCB's interest in PBV.
The practical merger of the European operations of FCA and parts of PBV
creates a special need for interim relief. Such a merger has significant
financial implications for the costs and revenues of the joint venture as FCA
personnel and business commitments are added. It also indicates that, in the
absence of interim measures, Publicis intends to manage and operate PBV in the
way it sees fit -- even if FCB disagrees.
This manifestation of the Publicis plan to go its own way, combined with the
Publicis efforts described below to deny FCB access to financial information
about the joint venture and to terminate the Alliance Agreements, raises the
real threat that Publicis will conduct the operations of PBV to FCB's detriment.
Without interim measures, even if FCB prevails in this arbitration and obtains
control of PBV, its success would be empty if Publicis has plundered the joint
venture of its clients, creative employees, and assets.
The concern that Publicis will take actions at the joint venture to harm FCB
is not idle speculation. In an April 14, 1994 conversation with Mr. Bruce Mason,
the Chairman and Chief Executive Officer of FCB, Mr. Levy said that, if FCB took
over control of PBV, FCB would be taking over a shell because Publicis would
convince the clients not to stay with PBV. Publicis would "burn the earth"./33/
Mr. Morin, the chief financial officer of Publicis, was equally blunt a few
weeks ago when he spoke to a U.S. financial analyst. There is "no way"
___________________________
/33/ Attachment 7.
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<PAGE>
FCB will take control of PBV. Publicis is the "master" of that operation; PBV
"is in our country with our people and our managers."/34/
B. Refusal to provide essential financial information and to permit a
special audit.
Publicis and PBV chronically fail to supply FCB with essential financial
information. The Alliance Agreements specifically impose on the Publicis
entities the duty to provide such information. Section 4.01(b) of the PBV
Shareholders Agreement provides that:
PBV shall furnish to FCB at PBV's expense all information requested by FCB
that is required by United States' generally accepted accounting principles
to enable FCB to account for its investment in PBV using the equity method
of accounting in accordance with United States' generally accepted
accounting principles or otherwise to comply with any reporting requirements
under applicable United States' tax and securities laws and regulations. PBV
shall also provide any additional information regarding PBV to, and
otherwise cooperate with, FCB so as to enable FCB to prepare financial
statements in accordance with accounting principles generally accepted in
the United States and otherwise comply with United States law.
Publicis has a similar obligation under section 6.2 of the Publicis
Communication Shareholders Agreement. In addition, as described below, FCB has
rights of access to the records and financial information of PBV.
Two recent examples of the Publicis failure to provide essential financial
information to FCB should suffice. Both occurred after FCB began this
arbitration, which suggests that, in the absence of interim relief, FCB will
encounter increasing resistance to its needs for information from Publicis and
PBV.
________________________
/34/ Attachment 8. Similarly, an AP-Dow Jones report from February 24, 1995
quoted Mr. Levy as saying: "There's not one chance in a hundred that the
[arbitrators] will decide to change majority-ownership." Attachment 9.
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<PAGE>
The first concerns information FCB required to prepare its audited financial
statements and tax records for 1994. Publicis had been reasonably reliable in
past years in providing this critical information in sufficient time for FCB to
release fourth quarter and annual earnings in February and to complete its audit
in time for filing the annual report to shareholders required by the U.S.
securities laws. This year has been different. Publicis has not provided the
necessary information. In particular, it failed to provide adequate, much less
audited, information about the results of PBV,/35/ although Mr. Levy told the
directors of FCB on February 15, 1995 that the audit of PBV had been
completed./36/ As a result, FCB was not able to release earnings in February
1995, breaking its long tradition of doing so and frustrating the financial
markets, which had been expecting the information.
The failure to receive this information harms FCB in several ways. It is
unable to comply with U.S. tax laws, which exposes it to the assessment of
penalties, and with U.S. securities laws, which require periodic disclosure of
extensive financial information. FCB is depriving the U.S. financial markets of
information they have come to expect and thereby is creating uncertainty in the
markets, which has contributed to a substantial erosion in FCB's stock price
(see below). FCB also lacks information to make informed judgments about
investment and financial decisions, and it is unable to measure the success of
its investments in PBV and Publicis. In essence, FCB is harmed in every way that
businesses and investors are usually damaged when they cannot obtain reliable
information on revenues, profits, taxes, expenses, capital investments, assets,
liabilities, and cash flows.
