The International Arbitration Review: France
French arbitration law is codified under Articles 1442 to 1527 of the French Code of Civil Procedure (CCP) reformed by Decree No. 2011-48 of 13 January 2011. French law provides for a dualistic approach separating domestic and international arbitration. Provisions on international arbitration are embodied under Articles 1504 to 1527 CCP. Article 1506 CCP sets forth several articles related to domestic arbitration that are also applicable to international arbitration.2
French law on international arbitration provides for no specific formal requirement in relation to arbitration agreements. French law affirms both the positive and negative effects of the compétence-compétence principle: arbitral tribunals have exclusive jurisdiction to rule on objections to their jurisdiction;3 and when a dispute subject to an arbitration agreement is brought before a court, such court shall decline jurisdiction, except if an arbitral tribunal has not yet been seized of the dispute and if the arbitration agreement is manifestly void or manifestly not applicable.4
French courts have the power to assist arbitration during the constitution of an arbitral tribunal through the supporting judge both in the taking of evidence and by ordering interim measures.
The confidentiality provisions are only applicable to domestic arbitration; they do not apply to international arbitration. Hence, if parties want to make sure that their proceedings remain confidential, they have to make an express provision to that effect.
Disputes related to arbitration at the setting aside stage are submitted to the Paris Court of Appeal. The time limit to submit an application to set aside an award rendered in France is one month from the service (signification), unless otherwise agreed by the parties.5 An award may be set aside on the basis of one of the following grounds:
- the arbitral tribunal wrongly upheld or declined jurisdiction;
- the arbitral tribunal was not properly constituted;
- the arbitral tribunal ruled without complying with the mandate conferred upon it;
- due process was violated; or
- recognition or enforcement of the award is contrary to international public policy.6
The enforcement of international arbitral awards is sought before the Tribunal judiciaire7 of Paris for awards rendered abroad.
The parties can also apply for the revision of an award before the arbitral tribunal.8
Historically, French courts have adopted a pro-arbitration stance significantly contributing to the evolution and codification of law and practice with their profuse jurisprudence. Therefore, France is traditionally considered to be one of the most-preferred places for arbitration. However, as explained in the previous editions and below, some recent trends in case law might have brought about a change to this state of things.
The International Court of Arbitration of the International Chamber of Commerce is based in Paris, which means that disputes between parties and the institution are submitted to the French local courts.
The local arbitration institutions include, among others, the Centre of Mediation and Arbitration of Paris, the French Arbitration Association and the International Arbitration Chamber of Paris.
The year in review
i Developments affecting international arbitration
The French system has witnessed recent modifications to the definition of the arbitration agreement,9 as well as the introduction of provisions related to the immunity of assets of foreign states in France10 that set a requirement of a prior court authorisation, and a limited number of cases in which it can be granted, to enforce or take interim measures against the property of foreign states.
As explained in the previous editions,11 2018 was marked by the creation of the International Chamber of the Paris Court of Appeal (CICAP). The CICAP was set up to hear international trade disputes, which include cases related to international arbitration. The CICAP also has jurisdiction to hear appeals of decisions of the International Chamber of the Paris Commercial Court in the first instance. The procedure before this new Chamber is tailored to be adapted to international commerce and to improve the efficiency of proceedings. Thus, exhibits can be submitted without being translated into French and pleadings can be conducted in English. There is also the possibility to hear witnesses and experts in English. However, parties' submissions are still to be drafted in French. The decisions are available both in French and English languages. While cases related to set-aside proceedings and enforcement proceedings were traditionally allocated to the Paris Court of Appeal Pole 1 Chamber 1, as of March 2018, it appears that new cases in these matters are systematically referred to the CICAP (Pole 5 Chamber 16). Since 2019, the CICAP has also been hearing set-aside applications and appeals over exequatur decisions.
ii Arbitration developments in local courts
Jurisdiction and admissibility of claims
Jurisdiction is one of the five grounds under Article 1520 CCP to set aside an arbitral award in France.
