Arbitration Global Practice – A View From France

Regarding global arbitration practice in France, two significant recent developments can be noted in particular: (i) changes regarding the judge’s power to inspect whether there is a conflict between an arbitration award and international public policy (ordre public international), and (ii) the creation four years ago of the Paris International Jurisdiction (Paris jurisdiction international), the International Chamber of the Paris Court of Appeal.

Judicial control over the arbitration award

An award rendered in France in international arbitration matters can only be the subject of an action for annulment. That action is brought before the court of appeal in the jurisdiction in which the award was rendered. In addition, the judge’s control over the arbitration award is limited, as a judicial revision of an arbitration award is in principle prohibited.

More precisely, according to the principle of non-review of arbitral awards, an inspection of the content of an award itself is prohibited, which means that the judge is the guardian neither of the legal integrity of the award nor of the interests of the parties (according to French case law, violation of the rights of the parties is irrelevant with regard to considerations of public policy (see, for example, Paris, 7 July 1989, Société Veradour SICA c. Établissements Larroche Frères)). Thus, the cases in which arbitration awards may be annulled are strictly limited to the grievances listed exhaustively in Article 1520 of the French Code of Civil Procedure (Code de procedure civile). In this respect, the arbitrator’s error, given that it is not included in that list, is not a case for annulment of the award, even if French case law holds that “no limitation is placed on the power [of the annulment judge] to investigate in law and in fact all the elements concerning the defects in question” (Civ. 1re, 6 January 1987, No 84-17274, SPP v Egypt).

In any case, the judge has the power, according to Article 1520 No 5, to review whether “the recognition or enforcement of the award is contrary to international public policy”, and, consequently, to annul an arbitral award that is contrary to that policy.

However, in order to rule on that matter, the judge must necessarily make an assessment of the substance of the dispute, which seems to come close to the limits that the principle of non-review sets for the judge. The question thus arises as to the exact scope and intensity of the review that the judge may carry out on the awards: should the judge undertake a minimal or a thorough check in respect of violations of international public policy? On this question, French jurisprudence, seeking to find a balance between “revision and laxity”, has made many about-turns in its conclusions over a long period of time.

Initially, the Paris Court of Appeal had accepted that if the arbitrator was competent to apply the rules of public policy, this application of the rules had to be done “under the control of the judge of annulment” (Paris, 19 May 1993, Labinal), and thus ruled that “the control of the Court of Appeal must relate to the factual and legal aspects of all the elements allowing the application or not of the rule of public policy to be justified” (Paris, 30 September 1993, European Gaz Turbines v Westman).

Then, in the course of the 2000s, a liberal spirit and the difficulties of applying that control in practice led the Cour de cassation to adopt a “minimalist” approach, ruling that an annulment was only to be declared if the violation of international public policy was “flagrant, effective and concrete” (Civ. 1re, 4 June 2008, No 06-15.320, SNF v Cytec). The condition of flagrancy seemed to prohibit the judge from going too far, while the Paris Court of Appeal limited its examination to an intrinsic review, ie, a review limited to “elements included in the award referred to the court” (Paris, 18 November 2004, No 2002/19606, Thalès Air Défense v GIE Euromissile). This position was justified by a dogmatic reading of the principle of non-review, since “the alleged violation of a public policy law does not authorise any infringement of the procedural rule prohibiting control over the substance of the award” (Paris, 18 November 2004, No 2002/19606, supra), which in particular does not allow the judge to correct arbitral errors.

This resulted in checks being limited to flagrant violations without the scope of judicial investigations being able to go beyond the statements of the arbitrator. It was thus to be feared that unless the arbitrator had expressly noted a violation of a mandatory rule without drawing any consequence from this, no sanction would be incurred. For most French scholars this approach was seen as too liberal, and the “flagrant” criterion for judging violations of public policy was perceived as irrelevant.

Very recently, the Cour de cassation in a decision dated 23 March 2022 (Civ. 1re, 23 March 2022, No 17-17.981, FS-P+B) made a significant change to that case law. Indeed, it approved the scope and intensity of the check which the court of appeal undertook by distinguishing the extrinsic check from the review itself: an in-depth examination of the substance of the dispute is not prohibited, as long as it does not sanction the quality of the award but only its compatibility with international public policy.

More precisely, according to the Cour de cassation, “the judge responsible for setting aside the award must determine whether the recognition or enforcement of the award is compatible with international public policy. It was not for the court to determine whether [...] the actions of the Kyrgyz Republic constituted violations of the obligation of fair and equitable treatment under the bilateral investment treaty, but to determine whether recognition or enforcement of the award was likely to hinder the objective of combating money laundering. [The Court of Appeal] rightly held that such a search, carried out in defence of international public policy, was neither limited to the evidence produced before the arbitrators nor bound by the findings, assessments and qualifications made by them [...]”. The Cour de cassation further held that, by noting the serious, specific and corroborating evidence that allowed the identification of money laundering practices, “the Court of Appeal [...] did not carry out a new investigation or a revision of the substance of the award, but made a different assessment of the facts with regard solely to the compatibility of the recognition or enforcement of the award with international public policy”.