_________________________
/35/ See, e.g., Attachment 10 (Mr. Morin told FCB on January 30, 1995 "I still
don't know" results for 1994; the "audits have not yet been carried out");
Attachment 11 (a week before FCB expected to release earnings, Communication
provided sketchy "estimates" of results that were "preliminary" and not audited
and that failed to include, among other things, "FCA! Goodwill" write offs of
approximately FF 330-350 million).
/36/ Attachment 12.
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<PAGE>
The second recent refusal to provide financial information occurred when
Publicis refused to allow FCB to conduct its own special audit of the financial
records of PBV. The refusal directly contravened section 8.04 of the PBV
Shareholders Agreement, which states:
Each Shareholder shall have (a) access to the books, records and properties
of the Joint Venture or any Subsidiary and (b) the right to have a special
audit of the Joint Venture performed by accountants of such Shareholder's
choice and at such Shareholder's expense.
Section 4.2 of the Master Alliance Agreement imposes a similar obligation to
provide access to business and financial records of PBV.
Because of recurring problems in obtaining financial information, the Audit
Committee of the Board of FCB on November 8, 1994 sent written notice to
Publicis and PBV of its intent to have Coopers & Lybrand conduct a special audit
of PBV./37/ This request was not related to the arbitration. The Audit Committee
cited FCB's particular need for critical tax information because of threatened
U.S. tax penalties. Additional purposes of the audit were to obtain information
about capital needs, inter-company loans, inter-company transactions, reserves,
and other financial areas.
On December 13, accountants from Coopers arrived at the Publicis offices in
Paris to begin the audit and met with Mr. Morin. He turned the auditors away
without providing any information./38/
FCB later received a December 12 letter from Mr. Levy saying that Publicis
considered the request for a special audit "to be invalid."/39/ Mr. Levy
questioned the reasons given for
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/37/ Attachment 13.
/38/ Attachment 14.
/39/ Attachment 15.
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<PAGE>
the audit, the need for it given that outside accountants perform an annual
audit of PBV, and the procedure the Audit Committee used to authorize the
request. He raised these issues even though the agreement provides separately
for the appointment of annual independent auditors/40/ and does not require a
reason for a special audit or a specific procedure FCB must follow to initiate a
request.
On February 7, 1995, in a letter faxed to Mr. Levy as the President of both
Publicis and PBV, Mr. Mason referred the Publicis refusal to permit the special
audit of PBV to the Dispute Resolution Process created in the Alliance
Agreements./41/ Publicis accepted the reference in a letter dated February 9 but
did not concede that its refusal was wrongful or indicate that the audit could
proceed./42/
FCB does not here seek an order to permit the special audit, although it
might submit a claim concerning the audit if the Dispute Resolution Process does
not produce a satisfactory result. Our purpose here is to identify yet another
clear example of the refusal of Publicis to comply with its contractual
obligations and to give a particularly egregious, specific example of the more
general problem FCB has had in obtaining necessary financial information from
Publicis and PBV.
C. Refusal to permit attendance at Publicis Board meetings.
Publicis, through Mr. Levy and Mr. Morin, has on two recent occasions
denied FCB its contractual right to participate in meetings of the Publicis
Board of Directors. Mr. Mason is a director of Publicis as a result of the
Alliance Agreements, which provide for the election
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/40/ PBV Shareholders Agreement (S) 4.03. The PBV Articles of Association,
article 20(1)(b), also provide for the annual appointment of auditors.
/41/ Attachment 16.
/42/ Attachment 17.
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<PAGE>
of an FCB designee. Section 6.1 of the Publicis Communication Shareholders
Agreement states that, "if FCB's designee is unable to attend any meeting of the
Board, he shall be entitled to send a non-voting observer in his place who shall
be a senior officer of FCB."