One of the decisions of the CICAP last year concerned jurisdiction and the non-respect of a pre-arbitral step. On 1 December 2020,12 the CICAP held that the mere fact that a pre-arbitration procedure provided for in the contract had not been complied with did not entail the arbitral tribunal's lack of jurisdiction. In this case, the arbitration clause referred in general terms to 'all disputes' arising out of or in connection with the contract in dispute. Consequently, the CICAP held that when a pre-arbitral step is not complied with, the arbitral tribunal should assess whether the claims submitted directly to arbitration are admissible. In any case, such finding cannot affect the jurisdiction of the arbitral tribunal as admissibility is not a valid ground for setting aside an arbitral award under Article 1520 of the CPP. Eventually, the award was partially set aside on the ground of a violation of the arbitrators' mandate as the tribunal had awarded an amount of money higher than requested by the claimant. The CICAP does confirm that the fulfilment of the mandatory pre-arbitral condition is a matter of admissibility.
Independence and impartiality of arbitrators
The grounds of independence and impartiality of arbitrators were thoroughly considered in the previous editions.13 In particular, the requirement of prompt disclosure by arbitrators of any circumstance of such nature as to affect their independence or impartiality was extensively discussed in the Court of Appeal decision of 27 March 2018 in the Audi Volkswagen case.14 The case concerned agreements for the distribution of Audi and Volkswagen vehicles and spare parts by the Qatari company, as well as other related customer services. The Paris Court of Appeal set aside the International Chamber of Commerce (ICC) award on the basis that the arbitral tribunal was not properly constituted, as the arbitrator had failed to disclose existing links between his law firm and entities of the Volkswagen group, these circumstances being likely to create a reasonable doubt as to his independence and impartiality. If the services rendered by the arbitrator's firm in the past were considered a well-known fact, which was accessible to the parties at the start of the proceedings, it cannot reasonably be imposed on the parties to continue to research and monitor all publicly available information likely to concern the arbitrator. Accordingly, the arbitrator should have disclosed such information in the course of the proceedings. On 3 October 2019, the French Court of Cassation upheld the Court of Appeal decision.15
After the Court of Cassation decision, a lawsuit was filed against the conflicted arbitrator. In a judgment dated 31 March 2021, the Tribunal judiciaire of Paris held that it lacked jurisdiction to hear such a lawsuit against an arbitrator whose activity is based in Germany.16 The Tribunal judiciaire of Paris found that pursuant to EU law a liability action against an arbitrator must be brought in the jurisdiction where the arbitrator's duties are effectively performed. In this case, even though the seat of the arbitration was Paris, the effective performance of the arbitrator's duties had taken place in Germany, so that the lawsuit had to be filed before the German courts.
The CICAP issued two other decisions in early 2021 on the grounds of independence and impartiality of arbitrators regarding the scope of arbitrators' duty of disclosure of any circumstance of such nature as to affect their independence and impartiality.17 Interestingly, in both cases, the CICAP confirmed that the estoppel principle provided for in Article 1466 of the CPP could not be invoked in a case where the potential conflict of interest arose during the proceedings (or after the closing thereof) because of an ongoing duty of disclosure, in line with the Audi Volkswagen case law cited above. In the first decision dated 26 January 2021, the Court of Appeal was requested to set aside an award on the ground of irregularity of the constitution of the arbitral tribunal, including the lack of independence of two arbitrators out of five. The Court of Appeal grounded its decision on the ICC's Guidance Note on conflict disclosures by arbitrators of 23 February 2016 and held that reasonable doubt 'should arise from a potential conflict of interest of the arbitrator, which may be either direct because it relates to a relationship with a party, or indirect because it relates to a relationship of an arbitrator with an interested third party to the arbitration. In this respect, when the potential conflict of interest is indirect, the assessment of reasonable doubt will depend mainly on the intensity and proximity of the relationship between the arbitrator, the interested third party and one of the parties to the arbitration'. In the case at hand, however, after careful consideration of the facts, and referring to the notoriety of the link published in the Global Arbitration Review, the Court of Appeal decided that no further disclosure by the arbitrators was required.
In the second decision of 16 February 2021, the set-aside application regarding the ground of lack of independence and impartiality pointed out the reasoning of the arbitral award. The Court of Appeal's approach was twofold. First, it considered the ground of independence, which should be based on objective elements. Then, it held that impartiality supposes the absence of bias and even if such test is subjective by definition, its assessment should be based on objective and specific elements. In addition, the reasoning of the award cannot be reassessed by the set-aside judge. The Court of Appeal concluded that there were no precise and objective evidence of any alleged lack of independence or impartiality in the case at hand.
