On 4 March 2020 the First Civil Chamber of the Court of Cassation issued a decision in enforcement proceedings between Devas Multimedia Private Ltd and Antrix Corporation Ltd. In so doing, the court overruled a 2018 Paris Court of Appeal decision on the same case and determined that there was no basis for the argument that Antrix had not made certain procedural objections during the arbitration and therefore could not raise them in the enforcement proceedings. The decision raises interesting questions about the nature of the 'waiver' contemplated in Article 1466 of the Code of Civil Procedure,(1) which requires a party to raise procedural or jurisdictional arguments before an arbitral tribunal in a timely manner or waive the ability to invoke them in the future.
On 28 January 2005 two Indian companies, Antrix and Devas (together, the parties), concluded a contract that was subject to Indian law. The dispute resolution clause provided for arbitration by a three-person tribunal, with two co-arbitrators each nominated by a party and the president appointed by the two co-arbitrators. The seat was New Delhi. The contract further provided that the arbitration was to be conducted pursuant to the rules and procedures of either the International Chamber of Commerce (ICC) or the United Nations Commission on International Trade Law (UNCITRAL).
In 2011 a dispute arose between the parties in relation to Antrix's termination of the contract. Devas submitted a request for arbitration to the ICC. It did not seek Antrix's specific consent to ICC arbitration.
The ICC informed the parties that because the arbitration agreement substantially departed from the ICC rules of arbitration, it would conduct the arbitration in accordance with its rules unless the parties objected. Antrix objected, arguing that the dispute resolution clause provided for ad hoc arbitration. It argued that Devas could not unilaterally choose the applicable arbitration rules and that the ICC could therefore not administer the arbitration. Accordingly, Antrix informed Devas and the ICC that it had nominated its ad hoc co-arbitrator and petitioned the Indian support judge to nominate a co-arbitrator on behalf of Devas should it refuse to participate in the ad hoc process.
Notwithstanding Antrix's objection, the ICC established the tribunal in accordance with its rules.(2)
Antrix continued to object to the ICC arbitration after the ICC tribunal's constitution. Thus, the terms of reference noted its objection, which it had previously expressed to the ICC and Devas. Further, Antrix raised a jurisdictional objection in its submissions in the proceedings. It argued that the arbitration clause was pathological because it did not specify how the choice between the UNCITRAL and ICC rules would be made. Antrix argued that the parties needed to agree the applicable procedural rules in order for the arbitration agreement to be enforceable given that there was no agreement, the ICC tribunal did not have jurisdiction to resolve the dispute (the pathological clause argument).
The ICC tribunal rejected Antrix's arguments and, in 2015, issued an award in favour of Devas.
Later in 2015, Devas successfully obtained exequatur of the award in France.
Antrix appealed the order, arguing, among other things, that under Articles 1520(2°) and (1°) of the Code of Civil Procedure,(3) the ICC tribunal had been improperly constituted and thus had not had jurisdiction to hear the dispute. Reflecting its earlier opposition to ICC arbitration, Antrix argued that the arbitration agreement provided for ad hoc arbitration, in which the ICC or UNCITRAL rules could apply to the conduct of the arbitration only after the arbitral tribunal had been constituted, such that the ICC had never had the power to constitute the tribunal (the ad hoc arbitration argument).
However, the Paris Court of Appeal upheld the enforcement order. It considered that Antrix had not raised this objection before the ICC Tribunal and had therefore waived its right to do so at the enforcement stage, pursuant to Article 1466 of the Code of Civil Procedure. This article provides that a party "which knowingly and without a legitimate reason fails to raise an objection in a timely manner before the arbitral tribunal, shall be deemed to have waived its right to make that objection".(4)
According to the Court of Appeal, Antrix had presented arguments in the enforcement proceedings that were irreconcilable with its arguments in the ICC arbitration. Antrix could not argue before the ICC tribunal that the arbitration clause was pathological and thus unenforceable and that the ICC tribunal therefore lacked jurisdiction and conversely allege in the enforcement proceedings that the arbitration clause provided for ad hoc proceedings, which implied that the arbitration clause was in force and that the ICC tribunal had been improperly constituted.(5)
Antrix challenged the Paris Court of Appeal's judgment and the case proceeded to the Court of Cassation.