The relevant Board meetings occurred on January 20, 1995 and February 10,
1995. The agendas for both meetings listed items affecting FCB./43/ For both
meetings, Publicis provided Mr. Mason insufficient advance notice of the
meetings to permit him to rearrange his schedule to attend./44/ Mr. Mason sent
Mr. Levy a fax on January 16 stating that he could not attend the January 20
meeting but designating Mr. Greg Blaine, Executive Vice President of FCB, to
attend in his place./45/ On January 17, Mr. Levy replied that Mr. Blaine would
not be permitted to attend./46/
After Mr. Mason received notice of the February 10 meeting, Mr. Blaine sent
a February 8 fax to Mr. Levy saying Mr. Mason could not attend because of the
late notice and conflicting commitments. The fax also appointed Mr. Dale Perona,
the FCB Treasurer, as a non-voting observer pursuant to section 6.1 of the
Publicis Communication Shareholders Agreement./47/ Mr. Morin responded on
February 9: "[W]e are not in a position to accept Dale Perona's appointment as
FCB's non-voting member of the Publicis Communication Board."/48/
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/43/ The agenda for the January meeting had two main items: the increase in
capital to be paid by FCB and PSA and items relating to relations with
FCB, including the arbitration, the state of the conflict, and
consequences of the conflict for the contracts with FCB. Attachment 18.
The agenda for the February meeting listed litigation with FCB and
important financial matters. Attachment 19.
/44/ The January meeting was first set for January 13, and, even though
Communication postponed the meeting until January 20, Mr. Mason did not
have enough notice to permit him to attend because he had important
commitments for mid-January that had been scheduled much earlier. Mr.
Mason received notice of the February 10 meeting by fax on February 2 but
already had commitments, known to Mr. Levy, preventing his attendance.
/45/ Attachment 20.
/46/ Attachment 21.
/47/ Attachment 22.
/48/ Attachment 23.
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D. Other Conduct in Disregard of FCBI's Rights as a Minority Shareholder
in PBV.
Publicis has engaged in several other actions to disparage the rights of FCB
as the minority shareholder of PBV. Together, they, with the other incidents
described, indicate a substantial likelihood that Publicis, with Mr. Levy and
Mr. Morin at the helm, will continue to abuse its rights as the majority
shareholder and perhaps will be emboldened to take even more aggressive steps to
deprive FCB of its rights and investment in PBV.
Two violations of the PBV Shareholders Agreement occurred recently in
connection with a proposed "Publicis . FCB Europe Board meeting," which is a
meeting of representatives of Publicis and FCBI as the shareholders of PBV,
described in the agreement as a Shareholders Committee meeting. On February 2,
1995, Mr. Levy sent a fax to schedule the meeting for February 9 in Paris./49/
Mr. Blaine faxed a response on February 8 saying that the FCB representatives
would be unable to attend because of the lateness of the notice and prior
commitments. As permitted by the agreement,/50/ he proposed that the meeting
occur by telephone on certain dates within the next 10 days./51/ Publicis
refused to reschedule the meeting and, we understand, proceeded to hold the
meeting on February 9 without the presence of any representative from FCB. Mr.
Morin informed Mr. Blaine on February 9: "The meeting will therefore go ahead as
planned ...."/52/ Publicis thus breached the PBV agreement by disregarding FCB's
contractual right to have the meeting occur on an alternate date convenient to
both parties and by purporting to hold a Shareholders Committee meeting in
contravention of the quorum requirement that "at least one representative of
each Shareholder" be present.
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/49/ Attachment 24.
/50/ PBV Shareholders Agreement (S) 2.02.
/51/ Attachment 22.
/52/ Attachment 23.
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<PAGE>
At an earlier Shareholders Committee meeting, the Publicis representatives,
who constitute the majority of the Committee, refused to take steps FCB proposed
to protect legitimate interests of FCB as the minority shareholder during the
pendency of this arbitration. As one such step, FCB moved that PBV retain
separate legal representation for the proceeding. The reasons for the motion
were that Publicis owns 51 percent of PBV, the senior managers of PBV (Mr. Levy
and Mr. Morin) are also senior managers of Publicis and PSA, and PBV has
interests that are different from and possibly inconsistent with the interests
of PSA and Publicis. The motion was defeated because all the Publicis
representatives voted against it./53/
E. Notice of Termination.
On January 23, 1995, four months after FCB filed its Notice of Arbitration
that began these proceedings, Publicis mailed FCB a notice purporting to
terminate the Master Alliance Agreement (one of the Alliance Agreements) on July
24, 1995. The Publicis Board apparently made the decision at its January 20,
1995 meeting. Without elaboration, Publicis stated that the notice would have
"the consequences which necessarily result therefrom as concerns" the other
Alliance Agreements, including the PBV Shareholders Agreement./54/
Publicis had several purposes in sending the so-called termination notice.