Compliance with the mandate
Violation of the mandate is another ground under Article 1520 CCP to set aside an arbitral award in France.
In a recent case18 dealing with a dispute between a French seller (A) and a Hong Kong consulting company (S) in relation to a sale of helicopters in China, the CICAP dismissed the challenge of the award on the ground of a violation of the mandate of the arbitral tribunal. In January 2018, S initiated arbitration proceedings against A in Paris to obtain payment of outstanding invoices for the services related to the sale of helicopters. The arbitral tribunal thoroughly examined several corruption indicators, including 'red flags'. The award issued in March 2019 dismissed the payment claims amounts and found that there were indicators that the payment of the requested invoices amounted to a violation of international public policy. S filed a set-aside application. The CICAP found that 'by attempting to assess the existence of a situation of corruption on the basis of a body of evidence and by recalling that for such a situation to be characterized, these indicators have to be sufficiently “serious, precise and corroborating”, the arbitral tribunal did apply French law exclusively, even though it was able to consider that certain indicators, which are now also retained by American legislation, could be taken into account to establish corruption, without departing from the application of French law'. It is part of the mandate of the arbitral tribunal to assess whether indicators of corruption, such as 'red flags', invoked by a party, can be taken into account as consistent evidence, even if they have not been yet enshrined in French case law. The CICAP considered, therefore, that the arbitral tribunal complied with its mandate to decide the dispute under French law.
International public policy
International public policy has probably been one of the most debated grounds for setting aside in recent years. In the previous editions, it was extensively discussed as a result of the notable decisions in the Belokon, MK Group, Democratic Republic of Congo and Alstom cases.19 The decisions rendered since then by the CICAP on the ground of international public policy are in line with the previous case law.
In a 27 October 2020 decision,20 the CICAP dismissed a state's action to set aside an arbitral award that had ordered it to pay a certain amount in compensation for a breach of contract with regard to two foreign companies, based inter alia on the violation of international public policy. The state alleged that the award would give effect to a contract obtained by corruption, thus violating international public policy. The Court of Appeal, consistently with the previous decisions, confirmed that it had the power to assess the alleged 'red flags' after the analysis performed by the arbitral tribunal with the scope to ensure that there is no manifest, effective, concrete violation of international public policy. It is therefore not bound by the findings of an arbitral tribunal in this respect. However, such assessment cannot lead to a revision of an award on the merits. The Court of Appeal has therefore to carry out a red flags analysis but only to consider whether they are serious, precise and consistent indications of corruption that could give rise to a violation of international public policy in case of recognition or enforcement of the award. In the case at stake, the Court of Appeal, while reconfirming the increasing control over arbitral awards where corruption allegations are put forward by the parties, found that the proof of precise, serious and concordant indications of corruption had not been established.
Three other decisions recently confirmed the application of the 'red flags' by French courts.21
Enforcement of international arbitral awards
As mentioned above, the French legislator introduced new provisions on the immunity of foreign states.22 A decision of the Court of Cassation of 10 January 2018 ruled that, notwithstanding the fact that the new provisions do not apply to enforcement measures made prior to their entry into force,23 they should nevertheless be taken into account.24
The Court of Cassation had recently been asked to render another decision regarding the enforcement prior to the entry into force of the new law on the immunity in the same case between the Republic of the Congo and the Commissions Import Export (Commisimpex).25 The attachments at stake were performed in October 2016 on the bank accounts of the state diplomatic mission in Paris on the basis of two arbitral awards rendered on 3 December 2000 and 21 January 2013. The Republic of the Congo opposed its immunity from execution and absent any express and specific waiver requested the lift of the attachments.
In its decision, the Court of Cassation referred to customary international law and its previous case law confirming the new requirement of an express and specific waiver by a foreign state. The immunity from execution applies to bank accounts of the diplomatic missions, which are presumed to be used for the needs of the sovereign mission of a foreign state. This presumption can be reversed by any means. In addition, the Court of Cassation confirmed that the immediate application of a new law resulting from a change of a case law does not infringe the principle of legal security as long as there is no denial of justice.