The Cour de cassation therefore approved the judge’s in-depth examination of the substance of the dispute, which may coincide in terms of its intensity with the prohibited review but is not itself one; only an arbitral award’s violation of international public policy can be sanctioned. It thus distinguishes the extrinsic check from the review of the decision’s substance. In particular, the Cour de cassation considered that the prohibition of review does not imply a prohibition of the examination of new evidence.

Many practitioners and academics approve of the new position of the Cour de cassation, which seems to them to strike the right balance between “revision and laxity”. This evolution is very important for international arbitration practitioners in France, who must also be aware of the jurisdiction of the International Chamber of the Paris Court of Appeal.

The International Chamber of the Paris Court of Appeal

The International Chamber of the Paris Court of Appeal was created in February 2018, even though it did not really get underway until September 2018.

The International Chamber of the Paris Court of Appeal handles appeals from the International Chamber of the Paris Commercial Court, as well as appeals against international arbitration awards. It has jurisdiction over disputes relating to international trade contracts, whether subject to French law or the law of another country.

The use of English (or another language other than French) in front of the International Chamber of the Paris Court of Appeal is made compatible with the requirements of the Ordinance of Villers-Cotterêts of 25 August 1539, which imposes in principle French as the language for justice. More precisely, subject to the agreement of the parties:

• the pleadings remain in French but may be accompanied by a translation into the languages of all the parties;
• the documents of the debates are filed in the language chosen by the parties, but the judge can require a translation;
• during the hearing, the witnesses, experts and parties as well as the lawyers may speak in a foreign language, but simultaneous translation may be provided and interpreters’ booths in the courtrooms may be provided; and
• the judge has to speak in French, with simultaneous translation at the request of the parties; the judgment has to be delivered in French, with translation.

This modernisation is a continuation of, and clearly inspired by, the report issued on 3 May 2017 by Mr Guy Canivet, former First President of the Cour de cassation. But it also echoes a practice that has been established within the Paris Commercial Court, which has had such an international chamber since 1995. The creation of the International Chamber of the Paris Court of Appeal thus judiciously complements it at the second level of jurisdiction.

The government and French lawyers have worked on this project since the Brexit vote, in order to respond to the opportunities that have arisen following the UK’s decision to leave the EU. There is definitely an opportunity to develop the economic attractiveness and strengthen the legal influence of the French capital in the world. London has indeed established itself as a leading jurisdictional centre, and the jurisdiction of the London courts was often based on the EU law on jurisdiction clauses (Article 25 of the Brussels I bis Regulation). Brexit has now changed that situation, as it has caused the UK to lose its access to the common judicial area and has thus compromised the attractiveness of the London courts. Indeed, London courts’ decisions no longer benefit from the same automatic recognition in the remaining EU countries and, above all, the same enforcement power (Articles 36 and 39 of the Brussels I bis Regulation).

The International Chamber of the Paris Court of Appeal may also attract large banks following Brexit and strengthen the position of the Paris financial centre vis-à-vis its competitors. Indeed, most major international financial contracts are presently drafted in English and often subject to UK law; those contracts will certainly also be affected by Brexit. In this respect, the Paris marketplace may become more attractive for foreign investors. That attractiveness is further enhanced by the fact that the European Securities and Markets Authority and the European Banking Authority are today both located in Paris.

In addition, the International Chamber may also arouse the interest of other non-European business operators from regions with a civil law tradition but not necessarily French-speaking.

Four years after its official launch, has the International Chamber of the Paris Court of Appeal achieved its goals? In March 2022, there were 187 cases set down for hearing, approximately 60% of which involved arbitral awards. Of all cases handled, 75% involved litigants from the European zone and 25% from non-European countries; and since its creation, the chamber has been requested by litigants from 73 countries. The parties are generally represented by French-speaking lawyers, sometimes accompanied by foreign lawyers. Pleadings in English are possible as already mentioned, although there has been no demand for this until now; on the other hand, there are hearings of parties and experts in English. The procedural protocol is flexible enough to adapt to the specificities of the case, as it leaves a lot of freedom and often refers to the Code of Civil Procedure.

It thus seems that the International Chamber of the Paris Court of Appeal is close to achieving its goals. And with 187 cases, one can say that there was a need for it and that the creation of this chamber has met that need. It remains the case that, despite the presence in Paris of an international business Bar and the low cost of French proceedings, Paris must continue to make some efforts to attract international business litigation.

But the main challenge today in order to be attractive remains the quality of the judges, the doctrine and case law in France. Hence the desire of Paris to make the International Chamber a body composed of specially qualified judges who are fluent in English and recognised for their ability to judge international business law disputes that are often very technical and complex.