In its decision, the Court of Cassation found that the pathological clause argument and the ad hoc arbitration argument were not incompatible as they both pertained to the improper constitution of the ICC tribunal. In this regard, the Court of Cassation stated that Antrix's pathological clause argument "necessarily implied an objection relating to the improper constitution of the ICC Tribunal".(6) It reasoned that:
- in relation to the applicable rules of procedure, the arbitration agreement provided for an option between the ICC rules and the UNCITRAL rules;(7)
- the option of UNCITRAL arbitration necessarily implied that any arbitration commenced pursuant to the arbitration agreement would be ad hoc and therefore exclude the possibility of an institutional arbitration;(8) and
- despite the above, the underlying arbitration was an institutional ICC arbitration from the outset, notwithstanding Antrix's initial objection.
Accordingly, the court concluded that Antrix's pathological clause argument necessarily implied an objection relating to the improper constitution of the ICC tribunal.(9)
The Court of Cassation therefore analysed the pathological clause argument and the ad hoc arbitration argument consecutively and as complementary arguments. Therefore, it concluded that they were not incompatible and that the Paris Court of Appeal's decision violated Articles 1466 and 1506(3) of the Code of Civil Procedure.
French case law has long encompassed the principle that procedural irregularities raised during annulment or enforcement proceedings by a party that either failed to raise or acted inconsistently with them in the underlying arbitration are inadmissible.(10) That case law reflects a broad understanding of waiving conduct. In 2011 the waiver principle was codified in Article 1466 of the Code of Civil Procedure, which expressly refers to a waiver arising from a party's failure to invoke a procedural irregularity in a timely manner before an arbitral tribunal.
A few years earlier, in the 2005 Golshani case, the Court of Cassation recognised the principle of estoppel as an autonomous defence in annulment and enforcement proceedings.(11) In general, for a party to be estopped from raising an argument in favour of annulment or to resist enforcement:
- it must have acted inconsistently with statements or actions made before the arbitral tribunal; and
- the other party must have detrimentally relied on the inconsistency.
A party that successfully pleads estoppel may obtain damages in addition to having the other party's argument rendered inadmissible.(12)
The relationship between estoppel and waiver under Article 1466 of the Code of Civil Procedure is unclear. Some authors argue that Article 1466 encompasses the principle of estoppel(13) and some courts have applied the principle of estoppel under Article 1466.(14) However, other authors consider that the waiver under Article 1466 and the principle of estoppel are distinct defences, although their respective scopes of application can, in some cases, be identical (as the Court of Cassation ruled in a 2009 decision).(15) Some courts have similarly distinguished between the two defences.(16)
In the Antrix case, both the Paris Court of Appeal and the Court of Cassation considered, in their analysis of the implications of Article 1466, whether Antrix had waived its right to raise the ad hoc arbitration agreement in the enforcement proceedings because this argument was inconsistent or incompatible with the pathological clause argument which it had made in the arbitration itself. These considerations would normally form part of the analysis of an estoppel argument. The Court of Cassation's approach may be partially explained by the conflation of both concepts in French case law and academic commentary. The conflation was perhaps also unavoidable in light of how Devas presented its waiver arguments, which hinged on allegations that Antrix's position in the enforcement proceedings was inconsistent or incompatible with that before the arbitral tribunal.(17) At its core, Devas's argument was that it would be procedurally unfair for the court to accept Antrix's arguments for resisting enforcement. In that context, the overlap between the loss of the right to object (Article 1466) and the principle of estoppel is understandable given that the preservation of procedural fairness lies at the heart of both.(18)
That said, the Court of Cassation's decision does not necessarily mean that Article 1466 of the Code of Civil Procedure includes both the loss of the right to object and the principle of estoppel. In this regard, neither the Paris Court of Appeal nor the Court of Cassation found that Devas had detrimentally relied on Antrix's conduct, which is normally a component of estoppel under French law.(19) This could be seen as the Court of Cassation interpreting Article 1466 to include a waiver by silence as well as a waiver by inconsistent or contradictory conduct – thereby taking a broad understanding of the meaning of 'waiver' without broadening the scope of application of Article 1466 itself.(20) This would leave the principle of estoppel as a distinct concept, allowing a party that has suffered harm due to detrimental reliance to obtain damages in addition to a declaration that its opponent's arguments are inadmissible.