Another interesting decision concerned the recognition and enforcement in France of international arbitral awards that have been previously annulled in their country of origin.26 The case at hand originated in a dispute between the Egyptian national gas company, NATGAS, and the public entity in charge of gas and oil activities, named the Egyptian General Petroleum Corporation (EGPC), concerning a natural gas supply contract in Egypt. Following an arbitration application by NATGAS before the Regional Commercial Arbitration Centre in Cairo pursuant to the arbitration clause in the contract, the arbitral tribunal issued an award on 12 September 2009 ordering EGPC to pay compensation for the damage suffered by the claimant. NATGAS had obtained the exequatur of the award in France on 19 May 2010, but the award was subsequently annulled in Egypt on 27 May 2010 on the ground that the arbitration clause did not receive ministerial approval in violation of Egyptian public policy. An appeal against the exequatur was filed by EGCP leading to several successive proceedings before the French courts. The Paris Court of Appeal, to which the case was referred for a third judgment, maintained the decision to grant the exequatur. After recalling that French provisions on recognition of arbitral awards shall apply to both domestic and international arbitral awards issued abroad, the Court of Appeal qualified the current arbitration as international on the ground that the transaction had implications that were not limited to Egypt (a foreign shareholder of NATGAS was involved in the contract as a technical partner, and an Italian bank as well as Italian suppliers were involved in the financing of the project). Therefore, Egyptian public policy cannot prevent the enforcement of an arbitral award in France. Moreover, the annulment of the award in Egypt was irrelevant since, pursuant to Article VII, 1 of the New York Convention and French case law, the annulment of an arbitral award at the place of the arbitration does not constitute a ground for refusing the recognition and enforcement in France of a foreign award. The case was referred for the third time to the Court of Cassation following the Paris Court of Appeal decision to grant the exequatur for the third consecutive time. On 13 January 2021,27 the Court of Cassation confirmed that the annulment of the award in Egypt is irrelevant and held, for the first time, that this solution also applies to foreign arbitration awards, even if it is a purely domestic award.
This issue has given rise to an extremely divisive debate since the famous Putrabali case,28 and even before.29 However, the decision here deals with a slightly different situation as both parties were Egyptian entities, the contract was to be performed in Egypt, Egyptian law was applicable to the merits, the place of the arbitration was in Egypt and the case was administered by a an Egyptian institution.
iii Investor–state disputes
France is currently a party to 112 BITs. Following the CJEU's Achmea decision,30 which ruled that intra-EU BITs were incompatible with EU law, and a declaration of the Member States of 15 January 2019, 23 Member States, including France, signed an agreement on 5 May 2020 for the termination of intra-EU BITs concluded to date (termination agreement).31 On 29 August 2020, the termination agreement entered into force terminating five intra-EU bilateral investment treaties.32 Others are due to be terminated once the termination agreement will be ratified or provisionally applied. France has not yet ratified this agreement. Concluded investment treaty arbitrations proceedings are not prejudiced by the termination agreement; nor are affected agreements to settle a dispute amicably that are subject to arbitration proceedings initiated prior to 6 March 2018. However, pending disputes between an investor and a Member State shall be resolved via 'structured dialogue' overseen by an impartial facilitator within six months from the termination of the BIT in question or by bringing proceedings in national courts and invoking national judicial remedies. It remains to be seen whether the framework provided by the termination agreement proves to be practical, in particular concerning the structured dialogue option, and thus offers a satisfactory legal protection to EU investors making an investment in another Member State.
In 2020, no ICSID proceedings were initiated against France, and four cases have been introduced by French investors against foreign states (the State of Kuwait, the Republic of Iraq, the Czech Republic and the United Mexican States).
This year again, case law developments concern in particular the jurisdiction of arbitral tribunals in investment arbitration disputes.
A first noteworthy decision concerned a case on appeal after cassation before the CICAP following the judgment of the Court of Cassation of 13 February 2019 in an investment case against Venezuela.33 The arbitral award was rendered in Paris on 15 December 2014 on the basis of the bilateral investment treaty between the Kingdom of Spain and the Republic of Venezuela upholding the jurisdiction of the arbitral tribunal. The application to set aside the award led to a partial annulment by the Paris Court of Appeal finding that the arbitral tribunal lacked ratione materiae jurisdiction, but that its jurisdiction ratione personae had been established. The case was then heard before the Court of Cassation that quashed the decision of the Court of Appeal on the ground that 'the applicability of the arbitration agreement based on the bilateral investment treaty depends on the fulfilment of all the conditions required by this bilateral investment treaty on the nationality of the investor and the existence of an investment, so that the Court of Appeal could not partially set aside the award'. Therefore, in international investment cases, the jurisdiction criteria are considered cumulative and indivisible, prohibiting partial annulment.
