The jurisdictional duality which characterises the French legal system triggers practical difficulties in international arbitrations, especially when they involve the recognition and enforcement in France of arbitral awards relating to issues of French administrative law. The Cour de Cassation recently decided on this issue, holding that civil courts have jurisdiction to rule on the recognition and enforcement of any foreign arbitral award.
The issue of sovereign immunity from enforcement is highly sensitive. It is regarded as a vital component of state sovereignty and as necessary to preserve peaceful relationships between states, and should be recognised as a matter of international comity. However, the interests of international commerce and private parties cannot be denied. The Supreme Court recently issued a key decision focusing on diplomatic assets.
Two recent Paris Court of Appeal decisions offer a contrasting perspective on the challenges associated with arbitration: while the enforcement of awards that have been recognised must be facilitated and applications for stays of enforcement are held to the most stringent standards, the legitimacy of arbitration requires that the legal process remain immune from suspicions of corruption and fraud.
In order to enhance the flexibility of the arbitral process, French arbitration law allows parties to nominate their arbitrators, either directly or by reference to arbitration rules. Two recent decisions on conflicts of interest are illustrative of the approach of French courts, which seek to strike a delicate balance between giving arbitration users added freedom and ensuring that due process and fair trial guarantees apply
In its April 1 2014 decision the Paris Court of Appeal has reiterated its well-established position in relation to the enforcement of arbitral awards set aside at the seat of arbitration, confirmed the arbitrators' duty of disclosure, and restated the respective roles played by the arbitrators' duty of disclosure and the parties' duty of loyalty in arbitration proceedings.
The Supreme Court has upheld the validity and enforceability of a bilateral option clause which gave both parties the option to resolve their dispute by way of arbitration or through domestic courts. While this decision clarifies the French courts' position regarding bilateral option clauses, it raises concerns as to the validity of sole option clauses.
Reforms to French arbitration law determined that appellate review would no longer automatically stay execution of an award. A member of Parliament questioned this regime, which does not provide for an adversarial debate at the level of the application for an exequatur order, by posing a question to the minister of justice. The minister recently responded that exequatur proceedings are to remain ex parte – for now, at least.
When French arbitration law was reformed in 2011, one major innovation was to amend the position on the stay of enforcement of international arbitral awards pending the outcome of annulment proceedings or of an appeal against an order granting leave to enforce (exequatur). However, the courts' severity towards requests for a stay of execution has given rise to concerns about exequatur proceedings.
According to the French law on international arbitration, an action to set aside is available against international arbitral awards issued in France. Therefore, such an action may be instituted only against arbitral awards. The distinction between arbitral awards and other communications issued by tribunals can be unclear; however, a decision of the Supreme Court provides useful guidance.
The interaction between insolvency proceedings and arbitration is treated differently in different countries. The French legal position is clear: the supervening insolvency of a party does not render a dispute inarbitrable. In a recent decision the Paris Court of Appeal found that the International Court of Arbitration of the International Chamber of Commerce had committed an "excessive measure" justifying the annulment of an award.
In a recent case the Supreme Court reaffirmed the existence of an arbitral legal order, independent of any national legal order. It held that the arbitral proceedings in question were detached from the French judicial order, since the tribunal's seat was located in Sweden and proceedings were governed by the United Nations Commission on International Trade Law rules.
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.