Although the Court of Cassation's decision nullifies that of the Paris Court of Appeal, the former did not make its own ruling regarding the enforcement of the award. Rather, the case was remanded to a different composition of the Paris Court of Appeal. Thus, it will be interesting to see how the Paris Court of Appeal decides the matter in light of the Court of Cassation's guidance. It will also be interesting to see how the French courts address this issue in future.
Endnotes
(1) Article 1466 of the Code of Civil Procedure applies to international arbitrations pursuant to Article 1506(3°) of the same code. It provides that, absent a good reason, parties that fail to invoke a procedural irregularity in a timely manner before an arbitral tribunal are considered to have waived their right to do so in the future.
(2) The ICC confirmed the arbitrator designated by Devas, nominated a co-arbitrator on behalf of Antrix and appointed the president of the tribunal since the two co-arbitrators refused to do so themselves.
(3) Articles 1520(1°) and (2°) of the Code of Civil Procedure provide that "a party may challenge the arbitral award only if: 1° the arbitral tribunal improperly exercised jurisdiction or refused to exercise jurisdiction; 2° the arbitral tribunal was improperly constituted" (unofficial translation) (Le recours en annulation n'est ouvert que si : 1° Le tribunal arbitral s'est déclaré à tort compétent ou incompétent ; ou 2° Le tribunal arbitral a été irrégulièrement constitué").
(4) Unofficial translation of Article 1466 of the Code of Civil Procedure ("La partie qui, en connaissance de cause et sans motif légitime, s'abstient d'invoquer en temps utile une irrégularité devant le tribunal arbitral est réputée avoir renoncé à s'en prévaloir"). This procedural defence has long been recognised in French case law and was codified in the Code of Civil Procedure through the 2011 revision of French arbitration law (Decree °2011-48, 13 January 2011, Portant réforme de l'arbitrage, Ch Seraglini, J Ortscheidt, Droit de l'arbitrage interne et international, Lextenso, Second Edition, para 523).
(5) The Paris Court of Appeal noted that the ad hoc arbitration argument pertained only to the improper constitution of the ICC tribunal and not to its lack of jurisdiction, but considered that Antrix's pathological clause argument pertained only to the ICC tribunal's lack of jurisdiction.
(6) Unofficial translation of Cass Civ 1e, 4 March 2020, °18-22019. ("l'invocation par la société Antrix, devant le tribunal arbitral, du caractère pathologique de la clause prévoyant une procédure d'arbitrage conduite conformément aux règles de procédures de la CCI ou de la CNUDCI emportait nécessairement contestation de la régularité de la composition du tribunal arbitral, constitué sous l'égide de la CCI, dès lors que l'option alternative du choix des règles de la CNUDCI offerte par la clause impliquait un arbitrage ad hoc, exclusif d'un arbitrage institutionnel." (Emphasis added.))
(7) Cass Civ 1e, 4 March 2020, °18-22019:
l'invocation par la société Antrix, devant le tribunal arbitral, du caractère pathologique de la clause prévoyant une procédure d'arbitrage conduite conformément aux règles et procédures de la CCI ou de la CNUDCI emportait nécessairement contestation de la régularité de la composition du tribunal arbitral, constitué sous l'égide de la CCI, dès lors que l'option alternative du choix des règles de la CNUDCI offerte par la clause impliquait un arbitrage ad hoc, exclusif d'un arbitrage institutionnel, de sorte que l'argumentation soutenue devant le juge de l'exequatur, selon laquelle la clause d'arbitrage viserait un arbitrage ad hoc sans intervention de la CCI dans la désignation du tribunal arbitral, n'était pas contraire à celle développée devant celui-ci. (Emphasis added.)
(8) Cass Civ 1e, 4 March 2020, °18-22019:
l'invocation par la société Antrix, devant le tribunal arbitral, du caractère pathologique de la clause prévoyant une procédure d'arbitrage conduite conformément aux règles et procédures de la CCI ou de la CNUDCI emportait nécessairement contestation de la régularité de la composition du tribunal arbitral, constitué sous l'égide de la CCI, dès lors que l'option alternative du choix des règles de la CNUDCI offerte par la clause impliquait un arbitrage ad hoc, exclusif d'un arbitrage institutionnel, de sorte que l'argumentation soutenue devant le juge de l'exequatur, selon laquelle la clause d'arbitrage viserait un arbitrage ad hoc sans intervention de la CCI dans la désignation du tribunal arbitral, n'était pas contraire à celle développée devant celui-ci. (Emphasis added.)