It is seeking an illegitimate tactical advantage over FCB by claiming to be free
of the constraints and obligations the Alliance Agreements impose on it. It
wants to be free to own agencies that compete with FCB in the United States. To
Publicis, the purported termination notice means that "all of [FCB's] general
rights are cancelled"; "Publicis can buy/own any agency in US or
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/53/ Attachment 6.
/54/ Attachment 25. According to a news report, Mr. Levy said the termination
covers the agreement governing the joint venture. Attachment 9.
Communication's purported termination notice is not valid or legally
effective as to any of the Alliance Agreements, but this request for
interim measures is not the appropriate place to argue that issue. We
intend to contest the validity and effectiveness of the notice in our
Statement of Claim in the main proceeding.
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<PAGE>
network in Europe ...." Publicis had to send the notice because this arbitration
"will take 2-3 years," and "they cannot be held back for 2-3 yrs on acquisitions
and business and so forth."/55/
Publicis also wants to be free to manage and operate PBV, the joint venture,
without regard for the interests or rights of FCB as a minority shareholder. It
is seeking to avoid the consequences of a Tribunal finding that Publicis
committed a material default of the contracts. Thus, although, if FCB prevails
in this arbitration, it would have the right to obtain control of PBV, Publicis
has taken the position that its plan "to rescind the alliance agreement"
requires FCB to negotiate a new basis for cooperation, including presumably the
terms for owning and operating PBV./56/ The Publicis view is that there is "no
way" FCB will obtain control of PBV./57/
After sending FCB the purported termination notice and issuing a press
release to comply with French stock exchange regulations,/58/ Publicis
representatives, particularly Mr. Levy and Mr. Morin, volunteered further
statements about the termination and the dispute with FCB to the press in the
United States and France. They also held direct conversations with the U.S.
stock analysts who follow FCB stock,/59/ although FCB cannot conceive of a
legitimate Publicis interest in discussing the Publicis termination with stock
analysts who follow FCB's stock./60/
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/55/ Attachment 8.
/56/ See Attachments 9, 26. Mr. Levy's private assurance that he has no
intention of "winding up" PBV provides no comfort on the important subject
of whether Publicis will respect FCB's right to obtain control of PBV if
FCB prevails in this case. See Attachment 27.
/57/ Attachment 8.
/58/ Attachment 26.
/59/ Mr. Morin spoke with the assistant of the analyst at Donaldson, Lufkin &
Jenrette who follows FCB. Attachment 8. The PaineWebber analyst for FCB
told FCB that both Mr. Levy and Mr. Morin spoke with him. Attachment 28.
/60/ Moreover, these communications of Mr. Levy directly contravene
confidentiality provisions in the (continued...)
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These additional public statements of Publicis personnel about the
termination notice have caused a significant decline in the price and ratings of
FCB's stock. With an adjustment for an FCB stock split in mid-February, the
price of FCB stock fell from 19 3/16 on February 10, 1995, the day Publicis
publicized its termination notice, to 16 on February 24, a drop of nearly 17
percent. Several major financial institutions, including PaineWebber, Merrill
Lynch, and Goldman Sachs, have downgraded their ratings of FCB stock./61/
Public statements of the sort being made by Publicis are bound to have
further adverse effects on FCB, as industry analysts observe. One said that the
Publicis-FCB dispute "is being closely followed by advertising agency observers
as well as the multinational clients the two companies share, such as Nestle,
Colgate-Palmolive and L'Oreal. Messy public squabbling between agencies is
anathema to such clients ...."/62/ Another wrote: "For by bringing these
disputes into the public light, the two parent companies run the risk of hurting
the performance of their offspring...."/63/
- ----------------------------
/60/ (...continued)
Alliance Agreements, see Publicis Communication Shareholders Agreement (S)
1.7; FCB Shareholders Agreement (S) 1.7; PBV Shareholders Agreement (S)
8.05, and a confidentiality policy adopted by the FCB Board of Directors
in May 1994. Mr. Levy is a director of FCB and was present at the May 1994
meeting. The Board adopted the policy to assure compliance with U.S.
securities laws and to prevent serious problems for FCB and its clients.
