The Paris Court of Appeal recently clarified the scope of application of Article 1466 of the Code of Civil Procedure and for the first time confirmed that Article 1466 can also limit a party's ability to seek annulment based on a variety of arguments, whether relating to procedural irregularities or otherwise, that could have been raised in the arbitration.
The Court of Cassation recently confirmed the quasi-absolute priority given to arbitral tribunals to determine questions relating to their jurisdiction, even when this involves rules of French public order. Although this is well established in French case law, it is the first time that the court has upheld an arbitration clause that conferred on a tribunal the statutory power to value shares in lieu of a party-appointed or judicially appointed expert.
The US District Court for the District of Columbia recently lifted a stay of proceedings to confirm an award issued by an ad hoc tribunal in Paris under the Energy Charter Treaty. The district court noted that the French Court of Cassation had overturned a decision of the Paris Court of Appeal setting aside the award. This article revisits the relevant facts and issues that gave rise to the setting aside of the award in France, and the subsequent reversal at the highest instance.
Consistent with France's reputation as a pro-arbitration jurisdiction, the French civil courts' review of arbitral awards on grounds of public policy is traditionally limited in terms of both standard and content. However, in recent years, the scope of the courts' review in this regard has been tested in certain Paris Court of Appeal decisions which reviewed the underlying evidence rather than the arbitral tribunal's own determinations in the relevant award.
Parties' ability to choose their arbitrators remains one of the most frequently mentioned advantages of arbitration over litigation. However, this freedom makes sense only if it preserves the overarching duties of arbitrators and judges alike – that is, the duty to be and remain independent and impartial from the parties.
The Court of Cassation recently rendered a decision concerning an AirAsia Airbus A320 which crashed in the Java Sea in December 2014, killing all crew and passengers on board. Notably, this decision reaffirms that, under French law, a manufacturer's liability cannot be limited or excluded on the grounds that another party or some other cause contributed to the damage if the product was defective and caused the damage.
French drone legislation was recently updated to require telepilots who fly drones for leisure purposes to undergo specific training. In addition, Law 2016-1428 on enhancing drone operational safety recently entered into force. Among other things, the law requires telepilots who fly drones weighing more than 800g to undergo mandatory training and requires certain civil drones to be registered.
In 2016 French contract law was restructured to render it more predictable and commercially attractive. The reform extended to the currency limitation rule, which was considered both restrictive and unclear. A recently passed implementing law is expected to provide greater flexibility for aviation transactions, as the currency limitations no longer apply to transactions between professionals where payment in a foreign currency is common practice in the relevant industry.
While developing its French network, Ryanair received support from various regional airports, including the Mixed Syndicate of Charente Airports (SMAC). The European Commission ultimately found this financial support to be illegal and, as a result, Ryanair had to repay the illicit subsidy to the SMAC. When Ryanair failed to make the payment in full, the SMAC requested the Bordeaux court to order the arrest of a Ryanair aircraft on its arrival at Bordeaux-Merignac Airport.
Bird strikes are not uncommon in civil aviation: every year there are approximately 5,000 to 6,000 incidents costing $1.2 billion worldwide. But this begs the question of who should be held responsible for bird strikes where an airport subcontracts the prevention of bird risk to a third party. The Supreme Court for Administrative Law recently had to decide which party was responsible for this collision, as previous case law on the matter was unclear.
The Court of Cassation recently clarified its position on first-demand guarantees. Considering the significant consequences for the beneficiary of a guarantee (depending on whether it is characterised as a first-demand guarantee or suretyship), the court's reasoning should be looked at carefully by any drafter of a first-demand guarantee.
The Commercial Division of the Supreme Court has clarified how an assignment of business receivables, known as a 'Dailly assignment', operates. Through this decision, the Supreme Court has reinforced the effectiveness of the Dailly assignment mechanism by giving full effect to the assigned debtor's actual knowledge of the assignment and by giving no effect to contractual provisions that restrict assignment.
The new law on the duty of vigilance for parent companies and principal contractors aims to improve the accountability of multinational companies, prevent serious incidents in France and abroad and allow parties to obtain compensation for losses which they suffer as a consequence of non-compliance. To achieve these aims, the law requires companies to draft an awareness plan and implement a monitoring and whistleblowing system. It also introduces penalties for non-compliance.
The Sapin II Law aims to support transparency, modernise business activity and combat corruption. It introduces measures to regulate executive pay in listed companies, simplify company law and modernise bond issues. Among other things, it has simplified the procedure for contributions of goodwill, abolished the prior authorisation requirement for certain transactions and simplified the procedure for issuing bonds.
The concept of de facto management makes it possible to hold a parent company liable for its subsidiary by requiring that it make up any shortfall in its assets if the subsidiary is insolvent. This ultimately leads to a piercing of the corporate veil. A recent Supreme Court ruling points to a shift in case law towards a more restrictive interpretation of de facto management, thereby reinforcing the corporate veil.
A recent landmark European Court of Justice (ECJ) ruling calls into question the type of liability incurred when an established commercial relationship is suddenly terminated. According to the ECJ, the liability is contractual, whereas for the French Supreme Court, tortious liability arises. The practical consequences of this ruling are significant in that EU law on jurisdiction differs substantially, depending on whether the liability in question is tortious or contractual.
The Action Plan for Business Growth and Transformation was recently adopted. This ambitious law introduces (among other things) a new arsenal for the French state to monitor foreign investment in sensitive industries. It has also brought with it several answers, clarifications and improvements to existing rules applicable to the preferred shares and free share allocation plans regimes, which will undoubtedly be useful to investors and companies undertaking private M&A transactions.
The recently adopted Action Plan for Business Growth and Transformation contains new rules that will be of interest to parties that undertake private M&A transactions, particularly those involving foreign investment. Further, it clarifies the measures that the minister of economy can take should an investor pursue an investment without prior authorisation or fail to comply with the conditions set out by the minister in such prior authorisation.
The Supreme Court recently ruled that the granting of a call option over an asset which is subject to a pre-emption right violates such pre-emption right. In this specific case, the call option had been exercised when the pre-emption right was no longer applicable. However, the court held that the transfer had breached the pre-emption right as it had resulted from the exercise of a call option agreement that had been entered into when the pre-emption right was still applicable.
The rules and procedures for protecting the interests of French companies when it comes to foreign investments have been amended by Decree 2018/1057, which came into effect on 1 January 2019. The new decree has extended the control of foreign investments to new sectors and enabled targets to take an active part in the process by giving them the right to directly ask the Ministry of Economy and Finance whether the foreseen investment is subject to a prior authorisation.
In the context of the acquisition of group companies, the parties will carefully select what to insert in the bylaws of the company, whereas in separate private agreements, which are confidential, the parties may include further, more detailed information. If the advantage of such private agreements is their confidentiality, the drawback is their lack of enforceability against third parties. The Supreme Court recently held that a sale made in violation of a shareholders' agreement was void by application of the bylaws.