(9) Cass Civ 1e, 4 March 2020, °18-22019:
l'invocation par la société Antrix, devant le tribunal arbitral, du caractère pathologique de la clause prévoyant une procédure d'arbitrage conduite conformément aux règles et procédures de la CCI ou de la CNUDCI emportait nécessairement contestation de la régularité de la composition du tribunal arbitral, constitué sous l'égide de la CCI, dès lors que l'option alternative du choix des règles de la CNUDCI offerte par la clause impliquait un arbitrage ad hoc, exclusif d'un arbitrage institutionnel, de sorte que l'argumentation soutenue devant le juge de l'exequatur, selon laquelle la clause d'arbitrage viserait un arbitrage ad hoc sans intervention de la CCI dans la désignation du tribunal arbitral, n'était pas contraire à celle développée devant celui-ci. (Emphasis added.)
(10) See, for example, Cass Civ 2e, 11 July 2002 (cited in JCP G 2003, I, 105, °8 obs J Ortscheidt); Cass Civ 2e, 20 November 2003 (cited in Bull civ II, °342); see also Ph Pinsolle, Note - Cour de cassation (1re Ch civ), 6 July 2005, Rev Arb 2005, p994, paras 8-10.
(11) Cass Civ 1e, 6 July 2005, °01-15912; see also Ch Seraglini, J Ortscheidt, Droit de l'arbitrage interne et international, Lextenso, Second Edition, paras 523 and 525.
(12) Ch Seraglini, J Ortscheidt, Droit de l'arbitrage interne et international, Lextenso, Second Edition, para 397; Ph Pinsolle, Note - Cour de cassation (1re Ch civ), 6 July 2005, Rev Arb 2005, p994, para 19; L Cadiet, La renonciation à se prévaloir des irrégularités de la procédure arbitrale, Rev Arb 1996, p27, para 23.
(13) E Gaillard, P de Lapasse, Commentaire analytique du décret portant réforme du droit français de l'arbitrage, Cah Arb 2011, p263, para 51:
Comme suggéré par le CFA, l'affirmation du principe de loyauté s'accompagne de la consécration d'un nouveau principe, celui de l'estoppel ou de cohérence (article 1466), qui avait du reste déjà été consacré par la jurisprudence en matière d'arbitrage. On observera que les rédacteurs du décret ont pris soin d'ajouter que la partie devait s'être abstenue d'invoquer en temps utile l'irrégularité en cause. Cet ajout a été voulu par la Chancellerie pour donner une certaine souplesse à l'application du principe, par exemple dans l'hypothèse où une partie n'aurait pas pu opposer immédiatement à l'autre partie une exception procédurale parce que le règlement d'arbitrage ne le permettait pas.
(14) See, for example, Paris Court of Appeal, 18 March 2014, °12/22314; Paris Court of Appeal, 31 October 2017, °16/16865: Considérant qu'en application de l'article 1466 du code civil, l'estoppel s'oppose à ce qu'une partie se contredise au détriment d'autrui ; que se contredit au détriment d'autrui la partie qui adopte des comportements procéduraux incompatibles.
(15) Ch Seraglini, J Ortscheidt, Droit de l'arbitrage interne et international, Lextenso, Second Edition, para 523:
même si, comme l'a jugé la Cour de cassation, le domaine d'application respectif de ces deux fins de non-recevoir peut, 'dans certains cas être identique', elles ne sont pas exactement fondées sur les mêmes principes et la première est aujourd'hui consacrée par le Code de procédure civile
See also Ph Pinsolle, Note - Cour de cassation (Cass Civ 1e), 6 July 2005, Rev Arb 2005, p994, para 12:
Le principe de l'estoppel est… distinct du principe de la renonciation, même si leur domaine d'application respectif peut parfois être identique. En d'autres termes, les mêmes circonstances peuvent de fait être envisagées à la fois sous l'angle de l'estoppel et sous celui de la renonciation. C'est en réalité la nécessité de protéger la confiance de la deuxième partie victime des contradictions de la première, ainsi que la condition de détriment pour cette deuxième partie, ou d'avantage retiré par la première, qui distinguent l'estoppel de la renonciation.