On 3 June 2020,34 the CICAP set aside the award in full holding that the arbitral tribunal had ruled on its jurisdiction without verifying whether the nationality requirement of the investors provided under the bilateral investment treaty was fulfilled on the day the investments were made and that in the present case the investors did not have Spanish nationality on the date the investments were made and were therefore not investors within the meaning of the treaty.
Another decision on jurisdiction worth reporting was rendered on 30 March 2021 in the context of set-aside proceedings related to an investment arbitration award against the Russian Federation.35 The dispute arose out of the annexation of Crimea and the order issued by the Bank of Russia to JSC Oschadbank (a Ukrainian bank having its subsidiary in Crimea) to cease all its activities in Crimea peninsula. JSC Oschadbank, considering that its activity was protected by the bilateral investment treaty between the Russian Federation and Ukraine of 27 November 1998 and that it had been expropriated, initiated on 20 January 2016 arbitration proceedings seated in Paris before the Permanent Court of Arbitration (PCA). The Russian Federation disputing the jurisdiction did not take part in these proceedings. The arbitral tribunal rendered an award ordering Russia to pay damages in the amount of more than US$1 billion. On 19 February 2019, Russia filed a set-aside application before the Paris Court of Appeal.
The case was referred to the CICAP. The Paris Court of Appeal first assessed the common will of the contracting parties during the negotiations of the Russia–Ukraine BIT. Then, considering the conditions of application of the BIT containing the offer to arbitrate, the Court of Appeal stated that Article 12 provided that it was applicable to all investments made by investors of a contracting party in the territory of the other contracting party as from 1 January 1992. This rationae temporis jurisdictional criteria was not assessed by the arbitral tribunal. The Court of Appeal eventually found that the bank's activity in Crimea had begun before 1 January 1992 and held that the rationae temporis requirement of Article 12 of the BIT was not fulfilled, so that the arbitral tribunal wrongly upheld its jurisdiction. The Russia's set-aside application was consequently upheld.
The CICAP also rendered a decision on 23 March 2021 in a case involving the State of Libya.36 In this dispute, the set-aside application was brought on the ground of an irregular constitution of the arbitral tribunal. The Paris Court of Appeal confirmed that the constitution of the arbitral tribunal in this case was in fact irregular. The question submitted to the Court of Appeal concerned the regularity of the appointment of an arbitrator by the Secretariat of the PCA in a dispute based on the Organisation of the Islamic Conference (OIC) investment agreement of 5 June 1981. The missing arbitrator was appointed by the appointing authority designated by the PCA, the Libyan State and then the Secretary General of the OIC failing to appoint the arbitrator. The arbitral tribunal issued a partial award confirming the regularity of the constitution of the arbitral tribunal. Libya referred this award to the Paris Court of Appeal. The Court of Appeal had to rely on an interpretation of Articles 8 and 17 of the OIC agreement and considered that the intention of the contracting parties was to provide for an ad hoc procedure and not to refer to another dispute resolution procedure, pending the establishment of a specific body with its own procedural rules. Taking into account the lack of an express agreement of the Libyan State to submit the constitution of the tribunal to the Secretary General of the PCA under the UNCITRAL Rules, according to the Court of Appeal the arbitral tribunal was thus irregularly constituted.
Outlook and conclusions
The year under review was again marked by the decisions rendered by the International Chamber of the Paris Court of Appeal, which seem so far to be in line with the previously established proactive approach in case law, in particular on the issues such as corruption and fraud, increasingly making usage of red flags.
The year under review was unsurprisingly affected by the covid-19 pandemic. The second semester of 2020 has witnessed a greater number of decisions within the framework of the setting aside, recognition and enforcement of proceedings as a result of a partial stand-by in the first semester.
1 Valentine Chessa and Marina Matousekova are partners, and Nataliya Barysheva is a senior associate at CastaldiPartners.
