Since March 2010 the ordinary French courts have been able to challenge the constitutionality of a statute or statutory provision through a specific procedure. However, the reform was silent on the issue of whether arbitral tribunals enjoy similar rights to ask the Supreme Court to refer a matter to the Constitutional Council. In a recent decision, the Supreme Court found no basis for such rights to be allowed to arbitrators.
It is a truism that relativity applies in arbitration. An award can be set aside by the courts of the English seat of arbitration and yet be declared enforceable in France. The conflicting decisions issued by the Paris Court of Appeal and the UK Supreme Court in Dallah illustrate that an arbitral award can have a different fate depending on the approach of the courts of the seat of arbitration and the courts of the places where enforcement is sought.
The International Arbitration Institute has prepared an English translation of the new Decree 2011-48, which came into force in January and has introduced comprehensive reforms to the French arbitration system.
The reaction to the new arbitration law reform has been overwhelmingly positive, with commentators variously hailing it as arbitration friendly, innovative, elegant and trend setting. Practitioners agree that it has made a complex body of judicial solutions more accessible to non-specialist audiences and enhanced the predictability of solutions. This udpate considers the market response and delves more deeply into its provisions.
The new arbitration law reform features several innovations that will improve the efficiency of international arbitration and arbitral awards. It also codifies French court decisions in international arbitration law, updates the Code of Civil Procedure and clarifies the provisions of French domestic arbitration law applicable to international arbitration, with provisions inspired by foreign laws that have proved useful in practice.
The government is about to approve long-awaited reforms to French domestic and international arbitration law. Among other things, the Paris Court of First Instance will be empowered to assist parties with the production of documents, and the enforcement of international arbitral awards will be made easier. The decree should be published tomorrow.
The Supreme Court recently ruled that the standard International Chamber of Commerce arbitration clause included in a contract applied to a claim for wrongful termination, even though it was brought in tort on the grounds of a mandatory rule of French law. The legislation at issue purports to grant distributors mandatory indemnification rights in the event of termination without cause and appropriate advance notice.
It is the policy of French courts to enforce arbitration agreements where the parties clearly intended to submit their dispute to arbitration. In keeping with this well-established trend, the president of the Paris First Instance Court recently upheld a 'pathological' International Chamber of Commerce arbitration clause and exercised his power to assist the parties in constituting the arbitral tribunal.
The Cour de Cassation recently held that an international arbitral award may not be challenged by a third party to the arbitral proceedings by way of a third-party recourse. Only a party to the arbitration may bring proceedings in France to obtain the setting aside of an international award or to challenge the recognition of a foreign award by the French courts.
Courts must state the reasons for their decisions to enforce or vacate arbitral awards. Article 455 of the Code of Civil Procedure obliges judges to set forth the grounds on which their decisions are based and leads to frequent decisions being made by the Supreme Court in matters previously resolved by state courts.
The Paris Court of Appeal has held that the International Chamber of Commerce (ICC) Rules in force on the date an arbitration agreement is entered into apply unless the parties have agreed otherwise, and that the exclusion of liability clause contained in the 1998 version of the rules is unenforceable, as it is contrary to an essential duty owed by the ICC.
The Paris Court of Appeal has set aside an ICC award on the grounds that the arbitral tribunal had been irregularly constituted due to the chairman's lack of independence. It ruled that the duties of independence and impartiality are "the very essence of the arbitral function". The duty of independence is generally considered to relate to issues that may arise during the course of the arbitrator's relationship with one of the parties.
In a recent decision the Supreme Court gave priority to an arbitral tribunal to rule on the extension of an arbitration agreement within a group of contracts on the grounds of two major principles of French arbitration law, namely the autonomy of the arbitration agreement and the kompetenz-kompetenz principle.
A recent judgment of the First Civil Section of the Supreme Court is interesting because it confirms a 2005 ruling regarding the conditions for granting a stay of annulment or enforcement proceedings when criminal proceedings are running parallel to them, adopts a test formulated by the Paris Court of Appeal and restates that a state court hearing annulment proceedings does not review the merits of the case.
The doctrine of res judicata precludes a claimant from bringing proceedings when an earlier and final judgment or arbitral award has been made involving the same matter or relief, the same grounds and the same parties. The Supreme Court has now held that the broad interpretation of res judicata it established in Césareo also applies to arbitral awards.
The Supreme Court recently confirmed that in a chain of contracts which successively transfers title to the same goods the arbitration agreement is transferred automatically as an ancillary element to the right to sue, which is itself ancillary to the transferred substantive right.
The Supreme Court recently reiterated the kompetenz-kompetenz principle, which empowers arbitrators to rule on their own jurisdiction, and confirmed that exceptions to it are to be construed narrowly. Under French law, this principle applies in both domestic and international arbitration.
In two recent decisions the Supreme Court confirmed its liberal approach to the enforcement of arbitral awards. The reasoning is consistent with the approach adopted by French courts since Norsolor and Hilmarton. Where two foreign arbitral awards are irreconcilable, the first for which leave to enforce is granted will be enforceable in France, creating the risk of a race for official recognition.