Attachment 29.
/61/ The FCB specialist at PaineWebber wrote that uncertainty about the
relationship between Publicis and FCB, "read risk, can not be ignored. And
estimates of [FCB's] performance in 1996 will depend, to some degree, on
the resolution of the dispute with Publicis. As a result, we are lowering
the stock's rank from buy (1) to attractive (2)." Attachment 30. The New
York Times reported: "The possibility that the alliance might collapse,
leading to increased costs for both agency companies as they begin
competing, led some financial analysts to reduce their stock ratings.
Merrill Lynch & Company downgraded True North to neutral from above
average ...." Stuart Elliott, Agency Spat Escalates Over European Venture,
New York Times, February 14, 1995, at D21.
/62/ Kevin Goldman, True North-Publicis SA Alliance Has Turned Into a Tug of
War, Wall Street Journal, February 21, 1995, at B7.
/63/ Attachment 30. See also Daniel Tilles, Publicis Weighs Rupture of Its Ad
Alliance in U.S., International Herald Tribune, February 13, 1995
("dissolution of the agreement could disrupt programs coordinated by the
two companies in different regions of the world for clients such as
Nestle S.A.").
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<PAGE>
It is therefore absolutely essential that the Tribunal order Publicis to
continue to comply with the Alliance Agreements during the arbitration and until
the Tribunal has an opportunity to determine whether the notice has any validity
or effectiveness. As we have shown, Publicis has a proclivity for disregarding
its contractual obligations. It cannot be allowed to use the public termination
notice as an excuse for a total renunciation of its obligations. This is
especially true for its operations of the joint venture, PBV, in which FCB has a
significant investment in value, assets, and goodwill. That investment is
threatened by the Publicis claim that the Alliance Agreements terminate in July
1995 both because of actions Publicis might take in the joint venture given its
majority and operational control and because a forced dissolution or sale would
produce a return well below actual value as a going concern.
Taken together, all of the foregoing incidents establish that interim relief
is necessary to prevent such conduct from occurring again and to require PSA,
Publicis, and PBV to comply scrupulously with the terms of the Alliance
Agreements during the pendency of this proceeding. The arbitrators must act to
prevent the recurrence of this irreparable prejudice to FCB and to maintain the
status quo as established by those agreements. In particular, immediate relief
is necessary to prevent Publicis and its current senior management from taking
action within PBV to diminish its value in anticipation of the prospect that FCB
will secure control at the end of the arbitration. Thus, the panel must act to
stop Publicis from taking action at the joint venture level that might, as a
practical matter, either deny the FCB contractual right to obtain control of PBV
or complicate the form of the relief the Tribunal would need to order.
None of the interim relief sought by FCB would have the converse effect of
being tantamount to a final award in favor of FCB or prejudicial to a final
ruling in favor of the Respondents./64/ Similarly, the interim relief would not
unduly prejudice PSA, Publicis, or PBV.
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/64/ See United Technologies Int'l, Inc. v. Islamic Rep. of Iran, 13 Iran-U.S.
C.T.R. 254 (1986) (Decision No. 53-114-3); Behring International, Inc. v.
Islamic Rep. of Iran, 8 Iran-U.S. C.T.R. 44 (1985) (Award No. ITM
46-382-3).
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<PAGE>
IV. The Tribunal Should Order the Following Interim Measures.
For these reasons, FCB requests the Tribunal to issue an order in
substantially the following terms. The order should be in the form of an interim
award under UNCITRAL Arbitration Rules 26(2) and 32(1), should have effect
immediately, should have provisional enforceability ("execution provisoire"),
and should continue in effect during the pendency of this proceeding.
A. The Alliance Agreements shall remain in full force and effect during
the pendency of the arbitration. PSA and Publicis shall not take any
additional action in furtherance of the Publicis notice of termination
and shall not take any action to terminate the Alliance Agreements
except for a reason specified in the agreements.
B. PSA and Publicis shall not acquire or establish any further interest
in any form in a general advertising business in the Venture Territory
or any sphere of influence of FCB, as those terms are defined in the
Alliance Agreements, including but not limited to Europe (outside of
France) and North America, without FCB's prior consent.