2 Articles 1446–1448 (1, 2), 1449, 1452–1458, 1460, 1462, 1463 (2°), 1464 (3°), 1465–1470, 1472, 1479, 1481, 1482, 1484 (1, 2), 1485 (1, 2), 1486, 1502 (1, 2) and 1503 CCP.
3 Article 1465 CCP.
4 Article 1448 CCP.
5 Article 1519 CCP.
6 Article 1520 CCP.
7 From 1 January 2020, in the framework of the implementation of the reform for judicial reorganisation, the tribunal judiciaire replaced the tribunal de grande instance. Article 1516 1 CCP: 'An arbitral award may only be enforced by virtue of an enforcement order (exequatur) issued by the tribunal judiciaire of the place where the award was made or by the Tribunal judiciaire of Paris if the award was made abroad'.
8 Article 1502 1 and 2 CCP.
9 Law No. 2016-1547 of 18 November 2016 related to the 'modernisation of justice of the 21st century' provides a new definition of the arbitration clause at Article 2061 of the French Civil Code (free translation):
An arbitration agreement shall be accepted by the party against which it is invoked, unless that party succeeded to all rights and obligations of the party, which initially accepted it.
If one of the parties has not contracted in the course of its professional activity, the arbitration agreement cannot be invoked against that party.
10 Law No. 2016-1691 of 9 December 2016 relating to the transparency, anticorruption and modernisation of economic life deals, among other things, with the immunity of assets of foreign states in France, and introduces three new provisions in the French Code of Civil Enforcement Proceedings: Articles L111-1-1 to L111-1-3.
11 The International Arbitration Review, tenth edition, 2019, pp. 190–1; eleventh edition, 2020, pp. 181–2.
12 CA Paris, Pole 5 – Ch. 16, 1 December 2020, No. 19/08691, Qatar v. Keppel Seghers Engineering Singapore Pte Ltd.
13 The International Arbitration Review, tenth edition, 2019, pp. 192–5; eleventh edition, 2020, pp. 183–4.
14 CA Paris, Pole 1 – Ch. 1, 27 March 2018, No. 16/09386.
15 Cass., 1re civ., 3 October 2019, No. 18-15.494.
17 CA Paris, Pole 5 – Ch. 16, 26 January 2021, No. 19/10666; 16 February 2021, No. 18/16695.
18 CA Paris, Pole 5 – Ch. 16, 15 September 2020, No. 19/09058.
19 The International Arbitration Review, tenth edition, 2019, pp. 197–8, eleventh edition, 2020, pp. 185–6.
20 CA Paris, Pole 5 – Ch. 16, 27 October 2020, No. 19/04177.
21 CA Paris, 17 November 2020, Nos. 18/07347 and 18/02568, Etat de Libye v. Sorelec; CA Paris, Pole 5 – Ch. 16, 15 September 2020, No. 19/09058.
22 Articles L111-1-1 to L111-1-3 of the French Code of Civil Enforcement Proceedings.
23 In force since 9 December 2016.
24 Cass., 1re civ., 10 January 2018, No. 16-22.494.
25 Cass., 1re civ., 3 February 2021, No.19-10.669.
26 CA Paris, Pole 1 – Ch. 1, 21 May 2019, No. 17/19850, Société Egyptian General Petroleum Corporation v. Société National Gas Company (NATGAS).
27 Cass, 1re civ., 13 January 2021, No. 19-22.932.
28 Cass, 1re civ., 29 June 2007, No. 05-18.053, Putrabali.
29 Cass, 1re civ., 23 March 1994, No. 92-15.137, Hilmarton.
30 CJEU, 6 March 2018, case No. C-284/16, Slovak Republic v. Achmea BV.
33 Cass., 1re civ., 13 February 2019, No. 17-25.851, Venezuela v. Serafin.
34 CA Paris, Pole 5 – Ch. 16, 3 June 2020, No. 19/03588, Venezuela v. Serafin.
35 CA Paris, Pole 5 – Ch. 16, 30 March 2021, No. 19/04161, Russian Federation v. Joint Stock Company 'State Savings Bank Of Ukraine' (JSC Oschadbank).
36 CA Paris, Pole 5 – Ch. 16, 23 March 2021, No. 18/05756, Libya v. D.S. Construction FZCO.