See also L Cadiet, La renonciation à se prévaloir des irrégularités de la procédure arbitrale, Rev Arb 1996, p26, para 23:
On ajoutera donc, sur le fond, que les conditions de l'estoppel ne paraissent pas correspondre aux hypothèses de renonciation implicite à se prévaloir des irrégularités de la procédure arbitrale. Je ne prétends pas qu'il n'y a pas matière à appliquer le principe de l'estoppel en matière d'arbitrage ; l'étude d'Emmanuel Gaillard établit largement le contraire. Seulement, ce principe me semble inadéquat pour régler la question [de la renonciation].
(16) See, for example, Paris Court of Appeal, 14 May 2019, °17/06397:
Au surplus, l'article 1466 du code de procédure civile, qui présume que celui qui s'est abstenu d'invoquer une irrégularité devant le tribunal arbitral a renoncé à s'en prévaloir, n'est opposable qu'à celui qui a participé activement à l'arbitrage. Il convient, par conséquent, d'écarter la fin de non-recevoir tirée de l'estoppel ou de l'article 1466 du code de procédure civile.
See also Paris Court of Appeal, 27 February 2018, °16/01358.
(17) Paris Court of Appeal, 27 March 2018, °16/03596.
(18) See F-X Train, Reconnaissance et exécution des sentences arbitrales étrangères : le droit français au prisme de la Convention de New York, Revue internationale de droit comparé, 2014, p260, para 23, which reads as follows with regard to Article 1466 of the Code of Civil Procedure:
La règle a un double fondement. Elle est dérivée du devoir de loyauté procédurale, en ce qu'elle tend à éviter que la sentence soit remise en cause pour des motifs que les parties auraient tardé à invoquer, par malice ou par négligence. Mais elle repose également sur un fondement utilitariste : en purgeant la procédure arbitrale des vices qui ont pu l'affecter, la règle de la renonciation assure à la sentence une grande sécurité et participe donc de l'efficacité de l'arbitrage en général.
See also J-B Racine, Société française de rentes et de financement Crédirente v Compagnie générale de garantie SA, Paris Court of Appeal (1e Ch C), 7 February 2008, Rev Arb, p511, which reads as follows with regard to the estoppel defence: "La règle de l'estoppel, au service de la loyauté procédurale, permet de lutter contre de telles attitudes et sert ainsi à assainir la procédure arbitrale."
(19) This is the dominant view. See, for example, Ph Pinsolle, Note - Cour de cassation (Cass Civ 1e), 6 July 2005, Rev Arb 2005, p994, para 12. However, one author points out that the principle of estoppel is not clearly defined under French law, particularly with respect to the requirement of a detriment. See E Loquin, Jurisclasseur Procédure Civile, Fasc 1036: ARBITRAGE – Instance arbitrale – Procédure devant les arbitres, 4 November 2015, para 125:
Certains auteurs, en se référant au contenu donné au concept, par la Common Law, considèrent que l'estoppel et la renonciation n'ont pas le même domaine. L'estoppel suppose une confiance trompée, c'est-à-dire un effet sur l'autre partie, qui devient la victime du comportement contradictoire de son adversaire (V note Ph Pinsolle : Rev Arb 2006, p 993). La renonciation impose seulement la volonté du renonçant. D'autres auteurs considèrent que la Cour de cassation retient une conception acculturée de l'estoppel, lequel consiste à ne porter un jugement sur le seul comportement de son auteur, c'est-à-dire, un changement de position de nature à induire en erreur le colitigant. Dans la première interprétation, l'estoppel se distingue nettement de la renonciation et peut cohabiter avec elle. Dans la seconde interprétation, la confusion des deux domaines est totale, de telle sorte que le recours à l'estoppel est inutile.
(20) See, for example, F-X. Train, Reconnaissance et exécution des sentences arbitrales étrangères : le droit français au prisme de la Convention de New York, Revue internationale de droit comparé, 2014, p260, paras 22 and 25. The author refers to a broad understanding of the meaning of 'waiver', encompassing waiver by silence and estoppel:
En termes procéduraux, le grief qui n'a pas été soulevé devant les arbitres alors qu'il aurait pu l'être est irrecevable (art. 122 CPC) devant le juge du contrôle de la sentence. La portée de ce mécanisme de renonciation est très large, la jurisprudence s'étant même référée, dans certaines décisions, à un 'principe de la renonciation'… dès lors que la renonciation est caractérisée par la simple abstention d'une partie, a fortiori l'est-elle en cas de contradiction de cette partie au détriment de son adversaire.
Benoît Martinez, intern – international arbitration group, participated in the preparation of this article.