C. Publicis shall procure that, without the written consent of FCBI, PBV
does not acquire or establish any further interest in any form in a
general advertising business in Europe (outside of France), does not
create or dispose of a subsidiary, and does not change its corporate
structure in any way.
D. Publicis shall provide and shall cause PBV to provide to FCB in a
prompt and timely manner all financial and business information and
records requested by FCB in accordance with provisions of the Alliance
Agreements.
E. PSA and Publicis shall preserve the value and assets of PBV.
1. They shall at all times act in the best interests of PBV and both
its shareholders, including FCB as the minority shareholder of
PBV.
2. They shall take no action to cause a PBV employee to leave, to
prevent PBV from recruiting any new employee, or to cause a PBV
client to place business with any other advertising agency.
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<PAGE>
3. They shall not in any way allocate any cost to PBV without
documentation sufficient for auditing purposes that PBV genuinely
incurred the cost and shall not deprive PBV of revenue without
documentation sufficient for auditing purposes that an entity
other than PBV genuinely earned the revenue.
The order of the Tribunal should provide for penalty payments by PSA and
Publicis for each violation of the order and for each day a violation continues.
The amount of the penalty payment should be sufficient, given the significance
of the matters involved in the case, to deter PSA and Publicis from violating
the order. We propose that the amount be FF 500,000.
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<PAGE>
The Claimants are serving a copy of this request, the French translation,
and attachments on the LCIA by hand delivery and on the three Respondents by
hand delivery to Mr. Aram J. Kevorkian, Kevorkian & Partners, 46, avenue d'Iena,
75116 Paris, France. Because of the need for expedition, we are sending a
courtesy copy by hand delivery or overnight courier to each arbitrator.
Respectfully submitted.
Neil Midgley
-----------------------------------
Mary A. Carragher Lloyd N. Cutler
Vice President and pp Andrew N. Vollmer
General Counsel WILMER, CUTLER & PICKERING
TRUE NORTH 2445 M Street, N.W.
COMMUNICATIONS INC. Washington, D.C. 20037
101 East Erie Street 1-202-663-6000
Chicago, Illinois 60611
1-312-751-7013 Thomas A. Cole
SIDLEY & AUSTIN
Patrick Bernard One First National Plaza
BERNARD HERTZ BEJOT Chicago, Illinois 60603
153 Boulevard Haussmann 1-312-853-7000
75008 Paris
France
33-1-4256-3080
Peter Roorda
STIBBE SIMONT MONAHAN DUHOT
P.O. BOX 75640
Strawinskylaan 2001
1070 AP Amsterdam
The Netherlands
31-20-546-0606 Counsel for Claimants
1 March 1995
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<PAGE>
[LETTERHEAD OF WILMER, CUTLER & PICKERING]
6 March 1995
Ms. Jennifer Cubitt-Smith
Deputy Registrar
London Court of International Arbitration
12 Carthusian Street
London EC1M 6EB
England
Re: Foote, Cone & Belding Communications, Inc. and FCB International,
Inc. v. Publicis S.A., Publicis Communication, and Publicis F.C.B.
B.V., LCIA Arbitration No. UN94/X25
Dear Ms. Cubitt-Smith:
We need to correct a point in the Claimant's Emergency Request for
Immediate Interim Measures filed with the LCIA on March 1, 1995. On page 20 of
the English version (page 22 of the French translation), we explained we had
reason to believe that Publicis held a meeting of the PBV Shareholders Committee
on February 9, 1995 in violation of the quorum requirement.
The meeting apparently did not occur, although we did not know that
until after the filing of the request for interim measures was already in
process. On February 28, 1995, FCB received a fax from Publicis Communication
stating that, because of the lack of a quorum, "no decisions within the purview
of the Shareholders Committee were taken" ("aucune decision relevant du
Shareholders Committee n'a pu eire prise").
Also since the filing of the request for interim measures, we obtained
the arbitrator's order awarding interim relief in Resort Condominiums, which is
discussed on page 9 (page 10 of the French translation). A copy is attached for
the convenience of the arbitrators.
We would be grateful if you would please send a copy of this letter to
each of the arbitrators. We will send Mr. Kevorkian a copy by fax.
Very truly yours,
/s/ Neil Midgley
pp Andrew N. Vollmer
Copy to: Mr. Aram J. Kevorkian (by fax)
